Patents and Trademarks: Empirical Evidence on 'Evergreening' from Australia

Evergreening is a strategy employed by pharmaceutical companies to extend patent protection around their branded medicines beyond 25 years. It involves claiming modifications to the original active pharmaceutical ingredient (API) as separate "inventions" to extend the period during which pharmaceutically equivalent products are denied market entry. Evergreening refers only to patents taken out by the company owning the original API. Similar improvement/modification patents taken out by other entities are referred to as secondary patents. Such delayed or reduced competition translates into an increase in the cost of healthcare.Brand pharmaceutical companies, of course, argue that these "lifecycle management" patents provide improved health outcomes to the community. They meet the (low) patentability thresholds of novelty, inventiveness and utility. Critics argue that the claimed improved health outcomes are usually either very small or non-existent. If the improved health outcome is negligible the evergreening patents incur a social cost rather than providing a social benefit, as the healthcare costs associated with delayed generic entry are large. This paper complements the existing empirical evidence by providing an in-depth analysis of a small number of Australian cases where evergreening of brand medicines has occurred. With two exceptions, the cases discussed here involve litigation. Evidence from court cases is useful in identifying rules that encourage or delay generic entry. For some cases PBS data allow partial estimates of the costs of evergreening. Analysis of the case material identifies types of evergreening patents and their market effects. This highlights some key issues in the impact of evergreening on market competition and healthcare costs and points to areas of patent and health policy that need reform. The paper also looks at the role of trademarks in evergreening by establishing branding distinctions. These are used by sales forces to encourage prescribing doctors to shift from the original branded medicine to the evergreened branded medicine, reinforcing any existing brand loyalty while developing new loyalty in the evergreened brand and extracting a price premium beyond the original patent period. For virtually identical patented drugs, PBS data allow the identification of "prescribing shifts." Drug companies have large marketing budgets and use these to "educate" decision-makers in the prescribing process. Consequent prescribing shifts, between closely similar medicines with very similar patient-health outcomes, indicate the returns to these marketing outlays. There are substantial challenges in using official patent databases to identify secondary patents. These are discussed as background to the case selection for this study.