Bad medicine pt. 1

In a recent House of Commons committee on health, Health Canada finally acknowledged what health economists, academics and activists had been saying for some time: drug costs will rise under pending trade deals like the TPP.

Testifying before the committee was Abby Hoffman, Assistant Deputy Health Minister, who replied to questions stating, “High prescription drug costs will rise under pending free trade agreements...  Yes, it’s true that Canadians in general receive less public support for their drug costs than many comparable countries.”

In the exchange, health critic and MP Don Davies asked it the department had done analysis on the impact of the TPP and CETA in relation to the likelihood it will increase the prices Canadians pay for pharmaceuticals (which it should be noted will this correlate to less people being able to fill their prescriptions at a time when up to 1 in 5 Canadians can’t afford to regularly).

Further, Hoffman acknowledged that some analysis had certainly been done on this topic by the government and agreed with MP Davies statement that, “Is it fair to say then that it’s the department’s position it is likely those two trade deals will increase the costs of drugs in Canada, we just don’t know how much?”

In a previous blog, ‘Liberals veto national pharmacare as more Canadians can't fill their prescriptions,’ we expressed disappointment with recent statements from the federal health minister stating, “It came as a major disappointment this week that Canada’s Health Minister, Jane Philpott, indicated pharmacare is not part of her mandate.  It has been reported that the minister believes pharmacare is too costly and she has highlighted it will not be introduced in this Parliament. Further Philpott stated, “It sounds like it might be expensive and that’s one of the reasons we’re not in the position where we’re about to implement pharmacare,” and, “There are public drug plans across the country for people who can’t afford medication.” It is hard to understand why the minister is ignoring the data that shows Canada could improve health outcomes and save costs with a universal pharmacare program; while she hinted her government would look at a national formulary this is a far from universal pharmacare (not to mention concerns over how the pharmaceutical industry could influence the formulary).”

It remains a head scratcher that improving the health of Canadians is claimed not to be in the mandate of the health minister. The blog goes on to discuss that these statements come at a time when according to Health Canada officials 10% of Canadians are not covered under any type of plan, and drug costs are growing exponentially (Canadians spend $29 billion a year on prescription drugs – the equivalent of $814 a year per capita).  In a submission to the health committee, Professor Marc-André Gagnon outlined that, “Out-of-pocket deductibles and co-payments vary from one private plan to another and from one province to another. This means that Canadians have different degrees of coverage depending on where they live and work, but not necessarily according to their medical needs... Both public and private drug insurance plans usually manage cost growth by raising the premiums of insured patients, increasing the co-payments or deductibles patients pay or restricting the treatments covered. As a result, out-of-pocket spending on prescription drugs by Canadian households increased by an average of 33% (in constant dollars) between 1997 and 2009. Moreover, these costs grew far more for low-income households. Between 1997 and 2009, out-of-pocket spending on prescription drugs (in constant dollars) by the richest 20% increased by 21%; for the poorest 20%, this figure was 64%.” So if you’re poor, don’t get sick.

Since 2000, the government’s own data shows that growth in drug expenditures in Canada has outpaced the growth in all other countries compared. Canadian drug expenditures increased by 184.43% between 2000 and 2012, which is a rate of growth was higher than that of all  countries compared – even the US. Canada remains among the four most expensive countries in the world for patented drugs. Overall we have the second highest drug costs in the OECD after the USA, not an admirable position to be in. For patented drugs alone, there were $13.7 billion in sales in 2014 (the most recent data), which is an increase of 3.1% from 2013. It is known that, “If Canada paid the same official price for drugs as the OECD median, Canadians would save about 25% on patented drugs, equivalent to some $4.2 billion a year given that we spent $16.8 billion on patented drugs in 2014. Canada’s fragmented drug insurance system (public and private, federal and provincial) is in large part responsible for our inability to benefit from better prices for patented drugs.” We also hold the dubious title of the only nation with public medicare that does not have a pharmacare component. Evidence from health economists shows that Canada can save anywhere between  $4-11 billion through a national pharmacare program.

The above figures should be enough to spur any rational government into action.  Instead, our government is eagerly attempting to sign trade deals that will further compound this problem. The reason for this, that above all else, health care is political.  While inaction on health policy and health care is often dressed up in fiscal excuses, psudeo-scientific buzzwords, and ideological jargon to explain why we can’t provide better health outcomes for Canadians, it comes down to values and choices at the end of the day.  Sadly, it is becoming increasingly clear that this government’s priorities and values don’t align with those of Canadians. Whether it is side-stepping the responsibility to implement a universal drug plan (first recommended in a the 1964 Royal Commission on Health Services) or signing trade deals that government’s own officials acknowledge will negatively impact the health of the nation, something wrong is definitely occurring.

When leaked text from the CETA and TPP trade deals first started to appear some time ago, the Council of Canadians put together an analysis on how the ISDS component and changes to intellectual property provisions for patents in these deal would serve no benefit to the people residing in the countries of the signatories (see here for the TPP and here for the CETA).  We further highlighted that going beyond the legislative chill from potential ISDS lawsuits (like the $500 million dollar NAFTA lawsuit against Canada from pharmaceutical company Eli Lilly), these trade deals have the possibility to preclude the creation of a national drug program/pharmacare. In his analysis of the TPP, law professor Michael Geist has explained that, “Should Canada decide to establish a national program [for pharmacare], the policy choices will not be limited to domestic considerations. Instead, the TPP will be waiting to mandate many program requirements, including appeals and reconsideration of decisions for the benefit of pharmaceutical companies.”

