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Billions at Stake if Canada Caves on Drug Patent Demands

Steve Verheul, the lead Canadian negotiator, said earlier this month that the pharmaceutical demands are unlikely to be discussed during the next two rounds of negotiations in September and October. Instead, the issue will be bounced back to cabinet, with the government ultimately making the decision on whether it is prepared to cave to EU demands with the trade agreement hanging in the balance.

The large pharmaceutical companies (known as Rx&D) insist that the reforms will increase research and development investment in Canada, yet past experience suggests that is unlikely to happen.

In the 1980s, the same industry lobbied for patent reforms that provided new rights and longer protections. In return, it promised to increase spending on research and development in Canada so that it would rise to 10 per cent of total sales by 1996. A new report from government’s Patented Medicines Prices Review Board shows that not only has that goal not been achieved, but the research and development spending to sales ratio continues a decade-long decline, hitting its lowest level since the 1987 reforms.

According to the report (which is gathered from data supplied by the companies themselves), the research and development to-sales ratio for members of Rx&D was 6.7 per cent in 2011, down from 8.2 per cent in 2010. The Rx&D ratio has now been less than the promised 10 per cent for the past nine consecutive years and is approaching its lowest level since tracking began in 1988.

From a global perspective, Canada fares very poorly, ranking ahead of only Italy as countries such as France, Germany, Sweden, Switzerland, the U.K., and U.S. all enjoy greater expenditures. In fact, the report notes that “several comparator countries, which have patented drug prices that are, on average, substantially less than prices in Canada, have achieved R&D-to-sales ratios well above those in Canada.”

Given 25 years of mostly failed targets, the rational approach is to put a freeze on any further reforms at least until the industry lives up to its commitments. But with the agreement shrouded in secrecy – the government has steadfastly rejected calls to release the draft text – it appears that the major health care decision will be made behind closed doors with no public discussion, debate, or access to the official text.

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One Comment

  1. Chris Brand says:

    What a surprise
    Give companies longer, stronger monopoly rights, and they don’t need to spend as much on R&D. How come that isn’t blindingly obvious to the politicians and negotiators involved ?