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    Billions at Stake if Canada Caves on Drug Patent Demands

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    Tuesday August 14, 2012
    The negotiations over a Canada - European Union trade agreement may be approaching the final stretch as both sides say they plan to wrap up the CETA talks by the end of the year. The parties have apparently reached agreement on roughly 75 per cent of the text, but the last quarter will require significant political compromise.

    My weekly technology law column (Toronto Star version, homepage version) notes that Canadian negotiators recently advised that there remains a sharp divide over issues such as investment rules, financial services, and taxation. Given the ongoing European financial crisis, these issues are particularly sensitive and will raise questions about how much risk the government is willing to assume in order to strike a deal.

    The most contentious issue, however, is likely to be the intellectual property chapter. The revelation that provisions from the Anti-Counterfeiting Trade Agreement may sneak their way into CETA generated widespread headlines throughout Europe last month with politicians and activists expressing exasperation at the clumsy attempt to secretly revive an agreement that was roundly rejected by the European Parliament.

    The Canadian opposition to the chapter will come from European demands for patent reforms that could result in billions in additional health care costs due to higher pharmaceutical prices. The pharmaceutical demands are one Europe’s top priorities, but Canada has thus far refused to counter the EU proposals, creating a stalemate that has dragged on for years.


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    Billions at Stake if Canada Caves on Drug Patent Demands

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    Tuesday August 14, 2012
    Appeared in the Toronto Star on August 12, 2012 as Billions at Stake if Canada Caves on Drug Patent Demands

    The negotiations over a Canada - European Union trade agreement may be approaching the final stretch as both sides say they plan to wrap up the CETA talks by the end of the year. The parties have apparently reached agreement on roughly 75 per cent of the text, but the last quarter will require significant political compromise.

    Canadian negotiators recently advised that there remains a sharp divide over issues such as investment rules, financial services, and taxation. Given the ongoing European financial crisis, these issues are particularly sensitive and will raise questions about how much risk the government is willing to assume in order to strike a deal.

    The most contentious issue, however, is likely to be the intellectual property chapter. The revelation that provisions from the Anti-Counterfeiting Trade Agreement may sneak their way into CETA generated widespread headlines throughout Europe last month with politicians and activists expressing exasperation at the clumsy attempt to secretly revive an agreement that was roundly rejected by the European Parliament.

    The Canadian opposition to the chapter will come from European demands for patent reforms that could result in billions in additional health care costs due to higher pharmaceutical prices. The pharmaceutical demands are one Europe’s top priorities, but Canada has thus far refused to counter the EU proposals, creating a stalemate that has dragged on for years.

    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), theresearch 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.

    Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.



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    CETA Update, Part One: Political Decision on Pharma Patents in the Fall

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    Wednesday August 08, 2012
    Steve Verheul, the lead Canadian negotiator for the Canada - EU Trade Agreement, provided an update on the CETA negotiations last week on a call with civil society groups. I will provide an update on the link between CETA and ACTA in part two tomorrow. This post highlights several additional details coming out of the call. First, new rounds of negotiations are scheduled for September 17 - 21 in Ottawa, followed by a round of negotiation in Brussels from October 15 - 26. Both sides say they remain hopeful that an agreement will be reached by the end of the year, though the call highlighted many ongoing areas of disagreement.

    Second, when asked about the lack of transparency associated with CETA, Verheul confirmed that both the EU and Canada oppose the release of the text until the agreement is concluded. He argued that the draft text may create an inaccurate picture of where the negotiations stand and that the most difficult issues are often addressed via face-to-face discussions rather than with the exchange of text.



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    Why the European Commission's Assurances on ACTA & CETA Don't Add Up

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    Thursday July 19, 2012
    Last week's revelations that the Canada - EU Trade Agreement's intellectual property chapter draws heavily from the Anti-Counterfeiting Trade Agreement sparked widespread media coverage across Europe (initial post with links to coverage, more here, here, here, here, here, here, and here). After initially refusing to comment, the European Commission, clearly sensing the growing public pressure, provided a response in which it claimed that the leaked February 2012 text was outdated and that the Internet provider provisions in CETA (which had mirrored ACTA) had been changed. While the initial response came via Twitter, a more detailed statement was circulated to many Members of the European Parliament and others. The statement included the following:
    • All FTAs negotiated by the EU, including CETA, contain chapters on IPR enforcement. They are just one aspect of a comprehensive approach. CETA is not different.
    • The Commission fully respects the vote of the EP of the European Parliament on ACTA and the IPR related text of CETA is being reviewed in order to remove or adapt elements that are considered problematic in the opinions and reports adopted by European Parliament.
    • The draft text of CETA of February 2012 (on which the press comments are based) is outdated and reflects thinking at a time before the ACTA vote in EP. It should come as no surprise that certain provision resemble ACTA, which both Canada and the EU had negotiated. In the meantime, negotiations have evolved and the February 2012 text no longer represents the current state of the negotiations.
    • For instance, even before the ACTA vote in the EP, the provisions on IPR enforcement on the internet had already evolved. For instance, Articles 27.3 and 27.4 of ACTA, which are considered problematic in the EP, are no longer reflected in CETA.
    • The final result of the IPR chapter of CETA is likely to be very close to the IPR chapter of the Korea FTA, which was endorsed by a broad majority in the Parliament, and which has been in force for over a year now.
    The European Commission statement not only confirms some changes in CETA, but suggests that the final version will look like the EU - South Korea Free Trade Agreement. This disclosure raises its own set of concerns for both Europeans and Canadians. This posts outlines six major areas of concern given the current uncertainty with CETA, its linkages to ACTA, and the influence of the EU - South Korea FTA.


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