Drug companies facing tougher future

AUSTRALIA'S biggest pharmaceutical companies are "not immune" to the patent cliff that threatens to strip billions of dollars of revenue from global drug makers.

The expiration of a series of patents over the next five years is estimated to cost the top 500 companies $148 billion.

A report by PwC on the future of the industry says companies, including those in Australia, stand to lose large amounts of revenue if they failed to invest more money in developing drugs.

Author John Cannings told BusinessDay that local companies could be affected by the so-called patent cliff, particularly those with patents in the US and Europe.

"There are a number of drugs that are large revenue generators which will come off patent and be subject to generic competition in the next five-year period," he said. "We are not immune to that."

Governments, including Australia's, make pharmaceutical patents temporary to minimise monopolies and help new drug makers enter the market.

Their expiration, which happens after 20 years in Australia, allows generic brands to compete with big companies, meaning more cheaper drugs become available.

Mr Cannings said the "cliff" was a result of a boom period in drug-making 20 years ago. The Australian government is reviewing the pharmaceutical patent act to see whether the laws fairly balance competition with innovation.

In submissions to the review, big companies have lobbied for restraint on reducing patent lengths.

GlaxoSmithKline's submission says patent protection should be "maintained, if not enhanced" - and that other incentives in manufacturing and clinical research should be implemented. "This will encourage future investment in Australia and improve Australian patients' access to new health technologies," it says.

CSL's outgoing chief executive, Brian McNamee, this week said the industry needed a patenting system that provided "certainty from an investment perspective".