Despite not being specifically excluded under s18 of the Australian Patents Act, technology utilising embryonic stem cells (ESCs) is not able to be patented in Australia.

With the technology forming a critical pillar of regenerative medicine and therefore having the potential to help realise treatments for some of the world’s most wicked diseases, and since Australia has such a strong reputation for cutting edge biological invention, why is this so?

The story of modern regenerative medicine begins in 1998, in the laboratories of Jamie Thompson at the University of Wisconsin. Working on rhesus monkeys, Thompson’s group showed for the first time that you could program ESCs to differentiate into pluripotent cells.

This gave rise to one of the key pillars of regenerative medicine – the ability to replenish cells in degenerative disorders. The breakthrough also brought with it a small, but growing minority who began to voice more loudly their objections to such use. Primarily, these objections arose from the need to use spare embryos donated from couples undergoing IVF.

These ethical and political concerns intertwined with the patentability of ESCs in Australia in an unexpected way.

The legislative framework

In Australia, section 18(2) of the Patents Act specifically excludes the patentability of ‘humans and biological processes for their generation’. The amendment was introduced during the Patents Bill 1990 by conservative catholic senator, Brian Harradine, almost as an after-thought.

In the second reading of the Bill, the Hon Simon Crean, the Minister for Science and Technology was sufficiently concerned by the absence of comment from the Opposition to voice his opinion. Stating that ‘flexibility was needed’, Mr Crean pointed out numerous scientific advances that were not anticipated by the preceding Patent Acts and suggested that the amendment should not be viewed as restricting patentability. Yet the repercussions of the hurried exclusion, incorporating concerns along the political, theological and ethical spectrum, while not explicitly defining what constitutes a ‘human being’, are felt even today, over 20 years later.

Why Australian patent applications are rejected

A quick review of recent patent applications claiming methods or uses of ESCs reveals numerous applications that have lapsed due to failure to gain acceptance. This is because, based on a 2004 decision of the Commissioner of Patents , they automatically trigger a s18(2) exclusion from patentability on the basis that an ESC can only be created in a process that involves the establishment of human life via a fertilized ovum, no matter how early. A review of these objections reveals that the IP Australia takes a hardline stance on patents directed to the utilisation or generation of ESCs, regardless of whether embryos are created, destroyed or arise from surplus Assisted Reproductive Technology embryos.

Yet given that the initial consternation arising from Senator Harradine’s conservatism was an objection to the potential destruction of embryos, and with the passage of time, it is interesting to reflect on whether or not such a hardline stance would hold up in a challenge to the Commissioner of Patents refusal to progress patent applications directed to ESCs.

A 2016 challenge did marginally move the goalposts: if the patent claims relate to parthenotes and parthenogenesis, IP Australia considers them no longer to fall under the umbrella exclusion of s 18(2). Parthenogenesis, in which researchers use chemicals to induce the egg to begin developing as if it had been fertilized. The egg—called a parthenote—behaves just like an embryo in the early stages of division. However, because it contains no genetic material from a father, it cannot develop into a viable fetus. This result was achieved by the patent applicant taking the issue to a hearing – a high stakes step which might have resulted in more weight to the Commissioner’s decision to reject applications under s18(2) rather than a relaxation of the position.

Time for a more modern approach?

In 2001, President George W Bush introduced restrictions on federal funding for research involving embryonic stem cells. This meant that projects that did not utilize already derived stem cell lines would not be eligible for funding. In a move meant to circumvent these restrictions, California voters in 2004 voted 59% in favour of the establishment of the California Institute for Regenerative Medicine (CIRM), a $3 billion dollar stem cell research agency. Unlike Australia, politicians struck while the stem cell iron was hot, and built on the optimism generated by early stem cell research. Fast forward to 2021 and California is now an international hub for regenerative medicine. The majority of CIRM’s research grants have been awarded to universities like Stanford, USC and UCLA, where researchers have made significant advances in stem cell research.

It has been over 20 years since the modern regenerative medicine story started, and ESC research is moving into clinical phases all over the world, including in Australia. Research has progressed from merely identifying these cells,[5] to now knowing how to replicate the intrinsic cues to trigger the differentiation of ESCs to beating heart cells.[6] Perhaps it is time to again revisit the exclusion from a legal and judicial perspective. Drawing inspiration from the words of Bruce Lehman, the former Commissioner of the USPTO, we are not patenting life – we are patenting technology.

