Patents Series Part 4: Generic and biosimilar products – regulation and intersection with patent rights

Paul WhenmanPaul Whenman, Consulting Partner at FB Rice, continues the FB Rice series into patents. In Part 4, he discusses the regulatory process and patent rights of generic and biosimilar products.


Before a drug is made available to the public, its safety and efficacy must be evaluated. This regulatory process is conducted by the Therapeutic Goods Administration (TGA). Following a successful evaluation, a drug is listed on the Australian Register of Therapeutic Goods (ARTG). This constitutes official approval for the supply of a drug to the public.

Australia has a world-leading healthcare system which includes a scheme where the supply of many approved drugs is at a price which is significantly subsidised by the Commonwealth. This is known as the Pharmaceutical Benefits Scheme (PBS). Evaluation of drugs and recommendations about the inclusion of drugs in the PBS is a function of the Pharmaceutical Benefits Advisory Committee (PBAC). Amongst the functions of the PBAC is the recommendation of the subsidised price for a drug.


PBS pricing

All single drugs are allocated by legislative instrument to either of the F1 or F2 formularies. Combination drugs are listed separately on a “Combination Drugs List”. In general terms, F1 is for single brand drugs (usually original, patented drugs) and F2 is for multiple brand drugs (generics and biosimilars). F2 drugs are subject to statutory price reductions, price disclosure and guarantee of supply.

One important aspect of statutory price reduction is when a drug moves from F1 to F2, that is it becomes generic. This triggers an automatic price reduction of 25%. Obviously remaining classified as F1 is very important.


Generic and biosimilar products

A generic drug is a pharmaceutical drug that contains the same chemical substance as a drug that was originally protected by at least one patent. Because the active chemical substance is the same, the medical profile of a generic drug is believed to be equivalent in therapeutic activity.

A biosimilar is a biological product that is highly similar to and has no clinically meaningful differences from an existing approved original product. Consequently, the medical profile of a biosimilar is believed to be equivalent in therapeutic activity to the original product. For our purposes, generics and biosimilars are treated equivalently.


Patent rights

The vast majority of new drugs are protected by patent rights. In many cases, multiple patent rights may exist. For such drugs, while the patent rights remain in place, the only available products will be either those supplied by the patentee or a licensee of the patentee.

In Part 1 of our Patents Series: Australian Patents in a Life Sciences Context, we set out how patent rights are obtained and their duration, which is generally 20 years from the filing of a patent application. In Part 2: Patent Term Extension in Australia, we explain that in Australia, for pharmaceutical inventions, it is possible to extend a patent term for a further five years.

It is therefore evident that the subsidisation of a drug over a 25-year patent term may be substantial. However, given the delays inherent in obtaining approval to supply a new drug, the effective patent term is more usually around 15 years.


Data exclusivity

When an application is filed with the TGA to obtain approval to supply a drug, the data provided to demonstrate safety and efficacy is confidential. The confidentiality of this data remains in place for five years after a drug is approved. This means that third parties cannot access or rely upon this data in order to support a third party application for drug approval.


Confidentiality generally

In addition to the data exclusivity provisions, the TGA is not permitted to publish any information about applications for drug approval until such time as approval is given. Of course, this does not preclude an applicant from making its own disclosure about a new drug application.


Expiration of patent term

Once relevant patents for a drug have expired, a third party generic application may be filed. Provided that the five-year data exclusivity period has also expired, the generic applicant may support its application with the originally generated data. This greatly facilitates the approval process and results in both the original product and the generic product being available in the market. As would be expected in such a competitive environment, the drug may now be accessed at a lower price.


Unexpired patent term

Although generally the existence of a patent prevents third parties accessing the underlying invention, in the case of pharmaceutical patents, third parties are permitted to make a regulatory filing without a threat of patent infringement. This provision allows third parties to make a generic application once the five-year data exclusivity period has expired. In these circumstances, a patentee cannot enforce its patent against a generic until such time as the generic supplies product to the market.


Generic obligations

If one or more patents are in force at the time of a filing a generic application and the generic applicant relies on the data generated by the originator, the generic applicant is required to provide a section 26B certificate to the TGA. The certificate must attest that the generic applicant either (1) has no reasonable belief that it will infringe a valid Australian patent; or (2) that there is a relevant patent and the generic applicant has notified the patentee of its intention to file an application.

Since a certificate of the first type is usual, a patentee will only become aware of the existence of the generic product when it is listed on the ARTG.


