An Unexpected Foe Challenges Pharma In Aussie Generics-For-Export Battle

Generic manufacturers and labor groups in Australia say current patent legislation is handicapping industry's ability to compete on the world stage and that, if the status quo remains, manufacturing and jobs are likely to go elsewhere.

"There are $150 billion in patented products coming off patent protection and Australia is cut off from that market," said Tim Oldham, Asia-Pacific president at Hospira, a global maker of injectable generics. Oldham said only about 10 percent of these products can be made in Australia.

Pharmaceuticals are Australia's second largest export manufacturers and the generics industry is the fastest growing segment. According to the Generic Medicines Industry Association, manufacturing export-only generics could increase the country's pharma exports by 10 percent from the current $3 billion.

Under patent extension regulations, Australia does not allow companies to manufacture generic versions of drugs that are still under patent there, even if those drugs are solely intended for export to markets where patent protection has expired. As a result of legislative quirks, including longer application procedures, patent protection is typically 12 to 18 months longer in Australia than elsewhere. This means that a product may come off patent protection in European, U.S. or Asian markets a year or more before than in Australia but manufacturers there cannot tap those new markets.

Last year Hospira started lobbying the government to change the regulations and allow manufacturing for export of drugs still under patent in Australia but not elsewhere. The government said it plans to make a decision soon, but provided no timeline.

The debate is picking up steam and has pitched big pharma, represented by Medicines Australia, on one side and a phalanx of groups and companies on the other including the Generic Medicines Industry Association (GMIA), AusBiotech, the National Union of Workers and the Australian Manufacturing Workers Union.

In a July 7 release, the GMIA said the changes would eliminate self-imposed barriers, maintain the balance between patent owners and generic companies but would not weaken intellectual property legislation.

"These molecules are going to be made somewhere… we are talking about very concrete examples of generic products that are going offshore," Oldham said.

One case in point is an oncology drug Hospira produces in South Australia. Over the next few days the company will decide whether to move manufacturing elsewhere, possibly India.

"In order to meet market expiry elsewhere we have to firm up manufacturing," Oldham said, but noted that current manufacturing in Australia is not likely to be affected. On the other hand, new manufacturing could go elsewhere.

Medicines Australia, which represents multinational drug manufacturers, says the change could be devastating to the country's innovation industry by diluting patent protection (Also see "Australian Legislators Debate Whether To Ease Restrictions On Producing Generic Drugs For Export" - Scrip, 7 Jul, 2009.).

"We are a country that boasts a sustainable competitive advantage in attracting and conducting high-quality, outcomes-oriented R&D. Australia's pharmaceutical industry alone attracts more than AU$1 billion a year in global R&D investment," said Medicines Australia Chief Executive Ian Chalmers. "Such investment depends heavily on a consistent and predictable business environment. … If predictability is undermined and IP legislation weakened, global companies will seek other investment destinations."

Oldham disagrees.

"We have not seen one concrete example of projects that would go offshore as a result of the change. … Their position is, in my view, almost nonsensical," Oldham said.

Uncharacteristically, the issue has spread beyond the drug companies and the government. The National Union of Workers, which represents some 95,000 people in the food, pharmaceuticals, rubber and plastics industries has sided with Hospira in an effort to attract more drug manufacturing, and jobs, to Australia.

"Generic medicines are growing at a much faster rate than other medicines," said NUW National Secretary Charlie Donnelly. "Many countries are competing for this work."

And Australia's own laws are a "disadvantage", he said. "In terms of Australian manufacturing, this is a classic own goal."

"If a drug is under patent in Australia, none of the generics can be sold [here]," he said. "We are protecting the patents for Australian purposes."

Donnelly believes big pharma has a typical reaction whenever any suggestion is made of a change to patent legislation.

"It's almost a reflex action. You talk about doing anything with patents and they oppose it," Donnelly said. "Their position is almost illogical because we are about expanding the industry in Australia."

"If anybody else is allowed to manufacture (a product) and export it, we want to be allowed to manufacture it and export it," he said. "For Australia to lock itself out of those markets is almost nonsensical."

- Alfred Romann ([email protected])