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Review of the Patents Act 1953. The pharmaceutical patent term in New Zealand. Discussion paper [2003] NZAHGovDP 3 (11 June 2003)

Last Updated: 12 July 2020

Review of the Patents Act 1953

The Pharmaceutical Patent Term in New Zealand

Discussion Paper

June 2003









































ISBN 0-478-26333-3

© Crown Copyright
First published June 2003 by the Regulatory and Competition Policy Branch Ministry of Economic Development
P O Box 1473 Wellington New Zealand

http://www.med.govt.nz

Permission to reproduce: The copyright owner authorises reproduction of this work, in whole or in part, so long as no charge is made for the supply of copies, and the integrity and attribution of the work as a publication of the Ministry of Economic Development is not interfered with in any way.

Contents

Disclaimer

The opinions contained in this publication are those of the Ministry of Economic Development and do not reflect official government policy. Readers are advised to seek specific legal advice from a qualified professional before undertaking any action in reliance on the contents of this publication. While every effort has been made to ensure that the information set out in this publication is accurate, the Crown does not accept any responsibility whether in contract, tort, equity or otherwise, for any action taken, or reliance placed on, any part, or all, of the information in this publication or for any error in or omission from this publication.

Information for Persons Making Submissions

Submissions in relation to this discussion paper are invited from researchers, pharmaceutical companies, health providers and the public. Submissions will be considered in the development of policy recommendations to the government on possible legislative reform.

To aid respondents in making submissions, questions for discussion can be found at the end of the document.

Submissions should be sent to:

Pharmaceutical Patent Term Submissions Attention Warren Hassett
Regulatory and Competition Policy Branch Ministry of Economic Development
PO Box 1473 WELLINGTON

Emailed submissions are also welcome. They should be addressed to: warren.hassett@med.govt.nz.

Submissions may be subject to disclosure under the Official Information Act 1982. Persons making submissions that include commercially or otherwise sensitive material that they wish the Ministry to withhold under the Act should clearly identify the relevant information and the applicable grounds under which the Ministry could withhold the information.

The closing date for submissions is Friday 11 July 2003.

Introduction

In December 2002 Cabinet decided that the issue of patent term extension for pharmaceuticals should be considered as part of Stage 3 of the current review of the Patents Act 1953.

A number of other countries, including many of New Zealand’s major trading partners make provision for patent term extension for pharmaceuticals.

The main reasons advanced for pharmaceutical patent term extension in those countries that provide for it are:

• To ensure that the patent system continues to provide adequate incentives for investment in the development of new pharmaceuticals; and

• To provide incentives for pharmaceutical companies to invest in the country providing for the extension.

The main reason advanced for not extending pharmaceutical patent terms is the cost that would be imposed on consumers. These costs occur directly through increased retail pharmaceutical prices and indirectly though higher costs to the public health system.

The patent term for pharmaceuticals has implications for the aims of the government’s Growth and Innovation Framework and for the objectives of New Zealand’s public health system. In considering this issue, the government will be concerned to achieve an appropriate balance between the objectives of fostering increased investment in innovation within New Zealand and ensuring that New Zealanders have access to high quality, affordable pharmaceutical products.

This document sets out the issues surrounding patent term extension for pharmaceuticals and seeks submissions from interested parties on the matters raised as a first step in the government’s consideration of this issue.

To aid respondents in making submissions, questions for discussion can be found in Appendix 2.

Patent Term for Pharmaceuticals

Patent Term for Pharmaceuticals: Why Is It an Issue?

1. The grant of a patent gives the patent owner the exclusive right, for a limited time, to commercially exploit the invention. This gives the patent owner an opportunity to make a profit from the patented invention, and thus earn a return from investment in innovative activity.

2. Currently, the maximum term of a New Zealand patent is twenty years from the date of filing of the complete specification. No extension of this term is provided for. This regime was instituted in 1994, when the Patents Act 1953 was amended to bring it into line with New Zealand’s obligations under the TRIPS¹ agreement. The TRIPS Agreement requires member states to provide a minimum patent term of twenty years from the date of filing of the patent application. There is no requirement to provide a longer term, although member states are free to provide a longer term if they wish.

