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Wednesday, 4 August 2004
Page: 25588

Senator STOTT DESPOJA (11:39 AM) —I also rise with my Democrat colleagues to address the US Free Trade Agreement Implementation Bill 2004 and the US Free Trade Agreement Implementation (Customs Tariff) Bill 2004. I wish to discuss in particular the issue of patents. I do so from the perspective as the Democrats' science and technology spokesperson. As some senators would know, I have had a long interest in the issue of patent law and intellectual property law, having initiated a least one inquiry recently into the patenting of stem cells and stem cell products, having introduced a private senator's bill in relation to patents and having moved many amendments over the years in relation to this issue.

I recognise that the impact of the FTA on pharmaceuticals in Australia has been widely debated in this place and has recently become one of the two issues of contention. Monday night's Four Corners program on the ABC, which I hear has been repeatedly referred to in this place, revealed the high and ever increasing cost of pharmaceuticals in the United States. According to that program, people in the United States can save $US10,000 a year by buying the majority of their drugs in Canada, although of course technically this is breaking US law. That program also reported that an American would pay more than $120 for a script that would cost an Australian concession card holder $3.80, with the government providing a subsidy of $60.

While the Prime Minister, John Howard, maintains that the FTA will not affect the price of pharmaceuticals, President George Bush does believe that Australia is paying too little for American drugs. Four Corners revealed the intense pressure that exists within the United States from the pharmaceutical industry and indeed their extensive lobbying through the FTA negotiations. Senator Jon Kyl, one of the chief FTA lobbyists, was quoted as saying:

... there's no such thing as a free lunch. Somebody has to pay for the research and development of these miracle drugs.

It is clear now that the US pharmaceutical companies see access to Australian markets through the free trade agreement as a great opportunity for their expansion.

The FTA will have several effects on Australian patent laws and the pharmaceutical industry. I will not delve into all of these, because they have been raised by other colleagues. I will, however, address the issue of changes to patent laws, which has been a minor consideration in the FTA debate until very recently—in fact, probably until yesterday, when it suddenly became an issue that the media considered worthy along with some others.

Under article 17.10.1(a) the FTA will require Australia to maintain a five-year data exclusivity period for pharmaceutical test data, meaning that this current practice will be locked in. Data exclusivity periods prevent the entry of generic drugs, as generic drug companies cannot rely on test data generated by a patent holder to register an equivalent product until the data exclusivity period has expired. The longer the data exclusivity period, the greater the delay in the introduction of generic drugs and the longer the originator company maintains its market monopoly.

The only real price competition in the pharmaceutical market comes from generic manufacturers, as we know. When generic versions of a drug become available, prices usually fall dramatically. PBS data shows that, on average, the price for a drug falls by 30 per cent when a generic enters the market. By locking in a five-year minimum, Australia is giving up the right to reduce this data exclusivity period and thereby facilitate faster entry of generics into the pharmaceutical marketplace. This goes well beyond our TRIPS obligations.

The FTA will also have the effect of permanently banning parallel imports of pharmaceuticals. The FTA provides patent owners with the exclusive rights to prevent importation of a patented product. I acknowledge that the parallel importation of drugs is currently not allowed in this country but, again, by locking this in we limit Australia's ability to lift this ban should this be considered necessary to encourage competition in the pharmaceutical sector and maybe reduce costs in the future. Studies suggest that in the European Union, where parallel importation is allowed, competition from the parallel importation of certain drugs has helped to keep drug prices down. The Senate committee report explicitly states:

This committee agrees that a decision to permanently ban parallel imports of pharmaceuticals, or any other product, should only be taken by parliament if it decides it is in our national interest after due consideration. It should not be forced on us as part of a trade deal. It is ironic that a `Free Trade Agreement' would contain an anti-competitive provision effectively limiting the free trade of certain goods. This is one provision the committee views as a negative for Australia.

