Canada Patent Protections In Spotlight As PhRMA Seeks Addition To “Priority Watch List”

The drug industry sees a not-so-friendly neighbor to the North and wants help from the Office of the U.S. Trade Representative to get Canada to change its “promise utility doctrine.”

India is once again on the top of the pharmaceutical industry’s list of countries that do not provide enough protection of intellectual property rights. But this year it is joined by an unlikely foe: Canada.

The Pharmaceutical Research and Manufacturers of America focused on the two countries at a public hearing of the Office of the U.S. Trade Representative, which was held to gather input for USTR’s 2014 Special 301 Report. The annual report identifies U.S. trading partners that USTR has determined provide inadequate protection of IP rights or deny fair and equitable market access for those relying on IP rights.

The agency puts trading partners who fall short on a “Priority Watch List,” “Watch List” or “Section 306 Monitoring” list. It also has a “Priority Foreign Country” designation for countries deemed to have the most egregious practices. Trading partners in this rarely used category may be subject to sanctions (see box for details). India was last on this list in 1993.

USTR Designations

Priority Foreign Country – Those whose onerous or egregious acts, policies or practices have the greatest adverse impact (actual or potential) on relevant U.S. products. USTR listed a country in this category for the first time in seven years when it gave Ukraine this designation in 2103.

Priority Watch List – Countries who do not provide an adequate level of IP rights protection or enforcement, or market access for persons relying on IP protection.

Watch List – A lower-level list of countries with underlying IP rights problems.

Section 306 Monitoring – Countries being assessed for their implementation of measures or agreements to enforce IP rights; monitoring is done under Section 306 of the Trade Act.

Speaking at USTR’s Feb. 24 hearing, PhRMA VP of International Affairs Jay Taylor said “unfortunately, many of our trading partners do not respect the value of innovative medicines as demonstrated through limitations on the availability of pharmaceutical patents in places like India with Section 3(d) of its Patents Act, or even in Canada, with its patent utility doctrine.”

In its 214-page submission to USTR, PhRMA recommends that India and Turkey be designated as Foreign Priority Countries, that 14 trading partners, including Canada, be included in the Priority Watch List and that 24 be included on the Watch List. PhRMA counts the European Union as one of the 14 trading partners it wishes to be on the Priority Watch List. It requests that six of the 28 EU member be put on the Watch List.

USTR is expected to issue its 2014 report on April 30.

Foreign countries and non-governmental organizations have sharply criticized the Special 301 report process, contending that it is dictated by U.S. industry, primarily PhRMA and the International Intellectual Property Alliance, which represents publishers and copyright owners.

USTR initiated public hearings in 2010 to give stakeholders a chance to present their positions. But the two sides remain divided with PhRMA advocating the need for greater IP protection and many countries and NGOs arguing that the pharmaceutical industry is seeking to expand its IP rights and make it more difficult for generics to enter the market.

First published in 1989, the Special 301 Report cannot force countries to change their IP policies but it is regarded as a weapon to pressure them to do so.

“It is an important way for us to demonstrate what we face around the world,” David Talbot, Eli Lilly & Co.’s director of international government affairs, said in an interview. “It is a tool the Administration can use to enforce obligations of our trading partners.”

PhRMA's IP Foes

The Pharmaceutical Research and Manufacturers of America has asked the Office of U.S. Trade Representative to put the highlighted countries on its list of trading partners that do not provide adequate protection of intellectual property rights.

Source: Map created by “The Pink Sheet” using data from PhRMA’s submission to USTR.

Inventors Must Predict Drug’s “Promised” Effectiveness

Canada had been on the “Priority Watch List” from 2009 to 2012 but was moved to the “Watch List” last year after making reforms to its copyright law. The pharmaceutical industry is now opposing the high standard Canada has set to show that an invention is useful.

The issue came to the forefront last year when Lilly brought a complaint against the Canadian government claiming its patent policy is a breach of IP protection provided under the North American Free Trade Agreement.

Lilly is seeking $500 million for lost revenue from Canadian court rulings that invalidated its Zyprexa (olanzapine) and Strattera (atomoxetine) patents on the grounds that the drugs are not useful. The dispute is being taken up by a three-person panel of arbitrators (Also see "O Canada! Lilly Claims Country’s Invalidation Of Its Patents Violates NAFTA" - Pink Sheet, 19 Sep, 2013.).

Supreme Court of Canada to review appellate court decision that overturned trial judge’s ruling that Plavix patent was invalid for lack of utility.

Lilly is the first innovator company to go the arbitration route in a patent dispute. It did so after it was unable to overturn court decisions on Canada’s requirement that inventions be “capable of industrial application,” i.e., useful. This utility requirement is included in the patent laws of other countries but Lilly says Canada has created a new “promise utility doctrine” that requires patent applicants to demonstrate or “soundly predict” the effectiveness of a pharmaceutical “promised” at the time an application is filed.

Talbot said it is difficult for pharmaceutical companies to clear the high utility bar that Canada has set. “We don’t have data to meet it in most cases,” he said.

Canada Politely Disagrees

Since the advent of the promise doctrine in 2005, 10 pharma companies have had 18 patents invalidated for lack of utility and a number of companies have had their patent applications rejected in Canada.

Innovator companies have prevailed in one dispute over the utility doctrine. Canada’s Federal Court of Appeal overturned a trial judge’s ruling that Sanofi/Bristol-Myers Squibb Co.’s Plavix (clopidogrel) patent was invalid for lack of utility. However, while the Supreme Court of Canada refused to hear Lilly’s appeal of rulings on its patents, it granted Apotex Inc.’s request to review the Plavix ruling. Oral arguments are expected to take place this fall.

