The Canada – EU Trade Agreement has been the subject of conflicting reports on the inclusion of ACTA provisions, but there has been no doubt about the ongoing dispute over the agreement’s patent rules. Given the EU demands for significant patent reforms, the issue has been set aside with the ministers expected to address it when they meet in November.
For months, big pharmaceutical companies (known as Rx&D) and civil society/the generic pharmaceutical industry have been battling over the issue. Each has released public opinion surveys that purport to demonstrate support for their position (Rx&D, civil society). More important has been a study that concluded that the proposed reforms could add billions to annual Canadian health care costs along with reports that show that the large pharmaceutical companies failed to meet research and development commitments the last time the Canadian government acquiesced to patent reform demands.
While Rx&D sought to downplay those studies (as did the government, which described these concerns as a myth), it now faces an internal government study conducted by Industry Canada and Health Canada that placed the costs of CETA patent reform as high as $2 billion per year. The $2 billion cost would significantly decrease the government’s claims of likely economic gains from CETA and heighten provincial opposition, since the costs will be offloaded to provincial health care budgets.
Having spent years claiming the CETA patent reforms would create economic benefits for Canada, Rx&D now says costs associated with the reforms are too difficult to predict. Responding to the internal government study, Rx&D says:
“The notion of trying to use retroactive thinking on an industry that’s going through huge change and offering more and more value and hope to our health care system and try to come up with a cost to our system – without even thinking of the value of it – is rather difficult to do. I think (it) is quite dangerous to base any public policy on it.”
The reality is that Rx&D has undoubtedly analyzed the economic impact of the potential patent reforms and expects to generate hundreds of millions of dollars in additional revenues. The math isn’t that complicated as the extension in patent term will keep generic alternatives off the market for years. The Rx&D companies know precisely how much revenue their patent drugs generate and the expected revenue decrease once generics enter the market. The government’s own analysis now says the patent reforms would cost billions. It must reject European demands with the bet that there is enough remaining value in CETA for both sides to reach agreement without creating a new multi-billion dollar burden on the Canadian health care system.