And yet the Labor Party supports this legislation regardless. The examination of the broader issues surrounding patents has been rushed and it has not been thorough, despite the attention on the pharmaceutical debate. The JSCOT report on the free trade agreement dedicated just over one page to patents and referred to a DFAT comment on the issue in paragraph 16.78:

The Committee understands that the Article on patents generally reflects Australia's current laws and it is not anticipated that major changes to the Patents Act 1990 will be needed to implement the FTA.

This is despite receiving a 98-page submission that solely addressed the patent related issues of the free trade agreement. Further to this, under the heading of `Business as usual' the report stated in paragraph 16.83:

However, the Committee is satisfied that the use of the word `harmonisation' in the DFAT fact sheet has led to some confusion in the general community and that the claims made by the various individuals and organisations will not eventuate.

The Senate report delved into the issue in a little more depth. It dedicated three pages to the issue of patents. Arising from the discussion of intellectual property, the report stated:

The US motive for the strong protection of IP rights is clear. The US has a disproportionately high share of IP rights and products that contain IP rights in its exports. It has therefore been proactive in promoting the rights of its own IP owners.

The committee, interestingly, reached this position after considering the concerns of Mr Henry Ergas, the former Chair of the Intellectual Property and Competition Committee. He states:

Australia is being obliged to adopt IP laws that can disproportionately favour producer interests.

In the article he explains how the US Federal Trade Commission—the US counterpart to the ACCC—recently examined the balance between competition and patent laws and identified that the US had been granting `excessively broad patents' and `too many trivial patents'. However, the report concludes at paragraph 3.214:

The Committee is satisfied that fears about `harmonisation' of Australian and United States patent law are probably unfounded. It bases this conclusion on DFAT's assurances that the AUSFTA will not change the nature of what is patentable in Australia.

Broad patents prevent or delay research and innovation while numerous trivial patents have a stifling effect by complicating the patent landscape that researchers must negotiate when determining whether their project will breach an existing patent. Electronic Frontiers Australia also expressed concern in their submission, stating:

... the FTA would commit Australia to making patents available `in all fields of technology', regardless of whether such monopolies are needed or are in our interests. Australia would only be permitted to exclude from patentability medical treatments and inventions that are against public order or morality.

Article 17.9.8 of the FTA provides for patent extensions where the use of a pharmaceutical patent has been shortened by the market approval process. The FTA does not specify a maximum period for the extension, only a minimum period of delay to qualify for the extension. This provision has got to be of some concern to people in this place. The FTA also states that when a generic manufacturer seeks approval to market its product before the patent's expiration, the patent holder will be notified. This early notification of the patent holder to potential competition greatly increases their ability to enforce their patent and stifle competitors' efforts to get their generic product to market.

The Senate committee has placed all its eggs into DFAT's basket in its findings on the changes to patents. Some of these changes will affect not only pharmaceuticals but also the commercialisation of other research. At a time like this it would be incredibly useful to have an expert report in front us that discussed the whole issue of patents in the area of health research. In 2002 during debate over the Research Involving Human Embryos Bill, I won Senate support for an amendment to gain an ALRC and AHEC investigation and report on the intellectual property and patent issues concerning stem cells and stem cell products. It is interesting to note that this report has been completed—and once again I acknowledge the hard work of those two organisations in this area—and we are awaiting its release. I wonder—and perhaps a minister can answer this for me during their comments in this debate—when it is going to be released. I was under the impression that it was due to be tabled in this place this week—in fact, yesterday. I am genuinely interested in knowing when that report will be available to the parliament. It was completed over a month ago; I am pretty confident it went to cabinet. It certainly would be an important and valuable report in the context of the current debate.

