IP regime for pharmaceutical innovation distinct from other types of innovation, says Kristin Wall
The COVID-19 pandemic held a bright side and a dark side for Canada’s pharmaceutical industry, says Kristin Wall, a lawyer and trademark agent at Norton Rose Fulbright Canada LLP.
On the negative end, the sector faced the same supply chain issues many companies have experienced. But the crisis also showed its innovative potential.
“The pharmaceutical area became front-and-centre during the pandemic,” she says. “We saw companies and regulators, like Health Canada, come together and work together in the ultimate streamline capacity to bring the vaccines that we needed to market as quickly as possible.”
“The world was amazed by the development we saw there and how quickly it happened. I think those have been the amazing lessons learned from COVID-19 – to know how fast you can bring about a change and bring a new drug to market when everyone works together.”
Wall is a partner in Norton Rose’s intellectual property group, specializing in life sciences, healthcare, and pharmaceuticals.
In a COVID-19 environment that has seen accelerated vaccine development, it is important to understand that Canada has developed a unique IP regime for pharmaceutical innovation, which is distinct from other types of innovation, says Wall.
On average, it takes more than $1 billion, and at least 10-15 years to bring a drug to market, she says. Most innovation will have access to a 20-year patent term, during which it will not have to compete against reproductions.
“Right out of the gate, you're coming to the market with half the amount of market exclusivity as most innovation,” says Wall. “As a result, there's been some special laws that have come to pass in Canada.”
“The main way that pharmaceutical companies recover research investment is by having a period of market exclusivity, because this is a business model that's highly dependent on intellectual property, and on patent rights.”
Canada’s necessarily unique pharmaceutical IP landscape is one theme of Norton Rose’s 2022 Guide to Canada’s Pharmaceutical Intellectual Property Regime. The second theme, says Wall, is the role that international trade agreements – going back to the mid-80s, early 90s – have played in bringing pharmaceutical IP protections to Canada. These began with the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (WTO TRIPS) and include the more recent Canada-European Union Comprehensive Economic and Trade Agreement (CETA). CETA brought a new protection regime to Canada, extended the patent term and gave pharmaceuticals extra exclusivity time in the market before generic competitors are allowed in, she says.
In addition to patent protection, Canadian pharmaceutical producers also have data protection, which shields the clinical trial data they file with Health Canada to get a drug approved. Canada adopted these data-protection amendments to the Food and Drug Regulations in 2006, and they give pharma companies an eight-year window before generic drug manufacturers can access their data and introduce their own products.
“That is very important for pharmaceutical companies to have that certainty to know that they can launch on the market, for a fixed period of time, to recover investment which they then reinvest in the next drug product,” says Wall.
Also unique to Canada is how it balances IP protection with consumer interests through the Patented Medicine Prices Review Board (PMPRB), she says.
Drug price regulation is governed by health technology assessment bodies, a public negotiation consortium, and public and private drug plans, said Norton Rose’s 2022 pharmaceutical IP guide. After Health Canada approves a drug, a health technology assessment body tests its effectiveness. Then the manufacturer can negotiate with the Pan-Canadian Pharmaceutical Alliance setting out the terms for its listing on public formularies, and the manufacturer enters into a product listing agreement with each participating public drug plan.
The PMPRB then imposes a price-ceiling to prevent excessive pricing, given the patentee’s monopoly position, said the guide.
In August of 2019, the federal government attempted the most significant price regulation reforms in 30 years, says Wall. Canada amended the Patented Medicines Regulations to add three new economic factors used to determine excessive price under the Patent Act: the pharmacoeconomic value of the drug, the drug’s market size, and Canada’s gross domestic product (GDP) and GDP-per-capita. The amendments updated the countries Canada uses to compare prices, removing the U.S. and Switzerland – which are the “highest price countries,” said the guide – and adding Australia, Belgium, Japan Netherlands, Norway, Spain – the “lower priced countries.”
The amendments also required patentees to “report price and revenue net of all price adjustments, including third-party transactions concluded with public drug plans,” and reduced reporting obligations for veterinary, over-the-counter, and certain generic medicines, said the guide.
The pharmaceutical industry contested the reforms in the Federal Court and Quebec Superior Court, in Innovative Medicines Canada v. Canada (Attorney General) and Merck Canada inc. c. Procureur général du Canada. In April, Health Canada announced it would only be moving forward with the new basket of comparator countries and would abandon the other reforms.
“As a result of those two pieces of litigation, two of the three reforms that Canada was proposing to launch were knocked down and found to be invalid,” says Wall. “That is very significant. In my view, the most significant litigation we've seen in the space in the last couple of years.”
There remains room for improvement in how Canada protects the IP of innovative pharmaceuticals, she says. Many of the protections Canada has adopted over the years have been obligations under various treaties, and Canada tends to opt for the “bare minimum” required.
One example is the certificate for supplementary protection, through which those eligible can add another two years onto their 20-year patent term. Canada was the last of the G7 countries to enact this patent restoration, waiting until 2017, says Wall. Canada also chose a two-year maximum term, while Europe and the U.S. implemented five-year terms.
There is also room for improvement on orphan drug protection, she says. Orphan drugs are medicines developed to treat a relatively small patient population, which creates development challenges because manufacturers have fewer customers with which to recoup their investment.
“Other countries have policies to really encourage investment in orphan drugs and bringing orphan drugs to market,” says Wall. “Canada still does not have an orphan drug policy.”
But “that's something that is on the horizon,” she adds. “I understand that’s something that's being worked on, and I think that would be a really important development and reform for Canada to have, to encourage bringing more orphan drugs to market.”