Intellectual Property Protection And Drug Plan Coverage: Evidence From Ontario

Canada has strengthened intellectual property (IP) protections for pharmaceutical drugs several times over the last three decades. These changes were intended to lengthen the period of market exclusivity for new brand drugs and thereby allow them to earn additional sales revenues that could be used to recoup R&D investments. Whether these policies achieved their objective of increasing sales revenues is unclear, however. Whether they did depends on the coverage decisions of the major drug plans. Longer periods of market exclusivity amount to a price increase for brand drugs. In response to higher prices, drug plans could have become more selective in the drugs they cover, and they could have waited longer to list these drugs on their formularies, reducing formulary exclusivity periods. To investigate, we assembled data on the coverage of brand drugs approved for use in Canada over the last 35 years by the Ontario Drug Benefit (ODB) program, the largest and most influential drug plan in Canada. We find that, except for a brief period of time, the marked strengthening of Canadian pharmaceutical IP laws over the last 25 years have not lead to an increase in the exclusivity period that brand-name drugs enjoy on the ODB formulary. In fact, exclusivity periods have been dropping more or less consistently since the mid 1970s. The causes of these changes remain to be explored.