3. Prior to the 1994 amendments, the patent term in New Zealand was a maximum of 16 years from the date of filing, with provision for up to 10 years extension on grounds that included inadequate remuneration.

4. Most of the patent extensions granted prior to the 1994 amendments were for pharmaceuticals, the grounds for extension being inadequate remuneration. The average length of extension granted was about 7.5 years.²

5. In most countries including New Zealand, pharmaceuticals cannot be marketed until they have received approval from the appropriate regulatory authority. The time required to carry out the tests and trials required to obtain approval can be substantial, and this time has been increasing in recent years, due to increased safety standards being applied by regulatory authorities internationally.

6. As pharmaceuticals are primarily developed for international markets, the time required to carry out the safety and efficacy tests is generally determined by international regulatory requirements. New Zealand is rarely the market for first approval. The New Zealand regulatory process takes approximately 18 months. It has been estimated, however, that the time taken to carry out all the tests and trials required before final approval is obtained in New Zealand has increased from an average of 4-5 years in the late 1960s to an average of over 10 years in the 1990s.³ This reduces the time in which the owners of patents for pharmaceuticals can market the pharmaceutical under patent protection. That is, the “effective patent life” (EPL), which is the portion of the patent term remaining after a pharmaceutical has been authorised for sale, is significantly less than the maximum patent term available.

¹ Agreement on Trade Related Aspects of Intellectual Property Rights, Annex 1C to the Agreement establishing the World Trade Organisation (WTO).

² John Parker Pharmaceutical Patent Extensions in New Zealand 1953 to 1995: An Appraisal, Economics Discussion Paper No. 0111, University of Otago, 2000.

³ John Parker "Pharmaceutical Patent Term Restoration in New Zealand," Prometheus, Vol. 18, No. 3, 2000.

7. Some non-pharmaceutical inventions, such as agricultural chemicals or new organisms, may also be subject to delays in gaining marketing approval. Most non-pharmaceutical inventions, though, can be placed on the market fairly soon after the patent application has been filed: for these inventions the effective patent life is similar to the maximum patent term available.

8. As a consequence of the reduced EPL for pharmaceuticals, the owners of pharmaceutical patents advocate that the patent term for pharmaceuticals be extended. They argue that such extensions are required to compensate patent owners for the portion of the patent term lost while carrying out the tests and trials required to obtain marketing approval.

9. Most of the costs in developing a new pharmaceutical lie in identifying and screening new chemical entities that may have pharmaceutical application in order to establish their safety and effectiveness. These costs are considerable, and typically amount to hundreds of millions of dollars. Once a new chemical entity has been identified as safe and effective it is relatively easy and cheap for others to copy it as they do not have bear these development costs. Pharmaceutical manufacturing costs are, relatively speaking, low.

10. Once the patent on a pharmaceutical has expired, generic pharmaceutical companies are free to copy the pharmaceutical and determine a price based on their costs. These prices are significantly lower than those for patented products, which is why many governments support the use of generic drugs.

11. Because of this, the pharmaceutical industry argues that if the EPL is too short, the ability of pharmaceutical companies to recover their research and development costs is reduced. If they cannot recover their costs, pharmaceutical companies may reduce their investment in research and development, leading to a reduction in the number of new drugs entering the market.

12. When considering this argument it is necessary to take into account the size of the relevant market. Most of the world’s pharmaceutical companies are based in North America or Western Europe and earn a large proportion of their revenue in these markets. North America and Western Europe together account for 60% of the world pharmaceuticals market and are major exporters of pharmaceuticals.

13. If, as a consequence of reduced EPL in these markets, pharmaceutical companies were to reduce their levels of investment, then this could adversely effect the economies of North American and western European countries. If this reduced investment led to fewer new high health benefit pharmaceuticals entering the market, this could also have negative consequences for human health.

