Generics don’t get an easy ride in Canada

Jim Keon

I think there are two broad areas. One is the big price depreciation in Canada over the last five or six years. There are multisource products that are compromised by competitive forces and the margins are very slim. The second is investment in new products. That's really where the value is for Canadians – the new savings from the lower price generics. I think that's where some of the current regulatory laws are hurting us.

The price deflation has been caused by regulation. Prices in Canada are set by the provincial governments. Our prices are set as a proportion of the price of the brand name drugs, at various percentages depending upon the type of drug. But not all products are created equally. Some products might be more difficult to reproduce or you might have to waste a lot of money challenging a patent.

Couple that with the fact that the provinces are setting prices but the Federal government is setting rules around health and safety, and patent rules, and we have a bit of a disconnect in terms of creating a sustainable market.

In terms of the Federal government, some of the key issues have been around the patent law in Canada. We have a linkage system, similar to Hatch-Waxman in the US.

There are two problematic areas: the first is what we would call a double jeopardy. Even after a generic wins patent litigation and gains approval for the drug in Canada, that does not end the litigation. The generic company can still be sued by the brand name company for infringing the same patent because the court does not rule on whether the patent is valid or infringed. The generic company either has to wait until those patents have expired or it has to persuade a court to invalidate them. So that's a delay, a complication and a cost of business. This is very hard for a generic company that is selling the product for perhaps 25% of the brand name price, but is subject to action by a company that could claim 100% of the price as damages. As a result, there's a great deal of litigation in Canada. It has a chilling effect.

Under section 8 provisions, the generic can also claim damages if the drug was held off the market and the patent was invalid. The problem is that the damages are in relation to what the generic has suffered, which is going to be much less than the brand name company would be able to claim.

We have been advocating for a legislative change, but it's been put on hold because the government has been engaged in free trade talks for a couple of years.

Decisions relating to section 8 damages have limited the damages that can be awarded to generics. Very few generic companies have been able to get anywhere near adequate compensation for delays.

There are also issues around patent utility in Canada. We recently had the Olanzapine case (Eli Lilly Canada v Novopharm), in which the Supreme Court refused to hear Eli Lilly's appeal.

The brand name industry has threatened the government – they are trying to use the investor state provisions under NAFTA to claim that they have been harmed. We think that's a bogus claim.

Recently, the Europeans have been pushing hard for changes to our patent laws and have taken the side of the brand name companies. They are arguing for patent extensions and even longer data exclusivity. Obviously we are opposed to that. Canada already has 8.5 years. They are also trying to make the linkage regulations even worse by adding what they call a right of appeal.

I don't think Canada is more favourable to generics than the US. If you look at IMS data, generics are now being used to fill about 88% of all prescriptions. In Canada, we have generics being utilised about 68% of the time. I think in a large measure that's a result of the fact that insurance companies are very cost-conscious. They design their reimbursement schemes so that generics are favoured.

In Canada, sometimes a doctor will write "no substitutions" on a prescription. In the US, there would have to be an explanation. In the US, they employ therapeutic substitution much more regularly than they do in Canada, in part because we have more government involvement. If the drug is expensive, often a company will say we are not going to pay for it, whereas a politician is more susceptible to advocacy for the drug to be available.

No, we have full patent protection for pharmaceuticals. We have a system that allows for evergreening. We have data exclusivity that's more generous than the US: 8 years of protection or 8.5 years if they have studied whether the drugs are more effective on children. I think when you put all that together, Canada has a beneficial system for brand name companies. In fact, when you look at the period of exclusivity it's not very different in Canada than it is in Europe and the US. Ultimately what matters is how long you can sell the drug without competition. That's about the same for Canada and the US.

Above all we are an international industry with multinational companies. We favour trade agreements. We would like to see them reduce regulatory difficulties. What we don't want is a situation where western, developed countries put in place IP laws that make companies in those countries uncompetitive.

One of the most important factors in the competitiveness of the generic industry is when the drug can come to market. If you have complicated patent laws with long protection you are going to be a late entry to the market. We are concerned that these trade agreements might make us uncompetitive.

No. In Canada and elsewhere it's been shown that increasing protection does not lead to more R&D. Brand name companies in Canada promised in the 1990s that they would spend 10% on research and development if patent changes were made relating to 20-year patents and data exclusivity. They haven't met that target.

And there is no direct link between patent protection in Canada and where R&D occurs. A company is eligible for the same patent protection whether it does its research in Canada or abroad. If it makes sense to do research in Canada they will do that now.

For generics in the international market, success really depends on how soon the product can be brought to market. Long patent protection in Canada is going to harm the generic system in terms of the increased costs. It clearly is not a good deal for Canadians. I think the Federal negotiators realise that; they have been pushing back against the Europeans.

We agree on issues such as our desire to see more regulatory harmonisation. We have worked with our brand name colleagues on that. We have also worked with them on the issue of drug challenges and the reporting rules around those – we have developed a database together.

For generics, it would be biosimilars. We have seen a real growth in biologic drugs, ecology drugs, which have been very difficult for generic companies to develop. It's not a simple chemical complex. It has been slow in terms of the regulatory aspects – we are required to get approval as being bioequivalent. Health Canada has lobbied for biosimilars as Subsequent Entry Biologics (SEBs). In future, the whole regulatory path towards them needs to be developed further. Then after that there will need to be a confidence-building exercise.

I think our members are looking for experts on Canadian patent law and a bit of a track record in being successful. It's sometimes difficult because a lot of the big law firms in Canada act for brand name companies and as part of those agreements they are prohibited from taking on a case for a generic company.

Some of our firms want exclusivity in a law firm – they don't want it representing other pharmaceutical companies, whether brand name or generic. Others have developed relationships with particular law firms.