The impact of the Canada – United States – Mexico Agreement on prescription drug expenditures in Canada

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The impact of the Canada – United States – Mexico Agreement on prescription drug expenditures in Canada.pdf

The Canada-United States-Mexico Agreement (CUSMA) extends data protection for biologic drugs from 8 years to 10 years.

Data protection is distinct from patent protection in that it begins when a drug is marketed, rather than when a drug is patented. Unlike other patented inventions, pharmaceuticals need to go through trials and testing to prove they are safe and effective. That time uses up part of their patent protection period. Since data protection begins when marketing occurs, it effectively provides a drug with a minimum period of market exclusivity – irrespective of its patent status.

The extension of data protection applies to a category of pharmaceuticals known as innovative biologics. Biologics are drugs with complex structures that have become increasingly popular. They are also exceptionally expensive.

Only biologic drugs whose primary patent provides less than 10 years of market exclusivity would benefit from the change.

This report focuses on the potential cost of this extended term of data protection. It defines that cost as the additional expenditures on originator prescription biologics relative to their potential competitors. These are known as biosimilars, that is, alternative products that are less expensive.

Since the increased expenditures caused by the CUSMA will not begin until well into the future, PBO projects drug expenditures and CUSMA-induced costs in 2028. This is the year in which additional expenditures would first occur if ratification and implementation of CUSMA were completed by 2020.

This future analysis is motivated by two factors. One is the industry’s concern that technological developments may render data protection to be the primary source of market exclusivity, rather than patent protection. The other is that biologics have been, and are likely to continue to be, gaining market share for pharmaceuticals.

Accounting for both, and assuming a more widespread use of biosimilars, PBO estimates that the CUSMA-induced increase in expenditures for consumers and drug plans would amount to at least $169 million in 2029, increasing annually thereafter.

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