First study on new Canada - EU trade agreement discusses consequences of increased protection for pharmaceutical innovation

Today, the Canadian Centre for Policy Alternatives (CCPA) released a new report entitled 'Making Sense of the CETA', providing the first in depth analysis of the new Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union. On 5 August, the parties announced the successful conclusion of the negotiations, and the beginning of the phase of legal scrubbing and translations leading to final approval, but the actual text of the agreement remained secret, until it was leaked in Germany a few weeks later. CCPA's analysis discusses, in a neat 128 page long document, all the aspects of the agreement, including the provisions related to intellectual property rights. Inter alia, it also comments on the enhanced standards of protection for pharmaceutical innovation embodied in Articles 9 - 10 of the draft agreement. These provisions, which implement TRIPS-plus proposals, already attracted significant criticism during earlier stages of the negotiations; the concerns generally mirror those expressed in relation to similar provisions adopted or negotiated in other free trade agreements (e.g. UNITAID's report on the Trans-Pacific Partnership Agreement, commented in a previous post).

Article 9.2 of the draft CETA states that each party should provide a period of sui generis protection for pharmaceutical products that have received marketing approval, determining its duration in relation to the period of time elapsed between the date of the patent application and the date of the first marketing authorisation, reduced by a period of five years. The parties are free to set the maximum period of additional protection (which can only be granted once), provided it does not exceed a term of 2 to 5 years, and may reduce the period of protection in relation to any unjustified delays resulting from the inactions of the applicant. The sui generis protection covers only the pharmaceutical product that has received the marketing authorisation, and confers the same rights and obligations arising from a patent, although the parties may limit the scope of the additional protection by providing exceptions for making, using, offering for sale, selling or importing of products for the purpose of export during the period of protection. If the product is protected by more than one patent, the additional protection applies only once, but the agreement allows the patent holder to choose a single patent whose expiration date will be the starting date for the sui generis right. There is also a mechanism that essentially withdraws the protection in case of revocation or expiration of the underlying patent or of the market authorisation.

Article 9 bis briefly provides that, if any of the parties employs a 'patent linkage' mechanism to link generic marketing authorisation to the expiration of the patent protecting the brand drug, all litigants should be afforded equivalent and effective rights of appeal. CCPA explained that, in Canada, originator companies may prevent the granting of marketing approval for generic drugs by initiating a special procedure described in the Patented Medicines (Notice of Compliance) Regulations and proving the existence of a valid, non-expired patent; however, if they lose the summary proceedings, they have no right to appeal (while, in the opposite situation, generic companies can appeal the unfavourable decision).

Article 10 contains provisions on the protection of undisclosed test or other data submitted during the process of marketing approval for pharmaceutical products that use new chemical entities, requiring the parties to protect the data against disclosure, if their origination involved considerable effort. Exceptionally, the parties may allow disclosure if necessary to protect the public, or if accompanied by measures to protect the data against unfair commercial use. The draft agreement adds that (i) no one, unless authorised by the right holder, can rely on such data to support an application for marketing approval for a period of not less than six years (not from the submission of such data, but from the date of marketing approval of the application of the right holder), (ii) the parties cannot grant marketing approval to any person that relies on such data during a period of not less than eight years. Interestingly, the provision also clarifies that, beyond the regime for data protection, there shall be no limitation on the parties in relation to the implementation of accelerated marketing approval procedures based on bioequivalence and bioavailability studies.

The report of the Canadian Centre for Policy Alternatives highlighted, first of all, that Canada currently has the second highest per capita drug expenditures in the world, and that the changes embedded in the CETA Agreement would further increase health care expenses in Canada, delaying the availability of cheaper generic drugs. The organisation cited a study according to which the agreement would extend the average market exclusivity for patented drugs by 383 days, increasing costs by $850 million each year. It also claimed that any increase in R&D expenditure by pharmaceutical companies in Canada, as a result of enhanced patent protection, is unlikely to offset the effects of the higher health care costs. Further, CCPA noted that 'Canadian negotiators made unilateral concessions in the CETA that will only affect Canada and will not require changes to the intellectual property rights regime for pharmaceuticals in the European Union', and observed that the draft agreement includes court decisions on patents among those that can be challenged through the CETA’s contentious investor-state dispute settlement mechanism. Although implicitly recognising that the measures proposed by the United States in the negotiations for the Trans-Pacific Partnership (TPP) Agreement aim at an even stricter regime of patent protection for pharmaceutical products, the report argued that the entry into force of the CETA would weaken Canada's position in the TPP negotiations.

Analysing the key provisions on patents, the CCPA took issue with a number of controversial issues, including (i) the possibility of extending patent protection 'even if the patent holder itself is responsible for the delay' (although a draft provision allows the parties to curtail the sui generis right in case of inactions leading to delayed marketing approval), (ii) the right of the patent holder to choose the most favourable patent for extension, in case of multiple patents on the same pharmaceutical product, (iii) the re-affirmation of the eight year period of protection for undisclosed data, first enacted in Canada in 2006, a commitment that would make 'it virtually impossible for any future government to shorten this time period', which extends beyond the term required by the TRIPS Agreement, (iv) the uncertainty surrounding the extension of the eight year data protection period 'to include products representing a minor change to an existing drug' (although recognising this case as unlikely).

Commenting on the provision concerning patent linkage, the report noted that the recognition of an equal right of appeal means 'that under CETA there could be a further delay of 6–18 months before generics appear, as the appeal makes its way through the court system' (citing an earlier scholarly comment). Finally, the CCPA observed that Canada appears to have dropped its request for the exclusion of court and administrative tribunal decisions related to IPRs from investor-state challenge, resorting, instead, to a declaration that is 'little more than a face-saving gesture for Canada, which provides no substantive protection for court decisions related to IPRs'.