Discussion paper No. 68, `Gene patenting and human health', which was released in March, covers some issues similar to those in the Senate committee report, such as the manner in which gene patents and monopoly rights are exploited in the marketplace; the ease with which patents over genetic materials and technologies are granted; and the compromising of public health through restrictive licensing practices. The industry and research sectors have been leading the government on patent law for some time and still the government does not appear to have a clear patent policy or a serious statement on what it believes the purpose of patents should be. ACIPA's submission No. 191 to the JSCOT inquiry into the FTA stated:

In an attempt to assess the way the Australian Government makes and then implements its policy dealing with intellectual property a series of questions were directed to each of the ministries ...


... none of the responses specifically dealt with each question, instead providing either a general response, or referring the matter to another department for a response.

If the government does not have a clear policy and a clear direction on the issue of patents or intellectual property more broadly, it brings into question the basis on which it negotiated the intellectual property sections of the free trade agreement.

I am biased on this issue—people know my views on the patenting of things such as genes and gene sequences—but I do not think it is a view that is not shared by others in this place. In fact, despite having a private senator's bill, moving many amendments on this issue and having them rejected by the two major parties, I sensed very strong support from individual senators on all sides of the chamber during the debate on the legislation on research involving embryos. I think there is a very strong view in this place that genes and gene sequences should not be patentable. That does not even go to the issue of the broader debates surrounding stem cells and stem cell products et cetera.

The Democrats have long argued—I have certainly long argued—against the granting of patents that unduly restrict the progress of research and constrain or delay public benefits. I have been doing this since 1995. I know that before me, Senator Coulter, when he had the science portfolio, and other Democrats before him have made clear our strong views on IP and patent law. In 1996 I introduced a private senator's bill that proposed to amend the Patents Act so that genes or gene sequences could not be patented. However—and I make this very clear—it allowed the processes used in gene technology to remain patentable.

The Democrats are strongly committed to deepening an innovation culture in this country. We recognise that the development of human and intellectual capital is basic to the success of an innovation society in a global knowledge economy. That means we need robust intellectual property systems that allow for incentives for investment in developing intellectual property and that enable the rapid diffusion of intellectual property while balancing the needs, of course, of both the community and consumers. We have opposed the direction in which Australia has been heading on its patent system. We oppose it because of the negative effects on research and innovation but, unfortunately, the government has shown little interest in engaging in this debate over the years. This was highlighted earlier this year when its science and innovation policy statement, Backing Australia's Ability 2, contained no discussion of these important issues.

Minister Vaile told Four Corners on Monday night that the FTA does not extend any extra rights to drug patent holders. The Democrats—and, I believe, the Labor Party—disagree. This bill locks in the very patent system about which scientists have been expressing concern. It increases the level of protection available to pharmaceutical patent holders and removes policy options for future governments to reduce the price of pharmaceuticals in Australia. These changes inevitably will benefit the large biotech and pharmaceutical companies, among others, but the Democrats argue that this will be to the ultimate detriment—probably in the short term—of consumers and research. Many scientists think the patenting of genes and gene sequences has inhibited the free flow of information on which science and its advancement ultimately depend. They believe potential researchers have avoided or vacated work in their specific area for fear of falling foul of the patent laws. The results of the FTA on the Australian patent system will actually entrench such negative effects across all areas of research. When further efforts are made to reduce differences in law and practice between the Australian and US systems, these effects will escalate.

The final worrying aspect of the free trade agreement is the suspicious lack of amendments that are expected to achieve the stated outcomes of the FTA patents section. Dr Peter Drahos from the ANU—who, I note, was also on the Four Corners coverage on Monday night—believes that the text of the FTA will override this bill. So, once enacted, the bill that we are dealing with will be overridden by the broader text of the FTA anyway. I suspect that the government is relying on that possibility.

The Australian Democrats will not support this regressive legislation. We welcome the fact that the Labor Party have finally recognised the issue of patents and intellectual property within the context of the FTA, but we are saddened that they do not have the guts to oppose this law when they recognise that the effects are incredibly deleterious for intellectual property and patent law in Australia now and in the future.