Clarifying what the TPP IP provisions mean in Canada for the Innovative Life Sciences Sector

April 20th, 2016 by Declan Hamill Leave a reply »

This is a guest blog post by Declan Hamill, Chief of Staff and Vice President, Legal Affairs, Innovative Medicines Canada.

Innovative Medicines Canada is the association of leading innovative pharmaceutical companies dedicated to improving the health of Canadians through the discovery and development of new medicines and vaccines. Our community represents the men and women working for more than 50 member companies which invest more than $1 billion in research and development (R&D) each year to fuel Canada’s knowledge-based economy, contributing over $3 billion to the Canadian economy.

We are delighted to have been given this opportunity to write a guest blog post to address four key misconceptions about how the provisions of the Trans-Pacific Partnership (TPP) will impact Canadian pharmaceutical innovation and Canadian patients.

Misconception #1 – The TPP represents a significant increase in Canadian Life Sciences IP Protections

The TPP allows for Canada’s current positions on data protection and patent linkage, as well as its CETA position for patent term restoration.

In Canada’s Technical Summary of Negotiated Outcomes: Intellectual Property Chapter, the Government has affirmed that TPP outcomes with regard to pharmaceuticals are “[i]n line with outcomes secured in the Canada-EU Comprehensive Trade and Economic Agreement” (CETA). It is useful to understand these CETA and TPP outcomes within the context of Canada’s current IP regime, and in comparison with regimes of our key trading partners.

In terms of data protection, under the current Canadian regime, generic companies cannot use an innovator’s confidential testing data submitted to Health Canada for product approval for a period of eight years (plus a possible additional six months for pediatric studies). The maximum 8.5 years of data protection available in the Canadian system must be considered in light of the maximum term of 8.5 years in the United States for chemical products and 12 years for biologic products, the maximum of 11 years in the European Union, and the up to 8 years equivalent protection with potential additional time available in Japan.

During CETA negotiations, the EU requested that Canada offer a term of data protection equivalent to its own, but the final text confirmed the status quo, requiring both parties to CETA to commit to a minimum of 8 years. As a result, no changes will be required to Canada’s data protection term due to CETA. The status quo will likewise remain in effect under the TPP, which calls for a minimum 5 years of data protection, plus an additional unspecified 3 years of additional protection. Canada’s current data protection term therefore does not need to change due to either CETA or the TPP.

Patent term restoration is a mechanism instituted in many nations to partially compensate pharmaceutical innovators for patent time lost due to lengthy clinical trials and regulatory approval processes. At the outset of CETA negotiations, Canada did not provide any form of patent term restoration to innovators and indeed was the only country in the G7 that did not. In comparison, and while there are differences in the operation of national regimes, the 28 members of the EU, Japan and the United States both offer patent term restoration of up to 5 years, depending upon the length of the clinical and/or regulatory delays. The complete absence of any patent term restoration mechanism in Canada makes it harder to compete for investment internationally, given that most other developed jurisdictions have accepted that some remedial measure is warranted given long pharmaceutical product development and approval times.

The EU asked Canada for patent term restoration of up to 5 years, comparable to its own system. Canada agreed to a maximum of 2 years for products protected by eligible patents. Regarding generic drug manufacturers, they can continue to make the drug and export it during CETA patent term restoration period. The Canadian Government has indicated it will institute this 2-year patent term restoration period in implementing the TPP, given that the TPP countries agreed to remedial time that can be added at the end of a company’s patent life to help compensate for unreasonable delays.

TPP parties also agreed to implement patent linkage regimes – meaning measures to prevent the market approval of a generic drug until the relevant patent expires unless the patent is invalidated or consent is given by the patent owner. But here again, Canada’s status quo will prevail, as patent linkage (albeit with significant issues, such as the absence of an appeal right for innovators, something which Canada has agreed to address in CETA) is already available via the Patented Medicines (Notice of Compliance) Regulations. Likewise, and notwithstanding international concern over the manner in which Canadian courts have interpreted utility requirements of the Patent Act, the TPP has not addressed utility standards in Canada.

Comparison of Canadian and non-Canadian IP regimes, showing changes agreed to under CETA and TPP

Comparison of IP Regimes

Misconception #2 – The TPP will extend the life of patents in Canada

Patent terms will remain 20 years; this is an international standard[i].

As in other countries, Canada’s market approval process significantly erodes the effective duration of the 20-year patent term for bio/pharmaceutical products of innovative companies. Canada’s proposed patent term restoration provisions do not change the length of pharmaceutical patents in Canada, but rather they will offer innovative pharmaceutical companies the potential to recover up to 2 years of time lost on their patent as a result of lengthy clinical trials and regulatory approval processes.

The TPP also provides that unreasonable delays shall include delays in issuance of more than 5 years from the date of filing – a potentially useful standard for the Canadian Intellectual Property Office (CIPO) to hold itself to, but a time limit beyond the average delays encountered by biotechnology patent applicants. According to CIPO’s 2015-2016 Service Commitments, applicants have a 90% chance of having a 19-month turnaround time from receipt of examination request to an examiner’s first action for biotechnology related inventions. Canada will also be permitted to exclude periods not directly attributable to the granting authority, as well as periods of time attributable to the patent applicant. While this patent office unreasonable delay standard is a step in the right direction, based upon CIPO’s own data, it would like only come into play in truly exceptional circumstances.

Misconception #3 – The TPP will increase the cost of Canadian medicines

Intellectual property does not drive the cost of new medicines. Governments will continue to have the power to negotiate prices of medicines with manufacturers.

