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Bitter. pills

The decades-long war between brand-name and generic drug manufacturers shows no sign of abating. But with a rapidly aging population and the spectre of new diseases on the horizon, there’s new pressure to find a solution soon that can both motivate innovative research and sustain affordable drug prices.

By Susan Goldberg
From the January/February 2007 Issue of National

Last year, people aged 65 or older constituted 13% of Canada’s population. By the year 2031, says Statistics Canada, that percentage will be closer to 25%, and by 2056, as high as 30%. By the year 2015, Canada’s elderly will outnumber its children for the first time in the country’s history. By 2031, there could be twice as many seniors as kids.

Canada’s greying population is only one of the factors bringing pressure to bear on the issue of pharmaceuticals and consumer drugs. Aside from older Canadians needing more drugs but with fewer resources to pay for them, billions of investment dollars will increasingly be directed towards pharmaceutical R&D, as the race to cure diseases known (cancer, AIDS, diabetes) and yet to come (the next pandemic, perhaps) heats up. 

In short, this would be a terrible time for Canada’s pharmaceutical industry to become bogged down in internecine warfare, endless litigation and policy paralysis. But that may be where we’re headed, as the pharmaceutical industry continues to host a battle royal between brand-name and generic drug manufacturers.

The legal manoeuvrings behind the development, manufacture, licensing, marketing, and sale of drugs has grown more bitter with time. Pharmaceuticals are one of the most profitable, most regulated — and most contested — industries in Canada and worldwide, with numerous players jockeying for their slice of a growing US$307 billion pie.

Generics, the (cheaper) bio-identical copies of brand-name drugs, are commanding an increasing share of that market, much to the chagrin of brand-name companies that actually research and develop drugs. In Canada, 40% of prescriptions are filled with generic products, accounting for one- third of the roughly $25 billion a year we spend on prescription drugs.

There’s no love lost between generic and brand-name drug companies. Against the backdrop of Canada’s unique environment of pharmaceutical legislation and regulations, the two continue to duke it out in a legal drug war that stretches back several years (see: “The war over drugs,” National, March/April 2003, p. 38).

The current weapons of choice are patent regulations and high-level lobbying. It’s hard to tell who’s winning, but two things seem certain: this war is being fought in the courts, not in the marketplace, and lawyers are in the thick of the fight.

Richard Gold, professor, McGill University, Faculty of Law, Montreal
“When you probe the arguments deeper, you realize they don't have much substance. They're each playing games to get what they want.”
Richard Gold, professor, McGill University, Faculty of Law, Montreal
Fractious relations
Ideally, the relationship between generic and brand-name manufacturers would be symbiotic, says Richard Gold, director of the Centre for Intellectual Property Policy and a professor in IP and common-law property at McGill University’s law school in Montreal. “The generics would push the brand-names to invest more in research, to create more products and have more exclusivity. And at the same time, the generics need the brand-names because the generics don’t do research on their own.”

Instead, says Gold, it’s a relationship “characterized by a lack of trust,” with players on both sides doing their best to position themselves in the public’s and politicians’ minds as the better contributor to the interests of Canadians — and as harder hit by policy decisions and regulations.

Complaints from both sides circle around issues of exclusivity. What can a brand-name drug company patent, and for how long can it have exclusive rights to patented products? On the surface, the answers would seem clear.

The brand-name drug companies develop new products, apply for and receive government patents, and enjoy exclusive rights to each product for 20 years from the date the patent is filed (although the drug itself may come on the market only several years later). When the 20 years are up, the generics can copy and market their own, cheaper versions. In reality, however, the system seldom works like that.

Obviously, the brand names have a vested interest in acquiring and protecting patents. “The entire business plan is wrapped around how long you will have exclusivity,” says Tony Creber, a patent lawyer with Gowling Lafleur Henderson LLP in Ottawa who represents more than a dozen brand-name firms, including Pfizer, Bristol-Myers Squibb, and Eli Lilly.

“If you don’t get your exclusivity to pay for the failures and the cost of developing these drugs, there will be no new drugs,” Creber says. “If innovator companies do not get sufficient exclusivity, they won’t survive. It’s as simple as that.”

