Canada – EU trade talks a myriad of intersecting issues and relative impact

Posted on August 11, 2010

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This afternoon’s interview with the Executive Director of the Canada Europe Roundtable for Business Jason Langrish, provided a number of important insights into both the complexity and importance of Canada “strengthening” its relationships beyond the confines of our current continental partnerships.

While nailing down specific numbers to substantiate a clear value (at least from a dollars and cents perspective), is a difficult if not impossible task given the fluidity of international trade, it would be fair to say that negotiating an agreement along the lines of what we are attempting to do with the EU is tantamount to taking Vitamin C to avert the effects of a cold.  Specifically, and while the benefits are up for debate, in the end it is something with which you can have a high degree of confidence that it is ultimately going to be good for you.

That being said one of the key objectives of the interview was to try and create a point of reference by which the average Canadian could gain a practical understanding of these most recent negotiations in terms of the relative impact it will have on our daily lives.

I would of course encourage you to tune in to the on-demand broadcast in its entirety, as the 60 minute interview revealed many interesting revelations.  This includes the practical and reciprocal opportunities associated with opening up our government contracts to suppliers from another country, as well as the role of government in promoting Canadian businesses to foreign customers.

However, there was one particular reference that I believe best illustrates both the complexity of intersecting interests that can potentially ripple through our entire social and economic infrastructure, and the subsequent consequences at what I will call the grassroots level of Canadian living.

I am talking about the expressed concerns that are linked to the potential for extending EU drug patents.  The degree to which this is a legitimate issue depends on your particular vantage point but, the implications nonetheless tell an interesting story that can ultimately have an impact on the quality of health care in this country.

For those who are unfamiliar with the role that patents play in the pharmaceutical industry, it is very straight forward.  Company A invests significant sums of money and resources developing, testing and eventually (at least that is the intention) having the drug approved for sale to the public.  Given the tremendous investment associated with this process, Company A applies for a patent – usually securing their rights to a particular compound at the beginning of the testing process before they actually begin producing the product.  Patents in the pharmaceutical industry vary from country to country but, generally speaking we are looking at between 15 to 20 years in length.

During this 15 to 20 year period, the patent prohibits other companies from producing this drug.

Even though Company A may attempt to extend the patent through a tweaking of the formula, a practice that is known as evergreening, eventually the patent period expires.  It is at this point that the generic drug manufacturers come into the picture by reproducing the same non-branded version of the drug and selling it to the public at a much lower cost than Company A.  The generic companies can do this because they did not  had to make the sizable investment associated with Company A’s original development of the drug.

The benefit of generic drugs is that they are between 30% and 80% cheaper than their branded counterparts .  Needless to say this represents a significant savings especially for those who have either no coverage or limited prescription drug coverage.  For generic drug manufacturers, the end of a patent represents a new and potentially lucrative revenue stream.

As a result, if EU drug patents are extended the resulting delay means that a cheaper alternative will not be available to the public as soon as many would like.  It also means that the generic drug industry in Canada loses revenue opportunities as they are prohibited from producing the drug until the extension has expired.

How does this impact health care in Canada?

In a May 31st, 2010 article that appeared in Reuters titled “Soaring costs force Canada to reassess health model” it was reported that an “aging population” coupled with a need to “rein in budget deficits,” is forcing Canadian provinces to take “tough measures” to curb health care costs.

This move to cut costs according to the article, represents a trend that could “erode the principles of the popular state-funded system.”  Now do you see the link between trade talks and our every day lives?

The above example is admittedly an overly simplistic illustration of the connection between trade negotiations and health care in this country.  And even though a patent extension in and of itself is not the sole contributing factor to the current crisis (that’s a story for another day), it is an important factor that warrants our attention as it illustrates that either directly or indirectly there is ultimately a “buck stops here” consequence associated with the Canada – EU trade talks.

Posted in: Commentary