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The $2 Billion Big Pharma Giveaway in CETA: Can the Government Ignore Its Own Internal Analysis?

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Thursday October 18, 2012
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.
Comments (5)add comment

Crockett said:

...
"... costs associated with the reforms are too difficult to predict."

With lovely assurances like that, you can be pretty sure they will not come in *below* expectations.
October 18, 2012

Chris Brand said:

the bottom line
is that this would just be a shifting of money from people buying drugs and taxpayers into the pockets of these huge multinationals. No doubt the question in Cabinet isn't going to be "is this a good idea ?" or "is this good for Canada ?" but "can we get away with this ?".
October 18, 2012

Crockett said:

Pigs at 9 O'clock
Well BCE's merger didn't fly, but it seems pigs have picked up the skill :D

Consumer win checklist:

SOPA = CHECK
ACTA = CHECK
SCC = CHECK
NEW THINKING AT THE CRTC = CHECK!

What's next, transparency in trade negotiations? Crazy!
October 18, 2012

monster beats pro said:

monster beats pro
http://www.beatsbydresite.org/
October 18, 2012

dreampod said:

Not a driver for innovation
I work as an independent contractor for one of the large Pharmaceutical companies and there does not seem to be any belief within the company that extended patents would increase innovation, but merely increase the profit realized. With the most expensive drugs, particularly biologics, production cost is the primary price increase but despite virtually guaranteed production cost drops as they develop better means of manufacturing the drug the price is fixed to generate a profit initially rather than spread across the lifespan of the drug. Many of these changes, however, can involve minor non-functional alterations that (in Canada) reset the timer on patent duration which means that the cutting edge drugs are actually effectively patented for longer than it seems on the surface (by introducing these changes near the expiry of the patent an extra 10 years can be generated).

What would really be a fair and equitable change regarding pharmaceutical patent law would be to grant the period of exclusivity based on when the drug comes to market rather than initial development in the lab. This would standardize the period drug manufacturers could profit from their inventions but would also limit the rush to market that often means testing and development is neglected to be fully undertaken.
October 22, 2012

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