“Springboarding”

14. In December 2002, the infringement provisions of the Patents Act 1953 were amended to add a “Regulatory Review Exception” (often known as a “springboarding” provision). The amendment, which is modeled on a similar provision in the Canadian Patents Act, provides that:

It is not an infringement of a patent for a person to make, use, exercise, or vend the invention concerned solely for uses reasonably related to the development and submission of information required under New Zealand law or the law of any other country that regulates the manufacture, construction, use, or sale of any product.

15. This amendment would allow the production, sale, or use of a patented product, without the patent owner’s permission, solely for the purposes of obtaining marketing approval. Such an exception to patent rights (often known as “springboarding”) is intended to allow generic products including generic pharmaceuticals, to enter the market shortly after the patent on the pharmaceutical expires.

16. Without this exception, manufacturers of generic products that require marketing approval (such as pharmaceuticals) would have to wait until the patent expired before starting the process of obtaining that approval. As it may take up to two or three years to conduct the testing required to obtain marketing approval, this has the effect of giving patent owners a period of market exclusivity after the expiry of the patent.

17. The owners of pharmaceutical patents have argued that springboarding provisions represent a significant erosion of their patent rights. They also argue that this is an argument for extending patent terms.

18. In March 2000, a Panel Report⁴ from the Disputes Settlement body of the World Trade Organisation ruled that springboarding provisions in the Canadian Patents Act were “not inconsistent” with the TRIPS agreement after a challenge from the European Union. Canada does not provide for patent term extension for pharmaceuticals.

19. The Panel Report accepted that the springboarding provision (referred to as a “regulatory review exception” in the report) was consistent with Article 30⁵ of the TRIPS Agreement. In referring to the additional period of market exclusivity available if generic manufacturers were not permitted to conduct testing prior to the expiry of a patent, the Report said (para 7.57):

The additional period of market exclusivity in this situation is not a natural or normal consequence of enforcing patent rights. It is an unintended consequence of the conjunction of the patent laws with product regulatory laws, where the combination of patent rights with the time demands of the regulatory process gives a greater than normal period of market exclusivity to the enforcement of certain patent rights.

20. The Panel Report also went on to comment on the question of patent term extension (para 7.82):

On balance, the Panel concluded that the interest claimed on behalf of patent owners whose effective period of market exclusivity had been reduced by delays in marketing approval was neither so compelling nor so widely recognized that it could be regarded as a "legitimate interest" within the meaning of Article 30 of the TRIPS Agreement. Notwithstanding the number of governments that had responded positively to that claimed interest by granting compensatory patent term extensions, the issue itself was of relatively recent standing, and the community of governments was obviously still divided over the merits of such claims. Moreover, the Panel believed that it was significant that concerns about regulatory review exceptions in general, although well known at the time of the TRIPS negotiations, were apparently not clear enough, or compelling enough, to make their way explicitly into the recorded agenda of the TRIPS negotiations. The Panel believed that Article 30's "legitimate interests" concept should not be used to decide, through adjudication, a normative policy issue that is still obviously a matter of unresolved political debate.

⁴ Panel Report WT/DS114/R

⁵ “Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking into account the legitimate interests of the patent owner.”

How Might Patent Term Extension in New Zealand Be Implemented?

21. There are no internationally recognised standards for implementing patent term extension. Countries are free to decide for themselves the conditions under which they will grant extensions, provided that these conditions are consistent with international agreements such as the TRIPS Agreement. Those countries that have implemented patent term extension have adopted broadly similar standards. Appendix 1 lists the features of patent term extension as it is implemented in some of these countries.

Is There a Case for Pharmaceutical Patent Term Extension in New Zealand?

22. The New Zealand market represents only a fraction (much less than 1%) of the world market for pharmaceuticals, and is a significant net importer of pharmaceuticals. The small size of the New Zealand market means that the nature and scope of the patent rights available in New Zealand (including patent term) are unlikely to have any influence on whether or not an overseas pharmaceutical company decides to invest in developing a new pharmaceutical.

