Drug firms in legal fight over price cuts

The government and ultimately patients are expected to reap hundreds of millions of dollars in savings as a result of legal action to bring drug companies to account for seeking to escape enforced price cuts.

The government is to launch legal action against companies which have sought to prolong protection against price reductions by claiming fresh patents for their products. These products are subsequently found to contain the same molecule as the original product but have meanwhile escaped official price reductions and competition from cheaper generic products.

Court findings of patent invalidity come after years of litigation, by which time the company has generated many millions of dollars in extra payments from the Pharmaceutical Benefits Scheme.

Fairfax has been told by industry sources there are several such cases. An early target of government legal action is expected to be the anti-clotting drug, clopidogrel, which may yield the government about $60 million in back payments because of a court undertaking by the maker, Sanofi, to compensate affected parties if the patent were found to be invalid.

The product's original patent was to have ended in 2003, but as a result of an ''evergreening'' application for a new patent, the company was given extended patent rights until next February. This was challenged by the GenRex generics medicine company in 2007 and after several court cases, the High Court revoked the patent in 2010.

Industry estimates put the potential total dividend to the PBS of such actions at about $500 million because of the probable savings available from price competition and government-mandated price cuts for what is a widely-used drug to counter strokes.


A spokesman for the Health Minister, Tanya Plibersek, said the government has paid ''millions more than it needed to for medicines such as clopidogrel, because companies tried to unfairly stop new products entering the market''.

The legal plan indicated the commitment to recover the funds through the courts where this occurred, he said.

''In doing so the government is also sending pharmaceutical companies a strong message that the Australian taxpayer will not tolerate unsubstantiated attempts to maintain market monopolies past a medicine's patent expiry,'' the spokesman said.

The Greens health spokesman, Richard Di Natale, accused companies of adopting ''sneaky tactics to prevent patients from getting access to cheaper medications''.

Senator Di Natale said patents were to reward innovation.

''But 'evergreening' by pharmaceutical companies exploits patent law to prevent competition from cheaper generic drugs. This means the taxpayer ends up paying more for medication.

''We are paying too much for some medicines in this country, and the strategy of 'evergreening' is partly responsible,'' Senator Di Natale said.

Kate Lynch, chief executive of the Generic Medicines Industry Association, said the practice of ''evergreening'' by drug companies to extract maximum profit potential out of a product was ''a growing problem'' probably reflecting the reality of tougher trading conditions facing pharmaceutical companies.

The benefit to the public was not only in lower prices but also removing the option of companies relying on existing products and not developing even better alternatives, Ms Lynch said.

A spokeswoman for Sanofi last night said the Commonwealth government had approached Sanofi on the issue, however, said it was ''not appropriate'' to comment.