Ask lawyers in Canada’s $84-billion biotech sector what the main concern confronting them in their work is, and the answer comes down to one point from which most others flow. “It’s to ensure that there are safeguards around any intellectual property the company may have,” says John R. Rudolph, general counsel and corporate secretary for Eli Lilly Canada Inc. But that task can be made harder if a fair and egalitarian regulatory framework is not in place to uphold the safety and efficacy of products, or when that framework is burdensome or protracted.
There is currently a need for more appropriate regulatory pathways for research and development in agricultural and pharmaceutical products in Canada, says Jane Clark, Ottawa-based leader of Gowling Lafleur Henderson LLP’s life sciences industry group. To that end, Gowlings’ business law partner Michael Herman adds in-house counsel frequently find themselves working on licensing and royalty agreements as well as searching for funds and risk capital for research and development.
But the requirement for general counsel is to wear multiple hats, and that’s a very significant part of their job, Herman says. Eli Lilly’s counsel in Canada, Australia, and New Zealand, for example, work to ensure fair and reasonable market and advertising environments, says Rudolph. And that’s the case at other companies too. “Our department supports all aspects of the business — research and development, manufacturing, marketing,” says Robin Keslassy, head lawyer of Toronto’s Sanofi Pasteur Ltd., the vaccines division of the Sanofi-Aventis Group.
However, in wearing those hats, counsel work around a number of grey areas in Canada, according to Rudolph. There are uncertainties about patent protection and markets for innovative medicines. Herman adds general counsel have become involved in advocacy work on public policy around incentives, marketing, and risk capital too. And much of the work of general counsel in the business revolves around “getting to know who you need to know in the provincial and the federal governments,” says Clark.
But this is not the best of times for the industry. An Ernst & Young report on the state of biotechnology worldwide paints a less-than-rosy scenario for Canada’s industry. It notes the number of public companies declined significantly, to 64 in 2009 from 72 in 2008, a decline of 11 per cent. Some firms were acquired or went out of business in the economic downturn, and there were no IPOs to replenish the stock.
On the private company side, the number of firms declined nine per cent to 260 in 2009 from 286 in 2008. A key survival driver for many companies was their ability to find ways of operating more efficiently, a primary mantra in the current economy. The report also notes that, looking primarily at U.S. health-care reform, current legislation is really about expanding access while containing costs and achieving those contradictory goals will inevitably require increasingly efficient ways of delivering health care.
And, counsel agree, levelling regulatory playing fields can assist in achieving that aim of efficiency. But they need products protected in order to participate. According to industry lobby group BIOTECanada, the country’s multibillion-dollar bio-economy is worth more than 6.5 per cent of annual GDP and supports an employment network of more than one million jobs. To nurture that industry, there needs to be stronger patent and data protection, say Sanofi Pasteur president Mark Lievonen and Keslassy. “We need sustainable world-class intellectual property regulations,” says Lievonen.
In Canada, that data protection is eight years, in contrast to the United Kingdom’s 10 to 11 years and the United States’ 12 years. In addition, it can take up to 20 years from the granting of a patent to getting something licensed for market. Clark says that’s a hugely expensive process that needs to have protections put on it so companies can recoup their costs at market. “It takes a lot of time to get it through the patent office,” she says. “You can’t sell it until you have regulatory approval. When you do business here, are you going to have your product protected? Is it worth it for the market?” And, all that time the clock is ticking with aggressive generic companies waiting to get the data, says Rudolph. “By the time the product gets to market, there is often little patent protection left on the product,” Lievonen says.
Rudolph adds patent-term restoration is lacking, and the legal system is not onside when it comes to patent infringements. “It takes years and years and years to get any damages from an infringement. There’s no meaningful deterrent.” He suggests something in the order of triple damages might prevent such situations.
All counsel interviewed for this story agree Canada is in need of a stronger strategy to deal with orphan drugs, medications used to treat rare disorders. Among BIOTECanada’s priorities is urging Health Canada to provide incentives for domestic research and a clearly defined regulatory pathway recognizing the unique nature of rare disorders treated with costly medications. Because the number of those with such disorders is small, so too is the potential market for new drugs to treat them, which makes research and development at times prohibitive. Steps have already been taken by government regulatory agencies in the U.S. and the European Union to reduce this disparity. Rudolph says it doesn’t seem to be the case in Canada. “There seems to be no clear or present interest in orphan drug legislation in Canada,” he says.
No matter what the drug at issue is, counsel also agree there is a need for a co-ordinated approach between the federal and provincial governments toward pricing and availability of biotech products. Rudolph says getting products listed is also a time-consuming process for companies. “Oftentimes, it’s the same data that is being reviewed and considered but it’s inconsistent in how it’s reviewed across the country,” he says, adding there has been a further thorn in the industry’s side with Ontario allowing generics to challenge invalid patents. He calls it a step in the wrong direction. “That’s patent-busting legislation in a province that wants to pride itself on protection of intellectual property. It doesn’t send a very good message to anybody outside Canada.” It’s not that Rudolph is against generics. “They play an important role,” he says. “Society should get full benefit of innovation once it’s paid for.”
BIOTECanada is also encouraging the federal government to secure Canada’s place in the global bio-economy by providing a minimum of $100 million per year to Sustainable Development Technology Canada to continue support for the next generation of industrial biotechnology and clean-tech innovations, and expand the fund to include more diverse bio-based technologies and bio-chemicals. BIOTECanada also suggests maintaining investment for vaccines to treat Canadians through continued support for the National Immunization Strategy program by creating a permanent fund with a minimum of $100 million and by working with the provinces and territories to establish a sustainable funding mechanism to ensure adoption of new recommended vaccines in public health programs within six months of their approval.
The Ernst & Young report notes public pharmaceutical companies in Canada, like their U.S. and European counterparts, have had to engage in major cost-cutting to survive. These efforts have delivered results on the bottom line, where the publicly traded industry’s net loss fell an astounding 94 per cent to only US$70 million in 2009 from $1.2 billion in 2008 — the industry’s lowest overall net loss in the last decade. Driving that bottom line improvement were three things: companies cut expenditures in the current financial climate, loss-making companies were acquired or wound up, and significant writeoffs of intangible assets abated as few companies now carry any sizable intangible assets on balance sheets.
However, much of the cost-cutting has come at the expense of research and development spending, which fell 44 per cent in 2009. Given that research and development is the driver of future growth in this sector, Ernst & Young says this sharp decline could have long-term repercussions for the Canadian industry. Without incentives or other cash-raising mechanisms, things might not change, say in-house lawyers at biotech companies. Despite the cost-cutting measures, there was no appreciable improvement in the industry’s survival index. Ernst & Young says while the amount of capital raised by Canadian firms rose significantly during the year, the vast majority of these funds went to a small group of companies, leaving 57 per cent of companies with less than one year of cash on hand.
Lievonen says Canadian government bodies are huge purchasers of biotech products. But, he says, decisions need to be made to protect the industry. It could well determine if Canada will be an importer or an exporter of biotech products, Lievonen says. And that could come down to what government does to ease pressure on the industry. “They’re not thinking about how to drive innovation and reward innovation.”
There is help available through government offerings such as the scientific research and experimental development program and through the Canada Revenue Agency. But, put together, the challenges facing the biotech industry are putting Canada at a disadvantage. “It may be nice if the provinces and the feds could co-ordinate on some issues,” says Clark. “You’re all over the map. It’s really in Canada’s best interest to be open to biotech. A lot of countries are competing to be the place to do biotech. If we co-ordinate efforts, we could smooth the way.”