As already noted, given that that the TPP IP provisions do not appear to strengthen Canadian pharmaceutical IP standards beyond the status quo plus CETA, and even if the argument could be made that there is a direct correlation between IP and pharmaceutical costs, the TPP’s impact would be appear to be insignificant. More importantly, the underlying assumption that stronger IP standards result in cost increases is highly dubious. Expenditures on pharmaceuticals depend far more on the supplier-customer relationships in each country and/or province than they do on IP provisions. Jurisdictions such as the 28 members of the EU and Japan have stronger IP protections than Canada, but their average costs for both innovative and generic medicines are lower than those in Canadian jurisdictions. The evidence from other nations strongly suggests that examining the impact of IP changes – without considering other factors such as pricing and reimbursement systems – can only result in deeply flawed conclusions.

The cost of drugs must always be placed into proper context within the larger healthcare system. The most recent Annual Report of the Patented Medicine Prices Review Board (PMPRB) shows that the prices of patented medicines are not the main obstacle when it comes to healthcare system sustainability. The total sales of patented medicines represent only 6.4% of total healthcare spending, a decline from 2013, demonstrating that any healthcare budget increases are almost certainly not due to innovative medicines[ii]. Patented medicines also represent less than 40% of total drug spending in Canada[iii], and public drug spending in Canada is third to last in the Organisation for Economic Co-operation and Development (OECD)[iv]. While there are undoubtedly increasing pressures on healthcare budgets, other factors are playing a larger role in the sustainability of these systems than innovative pharmaceuticals.

Finally, and even if innovative pharmaceutical costs were conclusively determined to be increasing in Canada, any assessment of such costs must be considered in light of the alternatives and the healthcare outcomes. For example, where a treatment for a disease condition alleviates or reduces the need for surgical operations, hospitalization, or physician time, the expenditure on the medicine must be evaluated from a holistic perspective given that other healthcare costs have been reduced[v].

Misconception #4 – Enough is being done under the current Canadian IP system to support life sciences competition and innovation

Strong intellectual property protects life sciences innovation. Innovation leads to new medicines. New medicines improve and save lives.

It has been alleged that current IP incentives are sufficient to support innovation in Canada, and that “too much IP” will somehow hinder competition. References to support this argument are often made to the communications and information technology sector, and to the activities of patent trolls, particularly in the United States. It is beyond the scope of this piece to consider the impact of IP standards on other sectors, but it is vitally important to understand and acknowledge the IP plays and different role in the life sciences sector, where development costs are very high and product development cycles are very long.

In the life sciences context, patents and data protection act as incentives for biopharmaceutical companies to make the enormous R&D investments necessary for new innovative medicines. The overall probability of clinical success (the likelihood that a drug entering clinical testing will eventually be approved) is estimated to be less than 12%[vi]. According to the most recent estimate published by Tufts University Center for the Study of Drug Development, as of 2013, the economic cost to develop, win marketing approval and conduct post-approval R&D for a new drug as required by the U.S. Food and Drug Administration (FDA) averaged between US$2.6 billion and US$2.9 billion. The time spent in this process averages more than 10 years. This estimate does not include further global costs and time spent obtaining additional drug approvals outside the USA[vii].

When periods of protection are too short, innovators will have less incentive to make the enormous R&D investments necessary for new medicines. Yet Canada actually affords less IP than its G7 counterparts and many other industrialized nations. In the context of the TPP, Canada is merely being asked to match the CETA standard already negotiated, rather than the 12 years of data protection currently provided for biologics in the US or the 10 years for all products in the EU, and up to 2 years of patent term restoration, rather than the 5 years in place in most other developed nations.

Far from having “too much IP” in Canada, a strong argument can be made that the TPP IP standards are not ambitious enough in the life sciences context. This is something that the Canadian Federal Government, given its ambitious objectives in Budget 2016, should consider carefully in the context of creating the right conditions for sustaining and growing a vibrant and dynamic life sciences sector in Canada. We look forward to engaging with the Federal Government to help it advance its laudable innovation objectives, which should benefit Canadian industries, workers, and – most importantly – patients.

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[i] Agreement on Trade-Related Aspects of Intellectual Property Rights, being Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization, 15 April 1994, 1869 UNTS (1994), art 33.

[ii] Brett J. Skinner, “Spending on patented drugs in Canada 1990 to 2014”. Canadian Health Policy (2016).

[iii] Analysis by Innovative Medicines Canada, April 2016.

[iv] OECD. (2015), Health at a Glance 2015: OECD Indicators, OECD Publishing, Paris. DOI: http://dx.doi.org/10.1787/health_glance-2015-en

[v] Lichtenberg, Frank R. “Pharmaceutical innovation and longevity growth in 30 developing and high-income countries, 2000–2009.” Health Policy and Technology 3.1 (2014): 36-58; See also several other studies by this Lichtenberg that demonstrate the economic benefits of innovative drugs in Canada and other countries.

[vi] PhRMA, “Biopharmaceutical Research & Development: The Process Behind New Medicines” (2016), http://www.phrma.org/sites/default/files/pdf/rd_brochure_022307.pdf.

[vii] JA DiMasi, HG Grabowski and RW Hansen (2014). “Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs. Briefing: Cost of Developing a New Drug”. November 18, 2014. Tufts Center for the Study of Drug Development at Tufts University. http://csdd.tufts.edu/files/uploads/Tufts_CSDD_briefing_on_RD_cost_study_-_Nov_18,_2014..pdf. News Release: http://csdd.tufts.edu/news/complete_story/pr_tufts_csdd_2014_cost_study.

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