If you would like to discuss the patentability generally in stem cells, or have a more specific query about embryonic stem cell technology, contact us.


[1] C Limon, ‘Human beings as non-patentable inventions’ in Yoriko Otomo and Edward Mussawir (eds), ‘Law and the Question of the Animal: A Critical Jurisprudence’, 57.

[2] Commonwealth, Parliamentary Debates, Senate, 16 October 1990, 2954 (Simon Crean, Minister for Science and Technology).

[3] Fertilitescentrum AB and Luminis Pty Ltd. (2004) (APO 19)

[4] International Stem Cell Corporation [2016] APO 52

[5] Martin, G. R. Proc. Natl Acad. Sci. USA 78, 7634–7638 (1981) and Evans, M. J. & Kaufman, M. H. Nature 292, 154–156 (1981).

[6] Murray, C. E. & Keller, G. Cell 132, 661–680 (2008).

Principal Karen Sinclair discusses the Australian Government’s proposed patent box scheme, the key role IP strategy will play in the ability of Australian companies to benefit from it, and what needs to be considered to ensure successful implementation.

Announced as an incentive for Australian medical and biotech companies to “undertake their R&D in Australia, keep patents here and manufacture patented technologies onshore1, the proposed patent box scheme is an ideal opportunity for the Australian Government to demonstrate that it really understands that new tech and sovereign manufacturing capacity is the future for Australia – one that extends beyond digging resources out of the ground.

Past reviews of the patent box model, both here2 and overseas3, suggest that introducing a patent box scheme runs several risks, including domination by multinationals, opportunistic patent applications based on R&D performed offshore, and adding little benefit to the local economy.

On the upside, it has been cautiously suggested that businesses using the patent box display an approximate 10% increase in business-level capital investment over the post implementation period4. The design of the incentive needs to be right for the scheme to be successful, and to ensure that future governments are discouraged from tinkering with the rules.

The patent box scheme: A quick refresher

Announced in the Australian Government’s Budget 2021, the patent box scheme aims to encourage businesses to undertake their R&D in Australia and “keep patents in Australia” by reducing taxes on income from innovative patented research.

Specifically, from 1 July 2022, income derived from Australian medical and biotech patents will be taxed at a concessional corporate tax rate of 17%. Only granted patents, which were applied for after the Budget 2021–22 announcement, will be eligible.

Getting the design right

It is vitally important that the patent box scheme benefits Australia by way of increased investment, job opportunities and exports through greater participation in global value chains.

On Budget 2021 night, the Federal Government signalled its intention to consult with the clean energy sector and to comply with OECD standards on patent box regimes, but was otherwise silent on detail.

We suggest that the following key requirements need to be considered in the design of the patent box scheme:

  • A cynic might suggest that by landing on the medical and biotech sector, the Federal Government exposes itself to little downside because of the long path to market of many products in this sector. Through a “COVID-19 lens”, extending the incentive to technologies which Australia will need to rely upon in the future for economic success makes sense. Politics aside, this must include clean and green energy. The defence sector also comes to mind. Although careful definition is required, to rebuild Australia’s manufacturing sector and to take advantage of residual programs set up by the departing car industry, manufacturing technologies are also a must.
  • Relevant IP rights must include both rights created by the beneficiary of the tax concession, and rights exclusively licensed-in by Australian companies. Consistent with policy aims, in both cases there must be an obligation to significantly develop, and even manufacture, the technology in Australia. Australia has demonstrated expertise in the ‘R” of R&D; it’s the Development and commercialisation part of the pathway that needs incentivising. Logically, to monitor and support development activities there would be a connection to the R&D Tax Incentive.
  • If the concessionary rate is to be higher than that of similar programs abroad (e.g 10% in the UK), then as an offset, it must be the case that all profits from commercialisation of the patented technology, no matter where they are made, will qualify. As an extra incentive and given Australia represents a small market, a further concessionary rate might be offered for income from products manufactured in Australia and then exported.
  • It may seem obvious, but the more regulatorily complex the implementation is, the less likely it is that Australian businesses will opt to take part. This may mean, for example, that complex business structures and IP holding companies might be excluded from eligibility. But there needs to be a focus on the policy objectives at all times: building Australia’s technology skillset and making the program accessible and economically successful.
     

