Good afternoon.
Let me begin by thanking the committee for giving me the opportunity to express my views today on the proposed Trans-Pacific Partnership trade agreement. This initiative has important public policy and public health implications, which I believe do merit extensive examination. Let me also note that I am here as an individual and not as a representative of Simon Fraser University, where I teach.
I'd like to start by making clear that I am not opposed to trade. We all benefit from trade. My focus is on whether the terms of this proposed agreement constitute a reasonable way to ensure that Canadians—and other parties to the TPP—achieve the benefits of trade in a fair, balanced, and equitable manner.
This committee hearing is also challenging because the full draft text of the agreement is not available. While secrecy is normal in trade negotiations, there is a powerful democratic argument that the public does have a right to know what is being negotiated on its behalf, given the major public policy and health implications of the TPP and given that once ratified, it is almost impossible to reverse. The limited information accessible to Canadians contrasts with the privileged access given to 600 of the world’s largest corporations that have been included as U.S. advisers in the negotiating process.
I believe the Canadian government should engage in a much wider process of consultation to enable Canadians to make an informed choice about whether they support the TPP. Canada should publish the full draft text of the agreement and provide adequate time for full legislative scrutiny and public debate before it considers ratification. It should follow the lead of the EU, which suspended negotiations with the U.S. on a new trade agreement until the completion of extensive public consultations on enhanced investor rights proposals.
Trade agreements are very complex, both in terms of the obligations in individual agreements and in terms of their interaction with other agreements. This makes it very difficult to know, in advance, how particular provisions will be interpreted by dispute panels. Complexity and interlinkage also open the door to costly trade challenges, the prospect of which can chill government initiatives. The increasing number of agreements—we have nearly 3,000 bilateral investment agreements globally and numerous other free trade agreements—also facilitates venue shopping by those who wish to challenge government policies. Dispute adjudication is handled by a small number of trade law experts who may have little background in health, increasing the risk that their decisions may ignore important population health considerations.
The proposed TPP, like other trade agreements, places restrictions on the policy tools available to governments. These restrictions are meant to minimize any policy on regulatory barriers to trade or investment flows, regardless of the actual intent of these policies. Public regulations to protect health or the environment or to achieve socially beneficial purposes can be challenged if they violate trade treaties.
However, there is a long history of public-health-based regulations that have contributed significantly to improving population health. In light of the well-documented benefits of public regulatory capacity, it is essential that nothing in the proposed TPP erode or restrict the ability of future governments to protect public health, or require governments to adopt measures that subordinate public health considerations to other policy objectives. Governments must continue to have the policy tools needed to protect and advance population health, including the policy flexibility to address future challenges.
The scope of the TPP is very broad, as you know, with 29 chapters covering matters such as intellectual property, public procurement, state enterprises, market access, investment, and so on. In the time available, I can comment on only a limited number of issues and will focus primarily on health implications. A more thorough analysis of the impacts of the TPP on population health is clearly needed. I hope the committee will do this.
Let me turn to some of the major health and public policy concerns raised by the proposed agreement. As the committee knows, intellectual property rights—IPRs as they're called—cover patents, copyright and trademarks. The U.S. has advocated stronger IPRs than exist in TRIPS and stronger than those Canada currently provides or may provide under CETA.
The proposals would extend the duration of pharmaceutical patents, that is TRIPS-plus; lock in data exclusivity, further restricting the ability of generics to enter the market; and include for the first time medical procedures, something the U.S. did not get in its recent agreement with Korea. They would also provide additional protection for biologics. If implemented, the changes will increase the time-to-market for lower cost generic drugs and increase the range of life-saving measures that may be patented, making it more difficult to provide affordable medicines and implement universal public drug coverage.
Canada’s past experience with patent extensions has not been favourable. In the mid-1980s under compulsory licensing, prescription drug expenditures represented 6.3% of total health spending. In 2012 they were 13.6% or $27.7 billion. Drugs have been the fastest-growing component of health expenditures over the past 25 years.
A recent analysis of patent extensions in the proposed CETA estimated that this would add between $850 million and $1.65 billion annually to our drug bill. High drug costs adversely affect many Canadians. Many patients do not fill prescriptions due to cost, or use less than prescribed amounts to make them stretch to fit their budgets, risking their health.
The multinational drug corporations promised to increase research and development in return for increased patent protection from Bills C-22 and C-91. The research and development target was an extremely modest 10% of revenues. While reached between 1993 and 2002, it has now fallen to 6% of sales despite the huge increase in industry revenues.
Much of this R and D is not basic scientific research, but rather applied, that is, clinical trials, marketing, and sales research. Almost half of the R and D is funded by federal and provincial subsidies and tax credits. Our ratio of R and D to sales is a fraction of that of other OECD countries.