ABSTRACT INTRODUCTION I. REVIEW OF EMPIRICAL STUDIES A. Study 1 B. Study 2 C. Study 3 D. Interpretation II. ARE THE REGULATIONS A SUCCESS? A. Debate Preceding Bill C-91 B. "Original Policy Intent" C. "Patent-Specific" Analysis D. Statutory Interpretation E. Revisiting the Empirical Data III. IMPLICATIONS FOR PHARMACEUTICAL LAW AND POLICY A. Theory of Linkage-Based Drug Development B. Globalization of Pharmaceutical Linkage SUMMARY & CONCLUSIONS INTRODUCTION
The Patented Medicines (Notice of Compliance) Regulations (NOC Regulations) (1) came into force in 1993 as part of Canada's perceived obligations under TRIPS and NAFTA to support the domestic pharmaceutical industry. (2) The original policy intent of the regulations, as outlined in successive government Regulatory Impact Analysis Statements (RIAS), was to encourage the development of new and innovative drugs and facilitate the timely market entry of generic drugs, and thus, to balance the goals and objectives of food and drug law with those of patent law. Prior to the linkage regime coming into force, drug regulation and drug patenting represented distinct goals and policy objectives. (3) This balancing exercise is a familiar one to the intellectual property bar owing to the quid pro quo of the traditional patent bargain. Thus, under the terms of the linkage regime, there must be a specific functional legal nexus between approved drugs and patent protection for those drugs pursuant to the NOC Regulations.
As appreciated in the early literature on topic, (4) it was not output metrics but a combination of lobbying by the U.S. pharmaceutical industry, its hopeful domestic university funding partners, and a federal government bent on harmonizing the Canadian system of intellectual property with that of the United States that led to enactment of the NOC Regulations. Once the domestic U.S. policy environment was recalibrated away from nascent support for a Canadian-based system of price controls and towards preventing nations such as Canada from having systems of intellectual property law that were perceived to be based on "rights piracy," (5) stronger patent protection in Canada was inevitable. However, with one notable exception,6 few independent observers would have guessed during the debate on patent reform that the linkage regime would potentially tip so far to the rights-protection end of the spectrum. It has now been almost two decades since the regulations were enacted subsequent to Canada's perceived obligations under NAFTA and TRIPS. Given the continuing public debate over high drug prices, (7) the large fraction of research and development carried out by publicly-funded institutions that is ultimately enveloped within commercialized products, (8) and wide criticism of the failings of the patent system to promote innovation, (9) it is an excellent time to assess whether the NOC Regulations have satisfied the twin policy goals of encouraging new and innovative drug development and the timely market entry of generic drugs. We have chosen as the vehicle of our investigation, the growing field of empirical legal research.
The empirical work reviewed and discussed here was designed to investigate whether and how the NOC Regulations have encouraged the development of new and innovative drugs since being enacted. The importance of empirical studies to assessing the efficiency and effectiveness of policy levers such as intellectual property law and regulations cannot be overstated. As noted by some of the most prominent economists, innovation scholars, and patent scholars over the last decades, (10) robust conclusions regarding the consequences for technological innovation of changes in patent law and policy are few and far between. This is due primarily to a fundamental lack of relevant empirical data. The same applies in the reverse, as governments have specific legal and policy goals in mind when drafting law and regulations, which are then reviewable by the courts in judicial review proceedings.
