2011 marks the ninth consecutive year that member companies of Canada's Research-Based Pharmaceutical Companies (Rx&D) have broken their promise to spend at least 10% of their domestic sales on R&D, says a government report.

Drug patent holders reported R&D expenditures of C$991.7 million for Canada in 2011, down 15.8% on 2010, and for Rx&D members - which accounted for 90.9% of all reported R&D spending last year – it was down 9.9% to C$901.2 million, says Canada's Patented Medicines Prices Review Board (PMPRB), in its annual report.

When Canada's Patent Act was amended in 1987, Rx&D members made a public commitment to increase their annual R&D expenditures to 10% of sales revenues by 1996. They reached this level by 1993 - in some years exceeding 10% - but since then for the past nine consecutive years, R&D-to-sales ratios for all patentees and Rx&D member companies have been less than 10%, it says.

In 2011, the ratio of R&D expenditures to sales revenues for all patentees was 5.6%, down from 6.9% in 2010, while for members of Rx&D it was 6.7%, down from 8.2% in 2010, says the Board, adding: "these values are close to figures last observed in 1988."

Moreover, in 2009, Canada's R&D-to-sales ratio was second lowest out of seven comparator countries, at 7.5% ahead only of Italy. I the five other nations, the ratio averaged 20.1%. 

Rx&D responded to the Board report by describing it as " a compelling call to action" which "demonstrates the urgent need to improve Canada's competitiveness so that the Canadian innovative pharmaceutical sector can become a leader in life sciences research and investment."

"We do not have the tools to compete internationally and the mechanisms created 25 years ago need to be updated," said the group's president, Russell Williams.

In 1987, Rx&D members had made their commitment "assuming that the international and national regulatory environments for the pharmaceutical industry will not undergo substantial change," Mr Williams pointed out,. But, he said, 25 years later, both international and domestic environments have become increasingly challenging.

"Today, multiple layers of federal and provincial regulatory process, intellectual property protection which is not globally competitive, along with limited access to medicines in Canada, are real concerns. International competition for research dollars is extremely fierce and it has become more and more difficult for Canadian CEOs to win global investments for Canada," he said.

He also pointed out that a report commissioned by Rx&D last year, which used updated criteria agreed to by Industry Canada, the PMPRB and the Canadian Institutes of Health Research (CIHR), found that Rx&D members had invested 28% above and beyond what was captured by the Board's 2010 annual report. A similar review of the group's 2011 investments is now underway, said Mr Williams, adding: "we believe that the regulations should be changed in order to document all R&D in Canada.”

But the Canadian Generic Pharmaceutical Association (CGPA) said the Board report "provides further proof that there is no link between longer market monopolies and increasing investments." 

"In Canada, market monopolies for brand-name drug companies have increased eight times since 1987, yet investments continue to decline," said CGPA president Jim Keon, who called for proposals by the European Union (EU) to lengthen the period of market exclusivity for brand-name drugs in Canada by an average of 3.5 years to he rejected.

The EU proposals, which form part of current negotiations for a Canada/EU comprehensive economic and trade agreement (CETA), would add around C$2.8 billion a year to Canada's prescription drugs bill, he added.

Meantime, the PMPRB report also notes that, last year, sales of patented drugs in Canada rose just 1.7%, to C$13.1 billion from C$12.9 billion in 2010. In comparison, annual sales growth in 1999 had been 27% and had remained in double digits until 2003.

Drug patent holders reported total revenues for 2011 of C$17.8 billion, up 4.7% from 2010, and sales revenues of Rx&D members stood at C$13.5 billion, accounting for 75.5% of the total, it adds.

And last year, patented drugs accounted for 59.1% of prescription drug sales in Canada, up 1.7% on 2010. This growth was driven largely by the introduction of new products and increased use of existing treatments; pricing changes did not contribute to this increase, as prices of patented drugs remained unchanged between 2010 and 2011, it says.

An international comparison shows that, in 2011, Canadian prescription drug prices were roughly in line with those in Sweden and Switzerland (5% lower and 3% higher, respectively), while those in Italy, France and the UK were appreciably lower than in Canada (16%, 16% and 18%, respectively), and those in Germany and the US were considerably higher (20% and 98%), says the Board.