The Canadian Patent Utility Coalition, a group of 19 pharma companies, submitted comments to USTR describing the negative impact of Canada’s patent utility requirement and asking that Canada be elevated to the Priority Watch List.

In the past Canada has been very critical of the USTR’s Special 301 review process. In 2007 testimony before Canada’s House of Commons, Nancy Segal, then acting director of the Intellectual Property, Information and Technology Trade Policy Division of the Department of Foreign Affairs and International Trade, said Canada does not recognize the 301 watch list process.

“It basically lacks reliable and objective analysis. It’s driven entirely by U.S. industry,” she stated. “If you aren’t on the watch list in some way, shape or form, you may not be of importance. Most countries with significant commercial dealings are on the watch list” (Also see "Intellectual Property Protection: Foreign Governments Get To Argue Their Case To USTR Before Publication Of "Watch Lists"" - Pink Sheet, 25 Jan, 2010.).

India’s Compulsory Licensing, Clinical Trial Regulations Under Fire

PhRMA has been battling India’s patent laws for years and developments of the past year have intensified its concerns. PhRMA, the Biotechnology Industry Organization and the U.S. Chamber of Commerce recommended that the USTR elevate India from the “Priority Watch List” to a “Priority Foreign Country.”

In its submission to USTR, PhRMA cited Section 3(d) of the Indian Patents Act, which bars patents on modifications of a known substance that do not demonstrate “enhanced efficacy.” India’s Supreme Court upheld this provision, invalidating Novartis’ Glivec/Gleevec (imatinib) patent (Also see "India’s Supreme Court Dismisses Novartis’ Glivec Patent; Upholds Section 3(d) Of India Patent Act" - Scrip, 1 Apr, 2013.).

PhRMA also noted that India is considering issuing compulsory licenses on approximately 20 patented medicines across a wide range of therapeutic areas. The Indian Patent Office granted its first-ever compulsory license in 2012 to Natco Pharma Ltd. for Bayer AG’s kidney cancer drug Nexavar (sorafenib) (Also see "India’s Decision To Uphold Natco’s Compulsory License On Nexavar Holds Key Lessons For Innovators, Generic Makers" - Scrip, 19 Mar, 2013.).

The association also expressed concern about India’s clinical trial regulations. In response to public protests over reported deaths in clinical trials last year, the Indian Ministry of Health and Family Welfare adopted rules that require broader compensation for participants who claim to have been injured due to a clinical trial.

PhRMA noted that the Indian Supreme Court instituted a moratorium on clinical trials and in November, the Drug Controller General of India ordered that in addition to obtaining written informed consent, trial sponsors must also get an audio-visual recording of the consent of each subject.

The Federation of Indian Chambers of Commerce and Industry has fought back, asserting that calls to crack down on the country were being made “to protect private corporate interests” and increase their intellectual property rights protection beyond the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) (Also see "Indian Business Hits Back At Calls For Tougher U.S. Stance Over Alleged Patent Abuses" - Scrip, 10 Mar, 2014.).

GPhA Calls For Balanced Approach To IP Protection

PhRMA’s primary concerns about the IP policies of other countries are:

• Narrowing of standards as to what is patentable subject matter;
• Compulsory licensing;
• Unfair commercial use of undisclosed clinical trial data;
• Allowing generics to enter the market before a patent expires or a patent dispute is resolved (linkage); and
• Lack of patent term adjustment for delays in getting a patent issued or a product approved.

In addition, PhRMA noted that several countries have imposed local manufacturing requirements as a condition for market entry. For example, it said that in 2013 Russia’s Industry and Trade Ministry proposed a decree stipulating that only Russian and Belarusian drugs would be allowed to participate in government procurement tenders, if two or more local manufacturers are registered in the market in a product category. A law was also passed in Russia that allows the government to enforce a ban on foreign goods in public procurement tenders.

The Generic Pharmaceutical Association and Mylan NV asserted in separate submissions to USTR that intellectual property protection outside the U.S. must be reasonable and balanced.

“Policies unduly protecting intellectual property for pharmaceuticals, such as patent term extensions, market and data exclusivity periods, patent linkage and overly broad definitions of patentable product, create market access barriers, which inhibit access to affordable generic medicines,” GPhA President and CEO Ralph Neas wrote in a letter to USTR Director for Intellectual Property and Innovation Susan Wilson.

Neas said policies and practices not directly linked to IP protection also operate as market access barriers, such as delays in marketing approval, delays in pricing and reimbursement decisions, the use of cluster patents, delays caused by patent litigation and inadequate efforts to stop counterfeit pharmaceutical products.

Advocates Seek To “Temper” USTR

Several groups reiterated their opposition to the Special 301 mechanism. Doctors Without Borders/Médecins Sans Frontières defended India’s policies. It said India issued the compulsory license for Nexavar in the interest of public health as the price-tag for the drug kept it out of reach of 98% of those eligible for treatment. The group said that granting the compulsory license reduced the price by 97%.

Knowledge Ecology International argued that the United States itself uses compulsory licenses through use of patents on standards essential for the adoption of new technologies. In addition, it said federal judges are granting compulsory licenses when they forgo the granting of injunctions in patent infringement cases in favor of forward looking royalties as a remedy for infringement.

“Instead of the aggressive approach of placing nations on watch lists for addressing well recognized abuses of patent rights, such as excessive pricing of medical inventions, or opportunistic patents on technology incorporated in standards, the USTR should temper the ways in which it considers its foreign relations,” KEI Director James Love wrote. “The U.S. is not the largest owner of world patents and should alter its policies to reflect that fact.”