We have recently published three studies that provide empirical data for analysis of whether pharmaceutical linkage regulations, in operation, are consistent with the intent of balancing the goals of patent law with those of food and drug law, while stimulating new and innovative drug development. The data are relevant to all jurisdictions that have, or are currently contemplating bringing in, some form of linkage. The first study focused on the types of new and follow-on drugs approved by Canadian regulators between 2001 and 2008. (11) The year 2001 was chosen as our starting point, as this was the date when substantial amendments to Canadian drug regulation were made that affected both the mechanisms and speed of approval. (12) The second study focused on patenting patterns associated with drugs identified in the first study. (13) We analyzed the number of patents per drug, the number of patents listed on the patent register, and the timing of these metrics to one another and the date of drug approval. We conducted tests on the statistical nature of the trends in patenting before and after the NOC Regulations came into force. In addition, we analyzed patents and approved drugs in terms of the World Health Organization (WHO) Anatomic Therapeutic Class in order to identify therapeutic areas (cardiovascular, cancer, etc.) in which forms are focusing their drug development activities. Finally, we developed an independent patent classification scheme to analyze the type (chemical, use, combination, etc.) of patents associated with approved drugs. The third study focused on the legal nexus between drug approval and drug patenting in a subgroup of the most profitable drugs sold in Canada. (14) Our aim was to quantify patenting, patent listing, and patent litigation patterns associated with these drugs under the NOC Regulations and to investigate the manner in which patent terms on already approved blockbuster drugs were extended via operation of the linkage regime. The purpose of the present Article is to review data from these studies and to analyze them in light of the stated objectives of the NOC Regulations as well as relevant Supreme Court of Canada jurisprudence and principles of statutory interpretation.
REVIEW OF EMPIRICAL STUDIES
Study 1 **
Our first study ("Study 1") (15) was an analysis of drug approvals, referred to in Canada as Notices of Compliance (NOCs), issued over the period from 2001 to 2008. Our goal was to develop an independent empirical methodology and synthetic model to investigate what types of drug candidates were approved by Canadian regulators over nearly a decade and to investigate which type of drugs might qualify for flexible departure under emerging lifecycle-based drug regulatory models. (16) A related goal was to use this model to identify patterns in the rate (how much) and direction (what kind) of innovative activity by domestic brand name and generic pharmaceutical firms. One methodological tool employed by our group was construction of "patent trees." Patent trees were used to assess the number, type, and timing of patents granted in relation to a specific drug or a group of related follow-on drugs, and these patent trees could be assessed and visualized. An example of such an analysis is provided in Fig. 1.
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We analyzed 3,837 drug approvals over the period from 2001 to 2008, with a particular focus on the types of new and follow-on drugs being approved and the manner in which approvals were consistent with emerging lifecycle models of drug regulation. (17) Of the cohort of 3,837 approvals, 45% were administrative in nature (product manufacturer or name change), leaving 2,122 approvals for detailed analysis. There were two related components of the work that were published in separate articles. The first focused on approval statistics, whereas the second focused on the innovative character of approved drugs.
Data from the first component demonstrated that the percentage of new drugs developed over the test period decreased substantially whereas the number and fraction of follow-on drug increased. All three groups in the "new drug" category investigated experienced a decrease over time. This included new drug submissions (NDSs) generally, and NDS submissions containing a new active substance (NAS) and those directed to First in Class drugs.
By contrast, all four categories of "follow-on" drugs increased over the same time frame, sometimes dramatically. Of the four groups followed, two represented brand-name submission classes (standard supplementary new drug submissions (SNDS) and First in Class SNDSs), and two represented generic submissions (standard abbreviated new drug submissions (ANDS) and supplemental ANDS, or SANDS). SNDSs, also known as "line extensions" of previously existing products, usually involve changes to a pre-existing drug such as a change in the route of administration (e.g., oral to intravenous), dosage form (e.g., tablet to capsule), salt form (e.g., besylate to mesylate), or indication (e.g., antidepressant to anxiolytic). For the most part, getting a line extension or SNDS onto the market is a faster process compared with drugs approved via the new drug submission stream. This is true even where approval times for SNDS and NDS are roughly equal, as production and marketing of line extension products takes less time than producing and marketing truly new drugs, owing to manufacturing experience and related competencies.
Drugs approved via NDS and SNDS routes can be classified as either First in Class or Me Too. For the NDS route, First in Class drugs are those that contain either a new ingredient or are directed to a new use (or indication), whereas NDS Me Too drugs neither contain a new ingredient nor are directed to a new use, but do have an improved benefit/risk profile. For the SNDS route, relatively small changes to existing chemical structures such as salts or isomers...