Generics, on the other hand, balk at any impediments to getting their products on the market in a timely fashion. They argue that brand-name companies artificially extend their monopolies by patenting minor changes to a formulation, a practice referred to as “layering” or “evergreening.” As a result, it’s becoming common practice for generics to challenge in court the validity of brand-name patents.

Generics are also upset about the brand-names’ ability, under the Patented Medicines (Notice of Compliance) (PM(NOC)) Regulations, to slap an automatic, 24-month injunction on any generic product suspected of infringing on a patent.

But then, brand names aren’t too happy about s. 55.2(1) of the Patent Act, better known as the “early-working” exception, which allows generics to use a patented drug in order to complete Health Canada’s regulatory approval process — while that drug is still under patent — in order to be in a position to enter the market as soon as possible after patent expiry.

“A lot of it, I think, is fairly disingenuous on both sides,” says Gold, who thinks many of the complaints “are basically hogwash. When you probe the arguments deeper, you realize they don’t have much substance. They’re each playing games to get they want.”

Licensing issues
Strained relations between generic and brand-name companies have been a part of the Canadian pharmaceutical marketplace since at least 1969, when the federal government allowed for “compulsory licensing” under the Patent Act.

That development meant that Canadian companies could automatically obtain a license to import and sell patented pharmaceuticals from other countries, paying only a small royalty to the originator. Out of compulsory licensing grew up Canada’s generic drug industry.

In 1987, under pressure from brand-name pharmaceutical companies and international agreements, the government phased out compulsory licensing. In 1993, it brought in the PM(NOC) regulations.

“Essentially, they took the food and drug approval process and married it together with the Patent Act, and came up with this mongrel of regulations,” says Carol Hitchman of Hitchman & Sprigings, a boutique Toronto IP firm that represents several generic companies, including industry leaders Apotex and Novopharm.

As happy as brand-names were to see the end of compulsory licensing, the generic industry is equally dissatisfied with the new regs and would love to see them repealed. Automatic injunctions and evergreening, they argue, can keep generic products off the market even years after the expiry of the original patent.

“Unlike patent disputes in every other industry, the brand company does not have to obtain a preliminary injunction from the courts to stop generic drug approval,” says the Canadian Generic Pharmaceutical Association (CGPA) in a position paper on its web site.

The CGPA says that “more than 200 court cases have been started under the Regulations, each triggering the automatic 24-month injunction” and “contributing to skyrocketing prescription drug costs” for Canadians — this despite the fact that, according to the CGPA, the generic manufacturer eventually wins the right to go to market approximately 80% of the time.

But without the Regulations, argue brand-name companies, generic companies could simply bring to market products that infringe patents, and then sell them during the time it takes to litigate under the Patent Act — often years.

Regulatory feuds
Another “fundamental problem” with the regulations, says Hitchman, is that they allow companies to list not only the active ingredients or molecules that make up a drug, but also the inactive compounds. “Does a patent that creates a really minor change in a formulation justify another 20 years of exclusivity?” she asks.

“What’s frustrating is that instead of coming up with new, good, compounds, drug companies are encouraged to come up with incremental formulations that aren’t going to help anybody but the bottom line.” At the very least, Hitchman would like to see only the basic, medicinal molecules covered under the Regulations; if a brand-name company suspects infringement of a non-medical, patented compound, she says, it can take action under the Patent Act.

Creber, on the other hand, dismisses “evergreening” as “a term coined by generics that ignores ongoing innovations.” A unique formulation that delivers the active ingredients more effectively, he argues, is “more investment, more work, more inventions, and time to work through the patent. A generic will be able to utilize those later-issued patents.”

Recent amendments to the Regulations aim to address evergreening by limiting somewhat the ability to list new patents — to the ostensible benefit of generics — while at the same time granting data protection rights to brand names of up to eight-plus years — a move, says Creber, that simply brings Canada into compliance with international treaties and is long overdue. Generics, chafing under the changes, argue that the data protection provisions exceed the minimum terms of international IP agreements.