The IP nexus

Patent and more generally, IP management and exploitation strategy, will play a key part in the ability of Australian companies to truly benefit from the proposed regime. Alignment between corporate strategy and IP strategy has never been more important to get the best out of the proposed patent box scheme.

What we need in Australia is more of this sentiment:

“The establishment of the patent box has transformed how we see the UK as a place to invest. As a result, last year we announced we were building our first new factory in the UK for 40 years.”

GlaxoSmithKline’s President of Global Manufacturing and Supply in 2013

and less:

“GSK announced … that we will close the Boronia [Melbourne] manufacturing facility at the end of 2022. …This decision aligns with a global focus on innovation…. the new GSK biopharma company needs to become more competitive, so we can spend more on vital investments in innovation, growth and the future success of our business….”

GlaxoSmithKline, press release 22 July 2020

With access to data-backed technology landscaping and analytical tools, deep expertise in securing IP protection for Australian businesses, and with a passion for Australian innovation, Griffith Hack’s team looks forward to making the implementation of the patent box scheme a winner for Australia’s technology future.


Footnotes:

Austrade 

Patent box policies, Department of Industry, Innovation and Science 

Patent box evaluation, HM Revenue and Customs 

Ibid

The federal budget demonstrates a commitment to research, innovation and technology – but to take full advantage, greater utilisation of Australia’s world class intellectual property (IP) system is required.

Treasurer Josh Frydenberg has handed down a 2021-22 federal budget that is focused on bolstering Australia’s economic recovery amid the fallout of the COVID pandemic. 

The broad-ranging budget places a significant emphasis on job creation and essential services, with childcare, aged care, infrastructure, education and training, small business, environment and housing figuring prominently.

But they weren’t the only winners. Technology companies, emerging industries, researchers, and start-ups can also look at last night’s announcement with a sense of optimism. Proactive measures to support innovation and business growth, and to address skills shortages, have been addressed, providing a once in a lifetime opportunity for Australia to technologically reposition itself on the global stage.

Of note, areas such as clean energy, artificial intelligence, digital economy, agribusiness, drone technology and technical skills-based training have all received substantial investment. Generous tax incentives also feature prominently, including the introduction of a “Patent box” aimed at reducing taxes on income from innovative research.

Key highlights in more detail

Patent box: Encouraging Australian medical and biotech innovation
Investment in Australian medical and biotech technologies is being supported by the introduction of a patent box. The patent box will reduce taxes on income from innovative research to encourage businesses to undertake their R&D in Australia and to keep the revenue that patents generate in Australia. 

From 1 July 2022, the patent box will tax income derived from Australian medical and biotech patents at a 17 per cent effective concessional corporate tax rate. Normally corporate income is taxed at 30 per cent or 25 per cent for small and medium companies. Only granted patents, which were applied for after the Budget announcement, will be eligible.

The Government will follow the OECD’s guidelines on patent boxes to ensure the patent box meets internationally accepted standards. The Government will also consult closely with industry on the design of the patent box to determine whether a patent box is also an effective way of supporting the clean energy sector.

This measure complements the Government’s $2 billion investment in the Research and Development Tax Incentive which was announced in the 2020‑21 Budget. The Government has asked the Board of Taxation to review the administrative framework of the R&DTI before the end of 2021.

Stimulating innovation in Australian businesses
The Government will allow taxpayers to self-assess the effective life of certain depreciating intangible assets for tax purposes, rather than being required to use the effective life currently prescribed by statute. This will apply to patents, registered designs, copyrights, in-house software, licenses and telecommunications site access rights.

Taxpayers will be able to bring deductions forward if they self-assess the assets as having a shorter effective life than the current statutory life. This change will reduce the cost of investment for business, and align the tax treatment of these intangible assets with the treatment of tangible assets. Taxpayers will continue to have the option to use the existing statutory effective life when depreciating these assets.

This will apply to eligible assets acquired following the completion of temporary full expensing, which has been extended and will now end on 30 June 2023.

Growing the Australian digital games industry
Australia’s digital games industry has been bolstered by a “digital games tax offset” that will cut the costs related to game development. Digital game developers will receive a 30 per cent refundable tax offset, capped at $20 million per year, for qualifying Australian games expenditure. The global digital games industry provides significant opportunities for Australia and this tax offset will make Australia an attractive destination for digital talent.

