Acting Prime Minister Mark Vaile has confirmed the "evergreening" amendment negotiated by former Labor leader Mark Latham could be tossed out after intense lobbying by the US pharmaceutical industry.
The medicines industry says the provision, designed to stop drug companies from extending medicine patents to fend off cheaper generic competitors, was one of a number the features that was harming investment.
"We will have a look at it, if (the evergreening issue) is raised by the Americans," Mr Vaile told The Australian newspaper.
"(But) the US will have to prove that Labor's evergreening amendment is commercially detrimental, not just philosophically detrimental."
Under the evergreening amendment, pharmaceutical companies are subject to multimillion dollar fines if they are found to have stopped other companies from introducing cheaper drugs.
Health Department secretary Jane Halton will travel to Washington on January 13 to discuss the issue ahead of a formal review of the FTA in March.