As U.S. looks to modernize NAFTA, strong enforcement of existing obligations should be a top priority

Yesterday, PhRMA filed comments on negotiating objectives for the modernization of the North American Free Trade Agreement (NAFTA). The Administration’s review of our trading relationship with Mexico and Canada serves as a critical point in time for the U.S. to seek to resolve a number of outstanding issues stemming from weak enforcement of existing intellectual property (IP) commitments, and price-setting measures being considered by our trading partners, under NAFTA and other international obligations.

U.S. biopharmaceutical manufacturers rely on predictable and transparent IP policies, which are fundamental for robust innovation and continued economic growth and job creation. NAFTA set a strong baseline for IP protection, and has helped make Canada and Mexico top trading partners for U.S. biopharmaceuticals. However, recent actions by Canada and Mexico demonstrate inadequate enforcement of existing obligations; which is why upcoming negotiations require renewed attention to protect U.S. innovation.

In Canada, the judiciary has recently created a new and heightened standard for determining patent “utility,” which has resulted in the invalidation of 25 biopharmaceutical patents since 2005. Canada remains the only country in the world that interprets patent utility in this manner, breaking the letter and spirit of its NAFTA obligations by undermining patent protection and removing an incentive that is critical to driving and sustaining biopharmaceutical innovation.

Additionally, in both Mexico and Canada, the protection of confidential business information (CBI) and regulatory data protection (RDP) remain uncertain. Despite the fact that NAFTA and other agreements require CBI—including biopharmaceutical clinical trial and other data—to be protected against disclosure, except where “necessary to protect the public,” Canada has lowered this objective threshold—flying in the face on their international obligations. And, while Mexico has taken initial steps to implement RDP provisions by issuing guidelines to key federal agencies, the country has failed to fully implement their RDP obligations as the guidelines can be rescinded at any time because they have not been reflected in any national regulations or legislation.

Other policies, in addition to weak IP enforcement, have the potential to threaten innovation and access to breakthrough biopharmaceuticals. In Canada, for example, both the Ministry of Health and the Patented Medicines Pricing Review Board (PMPRB) are exploring an expansion of Canada’s price setting mandate that would, for example, eliminate the U.S. as a reference country and instead adopt pricing setting measures from other countries. Changes to the PMPRB mandate could affect how Canadian pharmaceutical prices are established and benchmarked against pricing in other markets, which could – in turn – potentially hamper patient access to medicines. 

As part of its effort to modernize NAFTA, the U.S. should seek to ensure stronger enforcement of patentability standards and the provisions that protect the IP of U.S. innovators, as well as address potentially negative price-setting measures. Maintaining strong policies will help promote the discovery of new medicines and support our economy and workforce.