CANADA WELCOMES WTO RULING ON EU CHALLENGE OF CANADA'S PHARMACEUTICAL PATENT REGIME
March 17, 2000 (2:00 p.m. EST) No. 48
CANADA WELCOMES WTO RULING ON EU CHALLENGE OF
CANADA'S PHARMACEUTICAL PATENT REGIME
The Government of Canada is pleased that a World Trade Organization (WTO)
dispute settlement panel has validated Canada's early working exception, a
significant element of Canada's patent regime.
The European Union (EU), in its challenge of Canada's patent regime, alleged that
the exception was contrary to our obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and requested that the
issue be examined by a WTO dispute settlement panel. The panel, in a report
issued today, clearly decided in favour of Canada's early working exception.
"The decision is an important win for Canada. I am pleased to see that the WTO
panel agreed that this exception is consistent with Canada's trade obligations," said
Minister for International Trade Pierre S. Pettigrew. "This will help clarify
international trade rules."
In Canada, the early working exception allows manufacturers to begin the process
of seeking regulatory approval for competing versions of patented products prior to
the expiration of the patent term. This exception is particularly important for the
pharmaceutical sector. It allows entry into the market of generic drugs as soon as
possible after patent expiry.
"Canada's success proves that it is possible to have effective patent protection and
effective competition that benefits consumers," said Minister of Industry, John
Manley.
"This is good news for Canadians," said Minister of Health, Allan Rock. "It helps
provide Canadians with access to drugs at reasonable prices."
As part of the ruling, the panel decided that Canada's stockpiling practices were not
consistent with our international obligations. Pharmaceutical manufacturers are able
to stockpile quantities of product during the six months prior to the expiration of the
patent. The benefits of this exception are minimal in regard to the advantage of the
early working exception.
The Government of Canada is considering its options regarding this aspect of the
decision. All WTO members must be given at least 20 days before the report can be
considered for adoption by the WTO dispute settlement body. WTO rules also
provide that the panel report must be adopted or appealed within 60 days from the
date it was circulated to WTO members.
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Background information is attached.
A copy of the report is available at www.dfait-maeci.gc.ca/tna-nac/dispute-e.asp
For further information, media representatives may contact:
Sylvie Bussières
Office of the Minister for International Trade
(613) 992-7332
Jennifer Sloan
Office of the Minister of Industry
(613) 995-9001
Derek Kent
Office of the Minister of Health
(613) 957-1515
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
This document is also available on the Department of Foreign Affairs and
International Trade's Internet site:
http://www.dfait-maeci.gc.ca
Backgrounder
PROFILE OF CANADA'S PHARMACEUTICAL INDUSTRY
Overview
The Canadian pharmaceutical industry is a leading-edge, technology-intensive
industry that covers a range of activities -- from research, to the production of
innovative drugs, to the manufacturing of generic versions of these drugs -- based
on both chemical and biological processes and materials.
The world pharmaceutical sector was valued at $400 billion in 1998, with a growth
rate of about 7% per year. Growth rates of around 9% are forecasted for Canada
between 1998 and 2003. The largest market in the world is North America, which
has 39% of the total, followed by the European Union with 32%, and Japan with
16%.
The Canadian market, worth $7.8 billion in 1998, is about 2% of the global market,
and ranks ninth in market size. In 1998, the Canadian pharmaceutical industry
employed over 24 000 persons, according to Canada's Research-Based
Pharmaceutical Companies (Rx&D) and the Canadian Drug Manufacturers
Association (CDMA). Manufacturing employment has remained stable over the past
10 years, but there has been a significant increase in employment outside of
manufacturing, driven by growth in R&D. Between 1990 and 1998, total
manufacturing sales of the industry increased at an average rate of 10% per year, to
reach $7.8 billion in 1998.
Drug prices in Canada have declined since 1993 and have also declined compared
to prices in other countries. In 1998, prices of patented drugs were 12% below the
median price of a basket in similar countries used by the Patented Medicines Prices
Review Board (PMPRB) for comparison, and close to 40% lower than prices in the
United States.
Performance by Sector
Brand-name companies specialize in the development and marketing of innovative
drugs. The brand-name sector is the largest component of the pharmaceutical
industry in Canada, with about 85% of pharmaceutical sales. It employed
approximately 19 600 people in 1998.
Generic firms specialize in the manufacture of off-patent drugs and drugs licensed
under the previous compulsory licensing regime. The generic sector employed
approximately 4 800 people in 1998. Forty percent of prescriptions are filled by a
generic drug, representing 14.5% of the dollar value of the prescription market.
Backgrounder
EUROPEAN UNION CHALLENGE
TO CANADA'S DRUG PATENT POLICY
Canada's patent policy, as it applies to the pharmaceutical sector, pursues a
balance between providing effective patent protection to reward innovation in new
drugs, and providing early and effective competition for drugs to ensure access to
health care products at reasonable prices.
The European Union has challenged Canada's Patent Act under the World Trade
Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Agreement in respect of two exceptions:
- the early working exception, set out in Section 55.2(1) of the Patent Act; and
- the stockpiling exception, set out in Section 55.2(2) of the Patent Act.
The "regulatory review" or "early working" exception allows third parties to use a
patented invention during its term of protection, provided such use is directed at
obtaining regulatory approval for the marketing of an equivalent product upon expiry
of the patent. This is an exception to normal patent protection, which in most
circumstances prohibits the use of a patented invention by another, and would
expose an unauthorized user to patent infringement liability.
In the context of the pharmaceutical industry the early working exception is a
particularly valuable component of the Canadian government's balanced policy,
given that the regulatory review for drug approvals can be very time-consuming. It is
estimated that it may take a generic manufacturer from 2 to 4 years to develop a
regulatory submission and another 1 to 2.5 years for Health Canada to complete its
approval. The exception is important in that it allows competitors to do this work
prior to patent expiry and supply consumers with an approved generic drug soon
after patent expiry.
The WTO panel found that Canada's early working exception is consistent with
Canada's trade obligations under the TRIPS Agreement.
The second of the two exceptions is termed the "stockpiling" exception. In the case
of second-entry drug manufacturers who have taken advantage of the early working
exception and are entitled to regulatory approval upon expiry of the patent, the
stockpiling exception authorizes the manufacture and accumulation of the generic
product during the last six months of the patent term.
The WTO panel found that Canada's stockpiling exception is not consistent with
international obligations.
The Government of Canada is considering next steps in this process. WTO
members must be given at least 20 days before the report can be considered for
adoption at a meeting of the WTO Dispute Settlement Body. WTO rules also provide
that the panel report must be adopted or appealed within 60 days from the date it
was circulated to the WTO members.