Why Is the Canadian Government Killing the Generic Drug Industry?

There is a hidden continuing battle in the Canadian pharmaceutical industry. It pits Canada’s Research-Based Pharmaceutical Companies (mostly international and trade-name companies) against the Canadian Generic Pharmaceutical Association (CGPA).

The CGPA are companies that produce pharmaceuticals after the patent has expired.
The battle also involves the Food and Drug Directorate, whose mandate is to supervise the quality of the drugs for sale here as well as to allow their release for consumption, and the Ministry of Health for each province. These provincial government agencies decide whether the newly released pharmaceuticals will be paid for as a benefit for seniors by the provincial governments.

When did the battle really get started? In the 60’s, but the roots of the battle were planted in 1923 when the Patent Medicine Act was amended to allow Canadian companies to apply for “Compulsory Licenses” to produce the active ingredients of patented drugs. However it never amounted to much, as the Canadian market was too small to support the manufacturing of these ingredients.

In the early 60’s many government committees studied the state of the Canadian pharmaceutical industry and came to the startling conclusion that our drug prices were among the highest in the world. As well, very little drug research money was being spent in Canada.

In 1968 the Trudeau government amended the patent act to allow compulsory licensing but this time the companies did not have to manufacture the active ingredient here but could buy it abroad or even bring in the product in final dosage form. From the time this change was instituted until Mulroney took office, the Canadian generic drug industry exploded with growth so that today it can be compared to generic firms anywhere in the world. Apotex is the biggest of our Canadian firms followed by Genpharm and Novopharm. In my opinion the Trudeau Liberals were responsible for creating a world-class generic drug industry based in Canada. Many of these generic companies are now foreign-owned.

The Mulroney Conservatives put a stop to compulsory licensing. The research-based companies were guaranteed twenty years of exclusivity but in actual fact, because of the time taken to do clinical trials, it probably amounted to approximately fourteen years.

This was not enough for the international companies. They have become ingenious artists in using the laws and regulations to prolong their exclusivity. They do this with a series of legal and business maneuvers. For example, just prior to their patent expiring they license a smaller firm to sell their patented drug for a previously agreed upon royalty. Thus, they are in business selling under their branded name as well as under the generic name. However this, of course, limits the profit potential of another generic firm that has spent a great deal of money and gone through the process, demanded by Food and Drug, to get their equivalent released. This process is called “pseudo-generics”.

But that is only the half of it. In the Patent Act there are regulations called the Patented Medicine (notice of compliance) regulations. This regulation allows brand-name companies to stop Food and Drug approval of a generic equivalent simply by alleging patent infringement. The automatic twenty-four month injunction prevents the Food and Drug from granting approval to a generic drug until any alleged patent infringement claims are settled in court. The regulations withhold Food and Drug approval, not when a patent is infringed, but when a trade-name company says it might be. GUILTY UNTIL PROVEN INNOCENT.

This provides an enormous financial incentive for big companies to keep alleging infringement in order to keep their monopoly. This process is called “evergreening” or “layering”.

Why would the federal government do this for the big companies? The government would answer that the companies promised to do a great deal of research here in Canada. In fact this did not happen. The ratio of Research and Development money to sales is about 10% in Canada while the aggregate ratio for the seven other countries used by the Patented Medicine Price Review Board (PMPRB) comparison was nearly double at 19%.

The PMPRB also shows that in the year 2000 Canada spent $30. per person for research and development while $90. per person was the aggregate value of spending in a selection of other countries. Today more money is spent on drugs than doctors. Canada’s trade deficit in pharmaceuticals went from 2 billion in 1997 to 5.5 billion in 2000.

President George Bush is instituting changes in the American law on drug patents. Unless change comes quickly here in Canada, the provinces will not be able to meet their health care obligations. With a population fewer than thirty million, Canadian companies will never be able to produce branded drugs by themselves to sell worldwide. It is unfortunate that the Canadian government does not see the value in supporting the CGPA in an effort to keep prescription prices in Canada at a reasonable level as well as maintaining our standing among the world’s generic drug companies.

If you would like to have a say, scroll up to TOPICS and just above it is CONTACT. Hit it and I will receive your comments