Generic drug makers red flag EU free trade proposal

Free trade with the European Union – based on proposed changes to Canada’s drug patent system – could add $2.8 billion a year to prescription drug costs, says the CGPA.

February 8, 2011   by PLANT STAFF

Proposals would lengthen the period of data exclusivity to 10 years plus from eight.

Photo: Apotex

TORONTO: Free trade with the European Union – based on proposed changes to Canada’s drug patent system – could add $2.8 billion a year to prescription costs, and put Canadian generic manufacturers at a market disadvantage, says a study commissioned by the Canadian Generic Pharmaceutical Association (CGPA).

The Canada-European Union Comprehensive Economic & Trade Agreement: An Economic Impact Assessment of Proposed Pharmaceutical Intellectual Property Provisions, says proposals tabled by the EU would lengthen the exclusivity for brand-name drugs and delay the availability of generics by about 3 1/2 years.

The study’s authors, Aidan Hollis of the Department of Economics at the University of Calgary and Paul Grootendorst from the University of Toronto’s Faculty of Pharmacy, said the measure would be “the most extensive structural protection for innovative drugs of any country in the world.”

It says the proposals would require substantial changes to Canada’s intellectual property laws for pharmaceuticals, lengthening the period of data exclusivity to 10 years plus from eight and would make Canada the only country to combine a patent linkage regime, automatic patent term extensions, and 10-plus years of data exclusivity.

Governments, businesses and patients would face substantially higher drug costs, which according to the study would likely be $2.8 billion a year. And the EU’s proposed changes would not lead to a substantial increase in investment by brand-name drug companies in Canada, say the authors.

“The purpose of exclusivity rights granted to innovators is to create an incentive for research and development investments into new drugs. However, the amount of additional investment in pharmaceutical innovation that would result from the EU’s proposed pharmaceutical IP provisions ($345 million) would be a small fraction of the additional costs to Canadians,” says the study.

And there will likely be a significant negative impact on generic drug R&D in Canada, which is currently worth $615 million a year.

The study predicts increasingly more R&D would be done in countries with shorter exclusivity periods, and it’s possible the net impact on brand and generic R&D in Canada could even be negative.

Exporting is also at risk. The study notes that if exclusivity ends at the same time as the EU or later than the US (currently five years) and Mexico, Canada will become an unattractive place to locate manufacturing plants since they would not be able to produce for export to those markets until exclusivity ends.

“Generally it can be anticipated that manufacturing of new products will start in other countries, leading to a systemic disadvantage in generic manufacturing in Canada,” says the study.

CGPA president Jim Keon pointed out that pharmaceuticals are one of the EU’s top exports to Canada, comprising 15.6% of total exports with a value of more than $5 billion annually.

“The generic pharmaceutical industry supports the Government of Canada’s efforts to increase trade with other jurisdictions,” said Keon. “The pharmaceutical intellectual property proposals tabled by the EU, however, will not eliminate trade barriers, as pharmaceutical products from the EU already have unfettered access to the Canadian market. These proposals will simply increase profits for brand-name drug companies at the expense of Canada’s health-care system.”

Eight CGPA members manufacture generic drugs in Canada, and the industry employs 11,000 Canadians. The study did not look at how sales or jobs would be impacted by the EU proposals.

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