Canadian officials are mulling an attack on U.S. pharma, says Ottawa lawyer

In this March 21, 2006 file photo, pills move through a precision weighing machine at a pharmaceutical manufacturers trade show in New York. (AP Photo/Mark Lennihan)

Canadian officials are considering how to take aim at the massive U.S. pharmaceutical industry in the event of a full-blown trade war with the United States, according to an Ottawa-based law professor with knowledge of the situation.

The plan would target valuable U.S. patents, granting Canada’s generic pharmaceutical firms the right to copy, sell and potentially export American drugs.

Amir Attaran, a biomedical scientist and University of Ottawa law professor, said the move would stun Wall Street and the White House, while mobilizing the powerful U.S. pharmaceutical lobby behind Canada’s cause.

“Canadian officials are aware of and studying the proposal in case the United States decides to impose a major retaliation on Canada,” he told Yahoo Canada Finance on Tuesday.  “I’m positive it’s being considered.”

Foreign Affairs Minister Chrystia Freeland travelled back to Washington to resume NAFTA negotiations on Wednesday. U.S. officials have demanded a deal by Oct. 1., upping the pressure to resolve long-held sticking points such as the dispute resolution mechanism, cultural protections, and the supply-managed dairy industry.

Attaran spelled out how Canada could employ a pharma-based retaliation strategy in a magazine column in June. He declined to disclose who in the federal government is now considering the plan, saying only that it is not the officials negotiating the trade deal with the U.S.

Global Affairs Canada did not respond to a request for comment in time for publication.

“I think one plausible reaction for the Canadian government would be to say if the Americans operate radically outside of NAFTA, as by penalizing our car industry, we will pursue their pharmaceutical industry’s interests,” Attaran said. “At that point, you have exited the negotiating model of resolving our differences, and you are resorting to brute force.”

The Pharmaceutical Research & Manufacturers of America was the fourth largest U.S. lobby group in 2017, spending nearly US$26 million that year, according to the nonpartisan Centre for Responsive Politics. The Washington D.C.-based trade group’s members include drug industry giants Pfizer, Sanofi, and Johnson & Johnson.

Attaran said a threat by Canada to suspend U.S. patents on Canadian soil would be impossible for those companies to ignore.

“Pharma would be putting in phone calls out to everyone in Congress whom they made campaign donations to. And that is nearly everyone,” he said. “Pharma spends more on lobbying than banking and defence combined, and each of those are a huge lobby.”

Copying U.S. brand name drugs is nothing new for Canada’s generic drug industry. In 1969, the Patent Act was amended to allow firms to import the active ingredients needed to produce and sell copies of branded drugs still under patent. Canadian companies were only required to pay a four per cent royalty fee to the firm that invented the drug.

Decades of pressure from multinational drugmakers has brought Canada’s policies closer in line with more restrictive U.S. standards. But Attaran is confident that Canada can “compulsory license,” or essentially expropriate, U.S. drug patents without running afoul of the law.

“It’s 100 per cent legal,” he said. “The World Trade Organization agreement known as TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) is restrictive of compulsory licensing, but it is not prohibitive.”

It could happen, but will it?

Dr. Joel Lexchin, a University of Toronto professor and emergency physician with more than 30 years experience researching pharmaceutical policy, said the plan may work, on paper.

“It’s possible, but only in a theoretical sense,” he said. “This would be very contentious. It would trigger probably even more fury from Donald Trump.”

Dr. Lexchin warned the Americans may not even take the threat seriously, given the potential risks it could pose in Canada.

“There would be the question of whether or not the brand name (U.S.) companies would cut the supply of medications to Canada. They might threaten to do that. Generic drug companies won’t be able to take over all the current brand name drugs because there is the issue of getting access to the active ingredients,” he said. “I don’t see it being done in Canada. It wouldn’t be worth it.”

Attaran said Canada would need to target only a handful of drugs in order to get the deep-pocketed U.S. pharmaceutical lobby to speak up on its behalf. Even that, he said, may not be necessary if Canada becomes the first country to threaten to weaponize drugs patents in a trade war.

“Brazil has done so. Indonesia has done so. Thailand has done so. But these are typically middle-income countries that are looking to save a buck on medicines by circumventing patents. We would be doing it as retaliation rather than public health strategy,” Attaran said. “At that point, you would elicit an utter reaction of panic from the pharmaceutical industry in the U.S. and its allies in Congress. You probably never would have to do it for real.”

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