CETA and pharmaceuticals: impact of the trade agreement between Europe and Canada on the costs of prescription drugs

Lexchin and Gagnon Globalization and Health 2014, 10:30 http://www.globalizationandhealth.com/content/10/1/30 DEBATE Open Access CETA and pharmaceuticals: impact of the trade agreement between Europe and Canada on the costs of prescription drugs Joel Lexchin1,2,3* and Marc-André Gagnon4 Abstract On a per capita basis, Canadian drug costs are already the second highest in the world after the United States and are among the fastest rising in the Organization for Economic Co-Operation and Development. The Comprehensive Economic and Trade Agreement (CETA) between the European Union (EU) and Canada will further exacerbate the rise in costs by:  Committing Canada to creating a new system of patent term restoration thereby delaying entry of generic medicines by up to two years;  Locking in Canada’s current term of data protection, and creating barriers for future governments wanting to reverse it;  Implementing a new right of appeal under the patent linkage system that will create further delays for the entry of generics. CETA will only affect intellectual property rights in Canada—not the EU. This analysis estimates that CETA’s provisions will increase Canadian drug costs by between 6.2% and 12.9% starting in 2023. The Canadian government committed to compensating provinces for the rise in costs for their public drug plans. Importantly, this means that people paying out-of-pocket for their drugs or receiving them through private insurance, will be charged twice: once through higher drug costs and once more through their federal taxes. As drug costs continue to grow, there are limited options available for provincial/territorial governments: restrict the choice of medicines in public drug plans; transfer costs to patients who typically are either elderly or sick; or take money from other places in the health system, and threaten the viability of Canada’s single payer system. CETA will therefore negatively impact the ability of Canada to offer quality health care. Keywords: Brand-name drugs, Canada, CETA, Data protection, European Union, Intellectual Property rights, Patent linkage, Patent term restoration Background Negotiations for the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union were launched in May 2009. In October 2013, the negotiating parties announced they had reached an agreement in principle over CETA and that * Correspondence: 1 School of Health Policy and Management, York University Ontario, Toronto, Ontario M3J 1P3, Canada 2 University Health Network, Toronto, Canada Full list of author information is available at the end of the article its implementation should begin in 2015. One of the most controversial issues about CETA is its proposal to extend intellectual property protection for patented drugs in Canada, which could significantly increase drug costs for Canadians. We recognize that trade deals are complex and involve trade-offs for other benefits that countries hope to obtain. In this article we are not attempting to weigh the overall benefits and costs to Canada of CETA, rather we are just focusing on the impact that CETA will have on expenditures for patented prescription drugs. © 2014 Lexchin and Gagnon; licensee BioMed Central Ltd. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly credited. The Creative Commons Public Domain Dedication waiver (http://creativecommons.org/publicdomain/zero/1.0/) applies to the data made available in this article, unless otherwise stated. Lexchin and Gagnon Globalization and Health 2014, 10:30 http://www.globalizationandhealth.com/content/10/1/30 At over $700 per person per year (US$ purchasing power parity), Canada spends more per capita on pharmaceuticals than any other country in the world except the United States (US) [1]. Similarly when measured against comparator countries in the Organization for Economic Cooperation and Development (OECD), Canada’s growth in drug spending per capita (in real terms) between 2000 to 2009 was 4.3 percent per year compared to the OECD average of 3.5 percent. Although this rate fell to −0.3 percent per year from 2009–2011, the OECD average fell to −0.9 percent [1]. Canada represented 2.6% of the global market sales in prescription drugs in 2011, while the United Kingdom, with a population almost twice as large, made up only 2.5% of the global market [2]. In 2012 Canada was spending almost as much on prescription drugs at $27.73 billion as it was on physicians at $29.96 billion [3]. Compared to other health expenditures, from 1985 to 2006, Canadian drug spending consistently grew at a faster rate than overall health spending [4]. There were a number of cost drivers, including population growth and aging, general inflation, price effects (the cost of purchasing an individual drug), volume effects (number and size of prescriptions) and mix effects (changes in the drugs selected to treat a particular condition). Although population growth and aging are often cited as major reasons for spending increases, in fact the second largest contributor, after volume effects, was mix effects, i.e., substituting newer, more expensive drugs for older, less expensive ones [5]. While using more expensive drugs is justified when they are therapeutically superior, overall fewer than 1 in 10 new drugs offer any significant therapeutic advantages [6]. Since 2007, the growth in drug spending has slowed and in 2011 and 2012 was 3.8% and 3.2%, respectively [7]. The trend to slower growth is arguably due to a combination of two factors: the expiration of patents on blockbuster drugs (also known as the patent cliff) alongside the subsequent entry of lower priced generics, and the move in a number of Canadian provinces to lower generic prices [7]. The impact of such provincial policy changes is seen through Ontario’s expenditure on atorvastatin (Lipitor) – a drug used to treat high cholesterol. In 2009–10, prior to patent expiration, this medication cost Ontario $316 million [8]. Once Lipitor’s patent expired and generics were available, the cost for atorvastatin dropped in 2010–11 to $133 million [9], thereby saving Ontario $183 million. These savings will increase as provinces aggressively lower the price that they pay for generics as Ontario, British Columbia and Alberta, among other provinces, have done within the past few years [10]. This paper discusses the three main provisions in CETA that relate to patented drugs and explains how they will lead to increased drugs costs. Page 2 of 6 Discussion Impact of CETA’s intellectual property rights provisions By understanding Canada’s current pharmaceutical regime, we can better explore the potential impact that will be felt through CETA—specifically its intellectual property rights provisions (...truncated)