OTTAWA, December 13, 2004 -- The Government of Canada has proposed amendments designed to improve the regulatory environment for pharmaceuticals by establishing more predictable and stable rules relating to the protection of intellectual property. The amendments, proposed by Industry Canada and Health Canada, seek to optimize the balance between encouraging continued innovation in new drugs and promoting timely generic competition. In September 2004, First Ministers committed to improving access to safe and affordable drugs. The proposed amendments support the development of a national strategy on pharmaceutical management as agreed to by First Ministers. They also improve the international competitiveness of Canada's intellectual property regime for pharmaceuticals, eliminate a significant trade irritant with both the United States and Europe, and encourage more pediatric drug research. "These measures will not only stimulate research and innovation, but also competition to keep prices down," said the Honourable Ujjal Dosanjh, Minister of Health. "They form an important building block as we work toward our national pharmaceutical management strategy." "The government's actions will cut down on unnecessary litigation and clarify the rules, which fits into our focus on smart regulation and works to benefit both innovative and generic drug companies," said the Honourable David L. Emerson, Minister of Industry. "The measures also show our continued commitment to providing a stable environment in which research and development can flourish." The government's proposal would restore the original policy intent behind the Patented Medicines (Notice of Compliance) Regulations [PM(NOC) Regulations] and would enhance data protection under the Food and Drug Regulations. The current regulations provide innovative pharmaceutical companies with a period of market exclusivity in order to recapture the high cost of research and development before facing competition from generic drugs. Companies have, in some cases, been able to extend that period of market exclusivity in a manner that was not intended when the regulations were conceived. Under the proposed amendments to the PM(NOC) Regulations, this practice would stop. This will accelerate the market entry of generic versions of patented brand-name drugs by cutting down on unnecessary litigation. At the same time, brand-name companies would be allowed to protect improvements to the original form if they are genuinely innovative and therapeutic. In turn, the data protection provisions would be amended to provide new and innovative brand-name drugs with an internationally competitive guaranteed minimum period of market exclusivity of eight years -- up from the current period of five years. A further amendment would provide an additional six months of data protection to drugs that have been the subject of clinical studies in children. The proposed amendments were pre-published in the Canada Gazette, Part I, on December 11, 2004. There will be a 75-day consultation period, during which the pharmaceutical industry and other interested parties may submit their comments to the responsible departments. Any comments received will be carefully reviewed and the proposed amendments will be adjusted, if required. The detailed regulatory changes can be found at http://canadagazette.gc.ca/index-e.html. - 30 - For more information, please contact: Media Relations Industry Canada (613) 943-2502 Media Relations Health Canada (613) 957-2983 BACKGROUNDER Amendments to Intellectual Property Rules for Pharmaceuticals In Canada, there are two special forms of intellectual property protection for pharmaceuticals: the Patented Medicines (Notice of Compliance) Regulations [PM(NOC) Regulations] and data protection. Industry Canada and Health Canada are proposing a package of regulatory amendments designed to reaffirm the balanced policy intent behind the PM(NOC) Regulations and to reinforce data protection under the Food and Drug Regulations. If passed, the proposed amendments would bring a greater degree of stability and predictability to the intellectual property environment in the pharmaceutical industry by establishing a firmer upper and lower boundary to the period during which brand-name drugs enjoy market exclusivity. Patented Medicines (Notice of Compliance) Regulations The PM(NOC) Regulations were created in 1993, along with the "early-working exception" through amendments to the Patent Act brought into force by Bill C-91. Both instruments are an integral part of the government's drug patent policy, which seeks to strike an appropriate balance between encouraging continued innovation in new drugs and promoting timely generic competition. The early-working exception encourages timely generic competition by allowing generic drug companies to develop a drug for market approval while the equivalent brand-name drug is still under patent. This enables generic drug companies to enter the market as soon as the patents for the brand-name drug expire. The PM(NOC) Regulations provide effective patent enforcement by ensuring that generic companies do not use the early-working exception to enter the market prior to expiry of the patents for the brand-name drug. In cases where a generic company believes the patents should not block the market entry of its product, the PM(NOC) Regulations require it to serve an allegation to that effect on the brand-name patentee. If the patentee disagrees with the reasons for the allegation, litigation ensues and an automatic stay is triggered, which bars the generic drug from entering the market for 24 months or until the litigation is resolved in its favour, whichever comes first. Data Protection Data protection is based on international obligations in the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the North American Free Trade Agreement (NAFTA). Those