23. This is likely be the case even for New Zealand based pharmaceutical companies. The very high costs involved in developing new pharmaceuticals mean that it is the availability of returns from large markets such as those in Europe and North America that are likely to determine whether it is worthwhile to invest in the development of a new pharmaceutical.

24. The reasons advanced for providing pharmaceutical patent term extension in such jurisdictions as the United States and the European Union are therefore not necessarily applicable to New Zealand. The question needs to be asked as to whether there are any other reasons why New Zealand might consider extending the patent term for pharmaceuticals.

25. Two main reasons can be advanced which might be used to justify patent term extension for pharmaceuticals in New Zealand:

• to avoid accusations of “free riding”; and

• to provide an incentive for overseas pharmaceutical companies to increase (or at least maintain) their levels of investment in New Zealand and thus contribute to the development of the New Zealand pharmaceutical industry.

26. Failure to allow patent term extension may lead to accusations that New Zealand is “free -riding”; that is, benefiting from the investment made by overseas companies in developing new pharmaceuticals, while contributing less than a “fair share” of the costs. This is perhaps a “moral” rather than an economic problem, although it could become an economic one if failure to extend the patent term led, for example, to reduced investment in New Zealand by pharmaceutical companies.

27. While the provision of patent term extension in New Zealand is unlikely to affect the total level of investment worldwide by pharmaceutical companies, it may have an influence on where this investment takes place. Pharmaceutical companies have indicated that the patent term is one of the issues that they consider when deciding where to invest.

28. Many of the countries that New Zealand is likely to be competing with for pharmaceutical company investment already have patent term extension (for example, the United States, European Union, Australia). There is a risk that if New Zealand does not also offer patent term extension, the pharmaceutical companies could decide to invest their research and development funds in these countries rather than in New Zealand. Any reduction in investment by pharmaceutical companies could adversely affect the future development of innovative New Zealand pharmaceutical or biotechnology companies.

29. There are, of course, factors other than the patent term that may influence the activities of pharmaceutical companies in New Zealand. Pharmaceutical companies have identified a range of other reasons why New Zealand may be considered to be a less favorable place for R&D investment compared with other OECD nations. These include:⁶

• a limited venture capital base;

• a lack of science graduates in key positions;

• lack of qualified international R&D management; and

• low investment in R&D by the rest of the private sector.

30. The small size of the New Zealand market, and restructuring amongst the international pharmaceutical companies may also be factors in discouraging investment in New Zealand by pharmaceutical companies.

31. On the other hand, there are a number of factors that make New Zealand an attractive place to do research. These include:⁷

• the calibre of investigators conducting clinical trials is of the highest order and this is recognised internationally by pharmaceutical companies;

• the results of research and the integrity of researchers and data are rated highly;

• New Zealand researchers deliver on time and on budget;

• researchers are proficient in the language of international pharmaceutical companies,

i.e. English;

• research facilities, although in some cases aging, are of a good standard;

• communications are relatively cheap and effective;

• New Zealand is a cost-effective place to do trials.

⁶ New Zealand Institute of Economic Research Bio-Pharmaceuticals – A Pathway to Economic Growth?, 2002, Part 1, p15.

⁷ Ibid., Part 2, pp. 18 – 19.

Implications for New Zealand of Pharmaceutical Patent Term Extension

32. Extending the patent term for pharmaceuticals in New Zealand may provide benefits for the New Zealand economy, but will also impose costs. In deciding whether New Zealand should provide for pharmaceutical patent term extension, these costs and benefits will need to be considered to determine what the net effect on New Zealand of patent term extension will be.

Potential Benefits of Extending the Patent Term for Pharmaceuticals

33. As noted above, any benefits to New Zealand from extension of patent term for pharmaceuticals are likely to lie in the possibility of increased investment (or at least maintenance of existing levels of investment) in New Zealand by overseas pharmaceutical companies that occurred as a result.

34. What form might this investment take? The development of a new pharmaceutical includes several stages:

1. discovery of a potential new pharmaceutical;

2. preliminary testing;

3. assessment of safety and toxicity

4. assessment of efficacy;

5. clinical trials; and

6. marketing and production.

