1. Free Trade and Intellectual Property Rights: Implications for the Canadian Pharmaceutical Environment
Joel Lexchin MD
School of Health Policy & Management
York University
Emergency Department
University Health Network

2. Presenter Disclosures
Joel Lexchin
(1) The following personal financial relationships with commercial interests relevant to this presentation existed during the past 12 months:
No relationships to disclose

3. Points to Cover Background EU negotiating position
Canadian pharmaceutical market
Canadian intellectual property rights
EU negotiating position
Potential impact of CETA
Drug expenditures
Affordability
R&D by the brand name industry
Economics of the generic industry

4. Background
Canada is currently negotiating a comprehensive economic and trade agreement with the European Union – CETA
Large pharmaceutical companies (e.g., GlaxoSmithKline, AstraZeneca) are based in Europe & are major contributors to the European economy
EU is pushing for enhanced intellectual property rights in Canada for pharmaceuticals

5. Current Drug Spending in Canada
$5.1 billion
$26.1 billion

6. Inflation in Drug Spending

7. Domestic Lawmaking vs. Treaty Negotiations
Domestic legislative change is often marked by interest groups competing to negotiate trade-offs in respect of a specific issue
In the trade context, states are negotiating over a broad range of issues through trade officials
Canada could trade an agreement on IP that satisfies European interests in return for agreement in a separate area that advances Canadian interests
Trade officials may give a particular subject area less weight than the officials directly responsible for that area
Health officials not directly involved in negotiations
Trade officials may not consider social welfare loss due to increased IP protection

8. Data Protection
In order to market a brand name drug company must produce evidence that drug is safe and effective
Once a drug is known to work and be safe it is unethical to ask a generic company to repeat the same tests
When Health Canada received a submission from a generic company it would rely on safety and effectiveness data from the brand name company

9. Data Protection
Until 2006 Health Canada gave 5 years of protection for data
Since 2006 Health Canada is prohibited from using this data for 8 years after the brand name drug appeared on the market
Generic companies cannot submit an application for 6 years
Companies given additional 6 months of data protection if they study drug in children
Doesn’t matter how useful drug is for children
Only applies to “innovative” drugs, i.e., drugs with molecular entities not previously available on the Canadian market

10. Canadian Patent Legislation
Canada is a member of WTO
Patents valid for 20 years from date of application as per TRIPS agreement
Currently no additional patent time available for time medication spends in the approval system
Average period of market exclusivity once drug is approved is about 10 years

11. Notice of Compliance (NOC) Regulations
“Balance effective patent enforcement over new and innovative drugs with the timely market entry of their lower priced generic competitors”
Before generic company allowed to market a drug all patents have to be expired
If brand name company claims an existing patent there is an automatic 24 month delay on marketing drug
Stay expires either at the end of 24 months or when a court decision has resolved the issue
No NOC regulations in EU – only other country with similar provision is US

12. Comparative Summary of Pharmaceutical Intellectual Property Provisions: Canada and EU
TRIPS requirement
EU (now)
EU (after CETA)
Canada (now)
Canada (after CETA)
Patent term
20 years
NOC requirement No
Yes
Patent term extension
N/A
0 – 5 years
Data exclusivity
Allowed
Modified from: Grootendorst and Hollis

13. What the EU Wants Additional data exclusivity in Canada
From: years
To: (for new indication) years
Would apply to all pharmaceutical products such that minor changes to existing drugs might be eligible for data exclusivity
Patent term extension in Canada
From: 0 years
To: 0 – 5 years

14. What the EU Wants
Customs officials at the Canadian border could impound imports on the suspicion that they violate a patent
Currently generic companies are allowed to import active ingredients before patent expiration in order to begin to do regulatory work necessary for approval once the patent has expired

15. Impact of CETA - Drug Expenditures
Average period of exclusivity for patented medications is currently 10 years
Out of the total of $26.1 billion spent on prescription drugs
Patented medicines: $13.3 billion
Generic medicines: $5.7 billion
Off-patent brand-name medicines: $7.1 billion
Average generic price is 39% of brand-name price
Based on sample of 15 drugs that were first genericized in 2010 CETA provisions would extend patents for an average of 3.46 years
Modified from Grootendorst and Hollis

16. Impact of CETA on Drug Expenditures
Grootendorst and Hollis

17. Impact of CETA – Drug Affordability
40% covered through public drug plans (mostly those 65 and over + those on social welfare)
$12.1 billion
45% covered under private plans (through employment)
$9.4 billion
15% uncovered (students, working poor)
$4.6 billion out-of-pocket
Most vulnerable to any increase in drug prices

18. Impact of CETA – Brand-Name R&D Expenditures
From: Iacobucci

19. Impact of CETA - Generic Industry
Apotex (second largest Canadian generic company) top pharmaceutical R&D spender in $189 million
Sanofi-Aventis top brand-name spender $182 million
Generic sales in Canada $5.2 billion
To the extent that increased IP protection decreases generic revenue companies may invest less in R&D
If generic companies delayed in being able to produce products there may be declining investment in R&D and generic exports
Currently $1 billion in exports to 115 countries

20. Conclusions
Ongoing trade and economic negotiations between Canada and the EU may lead to enhanced IP rights for pharmaceuticals
Potential impacts:
Higher overall drug expenditures
Less affordability for those without insurance
No change in brand-name R&D
Poorer economics for the generic industry

21. Further Reading
Grootendorst P, Hollis A (2011) The Canada-European Union comprehensive economic & trade agreement. An economic impact assessment of proposed pharmaceutical intellectual property provisions. February 7, Available from:
Canada’s Research-Based Pharmaceutical Companies (2011). Reality check: analysis of the CGPA’s Economic impact assessment of proposed pharmaceutical IP provisions. March 31, Available from:
Iacobucci EM (2011). Innovation for a better tomorrow: a critique. May 30, Available from: