The TPP and Patents: Expensive Drugs, Questionable Returns

Modern multi-lateral trade treaties do not habitually soften IP protection. The Trans-Pacific Partnership (TPP), signed October 5th, is no exception. With prescription drug costs increasingly weighing on Western nations, does the TPP strike the best balance between protecting patents and incentivizing innovation?

The TPP’s IP chapter includes several rules that indirectly extend patent terms for pharmaceutical drugs, such as patent term restorationpatent linkage, and data protection. However, the actual benefit these provisions provide is debatable.

Take patent term restoration for example, which extends patent terms by a time equal to any “unreasonable” delay in a drug’s regulatory approval. This provision’s purpose recognizes that patent enabled drug monopolies are of little value when drugs cannot be sold legally. And the TPP considers any five-year delay unreasonable.

Patent restoration is welcome news for those who believe current patent terms successfully incentivize innovation, because lost monopoly time would hinder pharmaceutical development. This provision also detaches patent terms from flexible regulatory approval processes, adding certainty to IP investments. And it adds assurances against regulatory favouritism. However, some critics argue term restoration is a tool for IP owners used to extend an already sufficient monopoly.

Another debated policy found in the TPP is patent linkage. This rule requires generic drug companies to prove their products do not infringe any existing patents before they can be granted marketing approval. Opponents of patent linkage believe tying marketing approval to previous patents creates space for tactical litigation that can be used to delay generic competition and in effect extend patent terms. However, Canada already employs patent linkage, and has already committed to linkage rules similar to the TPP by signing CETA.

In addition to patent restoration and patent linkage, the TPP includes two controversial pro-patent provisions that provide data protection to pharmaceutical efficacy and safety research. This research is necessary for marketing approval and is an expensive cost of drug development. Supporters of the data provisions argue that these protections incentivize invention by shielding drug developers from free-riders.

Opponents of these provisions might take issue with protecting information on top of invention. However, this is not a monopoly on information, and generic companies are free to use the same data so long as it is reproduce at their own expense.

The TTP grants five year’s protection on drug efficacy and safety data, and an additional three year’s protection to research concerning biologic drugs, so called large molecule drugs. Biologics are an emerging field of pharmaceuticals, and the extended protection is meant to recognize how exploratory research is often more risky and thus more expensive.

One compelling argument against special protection concerns the nature of biologic drugs. Whereas traditional small molecule drugs are chemically synthesized and easily reproduced, biologics often have genetic and cellular components that are not as simple, or cheap, to replicate. Critics think this creates a natural barrier to entry, giving biologic developers a first-mover advantage that sufficiently returns the risky cost of research, eliminating any need for data protection.

However, some evidence suggests, even considering this advantage, that a longer term of twelve years would be ideal. The TPP’s compromise is eight years, which reflects Canada’s current treaty obligations.

As is usually the case with trade deals, the TPP’s patent provisions fall short of both advocates’ highest hopes and critics’ worst fears. For Canadian law, the TPP will have little effect. But this is not necessarily a good thing. Current patent rules may not be best for incentivizing drug development, as the debate over patent policy suggests. Meaning, this failure to change might successfully impede innovation.

All that can be said with certainty is the TPP will not reduce the price of today’s life-saving drugs. Whether innovation properly compensates this cost is for posterity to judge.

 

Matt Wallace is an IPilogue Editor, JD Candidate at University of New Brunswick, and writes on technology law.

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