Patent review bonanza has industry under siege

Continual government reviews of the intellectual property system are creating uncertainty in the life sciences industry that could hurt its future success.

Conventional wisdom dictates that a strong and reliable intellectual property and patent system is a standard requirement to attract sought-after foreign and domestic investment. So too public policy certainty in the business environment encourages business confidence, underpinning commitments to research and development, staff expansion and the like.

The flip side is that unstable policy and an uncertainty about the patent system discourages investment, as investors and businesses hold their cash and wait for more certain times. In every corner of the business world, a lack of confidence, caused by uncertainty, is the enemy. In industries where the business model is based on large investments over long periods, like biotechnology, the impacts of uncertainty are amplified.

This instability underscores a huge problem for the biotechnology industry in Australia at present: the uncertainty that is being created by continual government consultations on the same issues, such as patents.

The passing of the ‘Raising the Bar’ Bill earlier this year was the culmination of a long and difficult process. Specifically, it addressed the concerns that patents were hampering research and enshrined in law certainty for researchers to continue their work without fear of infringing patents. It should have heralded a break in consultations, while the impacts settled and we assessed if the perceived problem was solved.

But nothing could be further from the truth. Instead, the consultations and their related uncertainty facing industry at present remain; mainly targeted at patents. For example, AusBiotech has recently provided a submission to the Productivity Commission’s review into compulsory licensing in the patents system. The commission was examining whether and how to ensure access to patented technology, while maintaining the patent incentive to create and protect new technologies, and it is yet to report.

Last month, the federal government announced a review into the patenting of pharmaceuticals in Australia, when it appointed a three-person expert panel to review the “appropriateness of the extension arrangements for pharmaceutical patents”. This review is ongoing. In another recent review conducted by IP Australia, the federal government is “considering tough new standards for Innovation Patents in order to discourage large companies from abusing the IP system”.

The industry is also facing ongoing proposals to ban gene patents, despite the fact that there have already been two reviews by the Law Reform Commission, reviews by the Advisory Council on Intellectual Property and two Senate Inquiries, none of which have made a case for banning gene patents.

The cumulative effect of all these patent-related reviews is to make the business environment more uncertain, which has the potential to destabilise an industry that is returning real results to our economy and is bedding down a strong foundation for our future.

For example Australia’s pharmaceutical manufacturing exports are on the rise, having officially taken over as Australia’s number one export, with $4.1 billion in 2011-12. This is substantially more than the car industry at $2.8 billion and more than double the wine industry at $2 billion.

Patents on medicines only have five-year protection for clinical trial data submitted for regulatory approval, while most other industrialised countries offer eight to 12 years.

A new report from the UK Office of Health Economics reviewed research published over the last three decades and confirmed what the industry has know anecdotally for some time: the costs of R&D are increasing. The study shows an increase in costs from £125 million ($199 million) per new medicine in the 1970s to £1.2 billion ($1.9 billion) in the 2000s (both in 2011 prices).

The R&D cost of a new medicine identified four factors contributing to increasing R&D costs: higher company out-of-pocket costs, up nearly 600% over the period; lower success rates from clinical development as researchers tackle tougher therapeutic areas such as dementia and arthritis; increases in R&D time as science becomes more complex, from six years to 13.5 years; and increases in the cost of capital from 8 to 11%.

If Australia is serious about becoming a knowledge-based economy, the case is strong for extended and increased patent protection, and an end to the review bonanza that currently besieges us.