Patent infringement – patentee perspective

On generic approval, a patentee must decide to either seek an interlocutory injunction to prevent a generic product being sold or to commence an infringement action in the Federal Court. Since the infringement action will take some time to be decided, the generic will in the meantime gain market share and trigger reclassification of the drug from F1 to F2. For this reason a patentee will usually seek an interlocutory injunction.

However, one of the usual conditions of an interlocutory injunction is that the patentee must undertake to compensate the generic for damages should its infringement action fail. Since a generic will almost always be an acknowledged infringer, an infringement action usually only fails because of patent invalidity.

Should a patent be found to be invalid and the patented product is an F1 drug, the Commonwealth through the PBS will also be entitled to damages. The quantum of damages will be calculated on the F1-F2 price differential.

For example, in our article No Compensation for Commonwealth of Australia in Plavix Sanofi Decision, we explained that whilst the Commonwealth was entitled to damages ($325 million was claimed) in the case of the invalidity of the patent for the Sanofi PLAVIX product, no actual damage occurred because Apotex (generic company) could not supply product. This case is currently on appeal but we doubt the finding or legal principle will be overturned.


Patent infringement – generic perspective

Since it is the actions of a generic that may trigger an infringement action, it would appear that a generic has somewhat greater control firstly in the timing of its application for approval and secondly, the ability to supply approved product. If it provides a section 26B certificate (1) option, the expectation is that if challenged, it will invalidate the underlying patent. If it doesn’t then not only will it be prevented from launching product, it will incur the cost of both its own and the patentee’s legal costs. Further, if an interlocutory injunction is not granted, it will be liable for the patentees’ damages.

Accordingly we have seen a different strategy adopted by generic companies in Juno Pharmaceuticals Pty Ltd v Celgene Corporation [2021] FCA 236 (19 March 2021). In this case, Juno sought and was granted an expedited full hearing on the validity of Celgene’s patents whilst its TGA application was pending. That is, Juno was not in a position to launch product and hence be the subject of an interlocutory injunction.

Presumably once the trial is concluded, if Juno successfully invalidates the Celgene patents, it will be in an unfettered position to launch product.


The future

The existence of the PBS makes Australia a valuable market for pharmaceutical products. If an original, patented drug is approved, it will be an F1 product and priced accordingly. Successful generic patent validity challenges sound a warning to originators to ensure the validity of any of their asserted patents. If invalid, not only will their product be moved to F2, they will be required to compensate the Commonwealth.

In addition, there are three interesting developments that are yet to be played out.

  1. The Federal Government announced the creation of a patent box for life sciences technologies in its 2022 budget. This will encourage more Australian original drug inventions. More details are set out in our article Australian Life Sciences – Recipients of a Patent Box.
  2. The TGA commenced a consultation with the pharmaceutical industry on the desirability of the repurposing of drugs (new indications for existing drugs). Since safety and efficacy have already been established, the idea is that it will be less costly to demonstrate efficacy for a new indication. It is suggested that incentives may be provided to repurpose drugs.
  3. The TGA consulted with the pharmaceutical industry on the desirability of publishing all new drug applications (original and generic), once accepted for evaluation. Such a process would give originators early warning on generic applications but likely would have no real effect on the originators. The stated motivation for this consultation is to allow the public to know what new and potentially important drugs are being evaluated. We discussed this proposal in Is it All About Transparency?

As a result of the consultation, TGA decided that from 1 January 2021, it will publish a description of major innovator applications that are under evaluation by the TGA.

For generics and biosimilars, the TGA proposes that applicants for first generic and first biosimilar medicines, will be required to notify the patentee holder when their application is accepted for evaluation by the TGA, before the TGA commences the evaluation. That is a similar process to the current section 26B regime but much earlier. The implementation of this proposal requires an amendment to the Therapeutic Goods Act 1989.

Paul Whenman is a consulting partner in FB Rice’s Sydney chemistry team. As a qualified patent attorney, Paul has had a distinguished career with the firm with over 35 years’ experience in chemically related patents, including pharmaceuticals, animal health products, surface coatings and water related technologies. He has an enviable reputation for his knowledge and expertise in the chemical patent space, with an ability to instantly identify issues and develop management strategies to work around them, particularly in the scientific and R&D sectors where he has an in-depth understanding of business practices. Connect with Paul via email or LinkedInLinkedIn