As noted in another post on the CETA intellectual property provisions, one of the key elements in the deal from a European perspective was patent term restoration, which effectively allows the large pharmaceutical companies to extend the term of their patents (additional posts on the need to release the draft text and the telecom and e-commerce provisions). The change will delay the entry of generic alternatives and, as acknowledged by Prime Minister Stephen Harper, will raise health care costs across the country (estimates run into the billions). In fact, the Ontario government has already indicated that it may seek compensation (or “mitigate the impact”) for the additional costs.
Ironically, the CETA deal comes just as the government’s Patented Medicines Prices Review Board issued its annual report that shows that the major pharmaceutical companies spending to sales ratio continues a decade-long decline, hitting its lowest level since the last time the Canadian government caved to pressure for patent reforms. According to the PMPRB released data (which is gathered from the companies themselves), the R&D-to-sales ratio for members of Rx&D (the lead pharma lobby) was 6.6% in 2012, down from 6.7% in 2012. The Rx&D ratio has now been less than 10% for the past ten 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 with countries such as France, Germany, Sweden, Switzerland, the U.K., and U.S. all seeing greater expenditures.
The PMPRB identifies the factors on where companies locate investment or research:
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. Increasingly, the impact of the prices of medicines on companies’ decisions on where to locate investment or conduct research is being questioned. Other factors such as where companies can find the best science base at reasonable cost, taxation incentives, flexible labour markets and economic stability are seen as being important.
Note that extending patent term is not viewed as a key factor, suggesting that CETA will result in higher health care costs but is unlikely to make much difference in increasing pharmaceutical research and development in Canada.