A report released by the Australian government has said Australia's extension of term (EoT) scheme for patents in the pharmaceutical industry "has had little effect" on investment and innovation.
An EoT grants pharmaceutical patents an additional five years of protection, after the initial 20 years.
According to the report, released by the Productivity Commission on Tuesday, December 20, the scheme's arrangements have "proven largely illusory".
More than half of new chemical entities approved in Australia have been awarded an extension, and consumers and governments therefore face higher prices for medicines in the extended years.
The report stated: "Rather than compensating firms for being slow to introduce drugs to the Australian market, extensions should only be allowed where the actions of the regulator result in an unreasonable delay."
It added: "Timeframes (of around one year) set by government for the Therapeutic Goods Administration provide a ready benchmark for determining what constitutes a reasonable processing period. EoT should only be granted where the time taken by the regulator exceeds this period."
With the new approach, the government estimates that it would lower the cost of drugs in Australia and save consumers, as well as taxpayers, more than A$250 million ($180 million) per year.