Why this budget highlights the value of strategic IP protection

Investment in commercialised sectors such as medical research, biotechnology and clean energy provides a timely reminder of the importance of strategic IP protection to take full advantage of these investments.

Australian governments have long strived to align Australia’s IP protection systems with the most robust in the world. The objective of several significant legislative changes has been to ‘support innovation by encouraging investment in research and technology in Australia and by helping Australian businesses benefit from their good ideas’.

But while Australia now has a world class IP system, not enough Australian businesses are using it. Recent evidence suggests that the Australian patent filings market is experiencing sluggish growth with both locals and foreign filers cutting back on their investment in Australian patents. Australia risks entering the post-pandemic period significantly lagging other countries when it comes to the generation of home-grown IP. Prioritising innovation now is key to assist in our economic recovery.

Summary

Australia’s 2021-22 federal budget presents an opportunity for businesses in Australia to invest in, protect, and maximise the value from R&D and innovation. With the global economy in a fragile state after a tumultuous 12 months, and with a strong knowledge economy, Australia is well-positioned to better establish itself as a major global player in the technology, innovation and commercialisation landscape. 

Our experts will provide ongoing in-depth analysis on specific topics featured in the federal budget. To stay up to date, subscribe to our email list. If you have questions for our team about the impact and opportunities of the federal budget, or strategic IP protection, please contact us at .

The MD in ‘Managing Director’ might easily stand for many other things. Mitigating Disaster. Moving Deliberately. Making Deals – the list goes on. 

And with the average tenure of those in the hot seat at an Australian listed company being approximately 5 years, you’d be forgiven for thinking ‘Mortal Danger’ was also apt. There are however always a few bucking the trend.

Mr Paul Brennan, Managing Director of PolyNovo – a leading Australian medical device manufacturing company and Griffith Hack client, provides a useful case in-point.

In a candid conversation with Griffith Hack Principal Karen Sinclair during AusBiotech’s 2020 + INVEST conference, Paul kindly shared some of the ‘secrets’ behind PolyNovo’s rise to prominence. If that sounds somewhat grandiose, consider PolyNovo’s share price at the time of Brennan’s appointment in 2015: 7 cents versus today’s: $2.60 (plus).

Brennan is quick to give credit for this transformation to several factors beyond his desk; first and foremost, the quality of PolyNovo’s people (including a high-performing board), the uniqueness of the company’s products, engaged customers, proactive referrers, and a strong IP position.

Early focus 

PolyNovo’s ‘hero’ platform NovoSorb ®, builds upon polymer technology which originated from the Commonwealth Science Industry Research Organisation (CSIRO). “Free of aromatic cyanates, with no solvents used in the manufacturing process – NovoSorb ® breaks down via hydrolysis into lactic acid, Co2 and water” Brennan says.

Although not a scientist or academic by trade, Brennan’s grasp on the company’s technology is clear. In fact, a deep dive into PolyNovo’s intellectual property (IP) was something he sought to do right at the start. “There’s a significant amount of value and opportunity with IP. It’s not just about protecting the information and technology you have, it’s also about adding value and protection for your investors – that they have comfort about the safety and security of your technology” shared Brennan. 

IP as a commercial priority 

In the early days, particularly when cash-flow was restricted, Brennan acknowledges the tension he felt with respect of allocating resources to IP instead of on essential ‘day to day’ expenses. “But if you don’t spend it early on, you’ll be spending it late, and when you’re spending it late, you’re spending more” Brennan warns. “It’s a balancing act, but it’s an important thing to do”.

The benefits are two-fold according to Brennan. Not only does a strong IP position increase attractiveness to investors, it also enhances potential partnerships for joint technology developments in the future “giving certainty about what is theirs and what is yours”. Furthermore, particularly for companies like PolyNovo, Brennan believes IP portfolios (including registered trade marks), are a key element to effective marketing.

Maximising the value of external advice 

Rather than a ‘transactional’ approach with external advisers, Brennan prioritises a hands-on, collaborative working relationship. Quarterly IP strategy meetings held between key PolyNovo stakeholders (including Brennan, and Chief Scientist Dr Tim Moore) and Griffith Hack team members including Principal Karen Sinclair, seek to continuously capture value and challenge the status quo.

Themes for these discussions include what to patent (and therefore publish) and what to keep secret, applications to new devices or fields of use, the understanding and managing technology partners and keeping a watchful eye on the competition, making the most of the breadth and depth of the portfolio, and trademarks. With respect to growth in foreign markets, Brennan is an advocate for trade mark and brand protection citing the risk of hidden logistic costs if all the necessary angles aren’t considered. “To reduce future business costs, you need to take this seriously”.

