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December 13, 2012
Canada-EU trade deal near. Increased drug costs may follow

Reports published in The Globe and Mail suggest that Canada is on the edge of signing a free trade agreement with the European Union.  

According to that newspaper, to secure the agreement, Canada is prepared to harmonize its drug patent protection laws with those in Europe, leaving Canadians with higher drug costs.

Reports suggest that International Trade Minister Ed Fast and Agriculture Minister Gerry Ritz are in the last stages of negotiations with their European counterparts and that the federal government has agreed to extend the patent protection period on brand name prescription drugs.

An agreement extending patent protection will be a hard blow for the Canadian pharmaceutical industry, which includes many generic drug manufacturers, and for the provincial governments that have spent much of the past two years enacting reforms to reduce generic drug costs and resulting health care expenses.

According to the Canadian Generic Pharmaceutical Association (CGPA), changing Canada’s drug patent protection laws to the system proposed by the European Union would add as much as $3 billion annually to Canadian prescription drug costs.  Internal government calculations estimate the extra costs will range from $367 million to $903 million per year, The Globe and Mail reports.

The European model would provide “the most extensive structural protection for innovative drugs of any country in the world,” the CGPA says.  It would also delay the entry of lower-cost generic medications into the Canadian market by 3.5 years per medication, it notes.

Brand name pharmaceuticals are one of Europe’s major exports, accounting for 15.6 per cent of all European trade with Canada. Many of the world’s largest pharmaceutical companies have head offices in western Europe, providing the EU with over 640,000 direct jobs.  According to the CGPA, Canada is home to many generic drug manufacturers that employ approximately 11,000 people, mostly in Montreal and Toronto.

“The pharmaceutical intellectual property proposals tabled by the EU will not eliminate trade barriers, as pharmaceutical products from the EU already have unfettered access to the Canadian market,” CGPA Jim Keon says.  “These proposals will simply increase profits for brand name drug companies at the expense of Canada’s health care system.”

The Europeans argued that Canadian patent protection rules lag behind international standards.  The United States and Japan have made similar assertions in the past.  The EU wants to extend the protection period to 10 years from the current eight years.  The CGPA argues that 57 per cent of all prescriptions in Canada involve generic drugs yet, those drugs make up only 25 per cent of annual prescription medication costs.

The federal government counters that a trade deal with the EU would add $12 billion to the Canadian economy, or $1,000 per family.

If a free trade deal based on European demands is passed, plan sponsors should expect to see increased drug plan costs and more claims involving brand name pharmaceuticals.

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