A group of institutional investors representing more than US$500 billion is calling on the U.S. Congress to vote down the Canada-United States-Mexico trade agreement to prevent extended monopoly rights for pharmaceutical companies in all three countries.
The Interfaith Center on Corporate Responsibility, which represents more than 300 religious institutional investors, pension funds, foundations, asset managers and more, is leading the call. The group says the protections built into the agreement will increase drug prices, delay generic medicines from coming to market and ultimately harm patients.
In its letter to Congress, the group also argued the changes would incentivize innovative drug manufacturers to “pursue business strategies that further delay competition, and are based on revenue increases reliant on drug price increases rather than the development of new life-saving medicine.”
Read: CUSMA’s data protection proposals for biologics could raise costs for private plans: PBO
CUSMA would require the signatory countries to provide pharmaceutical companies with the means to extend the duration of their 20-year patents and would extend the data protection for biologic drugs to 10 years. In Canada, biologics currently have data protection for eight years and Mexico doesn’t have an exclusivity period for those medicines.
The extension of those protections will grant drug manufacturers an additional two years of market exclusivity because it prevents biosimilar developers from seeking approval of their drug by comparing it directly or indirectly to the reference biologic using the original data.
Data protection covers the results of trials conducted by drug manufacturers to develop their biologics. It can only be granted once a drug manufacturer receives its notice of compliance from Health Canada and is only given to innovative drugs. Unlike patents, data protection can’t be challenged in court.
A report from Canada’s Parliamentary Budget Office estimated the data protection proposals would cost consumers and drug plans an additional $169 million by 2029, with that number continuing to rise annually.
Read: Prescription drug costs for Canadian public plans hit $11.4 billion in 2017/18: report
The increased protections would take effect within five years of the countries’ ratifications.
Biologics and high-cost specialty drugs are driving up both public and private plans’ drug spending. A recent report from Canada’s Patented Medicine Prices Review Board found drug costs for Canadian public plans increased 8.3 per cent in 2017/18, with higher-cost drugs representing 7.1 per cent of that growth.
On the private side, the Express Scripts Canada annual drug trend report, released earlier this year, found that while the rapid increases in drug spending for private plans over the last two decades had started to slow, those numbers were masking strong growth in specialty drug usage rates. Specialty drugs made up only two per cent of drug claims in 2018, but 33 per cent of drug spending, the report found. In comparison, traditional drugs accounted for 98 per cent of claims, but just 67 per cent of spending.
Rosa van den Beemt, senior environmental, social and governance manager at NEI Investments, a signatory to the letter, told Benefits Canada in an email the group wanted to add its perspective to the strong dissent voiced by consumer and patient advocacy groups, and sway undecided members of Congress.
Read: Growing use of specialty drugs putting pressure on plan sponsors: report
She said investors plan to share the letter with the drug manufacturers they invest in. “We believe that the work these pharmaceutical companies do — advancing human health and saving lives by providing innovative medicine — is incredibly important, and at a certain level market protection is needed so they can spend time, effort and resources on innovation and [research and development].”
However, she added, the additional market protections “create even more barriers for patients to get affordable drugs at a time when we are in a drug affordability crisis in North America.”
Van den Beemt said the group is invested in both innovative and generic companies, and has a strong interest in their financial stability and the broader health-care system. “Market competition allows for both the entry of generic drugs, benefiting the generic producers and their investors, as well as the entry of new innovators and access to capital,” she said. “And as we know, monopolies can lead to excessive pricing and stifle innovation. Business strategies centred around excessive pricing are simply not viable in the long term.”
She declined to answer whether the investor group planned to draft a similar letter to Canadian members of Parliament. Canada has yet to ratify the deal.
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Sarah Dion-Marquis, director of media and public relations for Innovative Medicines Canada, said in an email to Benefits Canada that, while the organization doesn’t comment on other countries’ domestic political matters, the intellectual property provisions in the trade agreement “are an important step forward in fostering investment in Canada’s life sciences sector.”
She note it’s unclear when, if ever, this version of the agreement will be ratified and said it’s too early to estimate the potential business impact of the IP provisions. “A lot can happen in the biologics space between now and the time these changes take effect. Competition within the industry is increasing, as more and more innovative pharmaceutical companies are producing biologics and bringing them to patients quicker.”