Myths of Pharmaceutical Patents

Before breaking for the summer, the House of Commons Standing Committee on Industry, Science, and Technology considered weakening the patent regulations that support Canada’s pharmaceutical market. Now, prompted by public-sector unions, the Competition Bureau will look at whether pharmaceutical patents are anti-competitive. These investigations have only one result: to harm international investors’ confidence in Canada’s will to protect intellectual property. Furthermore, history suggests that if they succeed in weakening patents, drug costs are unlikely to come down.

From 1969 to 1987, Canada offered very weak protection for the intellectual property of creators of new medicines. Starting in 1987, Canada reformed its patent law to better conform to the standards required by international trade agreements.

Although Canada is at the bottom of the G7 with respect to protecting innovation with patents, Canada’s efforts so far have allowed Canadians to participate fully in the world’s trade, according to international treaties that protect the rights of those who buy and sell freely across borders.

Now, some people want to damage this by weakening some important elements in the patent regulations for prescription medicines. This effort is fuelled by three myths.

The first myth is that patented medicines are driving up prescription prices. In fact, from 1988 to 2002, prices of patented medicines rose an annual average of 1.3 percent less than the Consumer Price Index did, and 0.7 percent less that the overall pharmaceutical price index, which indicates that prices for non-patented medicines rose faster that prices for patented ones. Last year, prices of patented drugs decreased by 1.2 percent.

The second myth is that a research-based drug maker can automatically prevent a generic competitor from copying a drug, even if its patents are questionable. If a research-based drug maker believes that its patents are infringed by a proposed generic version, it can stop Health Canada from licencing the generic for up to twenty-four months, or earlier if a judge decides the case sooner. However, this compensates for several loopholes that generic manufacturers enjoy. The inventing drug maker spends hundreds of millions of dollars doing clinical research to support its application to Health Canada and other countries’ regulators. In most countries, the years that the regulator takes to review the research before approving the medicine is added back to the term of the patent. This does not happen in Canada.

As well, generic competitors in Canada have easier access to inventors’ proprietary research than they do in most other developed countries. Then, the generic competitor has the right to copy the medicine while it is still patented in order to facilitate Health Canada’s approval of the generic version. As well, the generic competitor does not have to replicate the expensive research that Health Canada demands of the inventor.

The third myth is that research-based drug makers wait until patents on a drug have almost expired, then tack on frivolous ones addressing things like the colour of a pill. However, when new patents are registered for new formulations of a drug, there is no regulation preventing generic companies from marketing the older version once its patents have expired.

Nor does international evidence indicate that strong patent protection causes extraordinary growth in prescription spending. The United States, which has always had better patent protection that Canada does, has been able to manage growth in prescription costs better than Canada, according to at least one measurement.

While both countries spent 6.4 percent of health dollars on prescriptions in 1975, the prescription share in the US dropped to as low as 4.8 percent before rebounding to 5.5 percent in 1987. Although Canada had weak patents at the time, prescriptions nevertheless rose to 7 percent of health spending by 1987. US pharmaceutical patents remained stronger than Canada’s despite our subsequent reforms. Nevertheless, as of 1999, Canada spent 11.7 percent of health spending on prescriptions, versus 8.4 percent for the US.

So, if Canadian legislators and regulators want to investigate anti-competitive practices, they should look elsewhere. In fact, they might start with the Canada Health Act, which establishes government monopoly over much of our healthcare system. When it comes to health spending, patents are not the problem.