In relation to PolyNovo’s patenting strategy, Brennan explained the importance of having a strong grasp of the intended commercial use for your patented products. Apart from the technology itself, Brennan believes that for “all manufacturers, there is that ‘art side’…. So it’s important to consider what you leave in the patents and what you leave out, and make sure you have protection around your trade secrets and the people that hold them” he adds. More than safeguarding the technology itself, Brennan also encourages innovative companies to ensure that they have “processes in place behind the scenes to protect against losing the inherent wisdom” of key individuals.

Overcoming regulatory hurdles 

For companies like PolyNovo that operate in a highly regulated market, Brennan places the utmost importance on getting one’s house in order from a quality management system perspective. In fact, he suggests that a capable quality management professional might be more valuable in the early days than scientists.

Taking the view that regulators exist primarily for the safety of patients (rather than as an adversary) promotes the right mindset says Brennan. “You need to work back from that position in your quality system. What do regulators want to see? What are the standards and how do we meet them? Make sure you’re always building towards that”.

Clearly understanding the regulator’s perspective is also dependant on the specific region points out Brennan. In the US for example, which operates on a ‘predicate system’, PolyNovo needed to prove the equivalence of nominated products – whereas in Australia, clinical work and clinical evidence are key. But “if you don’t have regulatory approval, you don’t have sales access” warns Brennan.

Engaging the board 

Brennan is refreshingly honest and admits freely that PolyNovo’s board plays a pivotal role in helping him lead the organisation. “I’ve never run an ASX listed company” Brennan says… “my board is my bench of coaches”. He credits the PolyNovo board as being strong, active and diverse, and encourages leaders to be proactive in leveraging board members. “They aren’t there as a friendship club” reminds Brennan “they’re there to help bring value to shareholders and make sure you cover your governance points”.

Regardless of the industry or sector, Brennan believes that a board should not only be involved in reviewing the strategy but be keenly interested in what organisations are doing to protect and grow their IP platform, how companies are stewarding the brand and what leaders are prioritising with their time. “Time is valuable, and time is opportunity”.

Staying customer-centric

While discussing PolyNovo’s clinical strategy, Brennan highlights something that often paralyses younger companies. “It’s not possibly to eat it all at once, so who do you go to first?” he asks. Referring to the formal theory of adoption curves, Brennan says that PolyNovo made a deliberate play in prioritising early adopters and key opinion leaders within specific markets. Australians Professor John Greenwood and Dr Marcus Wagstaff were key to NovoSorb ® BTM’s development and helped create momentum in other markets. Building evidence of clinical success helped PolyNovo strengthen its marketing power and created a positive cycle – more referral sites, more opinion leaders, more weight behind the product.

The advantage of having influential leaders who want to scrutinise your work and provide constructive feedback in a safe environment shouldn’t be underestimated. “Wherever you start from, you’re going to learn from your customers. Always keep your attitude and your ears open to your customers. Take on their values” Brennan implores.

Looking forward

Despite being six years in, Brennan talks about PolyNovo’s future as if the best is yet to come. However, he also remains committed to the principles he believes have helped the organisation become what it is; including its foundation in IP. Brennan believes that focussing “on the development of IP completely changes the way a company looks at its R&D” and that the right approach to applying technologies across a broad platform will keep IP “safe and alive for years to come”.

Note: Griffith Hack thanks Mr Paul Brennan for his time during the conference, from which this article has been written. 

Intellectual Property Rights are traditionally viewed as an economic tool designed to encourage and reward innovation. While ‘economic’ outcomes and innovation are often associated with profit driven organisations, not-for-profits and community organisations can also make important, innovative contributions to society. One of the pleasures of working in private practice, is the capacity to provide advice and assistance to some of these worthwhile causes. Griffith Hack is proud to offer Intellectual property services to several longstanding pro bono clients.

The Young People in Nursing Homes National Alliance (YPINHNA) is a community-based organisation creating systems change in the disability sector. The Alliance develops novel solutions to wicked problems facing young Australians living in aged care facilities (or at risk of being placed there) with a disability, who also have high and complex support needs.

