OTTAWA June 13, 2013 – International trade negotiations with the European Union and the Trans-Pacific Partnership are creating pressures to reform Canada’s intellectual property (IP) regime for pharmaceuticals. As a condition of accepting such reforms, Canada must ensure that strengthened IP protection yields increased investment in pharmaceutical research and development, argues the paper “Strong Medicine: Can Free Trade Agreements Cure Canada’s Pharmaceutical Ills?“, published today by the Macdonald-Laurier Institute.
Over the past 30 years Canada’s IP regime has been shaped by international agreements, however difficult choices that balance important domestic health policies and economic objectives remain for the future of IP in Canada.
“A robust IP regime stimulates R&D as innovators are able to recover their costs, encouraging the introduction and use of new drugs,” say the paper’s authors Stefania Bartucci and Laura Dawson. “However, there seems to be a point beyond which IP protections actually begin to stifle innovation by forcing out smaller players; the goal is to find that point.”
The study’s authors warn that the benefits of strong IP protection must therefore be balanced against potential increases in drug costs for governments and other buyers, and the economic impact of rent-seeking. For example, changes to Canada’s Patent Act in the 1980’s and 1990’s produced upswings in both innovation and litigation.
As it faces increased pressure from international trading partners to update its IP regime, Canada must take into account how revisions will affect our core interests, which are as follows:
• an innovative pharmaceutical sector, directly employing 15,000 people, and contributing $1 billion in R&D investment in Canada;
• an emerging biopharmaceutical sector which has promising growth implications for Canada’s knowledge economy but may fail to thrive because of high up-front costs and global competition;
• a generic pharmaceutical sector, employing over 11,000 people and providing affordable drugs to Canadian consumers; and
• public and private sector drug buyers seeking the latest innovations, secure access, affordable prices, and product safety.
The agreement that is concluded with the EU will lay the groundwork for the future TPP agreement with the TPP. Unless Canada makes significant reforms to its domestic IP regime in the near term, it will face increasing pressure to make even more extensive reforms in the future.
As important trade negotiations move forward, the paper recommends:
1. Objective analysis of the potential effects of IP reform in Canada – If there is indeed a threshold beyond which the costs of stronger IP outweigh the benefits, it is essential to explore what that threshold might be. The Government of Canada should produce, and make public, a study of how potential reforms in IP policy will affect the domestic pharmaceutical industry and the health care sector.
2. Review the system that supports pharmaceutical sector innovation – An evaluation of the other programs and tools to stimulate innovation in the pharmaceutical sector will assist in determining the relative impact of IP on innovative activity. This evaluation can inform our negotiating positions in future trade agreements, and any other proposed changes to Canada’s domestic IP regime
3. Obtain commitments from the innovative pharmaceutical industry for R&D expenditures in Canada – Stronger IP will provide these companies with more certainty of market exclusivity, and thus enhance the extent to which they can recover R&D investment.
However, the effects of stronger IP on drug expenditure and availability are uncertain, and there is a possibility that IP reform will increase the costs of drugs for provincial governments and other consumers. Given the ambiguity associated with these potential impacts, if Canada agrees to stronger IP for pharmaceuticals, it should do so in exchange for a commitment from industry to spend a certain percentage of sales on R&D in Canada, similar to the agreement made between industry and the government in the late 1980s.
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