obligations require that, where a company submits trade-secret data to a regulatory authority in the context of seeking approval to sell a drug composed of a new active substance, that data is protected from reliance by competitors for a minimum of five years from the date the drug is approved. Data protection was introduced in Canada in 1995 through amendments to the Food and Drug Regulations. In Canada and many other countries, generic drugs are approved on the basis of their "bioequivalence" to the already approved brand-name drug. In this context, generic drug companies are said to "rely" on the confidential data submitted by their brand-name counterparts. Unlike Europe and the United States, however, Canada has not implemented its data protection obligations in a manner that automatically prohibits this type of reliance for a minimum period of time. Rationale for Proposed Amendments The last few years have given rise to significant public dialogue about the intellectual property protection of pharmaceuticals, both nationally and internationally. As a significant component of their respective health care systems, many countries have made adjustments to legislation to optimize the balance between innovation and access to affordable medicines. In 2003, the U.S. amended its version of the PM(NOC) Regulations to correct perceived abuses of the regime by brand-name drug companies. In 2004, the European Union adopted new measures for data protection, settling upon a uniform 10-year market exclusivity period, with an additional one year in cases where a drug has been approved for a new use. In Canada, rising concerns have been expressed about the balance between innovation and the availability of generic drugs, most notably in the Romanow Commission's Report on the Future of Health Care in Canada, the June 2003 review of the PM(NOC) Regulations by the House of Commons Standing Committee on Industry, Science and Technology (the Industry Committee) and a statement by the Competition Bureau dated February 27, 2004. Industry Canada and Health Canada, as the policymakers responsible for the PM(NOC) Regulations and the data protection provisions respectively, have examined the two regulatory instruments and concluded that certain improvements are needed. In conceiving the proposed amendments, the departments took into account the testimony of industry stakeholders during the Industry Committee's review of the PM(NOC) Regulations mentioned above. As a whole, these amendments are intended to deliver greater stability, predictability and certainty, which will work to the overall benefit of both the brand name and generic sectors of the pharmaceutical industry. The government is of the view that these measures are also necessary to allow important next steps related to a national strategy on pharmaceutical management. Amendments to the PM(NOC) Regulations Recent jurisprudence has facilitated the ability of brand-name drug companies to enforce new patents over old products, resulting in repeat litigation, successive 24-month stays and, in some instances, the unwarranted delay of generic competition. Although this behaviour is exceptional, it does involve drugs of significant commercial value, and current evidence indicates that it is being imitated by a rising number of brand-name companies. Industry Canada is proposing amendments to the PM(NOC) Regulations that would facilitate the market entry of a generic version of the original form of a brand-name drug immediately following expiry of the relevant patents, as was originally intended, while at the same time allowing brand-name companies to duly protect improvements to the original form of the drug that are genuinely innovative (so-called "incremental innovation"). A further unrelated amendment also proposes to repeal a provision in the PM(NOC) Regulations, which was added in 1999 in order to close an apparent loophole that had allowed a generic company to avoid compliance with the regime. The provision in question was rendered redundant some time after its passage when the Federal Court of Appeal found that the unamended version of the PM(NOC) Regulations was sufficient to capture the avoidance strategy employed by the generic company. Repeal of the 1999 provision will also clarify that the PM(NOC) Regulations are not intended to apply to subsequent versions of patented, brand-name drugs where the company producing the subsequent version is required to conduct independent clinical studies to establish the safety and efficacy of its product. Amendments to Data Protection Data protection has been interpreted very narrowly by the courts such that it is rarely, if ever, triggered. As a result, brand-name drugs in Canada that are not well protected by a patent sometimes receive less than five years of market exclusivity. Canada's implementation of its trade obligations in this area is seen both as a compliance problem by our WTO and NAFTA partners and a disincentive to greater investment in Canada by multinational brand-name drug companies. In addition, the absence of a guaranteed minimum term of market exclusivity in Canada sometimes discourages non-patent-holding brand-name drug companies from launching new and important therapeutic products here. Health Canada is proposing amendments to the data protection provisions which would introduce the automatic prohibition approach to generic drug submissions as implemented in the U.S. and Europe. Under these amendments, new and innovative brand-name drugs would receive an internationally competitive, guaranteed minimum period of market exclusivity of eight years. In addition, a further six months of data exclusivity is proposed for drugs that have been the subject of pediatric studies designed and conducted with the purpose of increasing knowledge about the drug in pediatric age groups in which it may be used.
