Patent protections for the pharmaceutical companies have been among the most controversial aspects of recent high profile trade agreements such as the Canada – EU Trade Agreement (CETA) and the Trans Pacific Partnership (TPP). For example, CETA would require Canada to extend the term of protection for patents through a patent term restoration rule, which the Conservative government acknowledged would add billions to provincial health care costs. The TPP would reinforce those reforms, requiring changes even if CETA falls through.
The escalation in patent protections is set to occur just as drug prices hit all-time highs in Canada and pharmaceutical investment in research and development sinks to decade-long lows. Those results come from a recent report released by the Patent Medicines Panel Review Board (PMPRB), an independent body charged by the government to track patent medicines pricing and spending alongside investment in research and development by pharmaceutical companies.
The report indicates that Canadians pay more for patented drugs than consumers in France, the U.K., Italy, Sweden, and Switzerland (only the U.S. and Germany pay more among the countries tracked by the PMPRB). The PMPRB says that this represents a change over time:
In 2005, Canadian prices were, on average, approximately equal to or below corresponding prices in all comparators other than Italy. By 2014, Canadian prices were decidedly above prices in the United Kingdom, France and Italy, and somewhat higher than prices in Sweden and Switzerland.
Moreover, over the past 12 years, Canadian expenditures on drugs has outpaced all other comparator countries, including the U.S., with 184.4 per cent growth in total drug expenditures.
Not only have Canadian expenditures on drugs been high, but the ratio of sales to research and development in Canada by pharmaceutical companies has fallen to record lows. In the 1980s, the 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. The report indicates that the ratio is now at only 4.4 per cent, the lowest recorded since 1988 (the peak rate was 11.7 per cent in 1995).
Indeed, Canada is a significant laggard when it comes to pharmaceutical research. Despite ranking as one of the 10 most important markets and paying some of the world’s highest prices, the ratio of sales to research in other comparator countries is triple the Canadian rate. In other words, in countries such as the UK and France, drug prices are lower and research expenditures are far higher.
The confluence of high prices, low investment in research and development, and ever-increasing demands for further patent protections has caused the PMPRB to question the effectiveness of the Canadian system. It notes with regard to CETA:
Its implementation will require amendments to the Patent Act to provide pharmaceutical patentees with up to two years of additional market exclusivity. Such a change would come at a time of high drug prices and record low R&D, causing some to question the effectiveness of the PMPRB and whether a policy balance conceived over 25 years ago continues to serve its intended purpose.
The concern over Canadian pharmaceutical policy is long overdue as the evidence leaves little doubt that catering to the demands of the largely foreign-based companies have yielded few benefits.
Canadians pay significantly more for pharmaceutical drugs than consumers in many other developed countries and the promised increased investment in research and development has not materialized. Yet despite the costly state of affairs, the government is set to reward the industry with even stronger protections that will result in an extension of the higher prices.
Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.
