Drug Patent Shibboleths

"It is striking how the industry has for years now failed to meet its commitment. 
"It's fairly clear that [extending patient protection] is in a sense a cash grab.... The one thing it doesn't do is lead to any serious commitment to conduct new research in Canada."
"They should take those claims [arguments that stronger patent protection guarantees more R&D] with a grain of salt. We have decades of experience now to know that it is just not true."
Michael Geist, expert, intellectual-property law, University of Ottawa

Krisztian Bocsi/Bloomberg   A Merck pharmaceutical lab in Germany. On average, drug companies in the U.S., U.K., Switzerland, Sweden, Italy, Germany and France spent 22% of their sales into R&D in 2013, compared to 4.5% by Canadian pharmaceutical firms.

 

The trade group for pharmaceutical companies speaks of them as "research-based" corporations. There was an longstanding understanding that pharmaceutical manufacturers felt an obligation to spend ten percent of their revenues on research and development in Canada. The research that goes into the development of new drugs to be added to the pharmacopoeia is time-consuming, precise and expensive, and this, so the argument goes, accounts for the high price of such drugs once they reach the consumer market.

Mainstream pharmaceutical manufacturers always maintained that they needed an extended protection time on their research patents to enable them to recoup the cost of developing new drugs before generics could move in to replicate the product at lower cost. And the objections to permitting generic drug manufacturers to take advantage of formulas to products that were pioneered by the originators being that if patent protection time wasn't of an agreeable duration this would leave the manufacturers without the protection they require to earn back their cost of development, and no further R&D could logically take place.

So, for the promise that pharmaceutical manufacturers would invest at least ten percent of revenue in new research and development, governments such as the-then Government of Canada, were willing to extend their monopoly through extended patent protection time. New statistics, however, reveal that research and development spending has dropped acutely the last few years, well below the ten percent commitment made in the 1980s. Even while currently, government is set to allow a longer-duration patent protection.

However, in 2013 a mere 4.5% of pharmaceutical sales was dedicated to research. This newly revealed number starkly represents less than a quarter of the average spent by the very same pharmacological firms in other countries; this according to the annual report of the Patented Medicine Price Review Board. The link that the pharmaceutical companies were so anxious to trumpet in their favour between patent protection and research investment has dissolved.

"Canada is not globally competitive when it comes to its intellectual property regime and its regulatory system. We want to reverse that trend, but that will not happen in the absence of strong public policy", advised Russell Williams, president of Research-based Pharmaceutical Companies (Rx&D), Canada's main industry trade organization. In their defence the group claims the review board has underestimated its members' level of investment.

Government, they claim, has used an inaccurate logarithm definition to qualify R & D spending. The companies actually spent $1-billion in 2013, asserted Mr. Williams, not the $652-million claimed. In the near future they will be further privileged when the Canada-Europe free-trade agreement provisions allow the companies a still longer monopoly protecting them from generic firm competition for another two years' extension in patent protection.

The price review board in comparing the pharmaceuticals' shrinking commitment to R&D in Canada, used benchmarks for determining drug prices in Canada with that of the United States, the United Kingdom, Switzerland, Sweden, Italy, Germany and France. The finding was that, on average, in those countries the pharmaceutical manufacturers plowed back close to 22% of their sales profits into R&D in 2013.

Canada represents over 2% of the world market in patent protection. Companies like Merck, Boehringer-Ingelheim and AstraZeneca have closed their research laboratories in Canada while they consolidate operations in the United States and Europe where their head offices are based. Extending drug monopolies delays entry of less expensive generic drugs and makes it more difficult for small pharmaceutical companies to innovate from existing medicines gone off patent.

"We suffer all those costs, but the benefits of increased [patent] protection in Canada are really minuscule. It doesn't work."
Richard Gold, intellectual property law expert, McGill University