Canada’s Pharmaceutical IP Laws Stronger Than You Think

As globalization shrinks our world, new connections are being made in unexpected areas. One such connection is a proposed trade agreement between Canada and the European Union that could have substantial implications on the domestic costs of pharmaceutical drugs if passed. As part of the the trade negotiations, the E.U. has proposed changes to Canada’s drug patent system, which could potentially add billions to Canada’s prescription drug plan per year, an area where Canadians already spend spend $22 billion annually.

The E.U. is home to many of the world’s big, brand-name pharmaceutical companies. Naturally then, they are seeking more stringent IP rules in Canada in order to delay the availability of lower-cost generic alternatives. In support of this, the Canadian Intellectual Property Council (CIPC) published a report earlier this year which claims Canada’s IP laws lags behind international competitors. The report claims that Canada’s failure to encourage research and development (R&D) would have negative impact on innovation, Canadian health and jobs.

A recent response by Professor Edward Iacobucci, a law professor at the University of Toronto, however, exposes many gaping holes in the CIPC’s claims. Even while keeping in mind that his report is commissioned by the Canadian Generic Pharmaceutical Association (CGPA), whose represented interests obviously lie in less stringent pharmaceutical regulation, Iacobucci’s arguments are convincing.

CIPC Claim: Stronger IP rights will drive job creation, economic growth and innovation.
Iacobucci: There’s no denying that pharmaceuticals have significantly contributed towards Canadians’ quality of life, however, the report 1) only stresses the benefits without considering the costs and 2) fails to appreciate the global nature of pharmaceutical investments.

Iacobucci makes the obvious point that while greater IP protection tends to promote innovation in socially beneficial drugs, it also hinders drug distribution once invented by weakening competition and raising prices. In fact, if the CIPC’s proposal to expand IP rights is applied to existing IP, this would simply result in a windfall for current IP-holders at the expense of consumers without spurring additional innovation.

It is also important to acknowledge that Canada is a small fish in the global pharmaceutical pond. As Canada represents only 2.5 percent of the world market, this means the stringency of Canadian IP laws will have little impact on international incentives to innovate. In fact, Iacobucci further reveals that many band-name drug companies have established production facilities in jurisdictions not known for their IP protection, including Chin and India. It seems other factors, such as human capital, are more economically important than IP laws in influencing the location of investments.

CIPC Claim: Canada’s IP laws are weak compared to the rest of the world, therefore, it needs to be strengthened to stay competitive.
Iacobucci: Canada’s IP laws are NOT weak, as brand-name pharmaceutical companies already benefit from protections that go beyond international, TRIPS standards, specifically:

• An automatic injunction against generic competition of up to 24 months
• Two rounds of patent infringement litigation on the same set of patents
• No statutory incentive for generic pharmaceutical companies to challenge patents
• Regulatory data protection that lasts several years longer than the international average
• The ability to obtain patents on multiple aspects of a drug without any mechanism for generic companies to oppose a patent except through litigation

As well, when comparing different IP regimes, they should be viewed along varying dimensions, and their “strength” not assessed based single, isolated aspects, which is what the CIPC report does with data exclusivity periods. The laxity in one area may very well be offset by the stringency in another.

Overall, it seems that the CIPC’s report really is more of an advocacy piece rather than one on which sound policy can be based, particular with respect to the current E.U. pharmaceutical trade negotiations. If the CIPC’s recommendations are implemented, looks like only big, pharmaceutical companies stand to benefit, and not Canadians as the CIPC report claims.

CRTC Report
Iacobucci Report