Australia’s disability sector has in recent years become a highly competitive market due to the National Disability Insurance Scheme (NDIS). Systems, processes and solutions that used to be freely developed and shared between non-profit organisations now have significant commercial value.

Through its submissions to and appearances before the Royal Commission into Aged Care Quality and Safety, YPINHNA has promoted novel and innovative service models which will assist many young Australians have a better standard of care as a matter of right. These models were well received by the Commissioners. The Alliance is the registered proprietor of numerous trade marks including SYSTEMS WRANGLER and SERVICES WRANGLER. YPINHNA’s ownership of these trade marks gives the Alliance the right to stop use of these trade marks on service programs that do not meet the Alliance’s standards of care and compassion.

Dr Bronwyn Morkham, National Director of YPINHNA says that “In this market-driven and highly competitive sector, our reputation and our IP are more important than ever. Trademarks and IP protection have become a key part of our risk management strategy”.

“In the 21st century, a contemporary not for profit community organisation, needs a good head as well as a good heart and through its invaluable advice and assistance on all matters IP, Griffith Hack has provided strong guidance and practical assistance”.

Griffith Hack personnel are proud to have assisted YPINHNA for over 10 years and look forward to maintaining our contribution towards the Alliance’s continuing impact on the well- being of young Australians for many years to come.

Prior to COVID-19, Australia enjoyed an enviable economic record; outperforming much of the world and avoiding recession for 29 years. 

With two quarters of consecutive GDP contraction due to coronavirus-related shutdowns, Australia is now poised to face economic challenges not experienced since 1991. The Australian federal government’s 2020-21 budget incorporates an additional $2 billion ($1.42 billion)for additional R&D incentives, in the hope that homegrown will help on the road to fiscal recovery. 

Pharmaceutical spending down under

Australia’s universal healthcare system comes at a high economic cost. Managing the national purse while providing access to new therapeutics remains a challenge. The Government performs this balancing act via the Pharmaceutical Benefits Scheme (PBS). 

The PBS is a barrier to market entry

Similar to the United States’ Food and Drug Administration (FDA), the Therapeutic Goods Administration (TGA) is Australia’s regulatory authority for therapeutic goods, including prescription pharmaceuticals. Obtaining TGA approval to market and supply pharmaceuticals is a necessary hurdle for therapeutic products new to Australia.

However, acquiring TGA approval is not always enough for many pharmaceuticals to crack the market. The government subsidises pharmaceutical costs so that vital medicines are available and affordable for patients. Typically, at least one treatment for most diseases or conditions is subsidised. Since the retail cost of pharmaceuticals can be prohibitive for some patients, if the first choice of medication is not listed on the PBS, a treating physician usually prescribes an alternative that is subsidised by the PBS. Consequently, securing a PBS listing is considered a major regulatory barrier to market entry.

Some are in, and some are out

Medicines listed on the PBS are often pharmacy-dispensed prescription medication; although some supervised administration medicines (including chemotherapy drugs for hospital use only) are also subsidised. Not all prescription medications are listed on the PBS.

The Pharmaceutical Benefits Advisory Committee (PBAC), an independent expert panel whose members include health professionals and economists, recommends medicines for listing on the PBS. In its assessment of submitted therapeutics, the PBAC considers the condition for treatment, clinical effectiveness, safety and cost-effectiveness compared with other treatments. Most medicines that receive a positive PBAC recommendation are listed on the PBS. However, this can be influenced by the state of the economy, and sometimes political pressure.

Following a PBAC green light 

A recommendation from the PBAC is only the first step in achieving a PBS listing. Once recommended, financial negotiations are undertaken with the government to determine the size of subsidy, which dictates the price at which the therapeutic can be supplied to patients. The current Liberal government claims it is committed to listing all PBAC recommended medicines, appearing progressive than the former Labor government.

In February 2011, Labor’s health minister promoted the new PBS listings at the time in a press release, but deferred listing several other medicines for which existing treatments were already available on the PBS for reconsideration when circumstances permit. 

The only instance where the government previously did not accept the PBAC’s recommendation was in respect of the attempt to list Viagra, due to cost concerns. This decision prompted a slight reform to the PBS listing process, in which drugs expected to cost more than $10 million a year in the first five years, also require Cabinet approval prior to listing.