35. The bulk of the funds that go into research and development are spent in steps iii, iv and v. The pharmaceutical industry believes that increased investment in those areas would provide the infrastructure to develop the first three steps in the pharmaceutical development process.⁸ That is, increased pharmaceutical company investment in New Zealand has the potential to increase New Zealand’s capability to carry out basic pharmaceutical research.

36. In Biopharmaceuticals – A Pathway to Economic Growth?, a report prepared for the Researched Medicines Industry by the New Zealand Institute of Economic Research, it was suggested (see Part 1 p25) that:

The scale of global R&D investment and the developments in biotechnology favoring smaller specialist R&D providers, suggest that New Zealand has an opportunity to build on its existing agriculturally based biotechnology sector and nascent biotechnology industry to expand exports substantially.

37. This suggests that in the future, more and more biotechnology research will be carried out by specialist research and development firms rather than by the major pharmaceutical companies. If extending the patent term for pharmaceuticals, by stimulating greater investment in New Zealand by overseas pharmaceutical companies, led to an increase in

⁸ Ibid., Part 1 p19.

New Zealand’s capacity to carry out such research, then New Zealand could be well placed to take advantage of this trend. This would contribute to the goal of the government’s Growth and Innovation Framework to build a “knowledge economy”.

Will Pharmaceutical Patent Term Extension Result in Increased Investment in New Zealand?

38. The effect of extending the term for pharmaceutical patents would be to increase the revenue that pharmaceutical companies derive from their New Zealand operations. There is, though, no certainty that this increased revenue would lead to significant additional investment in research and development activities in New Zealand by overseas pharmaceutical companies.

39. This is because nearly all the profits that might be earned from any new pharmaceuticals developed from these activities would be earned in other, larger markets such as the United States and the European Union rather than in New Zealand. Increasing the length of the patent term for pharmaceuticals in New Zealand will not affect the level of profits from these other markets. This suggests that the issue of the patent term in New Zealand should not be a significant factor in pharmaceutical companies’ decisions on whether to invest in New Zealand.

40. As noted above, any benefits to New Zealand from pharmaceutical patent term extension are likely to lie in the possibility of increased investment in New Zealand by overseas pharmaceutical companies. This raises the question: what is the likelihood that these companies would increase their investment in New Zealand in return for an extended patent term for pharmaceuticals?

41. When considering whether it would be possible to require pharmaceutical companies to increase their levels of investment in New Zealand as a condition of extending the term of their patents, it is necessary to have regard to New Zealand's international obligations.

42. Among other things, Article 27.1 of the TRIPS Agreement specifies that patent rights shall be enjoyable without discrimination as to the field of technology or whether the products are imported or locally produced. Requiring increased local investment as a condition of pharmaceutical patent term extension may be seen as a form of discrimination inconsistent with Article 27.1. No other country that provides for pharmaceutical patent term extension (see Appendix 1) requires increased investment as a condition of extension.

43. If the provision of pharmaceutical patent term extension did lead to an increase in investment in New Zealand by pharmaceutical companies, there would be benefits to some sectors of the New Zealand economy. It is not clear, though whether the overall benefits of this increased investment would be sufficient to offset the costs imposed on New Zealand by an extended patent term. That is, would providing for pharmaceutical patent term extension provide a net benefit to New Zealand as a whole, even though there may be benefits to particular groups within the economy?

44. It may also be difficult to repeal provisions for pharmaceutical patent term extension if, once provided, it was determined that they were providing no benefit to New Zealand. Repealing provisions for patent term extension would not contravene New Zealand’s obligations under the TRIPS Agreement, provided that New Zealand maintained a minimum 20 year patent term. Such a move could be seen as a “backward” step by New

Zealand’s major trading partners and may harm New Zealand’s relationship with those countries.

45. In summary, then, there is no guarantee that extending the patent term for pharmaceuticals will lead to increased levels of investment in New Zealand by overseas pharmaceutical companies. If investment levels are increased, then there is no guarantee that the benefits of the increased investment would be sufficient to offset the costs.

