Bringing a new drug to market is a costly and time-consuming endeavour. It is a process inherent with the risk of failure. In recognition of this, patent and regulatory regimes in many jurisdictions provide certain compensatory schemes to innovator companies to offset the investment made in developing new drugs.

Data protection, for example, protects the data submitted to regulatory authorities by innovator companies during the new drug approval process by preventing generic companies from relying on this data for a specified length of time (generally five to 12 years).

Patent term extension, such as that provided by European supplementary protection certificates (SPCs) and U.S. patent term extensions, compensates patentees for at least part of the patent term lost while a drug goes through regulatory approval by extending the term of a patent that covers the drug in question (typically by up to five years).

Finally, linkage schemes that link the patent regime with the drug regulatory regime allow innovator companies that apply for regulatory approval of a new drug to list patents relating to the drug with the relevant regulatory authority. Any company subsequently applying for approval of a generic version of the new drug must address each listed patent by (i) agreeing not to market their product until all the patents expire, (ii) asserting non-infringement, or (iii) challenging the validity of the patents. A response by the innovator company to an assertion of non-infringement or a validity challenge automatically triggers a temporary injunction period preventing approval of the generic drug while the injunction is in place (typically to provide a time period for courts to hear and decide the infringement and validity issues).

Canada’s Patented Medicines (Notice of Compliance) Regulations provide for such a linkage scheme. In addition, as a result of Canada’s TRIPS and NAFTA obligations, the Food and Drug Regulations provide a data protection scheme that allows for a total of eight years data protection for innovative drugs, including biologics. Compensatory patent term extensions on the other hand remain notably absent from Canada’s patent and regulatory systems and put Canada at odds with major trading partners, such as the U.S. and the European Union (EU).

Canada is, however, currently negotiating a Comprehensive Economic and Trade Agreement (CETA) with the EU and the opportunities for Canada are significant. For example, Canadian businesses and products would have improved access to the European market of approximately 500 million people. In return for this access, the draft CETA contains a number of provisions relating to intellectual property and regulatory laws, including an obligation for Canada to implement a patent term extension scheme similar to that found in Europe. Europe is making a simple and fair request. It wants Canada to implement patent term extension provisions that mirror the SPC system in Europe.

Europe’s position is that European pharmaceutical companies operating in Canada should be provided with the same protection as a Canadian pharmaceutical company operating in Europe. Europe provides a maximum extension of five years to the patent term to compensate for the regulatory approval process, with the possibility of a further six month paediatric extension where the innovator company conducts pre-approved clinical studies in children.

In addition to negotiations with the EU, Canada has recently formally joined the Trans-Pacific Partnership (TPP) trade negotiations, of which the other participants are currently Australia, Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam. Both Japan and South Korea have also expressed an interest in joining the TPP, with Japan making a formal announcement to this effect on March 15, 2013. As is the case for a CETA with the EU, a TPP agreement would potentially improve market access for Canadian businesses and products, in this case to the rapidly developing Asia-Pacific markets.

The draft TPP Agreement, like the draft CETA, includes provisions covering intellectual property rights. According to official documents, the proposals under discussion relate to various areas of intellectual property, including patents and data required for the approval of certain regulated products. A number of documents relating to the TPP negotiations have been leaked into the public domain, including a proposal on patent protection tabled by the U.S. in 2011. This proposal included requirements for all members to implement both data protection and linkage schemes, as well as compensatory patent term extensions. The proposal apparently faced severe opposition from other members of the TPP and was subsequently withdrawn.

Intellectual property issues are acknowledged to be some of the more challenging in the TPP negotiations and official reports indicate that they will be a focus of the next round of negotiations that take place from May 15-24, 2013, in Lima, Peru. The U.S. is likely to be a strong voice in these negotiations and should either Japan or South Korea, who both provide compensatory patent term extensions, join the TPP, the U.S. position on this aspect of patent protection may be strengthened. While some of the TPP members already provide some form of compensatory patent term extension (see Table), a significant number do not, and some, such as Peru, have already successfully negotiated around having to implement such schemes in bilateral agreements with the U.S. As such, Canada may find support within the TPP group for a position against implementation of patent term extensions. This may, however, be a moot point if a CETA is signed with the EU that requires Canada to implement such extensions.

In summary, as the result of these two major ongoing trade negotiations, Canada is facing considerable pressure to implement patent term extensions as a complement to its existing linkage and data protection schemes. It will be interesting to see if 2013 brings about a change in Canada’s current position.

Table: Patent Term Extension in Countries Party to CETA and TPP Negotiations

Click here to view table.