Good news for pharmaceutical originators 

Australian patent law has one of the more liberal approaches to the patenting of therapeutics in the world. While support for the breadth of claims must be strong, products can be claimed in a variety of forms. Examples include enantiomers, salts or polymorphs, in different morphologies, formulations and compositions; and as methods of treatment, in Swiss-style claims, as second and further medical indications, and even in the form of treatment regimes.

Since taking power in 2013, today’s government has approved more than 2,450 new or amended listings on the PBS at a published spend of $11.8 billion. Their promise to list all PBAC recommended therapeutics, and indeed actions to date which support this claim, are good news for pharmaceutical innovators.

The reasonable expectation that products will reach consumers through PBS listing (including those that are improved over existing treatments, are for second and further medical indications as well as for breakthrough treatments) gives some certainty that Australia is an attractive market to enter. 

With improved market access through the PBS, in addition to a ruling government that appears to be listening to both industry and consumer advice, now is a good time to be a patentee in Australia, with exclusive rights to supply therapeutics.

Recent PBS announcements 

In the 2020 federal budget the ovarian cancer drug Lyn-parza® was announced for inclusion on the PBS. Rather than costing a patient over $140,000 for a course of the drug, it will be available for about $40 a month, or less than $10 for those with an eligible concession. As well as Lynparza®, new and amended PBS listings in this budget include medicines for liver cancer, Parkinson’s disease, eye conditions and high cholesterol at an expected cost of $376 million.

The expanded listing on the PBS of Tecentriq® and Avastin® (atezolizumab and bevacizumab) for combination use in the treatment of advanced unresectable hepatocellular carcinoma is projected to cost over $230 million and is expected to benefit more than 500 patients a year. This is the most common form of liver cancer in Australia and currently has a low survival rate.

Other recent PBS updates include expanded listings for Eylea® (aflibercept) and Apomine® (apomorphine). The anti-VEGF agent Eylea® is now subsidised for patients affected by subfoveal choroidal neovascularisation due to pathologic myopia (mCNV), where previously it was listed only for other ocular conditions, including diabetic macular oedema. The listing for Apomine® was exclusively for the treatment of Parkinson’s disease but is now approved for maintenance therapy through community pharmacies without restriction to hospital treatment. 

The PBS also includes a price disclosure policy, applicable to medicines that are not exclusive and are therefore subject to competition. The policy aims to ensure the price at which the government subsidises multiple-brand medicines reflects the prices charged in the market. As announced in the budget, two high cholesterol medications, ezetimibe and rosuvastatin, will be cheaper under this policy. Around 300,000 Australians buy subsidised rosuvastatin, which will now be $2 less per prescription.

R&D Spending 

RDTI; what and why?

Australia’s Research and Development Tax Incentive (RDTI) is designed to encourage R&D spending in Australia by local and international entities. It provides tax offsets for R&D activities undertaken in Australia by companies liable for Australian income tax, which conduct at least one “defined core R&D activity” that incurs the minimum eligible R&D expenditure. The RDTI provides cash refunds up to 43.5% of spending on eligible R&D activities. Alternatively, entities with an annual turnover more than $20 million may be eligible for a non-refundable tax offset.

The scheme is one reason why Australia has historically been considered an attractive location to conduct clinical trials. When considered in addition to other favourable market characteristics, the opportunity to secure cash refunds for R&D spending makes Australia very competitive for conducting world-class clinical trials. Recently, the (mostly) effective domestic control of COVID-19 has further positioned Australia as an at-tractive choice.

Proposed RDTI changes 

The federal treasurer used the recent budget announcement to reveal that intended changes to the RDTI would not proceed. In September, legislation had been considered by Parliament which would cut $1.8 billion from the scheme. 

The changes were pitched at improving R&D in Australia but were seen by industry as a cost-cutting exercise. One of the most criticised changes was the introduction of a $4 million cap on the amount smaller companies could receive in refunded tax offsets. Also earmarked for introduction was a complex “intensity measure” for larger companies.

The role of R&D in strengthening the economy appears to have been given greater consideration as evidenced by the government’s decision to limit drastic changes proposed to the RDTI. The scheme can greatly assist patentees seeking to bring new drugs to market through the ability to subsidise not just classic R&D spending, but also Australian clinical trials.

Confirmed RDTI changes

Many of the proposed RDTI changes have now been rolled back. The legislation implementing these changes has already passed Parliament, just days after the budget announcement. 

