The wrong prescription: Trans-Pacific Partnership adversely affects Canadian Pharma

The wrong prescription: Trans-Pacific Partnership adversely affects Canadian Pharma

The Trans-Pacific Partnership (TPP) is the largest trade deal Canada has considered since NAFTA. But it shouldn’t be a surprise if you have not heard about it given the lack of publicly accessible information.

Negotiations surrounding the deal have taken place behind closed doors and little has been shared with the public. Media coverage of the TPP has focused largely on the impacts it could have on supply management in the agricultural sector. However, the changes to intellectual property (IP) rights standards included in the TPP can also have significant consequences for Canadian consumers and pharmaceutical businesses.

What is the Trans-Pacific Partnership?

The TPP seeks to open trade barriers up between 12 countries - New Zealand, Singapore, Chile, Brunei Darassalem, Canada, United States, Australia, Peru, Vietnam, Malaysia, Mexico, and Japan. Canada has been a part of the negotiations only since 2012, while most of the other countries began talks in 2008. This may have placed Canada at a disadvantage in the negotiations, as any articles agreed upon before Canada’s participation cannot be reopened for renegotiation. Despite this, the Ministry Of Foreign Affairs states that joining the TPP will provide market access to one of the world’s most dynamic economic regions.

Critics have indicated that Canada already has bilateral free trade agreements (FTA) with four of the countries – the U.S., Mexico, Chile, and Peru – and that the remaining countries only account for less than one percent of Canada’s exports. Even after accounting for the potential growth of exports to these countries, projections show the expected return to Canada from joining the TPP is still rather small. By 2025, the TPP is projected to contribute two and a half billion USD to Canada’s GDP. While this may seem large, it only represents a tenth of a percent of Canada’s projected GDP in 2025.[1] Projections also associate the TPP with a decline in Canada’s share of world exports. This means that the TPP is more beneficial to  other countries than it is to Canada. The returns to the US economy are also expected to be less than half a percent of their GDP.[2] These poor expected returns to trade indicate to some economists, including Paul Krugman and Lawrence Summers, that participation in the TPP may be less about trade and more about strategic reform to trade policy, including changes to IP standards. 

Intellectual Property Rights in Canada

The Institute has long argued that Canada needs to improve its IP regime in order to better compete in the global market. Businesses depend on a strong IP environment in order to protect their assets. A strong IP regime is also a strong signal to potential foreign investors of the soundness of a country’s regulatory and business environment. Furthermore, business leaders have contended that while Canadian businesses are equipped to grow, they remain ill equipped to compete globally due to the poor IP regime in Canada.

As will be further explored below, it is not clear that the TPP improves IP standards for the benefit of Canadian firms. While it does strengthen IP regulation, it appears to favor US corporate interests over those of the other TPP member countries, including Canada.

Patent Reform through the TPP

The IP chapter of the TPP, made public by WikiLeaks, indicates significant changes to IP regulation over and above those set out by the UN and even US domestic law.

Amendments to patent regulations include longer periods of data exclusivity for new uses of older drugs. Innovating pharmaceutical firms are allowed to keep data pertinent to their patent private for up to eight years in Canada. The TPP allows firms to extend this period of time if they find new uses for the drug. This increases the ability of firms to perpetually renew or “evergreen” their drugs without ever improving the therapeutic effect. It also means generic drug manufacturers will be unable to develop bioequivalent drugs as quickly. Patent terms are also being extended to reimburse firms for time lost due to regulatory processes required by the government, such as clinical trials.

The TPP also proposes more stringent patent linkage terms. Patent linkage is a process used to link the approval for marketing of a generic drug to the expiration of an innovative drug. In Canada it is facilitated through the NOC regulations, which require that generic firms gain approval before developing a generic drug that involves another firm’s patent. Currently, patent linkage is only required for drugs that meet certain requirements but the regulations in the TPP may extend this to all generic drugs. The greatest risk is that incumbent firms would be in a position to block entry of generic drugs through litigation, and with more resources at their disposal, they are more likely to win.

Taken together, these new regulations will create an IP environment that necessarily favours US corporate interests over Canadian ones. Most of Canada’s large pharmaceutical companies, such as Apotex and Pharmascience, are producers of generic drugs. These are the firms most likely to be adversely affected by these IP regulations, while American pharmaceutical firms are the most likely to benefit. In addition, by indirectly extending patent periods, these regulations are likely to result in higher costs for pharmaceuticals, an area where Canadians are already outspending all other OECD countries except the US.

The Institute agrees that improving Canada’s IP regime is essential to making Canada competitive in the global economy. However, the changes to IP standards suggested by the TPP will adversely affect Canadian consumers and producers. It is still too soon to say what the full effect of the TPP will be, as so little is known. What is known is that the projected returns from trade are minimal, and the current IP reforms do not favour Canadian firms and consumers. Given that these are the major components of the trade deal, one is hard pressed to find a reason as to why Canadians would want this deal.


[1] All Current USD; P. Petri, M. Plummer and F. Zhai, The Trans Pacific Partnership and Asia Pacific Integration:_A Quantitative Assessment , East West Centre, 2011

[2] Ibid.

Photo Credit: chombosan, Getty Images 

Category: Health Care, Innovation, Industrial Policy