While Treasurer Joe Hockey is complaining that Australia is running out of money to fund the health system, the Coalition Government has buried a report with recommendations for large-scale savings on drug costs.
Not long before the Gonski Review website vanished in late 2013, a less well known but potentially equally important review also quietly disappeared from view. Unlike the Gonski Review, this particular disappearing act barely made a ripple on the public’s consciousness.
But the burial of the findings and recommendations of the Review of Pharmaceutical Patents has huge economic, social and health implications for Australia.
The review began in 2012 and released a highly controversial draft report [PDF 2.2MB] in April 2013. The final report was delivered in May to the previous government, but still has not been released.
The Minister for Industry Ian Macfarlane recently indicated in Parliament that the current Government was not planning to release the final report, and was not even considering the recommendations in the draft report. And some time in the second half of 2013 the website for the review was taken offline along with all of the submissions.
The draft report and background paper are still available through the IP Australia website.
The draft report was controversial primarily because it highlighted the ballooning cost of granting extensions beyond the standard 20-year term for pharmaceutical patents. Since 1998, patent holders have been able to obtain extensions of up to five years to compensate for delays in issuing patents or in obtaining regulatory approval for a pharmaceutical.
Patent term extensions were originally made allowable under Australian law to encourage investment in research and development. But this comes at a heavy cost. While a product is under patent, cheaper generic versions of the drug cannot be manufactured or sold. The draft report flagged that patent term extensions already cost Australian taxpayers in the order of hundreds of millions of dollars a year.
The panel’s draft report was highly critical of the current negotiations for the Trans Pacific Partnership Agreement.
The draft report foreshadowed that the panel was developing economic estimates of the savings that could be made if patent term extensions were reduced. Where are these figures? These fiscal statistics have been buried along with the final report.
And in case our policy makers need any more convincing, the panel found that extending patents was not an effective way to stimulate investment in research and development, since those decisions are not made near the end of patent terms. The draft report suggested reducing the current five-year extension to patent terms and instead introducing a direct subsidy for Australian R&D targeted specifically to areas that would be of benefit to the community.
The panel’s draft report was also highly critical of the current negotiations for the Trans Pacific Partnership Agreement, a regional trade agreement Australia is in the final stages of negotiating with 11 other countries. Leaked negotiating documents [PDF 636KB] show the US has proposed intellectual property (IP) settings that would expand the range of patents eligible for patent term extensions, adding further costs to the PBS for Australian taxpayers.
This is just one of the many provisions proposed for this trade agreement that would expand and extend patent monopolies and delay the availability of cheaper generic drugs.
The draft report questioned whether Australia’s approach to trade agreements was based on ‘a broad economic understanding of what approach to IP is in Australia’s and other countries’ interests’. And it recommended that:
‘The Government should strongly resist changes – such as retrospective extensions of patent rights – which are likely to reduce world economic welfare and lead other countries in opposing such measures.’
In the Government’s haste to conclude the Trans Pacific Partnership negotiations, it is not surprising it is unwilling to consider the findings of the Review of Pharmaceutical Patents or to make them publicly available. This approach is consistent with the regrettable lack of transparency surrounding the TPP negotiations themselves.
But the burial of the final report, the submissions made to the review and the economic estimates of the costs of patent term extension is particularly concerning in the light of the current Government’s search for cost-cutting measures.
It will be a shame if we end up with knee-jerk policies like $6 GP co-payments in an attempt to cut health system costs when sensible reforms to patent law could generate hundreds of millions of dollars of savings through the PBS. And an even worse prospect would be the further extension of patent monopolies through our international trade agreements, adding hundreds more millions to the health budget.
How does this add up, Mr Hockey?
First published on The Drum on 28 February 2014.