Extended patent protection

Who benefits?
June 9, 2003

OTTAWA--The issue of Intellectual Property Rights (IPRs) for pharmaceuticals has returned to the agenda partly as a result of the Romanow Report but also because drug companies are pushing for extended patent protection. In the wake of the current House of Commons Industry, Science and Technology committee hearings, a new CCPA study by Dr. Joel Lexchin--"Intellectual Property Rights and the Canadian Pharmaceutical Marketplace: Where do we go from here?"--makes key points about IPRs that need to be front and centre in deciding a course for future action.

The industry maintains that stronger IPR protection will allow it to afford the R&D costs for new, more effective and safer drugs. However, profit levels in the pharmaceutical industry in the mid-1990s were substantial at over 15% on capital employed. Furthermore, most new drugs do not offer any significant improvement over existing therapies. Out of 455 new patented drugs introduced into Canada from 1996 to 2000 only 25 were major improvements or breakthroughs.

According to Dr. Lexchin, "industry largely engages in R&D of products that are aimed at carving out a share of a lucrative market. In order to capture market share, drug companies spend about $1.7 billion on drug promotion in Canada. Gaining a competitive edge on rival firms leads to a restriction in sharing of research results and delays in publication of findings because of commercial concerns." Significantly, R&D by multinationals has declined as a percentage of total sales since 1997, leaving Canada behind not just the U.S. and the U.K. but smaller European countries as well.

When the Patented Medicine Prices Review Board was established in 1987 through Bill C-22, it kept the price of individual drugs down; but it has done nothing to curb increasing overall drug expenditures. Between 1987 and 2001, spending on prescription medications rose from 7.0% of the health care dollar to 12.0%--a rise of 71% a year.

As a result of two complaints at the WTO, Canada has had to pass legislation that will give 30 drugs extra patent protection, resulting in an extra $40 million in drug costs and a delay in the introduction of generic products.

"American evidence suggests that at a certain point it becomes less expensive to fund R&D from public sources rather than continuing to rely on the patent system and private enterprise," says Dr. Lexchin. "The extra public funds that would be required would be more than made up for in savings on drug costs. These numbers should serve to start a debate about whether or not the patent system is the best way to fund pharmaceutical R&D in Canada."