“They’ve given us something with the left hand and taken away something with the right,” says Gunars Gaikis, a patent lawyer with the Toronto office of Smart & Biggar who acts on behalf of several brand-name companies. The data protection is good, he acknowledges, but it applies only to innovative drugs that have not been approved before.

See you in court
Lawyers on both sides, however, agree that the Regulations have added a layer of complexity to drug disputes, one that can lengthen the process and create uncertainty. In Canada, brand names and generics must first fight it out under the Regulations, and only then engage in litigation under the Patent Act.

Disputes under the Regulations are not full trials, but motions for summary judgment, argued from the record — and that, say lawyers on both sides, is also a problem.

“You do not get the best law being made when you don’t have the actual witnesses there for the judge to see and hear and ask questions,” says Hitchman. “It’s very complicated stuff. If you had the experts there, they could explain it, and the judge could get a better understanding of it and find some credibility, which I think is virtually impossible to [get] from a transcript.”

“Patent disputes in the pharmaceutical industry should be resolved through the normal litigation process used by every other industry in Canada,” adds the CGPA. “The world’s richest companies do not need their own special set of rules for patent disputes.” Ironically, lawyers for brand-name companies might agree.

“In 1993, when this scheme was introduced,” says Gaikis, “I couldn’t understand why we’d have two layers. In the U.S., they have one: they duke it out in the first round, and get to trial within 30 months of a generic [challenge to a brand-name patent]. Maybe we ought to get right to the litigation sooner. These are businesses; they like certainty. They don’t want to face years of uncertainty.”

Typically, once a case is decided under the Regulations, it’s rare for the parties to take it to litigation. But that may be changing. Recently, for example, the Federal Court ruled that Daiichi’s patent for a drug called levofloxacin was valid, blocking Novopharm from selling its generic version in Canada. However, Novopharm had earlier won the right to market the drug under the PM(NOC) regulations.

“It’s not good news for the generics,” says Hitchman. “It remains to be seen whether we’ll see more of that in the future.”

Real-world impact
There’s more at stake here than profits. Hinging on the pharmaceutical battles are massive investments in research and innovation, Canadian jobs and industries, and government budgets, not to mention the consumer affordability of drugs. Also at stake is the next “magic bullet”: the cure for cancer, diabetes or AIDS. So it’s not surprising that each side is well aware of the public perception and emotions surrounding the pharmaceutical industry.

Brand-name companies focus on the economic and health consequences of undercutting patent protection. They would invest more in Canada, they say, “if there were patent-term extensions, if there was more data protection,” notes Gold. “But there’s no reason to believe that’s true.

“We saw this when we got rid of compulsory licensing. The industry said, ‘The reason there isn’t more investment in Canada is because of your patent laws. Change them and we’ll increase our investment.’ So we changed them, and the investment increased [marginally], but was still well below other OECD countries. And then they slowly decrease their investment, and eventually come back and say, ‘Well now you need to do more.’ It’s a ratcheting game.”

Then there’s the debate around costs. On the one hand, governments and citizens need generics because they’re less expensive and more accessible. But, argue the brand-names, the high costs of branded drugs represent the massive expense required to develop them and bring them to market. If companies can’t recoup their costs, they’ll go out of business.

“If you want to have cheap drugs, you can legislate low prices,” says Gaikis. “But you’re quickly going to run out of drugs, because no one’s going to come up with new ones. If you’ve got an ill family member, and there’s no known cure, who’s working on that cure? Probably not a generic.”

“No one is coming up with cures, because cures are not economically useful under a patent system,” Hitchman says. “I think patent is useful for therapies. What you want is for someone to take your drug for the next 20 years and to get revenue from it. I think government has to find research on cures, and I think they’ve massively fallen down on the job there.” And this opens up a whole new can of worms.

Policy implications
“People talk about conflicting policy agendas of innovation versus health policy,” says Dr. Steve Morgan, a health economist and expert in universal pharmacare at the UBC Centre for Health Services and Policy Research in Vancouver. “But I honestly don’t see a conflict there. I believe strongly that that’s a false dichotomy, set up on purpose to make it seem as though [we] ought to pay unduly high prices in order to support health care innovation.