Potential Costs of Extending the Patent Term for Pharmaceuticals

46. If the patent term for pharmaceuticals is extended, then this would delay the entry of generic pharmaceuticals onto the New Zealand market. Generic pharmaceuticals are generally cheaper than the original patented pharmaceutical. This would have the effect of increasing the total amount that New Zealanders pay for patented pharmaceuticals.

47. The cost of this would be reflected through higher prices to consumers of the pharmaceuticals. For New Zealand, most of the cost would be incurred by the publicly funded health system. While the actual cost would depend on the design of an extension, the Government’s agency for managing pharmaceutical expenditure, PHARMAC, has estimated that the cost of extending patents over the next four years could be from $85 to

$135 million depending on PHARMAC’s ability to renegotiate supply agreements. This will either reduce the availability of subsidised pharmaceuticals to New Zealanders or, to maintain the same level of access, require the government to increase health sector funding. There will also be increased costs to consumers for nonsubsidised pharmaceuticals.

48. As most pharmaceutical patents granted in New Zealand are owned by overseas companies, it is likely that most of the extra revenue generated for patent owners by an extended patent term will flow overseas.

49. An extended patent term for pharmaceuticals may also disadvantage local manufacturers of generic pharmaceuticals. As well as delaying the entry of New Zealand generic manufacturers into the local market, patent term extension may also make it more difficult for them to compete in export markets. Generic manufacturers in countries that do not have patent term extension⁹ will be able to enter the market in those countries sooner than New Zealand manufacturers can. In addition, foreign generic manufacturers may be in a stronger position to sell in New Zealand once the New Zealand patent expires, as they will already be in production.

Alternatives to Patent Term Extension

50. The main benefit to New Zealand of extending the patent term for pharmaceuticals would appear to be the possibility of increased local investment by overseas pharmaceutical companies. As discussed above, while pharmaceutical patent term extension may result in an increase in investment in New Zealand, there is no guarantee that this investment will provide a net benefit.

51. In light of this, are there measures other than patent term extension which could provide greater incentives for overseas pharmaceutical companies to invest in New

⁹ For example, Argentina, Brazil, Canada, China, Hungary, India, Malaysia.

Zealand? If so, these measures may be more likely to provide a net benefit for New Zealand than patent term extension.

52. In many OECD nations (but not in New Zealand), governments and pharmaceutical companies have come to agreements over research and development investment and pharmaceutical pricing.¹⁰ Two examples of such agreements are found in Canada and Australia. Both these schemes focus on pharmaceutical prices. Any similar scheme may have implications for how New Zealand manages its pharmaceutical purchases.

53. Canada’s patent legislation also contains provisions (s79 – 103 of the Patents Act 1985) that allow pharmaceutical companies to charge higher prices for their patented pharmaceuticals where some of the research involved in developing the medicine has been done in Canada.

54. The Australian government’s Pharmaceutical Industry Investment Programme (PIIP) compensates pharmaceutical companies for the effects of low prices of pharmaceuticals supplied under the Pharmaceutical Benefits Scheme (PBS) where the companies are required to increase their research and development expenditure, as well as their domestic manufacturing and export activity in Australia, by agreed amounts.

55. The PIIP has also been the subject of a recent report by the Australian Productivity Commission.¹¹ The report included the following comments (“Key Points”, pXIV):

The PIIP has been effective in stimulating R&D and, to a lesser extent, value added in production. It has also had broader benefits for the capabilities of the industry, for example, by shifting R&D to more complex areas.

Despite this effectiveness, the program is not likely to make Australia better off overall.

• Its major rationale - to help counter the effects of low PBS prices on pharmaceutical activity - is, by itself, insufficiently strong to justify a tax-funded program, with the costs that this entails.

• Notwithstanding some benefits, particularly from spillovers associated with R&D activity, it is likely that the program generates net costs for Australians. This mainly reflects the distorting costs of raising taxes and the difficulties in targeting the program that lead to significant transfers abroad.

