TPP vs. Healthcare in Canada

Posted By Jennyfer Pelletier

The Trans-Pacific Partnership (TPP) is a free trade initiative agreed upon by 12 countries including Canada, the U.S. and Australia, for which negotiations concluded on October 5th 2015. The preamble states that the Agreement seeks to “liberalise trade and investment, bring economic growth and social benefits”, raise living standards and “reduce poverty and promote sustainable growth”, among others.

Participating countries began negotiations in 2008 with the intention of concluding the agreement in 2012. However, many contentious issues, including intellectual property concerns, prolonged negotiations. Pharmaceutical companies in the U.S. strongly lobbied in favour of the TPP. The Huffington Post reported that the Pharmaceutical Research and Manufactures of America (PhRMA) “spent over $110 million lobbying the U.S. Congress to support the TPP” as they knew the Agreement would increase their profits.

How might the TPP impact healthcare in Canada?

Many health professionals and organizations, such as Doctors Without Borders, have expressed concern regarding the TPP agreement. The released text of the TPP contains provisions that would “force governments to extend existing patent monopolies beyond current 20-years terms”. Furthermore, Doctors Without Borders claims that the agreement will “redefine what type of medicine” is patentable and will even grant patents for “modifications of existing medicines”. Hence, the TPP will increase the protection of brand name drugs. The agreement also limits generic competition by prohibiting regulatory authorities from using data related to the safety and efficacy of a drug in order to authorize a competing drug to enter the market, even if there is no patent on the first drug. If a participating country breaches a provision of the TPP, an international tribunal could theoretically require that country to pay the pharmaceutical corporations compensation for any lost profits caused by the breach. In a market that generates billions of dollars of profits, the stakes are high.

Some critics also argue that the increased protection of patents for brand name drugs and, consequently, the lack of generic competition, will allow pharmaceutical companies to make more profits and cause drug prices to rise. The Council of Canadians has said that the extension of patents under the TPP will delay “the release of more affordable generic drugs and [add] $2 billion to [their] annual public health care bill”. Already, 23% of Canadians are unable to take their drugs as prescribed, and an increase in cost would aggravate this problem. A decrease in drug compliance has adverse effects on health and increases the rates of hospitalization. In Australia, some critics even went so far as to say that the cost benefits derived from the TPP might be negated by the “costs associated with these poor health outcomes”. Overall, the provisions on intellectual property in the TPP may negatively impact the Canadian healthcare system, as well as healthcare systems around the world, by increasing the costs of drugs and thus, the costs associated with poor health such as increased hospitalization and increased absences from work.

Are there any possible solutions?

Canada possesses a regulatory system that serves to keep drug prices under control. The Patented Medicine Prices Review Board (PMPRB) is an agency that “sets a price based on what the same drug costs in other countries”. The maximum price in Canada is the median of prices in other countries including the U.K and the U.S. This system is meant to ensure that Canada will not be paying the highest cost for a drug. However, this power may be jeopardized if Alexion Pharmaceuticals succeed in an ongoing Constitutional challenge, in which they have argued that the Federal Government has no authority to force the company to lower the price of its drug.

This system has also been criticized as being ineffective in certain situations. For one, certain drugs are not available in all the comparative countries. If a drug is only offered in the U.S., which effectively has no price control system, then it can be sold for a high cost and the PMPRB cannot change it. Similarly, the PMPRB cannot lower prices of a drug that is expensive worldwide. Hence, if the TPP causes the global inflation of pharmaceutical prices, this system will remain powerless to help Canadians.

Can we draw any possible solutions from the TPP itself? The preamble of the text specifically addresses health concerns, stating that countries may protect “public health” and have an “inherent right to adopt, maintain or modify health care systems”. The intellectual property chapter provides that the commitment to the Declaration on TRIPS and public health will be maintained. While this chapter also specifies that countries may adopt “measures necessary to protect public health”, it requires that these measures be consistent with the provisions in the chapter. Article 18.6(a) mentions promoting access to medicines for all. However, the article then suggests that the protection of public health is required in the case of national emergencies and “public health crises”, such as HIV/AIDS. It is unclear from these provisions exactly what will be deemed an emergency or a public health crisis, and thus, it is uncertain what countries will be able to do with the rising costs of medication. Countries may be deterred from regulating in a manner that would lower costs, unless there is a clear epidemic, due to the potential of having to pay large compensation damages for breach of the TPP.

The impact of the TPP on healthcare remains to be seen. However, many critics have argued that its provisions on intellectual property threaten to inflate the costs of medication. Neither the PMPRB nor the text of the TPP appear to provide a clear solution should this problem arise. Hopefully, participating countries will remember and uphold their commitments to access to medicines, which can be found in previous trade agreements (Doha Declaration, TRIPS Agreement).