“We’re not talking about an industry that starving for profitability,” Morgan says. “And we’re not talking about [an industry] where development is funded solely through the private sector. The basic ideas and a lot of the basic science that leads towards a promising product is done by the public sector.”

Real innovation — not profits, or another version of Viagra — is what’s sorely lacking in the current system, says Morgan. Generics aren’t innovators; like brand-name companies, they’re interested in what Creber calls the “low-hanging fruit”: the blockbuster drugs that have proven successful and profitable. It’s a phenomenon that extends to competing brand-name companies, as well.

“We are in an environment where we do have enough revenues in the sector to justify investment,” says Morgan. “What we perhaps don’t really have is effective competition between brands,” which essentially invent around each other’s patents.

“This ‘me too’ competition, not the ‘generic versus brand’ competition, is probably the most problematic feature of this marketplace,” he says. “All the resources that go into bringing these ‘me-too’ drugs to market, that’s the time, energy, and talent of scientists that could have been spent looking for the next truly magic bullet.”

So, how do we reward true innovation — the first drug to treat a condition, or substantially improve upon existing therapies? Brand-name companies would argue for stronger patents, while generics would argue for weaker ones — or, in the most radical scenario, none at all.

It would be a logistical nightmare, virtually impossible, to do away with the patent system, says Gold. “But if it didn’t exist, you’d be crazy to invent it. It doesn’t serve innovation well.”

Morgan advocates a publicly funded system that encourages the speedy introduction of cheaper, off-patent products to the market, while rewarding products of true value — branded or generic.

“We’ve never see the market function according to rapid entry and competitive pricing of off-patented products,” he says. “So let’s just try it. And if in doing so, we find that firms stop investing in truly pioneering research products, then we’ve got a problem. But if they stop investing in me-too products, I don’t agree we’ve got a problem.”

In the end, few in the industry are convinced that much will change on the legal battleground between brand-name and generic pharmaceuticals. Governments will bring in incremental changes to legislation; lawyers will continue to try to act in their clients’ best interests given that legislation.

Who will win? The jury — made up of shareholders, patients, citizens, governments, scientists, lawyers, and the drug companies themselves — is still out.

Susan Goldberg is a freelance writer based in Toronto. Her previous article for National, about changing partnership structures, appeared in our August/September 2002 issue.


Faire passer la pilule
Le vieillissement de la population et l’émergence probable de nouvelles maladies témoignent de l’urgence de trouver une solution à la guerre de tranchée qui oppose les fabricants de médicaments génériques aux fabricants de médicaments de marque déposée.

Selon Statistiques Canada, d’ici 2031, la population âgée de 65 ans et plus devrait passer de 13% à 25% au Canada.  Elle atteindra le seuil de 30% en 2056.

Outre l’impératif de fournir des médicaments à bon marché, des investissements à coups de milliards de dollars devront être versés dans la recherche pharmaceutique visant à combattre les maladies, telles que le SIDA et le diabète, ou encore la prochaine pandémie. 

Or, les deux camps de cette industrie profitable s’enlisent dans une guerre d’usure, marquée par des litiges interminables et la paralysie politique engendrée par le lobbying intensif visant à influencer la réglementation des brevets. 

La mise est grande.  Le marché des médicaments génériques, copies identiques et biologiques de leurs équivalents de marque déposée, représente déjà 40% des ordonnances prescrites au Canada. 

Relations tendues
Les relations entre les deux camps sont fondés sur la méfiance.  Chaque côté assume à son tour le rôle de la victime, tout en prétendant agir dans le meilleur intérêt des canadiens.

Le problème, évidemment, se résume à l’exclusivité des produits. Quand une société pharmaceutique développe un nouveau médicament, elle demande et reçoit un brevet gouvernemental qui s’accompagne d’un monopole de 20 ans.  Sans protection suffisante, les compagnies innovatrices ne survivront pas, affirme Tony Creber de Gowling Lafleur Henderson à Ottawa.

