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Trade pact may hoist Rx costs in Canada
February 8th, 2011
TORONTO – Canada could face higher prescription drug costs depending on the outcome of trade talks with the European Union, which may bring changes to the nation's drug patent system.
Currently, Canada and the EU are in negotiations for a comprehensive economic and trade agreement (CETA), which Canadian global trade minister Peter Van Loan aims to wrap up before the year's end.
As part of the talks, the EU has made proposals that would "considerably lengthen" the period of market exclusivity for brand-name drugs in Canada and provide "the most extensive structural protection for innovative drugs of any country in the world," according to a study released Monday by the Canadian Generic Pharmaceutical Association (CGPA).
Commissioned by CGPA, the study found that, if implemented, the proposals would delay the availability of lower-cost generics in Canada by about 3.5 years. As a result, Canadian payers — including the federal government, provincial governments, businesses and patients — "would face substantially higher drug costs as exclusivity is extended on top-selling prescription drugs, with the annual increase in costs likely to be approximately $2.8 billion [Canadian] per year," the study noted.
Ontario would take the biggest hit from an extended exclusivity period for branded medications, with the province's prescription drug bill rising an estimated $1.2 billion annually, according to the study. Other provinces that would see hefty increases under that scenario include Quebec ($773 million), British Columbia ($249 million), Alberta ($212 million) and Nova Scotia ($95 million).
"A substantial share of the costs of the EU's proposed changes to IP [intellectual property] would fall on government drug plans, which cover approximately 45% of total prescription drug spending in Canada," stated the report, The Canada-European Union Comprehensive Economic & Trade Agreement: An Economic Impact Assessment of Proposed Pharmaceutical Intellectual Property Provisions. CGPA said the study was authored by two of Canada's top pharmaceutical policy experts: Professor Aidan Hollis of the Department of Economics at the University of Calgary and Paul Grootendorst from the University of Toronto's Faculty of Pharmacy.
According to the association, a key finding of the study is that the EU's proposed changes to branded drug exclusivity wouldn't result in a substantial increase in investment by brand-name drug companies in Canada.
"The purpose of exclusivity rights granted to innovators is to create an incentive for research and development investments into new drugs," the study's authors stated. "However, the amount of additional investment in pharmaceutical innovation that would result from the EU's proposed pharmaceutical IP provisions would be a small fraction of the additional costs to Canadians."
The research reckoned that $8 of additional drug premiums for Canadians would be needed to generate every $1 of R&D investment by branded drug companies. "Extending exclusivity periods beyond the current level in Canada, therefore, appears to be an expensive way of encouraging such investments," the study said.
What's more, provinces implementing drug benefit reforms — such as Ontario, British Columbia, Alberta and Nova Scotia — to reduce out-of-pocket costs for consumers in public and private plans may see hundreds of million of dollars in estimated savings "wiped out" if the EU exclusivity proposals are enacted, noted CGPA president Jim Keon.
Pharmaceuticals are one of the EU's top exports to Canada, each year accounting for 15.6% of total exports, or more than $5 billion, according to Keon. CGPA reported that generic drugs fill 57% of all prescriptions in Canada but represent just 25% of the $23 billion that the nation spends annually on prescriptions.
"The generic pharmaceutical industry supports the government of Canada's efforts to increase trade with other jurisdictions. 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," Keon said in a statement. "These proposals will simply increase profits for brand-name drug companies at the expense of Canada's health care system."