Susan K. Sell has stated that, “The hard truth that Big Pharma cannot swallow is the US patent law did not become global under TRIPS.” The TPP and other trade deals are largely about the practice of ‘forum shifting’ where big pharma uses a trade deal as a forum to get the patent rights they want through Investor State Dispute Settlement (ISDS). To put it another way, when democratic policy decisions on the domestic level don’t give them what they want, the drug companies go to deal making behind closed doors in trade agreements  that circumvents democratic deliberation and public scrutiny. In another article Sell pointed out that intellectual property (IP), “is now being defined as an investment asset under the ISDS provisions... In 2012 a multinational law firm Jones Day published a report arguing that ISDS was a new way forward for pharmaceutical firms to address the assault on their patents in the developing world. So this is a new strategy of intellectual property owners.”

Another tool big pharma uses is ‘The Special 301 Report’ which is prepared annually by the Office of the United States Trade Representative (USTR) under Section 301 as amended of the Trade Act of 1974. Each year the USTR must identify countries which do not provide US companies the intellectual property they feel they deserve. In particular, Susan K. Sell has pointed out most countries included in the reports ‘Priority Watch List’ and ‘Watch List’ were requested by the big pharma’s industry association, the Pharmaceutical Research and Manufacturers of America (PhRMA). From 2009-2012 Canada was on the ‘priority watch list’ and with this year’s report we remain on the ‘watch list.’  In the last available submission by PhRMA to the USTR which is from 2015, PhRMA aggressively calls for Canada to be put on the priority watch list simply for democratically drafting legislation not it is liking (and this was during the harper years).

With the 2016 report, it seems the Eli Lilly case has ruffled some with big pharma and the report states,

With respect to pharmaceuticals, the United States continues to have serious concerns about the availability of rights of appeal in Canada’s administrative process for reviewing regulatory approval of pharmaceutical products as well as about the breadth of the Minister of Health’s discretion in disclosing confidential business information. The United States also continues to have serious concerns about the lack of clarity and the impact of the heightened utility requirements for patents that have been imposed by Canadian courts. In these cases, courts have invalidated valuable patents held by U.S. pharmaceutical companies on utility grounds, by interpreting the “promise” of the patent and finding that insufficient information was provided in the application to substantiate that promise. These recent decisions, which have affected products that have been in the market and benefiting patients for years, have led to uncertainty for patent holders and applicants, including with respect to how to effectively meet this standard. This unpredictability also undermines incentives for investments in the pharmaceutical sector. The United States understands that the Supreme Court of Canada may have the opportunity to clarify this doctrine in the coming year. The United States urges Canada to engage meaningfully with affected stakeholders and the United States on patent utility issues. The United States also looks forward to working closely with Canada in the coming year to explore ways to address each country’s IPR priority issues. Under the TPP Agreement, which sets strong and balanced standards on IPR protection and enforcement (See Trans-Pacific Partnership), Canada has committed to strengthen its IPR regime in many of these, as well as other, areas. The United States will work closely with Canada on TPP implementation.”

Still, Pharmaceutical Research and Manufacturers of America (PhRMA), felt the sabre rattling in the 2016 report did not go far enough. PhRMA vice president Jay Taylor commented,“Innovative biopharmaceutical firms and their employees continue to face significant challenges in Canada. PhRMA and its member companies operating in Canada are extremely concerned about Canada’s intellectual property environment, which continues to be characterized by significant uncertainty. The Canadian judiciary has invalidated patents on 25 medicines and upended a practical and proven process used to bring new medicines to market in countries around the world. While PhRMA members appreciate the prominent mention of these and other concerns in the Special 301 Report we believe that the seriousness of the IP violations in Canada demand particular focus by the US government to address this critical issue.”

Two recent CCPA reports, “Involuntary Medication -The Possible Effects of the Trans-Pacific Partnership on the Cost and Regulation of Medicine in Canada ,” and  “Major Complications - The TPP and Canadian Health Care,“  provide a further robust analysis of the negative ramifications from these trade deals. Among many frightening topics, the reports show that depending on whether the TPP or the very similar CETA is ratified first, drug costs are expected to rise by between 5% and 12.9% start­ing in 2023. Without doubt, the TPP’s single biggest direct impact on the Canadian health care system would be to increase drug costs as a result of extending pat­ents (this is even though we already have an industry-friendly system of intellectual prop­erty protection for pharmaceutical patent holders). Other groups have pointed out that “provisions requiring data exclusivity, linking patent status with medicines regulation, patenting of new uses and new forms of known substances, and the prohibition of pre-grant oppositions, all of which go well beyond the minimum requirements of the TRIPS agreement.”

In regards to CETA, in the most recent annual report of the Patented Medicine Prices Review Board (PMPRB), chairperson Mary Catherine Lindberg stated in her message that, “implementation will require amendments to the Patent Act to provide pharmaceutical patentees with up to two years of additional market exclusivity. Such a change would come at a time of high drug prices and record low R&D, causing some to question the effectiveness of the PMPRB and whether a policy balance conceived over 25 years ago continues to serve its intended purpose.”  At the same time it is worth highlighting the PMPRB price reviews only extent to patented drugs; so in cases like Daraprim (which Turing Pharmaceuticals raised the price of by 5000%) or others where drugs are off-patent but still essential to patients they would not have any power to control the cost..The PMPRB, which -despite its issues- should be noted is an independent government body that monitors patented drug prices and pharmaceutical trends. Our government’s current ideological zeal of trade deals will be directly undermining and handcuffing the very agencies who are is tasked with setting the maximum prices that can be charged in Canada for patented drugs and regulates drugs that are still under patent and which yet have no generic substitutes. The TPP would further erode any policy independence, health decisions and oversight which Canada could legislate.

So what (or who) is driving this Liberal government to follow the Harper governments path in championing trade deals that are not in the interest of the country and why is this government evading its responsibilities to improve health of Canadians?