Les génériques, par contre, s’insurgent contre tout obstacle à la mise en marché expéditive de leurs produits. Ils soutiennent que les sociétés de marque prolongent indûment leurs monopoles en brevetant des changements mineurs à leurs modes de préparation, pratique qu'on appelle la « modification progressive ».  Puis, ils s’opposent à l'injonction automatique de 24 mois prévue dans le Règlement sur les médicaments brevetés (avis de conformité), qui avantage leurs concurrents de marque.

Mais ces derniers s’objectent à « l'exception pour travaux anticipés », prévue par la loi et qui permet aux sociétés génériques de développer un médicament en anticipation de l'autorisation de sa mise en marché, alors que le médicament de marque équivalent est toujours protégé par brevet.
Question de licences
C’est en 1969 que la Loi sur les Brevets est modifiée pour prévoir l’octroi de licences obligatoires permettant l’importation de médicaments brevetés au Canada afin de produire et de vendre des copies.  La mesure favorisera l’émergence des fabricants des produits génériques.  Puis un changement de cap en 1987 : le gouvernement décide de limiter leur utilisation. En 1993, on abolit carrément l’octroi des licences obligatoires.

Bien que cela fasse le bonheur des fabricants de médicaments de marque déposée, l’industrie générique déplore qu’en ayant recours à l’injonction automatique ou aux modifications progressives, leurs concurrents peuvent « freiner l’approbation du médicament générique » pendant des années après l’expiration du brevet original.

L’Association canadienne du médicament générique affirme que « plus de 200 poursuites judiciaires ont été intentées aux termes du Règlement, chacune déclenchant l'injonction automatique de 24 mois », ce qui « contribue à la hausse effrénée des coûts des médicaments d'ordonnance ».
Par ailleurs, Carol Hitchman, du cabinet Hitchman & Sprigings à Toronto, soutient que la pratique voulant que les fabricants de médicaments de marque déposée se limitent à effectuer des changements marginaux à leurs produits ne justifie pas une prolongation de 20 ans d’exclusivité.  Ces modifications progressives ne profitent qu’à la santé financière des détenteurs de brevets, affirme-t-elle.
Creber écarte cet argument qui, selon lui, ne tient pas compte l’amélioration continue d’un produit.
Pas facile de concilier les intérêts des deux camps. Des changements récents à la réglementation visent justement à limiter les modifications progressives de médicaments brevetés,  tout en accordant aux entreprises de médicaments de marque une interdiction de plus de huit ans à la concurrence. Main droite donnera ce que main gauche reprendra, déplore Gunars Gaikis de Smart & Biggar à Toronto.

Mais tout le monde s’entend au moins pour dénoncer la nature presque byzantine de la procédure en deux étapes qui régit les litiges se rapportant aux médicaments brevetés. Les parties doivent d’abord procéder par requête sur des questions se rapportant à la réglementation, sans témoins, pour ensuite peut-être obtenir une décision en vertu de la Loi sur les brevets.  Pas le meilleur moyen, selon Hitchman, d’en arriver à un jugement équitable.

Pas que des profits
Une chose est certaine : les deux camps sont bien conscients de leur image dans l’opinion publique. Les fabricants de médicaments de marque déposée répètent à qui veut l’entendre qu’ils investiraient davantage dans la recherche au Canada s’il était possible de prolonger la durée de leur exclusivité, pendant que les producteurs de génériques répondent que le public veut des médicaments à coûts réduits. 

Pour Steve Morgan, un expert en économie de la santé à l’Université de Colombie-Britannique, il s’agit d’un faux débat qui encourage la perception qu’il faux payer cher pour assurer l’innovation dans le secteur de la santé.  « L’industrie n’est pas en manque de profits », fait-il remarquer en rajoutant qu’une grande part des innovations est en fait issue du secteur public, alors que les sociétés génériques, tout comme les sociétés de marque sont attirées par les produits à grand succès du genre « Viagra ».

Il faut, selon Morgan, trouver un moyen efficace pour récompenser ceux responsables des vraies innovations.  Il propose donc un système financé à même les fonds publics qui encourage la mise en marché rapide de médicaments génériques et qui encourage par incitatif financier les produits pionniers.  Voilà un scénario qui devra se faire attendre.

Yves Faguy

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