David Henry, Professor of Clinical Pharmacology at the University of Newcastle, writes:
On January 13th, in Washington DC, the Australian government is likely
to come under pressure to repeal the evergreening clause in the Free
Trade Agreement (AUSFTA) enabling legislation. This was introduced by
Labor prior to the 2004 federal election. The amendment was approved
reluctantly by the Howard government, under pressure from the
opposition parties and the electorate.
It was designed to discourage the practice of evergreening,
whereby patented drug manufacturers use a number of techniques to block
the entry of cheaper generic drugs towards the end of the original
patent terms of their own products. Although the immediate direct
impact of the removal of the clause will be small, the move is very
significant for three reasons.
Firstly, it indicates that the US Trade Representative and the US
pharmaceutical companies are deadly serious about using the AUSFTA in
pursuit of their interests. This is not a gentleman’s agreement where
minor disagreements will be sorted out with a bit of back slapping.
If Australia does not meet the expectations of the US government and
industry, by rewarding what they regard as ‘innovative’ drugs, a case
may be established for triggering a dispute. US expectations are framed
by deliberate constructive ambiguities in the text of the AUSFTA. Any
dispute will be adjudicated by trade lawyers, who will not have the
health of Australians as their main priority.
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Secondly, it illustrates the current critical dependence of drug
companies on old drugs for their profits. Toward the end of their
patent term, well-marketed drugs are profitable, as the development
costs have been recouped and the manufacturing costs are low. They
generate lazy profits and are a very attractive alternative to the
uncertainty and risk of developing new innovative compounds.
This contradicts the industry’s constant refrain that they need high
profits to invest in new drugs. The number of new drugs being processed
through the Pharmaceutical Benefits Scheme fell sharply during the late
1990s. Hopefully, this trend will reverse. The US pharmaceutical
manufacturers are capable of superb science, but we need to see more of
Finally, the move by the USTR, and the initial weak response from the
minister Vaile, shows the extent to which the interests of corporations
dominate those of the public, and the parliamentary processes that
protect them. They may not like the evergreening amendment, but does
the Howard government have so little regard for the democratic
traditions of Australia that they would allow the rather base
commercial interests of a few American drug companies to override the
expressed will of the Australian Parliament?