Pleasingly, the $4 million cap has been scrapped. The tax offset rate applicable for refunds available to smaller companies has also been increased. In other good news, the formerly proposed increase in the annual cap in R&D expenditure from $100 million to $150 million has been retained.

However, despite profound concern voiced by some sectors, the “intensity measure” remains, albeit in a simplified two-tier form. The size of tax offsets available to companies with an annual turnover of over $20 million will now be determined by a comparison between their R&D spend and total expenses. 

Modern Manufacturing Strategy

Critics of changes to the RDTI believe the new measures will damage local manufacturing. However, the budget incorporates a $1.3 billion Modern Manufacturing Strategy driven in part by logistical frailties exposed by impacts from COVID-19. The strategy aims at improving Australian self sufficiency in targeted industries, including food and beverage manufacturing and medical products. It will include a grant scheme informed by advice from Industry, Innovation and Science Australia and the Commonwealth Scientific and Industrial Research Organisation (CSIRO). 

“Australian patent law has one of the more liberal approaches to the patenting of therapeutics in the world.”

Though details are still sketchy, part of the strategy includes funding to the SME sector to support manufacturers by co-funding capital investments and associated reskilling. The intent is to assist SMEs in modernising and adopting new technologies, including investing in efficient and transformative manufacturing processes. In short, whereas in recent decades, manufacturing capability in Australia has diminished, fuelled by cheaper costs and greater skills particularly in the Asia-Pacific region, this programme aims to place renewed focus on Australian innovation. 

This will hopefully translate to more intellectual property activity – not only in areas such as freedom to operate, but also in the protection of original ideas and new technologies. Where Australian originating patents have been proportionately decreasing at IP Australia over the last period, this strategy may see a trend reversal. An Australian manufacturing capacity increase should also incentivise offshore patentees to reconsider Australia as a patent destination.

Key considerations 

In these uncertain times, it is difficult to know where to invest for good return. Typical spending on infrastructure and services feels far riskier when the usual income sources are no longer guaranteed. The government’s 2020 Budget provides some assurances however, that Australia is committed to assisting and rewarding innovators, especially in the health and medical sectors. COVID-19 has proven to be an unexpected pivot point for the medical, food and beverage manufacturing sec-tors after struggling for years to attract the government’s attention.

The commitment to listing all medications recommended by the PBAC on the PBS, should encourage the pharmaceutical sector and reduce some of the risk associated with bringing new drugs to the Australian market. The rewarding RDTI further incentivises R&D spending in Australia and continues to position the country well as an ideal location to conduct clinical trials.

It is good to see the government’s recognition of the economic rewards available by investing in innovation; not only future-proofing advanced industry sectors, but for critical economic growth in the short term as well. Very few have been untouched by COVID-19; hopefully Australia’s 2020 Budget will help repair at least some of economic damage caused this year and beyond.

* This article first appeared in MIP winter edition 2020. 

Despite a recent downward trend in R&D expenditure, when it comes to innovativeness Australia punches above its weight. According to the World Economic Forum’s 2019 Global Competitiveness Report (released late last year), Australia ranked 16th and 18th for ‘Business Dynamism and ‘Innovation Capability’ respectively; two predictors that increase a country’s contribution technological progress.

Start-up accelerators play a key role in helping bring much of this latent capacity to life. Griffith Hack is proud to support one of Australia’s first innovation incubators the Melbourne Accelerator Program (MAP), through principal Karen Sinclair’s contribution as a program mentor.

Since inception, MAP has supported over 150 start-ups which have generated revenue in excess of $117M and created more than 1,400 jobs.

Speaking about her involvement with MAP, Karen said, “there’s something special about the creative passion, energy and vision each founder brings to the process.”

“I see my contributions as helping these innovators get past IP roadblocks and make smarter decisions about their IP early on; which hopefully means they don’t fall into one of the many pitfalls facing start-up businesses.”

Velocity Program – Applications now open!

Alongside the standard MAP accelerator, is the 15 week Velocity initiative. Velocity helps early-stage founders pressure test their start-ups – speeding up their discovery of first customers and pathway to product-market fit. Velocity is open to both for-profit and impact start-ups, with founders participating in evening workshops that include expert speakers, founder stories, and group activities to challenge and inspire.  

MAP is currently looking for 25 new teams to join the program – the application deadline is Sunday 26 July, 11.59pm. You can find more details, read FAQs or apply to Velocity here: https://www.themap.co/programs/velocity