Changes which the European Union says should be made to Canada’s drug patent system would add C$2.8 billion annually to Canada’s prescription drug bill, according to a new study.

Canada and the EU are currently in negotiations for a comprehensive economic and trade agreement (CETA), which Canada’s federal international minister for trade, Peter Van Loan, hopes to conclude before the end of 2011. As part of these negotiations, the EU has tabled proposals that would considerably lengthen the period of market exclusivity for brand-name drugs in Canada and, according to Professor Aidan Hollis of the Department of Economics at the University of Calgary and Paul Grootendorst from the University of Toronto’s Faculty of Pharmacy, authors of the report, these proposals would provide “the most extensive structural protection for innovative drugs of any country in the world.”

The key finding of their study - which was commissioned by the Canadian Generic Pharmaceutical Association (CGPA) - is that Canadian payers such as the federal government, provincial governments, businesses and patients “would face substantially higher drug costs as exclusivity is extended on top-selling prescription drugs, with the annual increase in costs likely to be approximately C$2.8 billion per year.”

Government drug plans cover approximately 45% of total prescription drug spending in Canada, and the authors estimate the trade proposals would add C$1.3 billion a year to their costs, while the extra for private-sector programmes would be around C$1.5 billion.

The EU negotiators are asking Canada to change its intellectual property (IP) protection laws by lengthening the term of patent protection by up to five years if products become mired in regulatory approval delays, extending the data exclusivity period from eight years to 10 or more and tightening the “notice of compliance” regulations with the introduction of an appeals process.

If implemented, the proposals would delay the availability of generics in Canada by approximately 3.5 years, and would not lead to any substantial increase in investment by brand-name drug companies in Canada, which would grow by only around C$345 million a year, the author estimates. “The purpose of exclusivity rights granted to innovators is to create an incentive for R&D investments into new drugs. However, the amount of additional investment in pharmaceutical innovation that would result from the EU’s proposed pharmaceutical IP provisions would be a small fraction of the additional costs to Canadians,” they say.

CGPA president Jim Keon points out that pharmaceuticals are one of the EU’s top exports to Canada, comprising 15.6% of total exports with a value of more than $5 billion annually.“The generic pharmaceutical industry supports the government of Canada's efforts to increase trade with other jurisdictions,” says Mr Keon. “The pharmaceutical IP proposals tabled by the EU, however, will not eliminate trade barriers, as pharmaceutical products from the EU already have unfettered access to the Canadian market. These proposals will simply increase profits for brand-name drug companies at the expense of Canada’s health care system.”

• Last month, the Canadian Intellectual Property Council (CIPC) released a report calling on Canada to improve and strengthen its IP regime  to close the gap with other leading industrialised countries, if it is to be able to attract R&D investment into the drug sector.

Canadian Chamber of Commerce chief executive Perrin Beatty supported the study, noting that while Canada's pharmaceutical industry is doing all it can to attract investment, “it cannot do it alone.”

The EU and many jurisdictions provide better IP protection and, as a result, offer a more advantageous investment climate, said Mr Beatty, adding: “Canada must keep pace if we want to fullfil the promise of creating jobs and investment in our pharmaceutical sector.”