Reading between the lines, government's response to the Productivity Commission's review of intellectual property arrangements is a significant victory for the research-based life sciences sector.
Government has essentially rejected its most controversial recommendations, including for the effective abolition of the five-year patent-term extension and the exclusion of intellectual property from negotiation of future bilateral trade agreements.
It has accepted the recommendation to abolish the innovation patent system, largely because it has not been extensively used, and will make further changes to what defines the 'inventive step' to bring Australian law into line with Europe.
Government says it will 'discuss ways to improve the patent term extension system with the sector', which is one of those phrases governments' use to politely reject a recommendation, but it has in principle rejected any change as well as the report's central and utterly ridiculous argument companies should only be compensated for delays in the 255 working day regulatory assessment process.
This is a major victory for the research-based sector and, frankly, fairness.
Government has accepted that the five-year patent term extension period compensates companies for the time it takes to develop the evidence required to successfully navigate the regulatory assessment process.
According to its response, "The Government acknowledges that for many pharmaceutical products, the effective patent life – the period between marketing approval and patent expiry – is reduced by the time taken for companies to obtain evidence to support applications under the subsequent regulatory review process. In common with other countries, this can affect incentives to discover and develop new pharmaceutical products."
The Productivity Commission's recommendation was an appalling attempt to further institutionalise an Australian 'free-ride' on the cost of drug development and completely contradicted wider innovation policy. It was rightly rejected.
Its direct and quite brutal rejection of the recommendation to exclude intellectual property from negotiation of future bilateral trade agreements was a victory for common sense.
Australia maintains multiple existing bilateral trade agreements with significant chapters on intellectual property. These agreements, notably with the US, are not going anywhere so what would be the point of accepting the recommendation? Even if Australia chooses not to include intellectual property in a future bilateral trade agreement, such as with the UK or EU, that will not change its commitments in existing agreements.
Moreover, and maybe this reflects the Productivity Commission's naivety on trade negotiations, can Australia really just rock up, demand all sorts of inclusions on things like agriculture and not expect to have to concede something in return?
Government has given its in principle support for the introduction of a system of monitoring settlements between originator and generic pharmaceutical companies to detect potential so-called pay for delay agreements.
"The Government notes the concerns raised by some stakeholders that there is presently no evidence that pay for delay activity is occurring in Australia," it says in its response. "However, it does not follow that such activity has not occurred or that incentives to engage in such conduct do not exist. Rather, it may only confirm the difficulty of detecting such agreements, particularly where an agreement that affects the price or availability of pharmaceuticals in Australia is made overseas."
It is a new compliance process, reflecting a similar reporting requirement in the US, and if the experience there is any guide it is almost certain to reveal something. In the end, it might come down to how government defines what constitutes a pay for delay agreements.
You wonder whether the mention of agreements "made overseas" might be a reference to the 2014 settlement between Sanofi, Bristol-Myers Squibb and Apotex on clopidogrel.
The commonwealth is currently seeking compensation from the originator company regarding the delayed entry of generic versions of clopidogrel. The company did attempt to argue the settlement, made in relation to clopidogrel-related litigation in Canada, Australia and the US, essentially invalidated the commonwealth's case. The federal court rejected the argument.
On the wider issue of intellectual property covering pharmaceuticals, the Productivity Commission's review followed the Pharmaceutical Patents Review in becoming the second in four years to essentially amount to very little.
We need to be practical and realistic about the likely 'firestorm' response of our leading trading partners to any attempt, current or future, to wind back protection for pharmaceutical patents.
This is not to say reviews into what are very important areas are not worthwhile, just that they need to conducted in a way that recognises the reality, particularly in relation to intellectual property where policy is set across borders not within them. Some may not like it but it is the reality they have to accept.