Federal patent changes to add new costs to drug plans, report predicts

New federal legislation around pharmaceutical patents will impose significant costs on public and private drug plans, the parliamentary budget officer is predicting.

The legislation would have cost drug plans and consumers an extra $392 million in 2015 had it been in place that year, the report, released in late April, estimates. Of that, $214 million would have fallen to provincial public programs.

As part of its obligations under the Comprehensive Economic and Trade Agreement with the European Union, the federal government has created certificates of supplementary protection, which came into effect on Sept. 21, 2017. The certificates extend, by up to two years, the 20-year patent protection for drugs with new medicinal ingredients or combinations.

“The purpose of this ‘patent term restoration’ is to compensate patent holders for delays in obtaining regulatory approval for their pharmaceutical products because of the need to prove their safety and effectiveness,” the report states.

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“However, a consequence of the change is to delay introduction of cheaper generic versions of popular drugs, thus preventing consumers and private/public drug plans from taking advantage of lower-cost sources.”

The two-year patent extension is “a reasonable, measured approach” that falls between no extra protection and the five years given in some European countries, says Noel Courage, a partner at intellectual property law firm Bereskin & Parr LLP in Toronto. Patent extensions are important because they allow pharmaceutical companies to recoup their research and development costs and make a profit, he says, noting they also encourage further innovation.

Drug plans won’t feel the effects of the new legislation for many years. “No existing approved medicines can get the extended patent terms,” says Courage. “It’s only available for medicines approved after [Sept. 21, 2017].” However, drugs with patent filings before that had yet to receive regulatory approval are still eligible.

Pharmaceutical companies file patents early in the drug development process to secure their rights and then often wait years to get regulatory approval and go to market. “So all the time you’re collecting data for regulatory submissions, your patent term is getting eaten up,” says Courage, noting that means the two-year extension will make a difference to drug plans’ bottom lines within 20 years.

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Neil Palmer, founder and principal consultant at PDCI Market Access Inc. in Ottawa, predicts that only a small subset of drugs will benefit from the extended patents. “Often, there are multiple patents that apply to a product . . . [so] the last patent that’s issued, which extends the market exclusivity period, would erase any benefit that would come from patent term restoration,” he says.

The federal government has promised to compensate provinces for any increased expenses they’ll face, but private plans are likely on their own. Governments will probably balk at the idea of subsidizing for-profit groups and will argue private drug plans can tweak their business to respond to any increasing costs, says Palmer. “That’s what we’ve heard in some other areas. For example, with the [pan-Canadian Pharmaceutical Alliance], private insurers want a piece of the action, if you will, in terms of rebates. The response has been from the provinces is these are for-profit organizations and more than able to look after themselves.”

In the larger scheme of things, increased patent protection isn’t likely at the forefront of private payers’ minds, according to Palmer. The Ontario government’s changes to public drug programs and the possibility of national pharmacare, for example, are “much bigger issues” affecting benefits plans, he says.