• It has some inflexibilities in its design that reduce its benefits.

56. These agreements are in addition to other incentives for research and development investment which governments may provide, for example, tax incentives or direct support for research or joint ventures.

¹⁰ Ibid., Part II, p14.

¹¹ Productivity Commission Evaluation of the Pharmaceutical Industry Investment Program, Research Report, AusInfo, Canberra, 2003. http://www.pc.gov.au/research/studies/piip/finalreport/

Appendix 1: Pharmaceutical Patent Term Extension in Other Countries

57. A number of countries now provide for extended patent terms for pharmaceuticals. These include Australia, Japan, Korea, Israel, the United States, and the member states of the European Union. Although there are no internationally agreed standards for patent term extension, the provisions for patent term extension in those countries that provide for it contain some common features:

• Extension is not automatic; the patent owner must make a specific application;

• The length of the extension granted depends on the length of time between the date of filing of the patent application and the date of marketing approval;

• A maximum extension of 5 years is provided for;

• The rights of the patent owner in respect of the patent are usually limited during the extended term compared with the rights available during the original term.

58. Although some countries do provide for patent term extension for pharmaceuticals, many countries do not. These include Argentina, Brazil, Canada, China, Colombia, Ecuador, Hungary, India, Malaysia, Peru, South Africa and Venezuela.

Australia

59. Sections 70 – 79A of the Australian Patents Act 1990 provide for the terms of patents for pharmaceuticals to be extended by a maximum of five years. To qualify for such an extension, the pharmaceuticals must be included in the Australian Register of Therapeutic Goods, and the period beginning on the filing date of the patent and ending on the first regulatory approval date for the substance must be at least 5 years. These provisions were inserted into the Patents Act 1990 by the Intellectual Property Laws Amendment Act 1998.

60. The effect of these provisions is to provide for an EPL of at least 15 years provided the time between the filing date of the patent application and the date of first regulatory approval is less than 10 years. If regulatory approval takes longer than 10 years the EPL will be less than 15 years. The rights of the patent owner are restricted though. The patent owner’s rights are not infringed by exploitation of the patented product for non- therapeutic uses, or for the purposes of gaining regulatory approval in Australia or elsewhere.¹²

European Union

61. Members of the European Union issue “supplementary protection certificates” (SPCs) which can be in force for a maximum of 5 years from the date that a patent expires in cases where the commercialisation of a product has been delayed by the need to seek a marketing authorisation for that product. Supplementary protection certificates are only available for medicinal products and plant protection products. The protection is only

¹² S78 Patents Act 1990.

available for the specific product for which marketing authorisation was sought, not all the products covered by the patent.

62. The duration of an SPC is the time between the date of first regulatory approval in an EU Member State and date of filing of the patent application, less five years, with a maximum duration of five years. It is necessary to apply for an SPC on a nation by nation basis throughout the EU.

United States

63. Section 156 of the United States Patent Act allows for the term of a patent to be extended where the patent relates to a product where the commercial exploitation of the product is delayed by the need to seek regulatory approval to market it. The duration of the extension is the period between the date the patent was granted and the date of marketing approval, with the proviso that the sum of this period and the patent term remaining at the date of approval must not exceed 14 years. This provides for a minimum EPL of 14 years. The United States administration has sought comparable patent extension policies from trading partners.

Appendix 2: Questions

1. Should New Zealand make provision for extension of patent term for pharmaceuticals? If so why?

2. Will extension of the pharmaceutical patent term lead to increased investment in New Zealand by overseas pharmaceutical companies? If so how likely is it that increased investment will occur?

3. What would be the benefits to New Zealand of an increased level of investment by overseas pharmaceutical companies (if it occurred)?

4. What would be the costs to New Zealand of extending the patent term for pharmaceuticals?

5. How likely is it that the benefits to New Zealand of pharmaceutical patent term extension will exceed the costs (that is, will there be a net benefit to New Zealand)?

6. Are there any alternatives to extending the patent term for pharmaceuticals that might provide greater benefits for the same or lower cost?