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CETA Reached "In Principle", Part Four: Pharma Gets Patent Extension Despite Declining R&D in Canada

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Friday October 18, 2013
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.
Comments (3)add comment

Richard Gold said:

Poor R&D Performance
The PMPRB stats are even more disappointing. Not only has the ratio of spending to revenues decreased, but the absolute expenditures on R$D have decreased significantly and, more worrisome still, especially in respect of basic research. Only basic research and some applied research contribute to Canadian innovation in the long-term. The high decline in this type of spending -- in favour of more clinical trials -- is a cause of deep concern. Without more basic R&D investment, we will lose our research edge and the ability to attract and retain top biomedical researchers.

From the reports so far -- I am awaiting confirmation that there is no new right of appeal against holdings of invalidity in the PM(NOC) process -- Canada did fairly well with respect to patents since the pressure was on to give much more. While the additional 2 years protection will do little to help Canadian innovation -- it more likely represents a cost to Canadian innovators -- it could have been much worse. One anticipates that the offsetting benefits of CETA, when they are calculated, will outweigh those costs. Nevertheless, it does place emphasis on the need to develop a more comprehensive innovation ecosystem to support real and long-lasting innovation.
October 18, 2013

Richard Gold said:

Right to appeal
I have received reports that CETA will include a right to appeal in the PM(NOC) context. At the same time, gov't has promised to eliminate the dual procedure that gives phrma two kicks at the can. By uniting the linkage process with infringement, less game playing, lower costs and less inconsistency. In the end, this may be neutral if implemented well. Canada's PM(NOC) regs are notoriously difficult and poorly drafted. Fixing them will represent a major advance in reducing unnecessary litigation. So far, it is uncertain whether the right of appeal will also extend the prohibition order against the Minister granting market approval. If not, then this may be a gain overall to the Canadian system without any harm to either phrma or generics.
October 18, 2013

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