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Trade fight: Is Canada ripping off the U.S.?

"America isn't against Canada. It's against Canada's devaluation of American intellectual property," says a coalition of Hollywood, Silicon Valley, and U.S. drug groups

“Devaluing” U.S. intellectual property, such as pharmceutical companies’ R&D, is what’s driving Action for Trade’s anti-Canada position.
“Devaluing” U.S. intellectual property, such as pharmceutical companies’ R&D, is what’s driving Action for Trade’s anti-Canada position.Read moreKatarzyna Bialasiewicz/Dreamstime/TNS

"America isn't against NAFTA. It's against Canada's devaluation of U.S. intellectual property."

That's what a group called Action for Trade told me in a note after my recent column about Canadian business and government leaders, visiting Philly on their way to Washington, who urged us to update (not scrap) our free-trade agreements and avoid President Trump's threatened import taxes, to help U.S., Canadian and Mexican companies compete as a group against China and other tough trade competitors.

Canada's doing what? Stepping on U.S. intellectual property rights, according to third-party articles forwarded to me by Action for Trade, a three-month-old group representing drug makers (the Biotechnology Innovation Organization and the Pharmaceutical Research and Manufacturers Association, also known as BIO and PhRMA); Hollywood (the Motion Picture Association of America and the Recording Industry Association of America); and two Big Tech companies, business-software giant Oracle and smartphone/drone developer Qualcomm.

The Hollywood people worry that the Canadians are too relaxed about suppressing unauthorized U.S. content from the internet. U.S. law pushes "service providers" — Comcast, YouTube — to knock copyright content off the internet once they've seen it. Canada "merely requires that online service providers alert subscribers, who can take legal action if they want to."

Copyrights should protect creators. But the U.S. has gone a lot farther than that, especially since President Bill Clinton signed a law allowing his Hollywood pals at places like Disney to control content for decades after its writers or artists are dead.

More interesting — and maybe more relevant for us in the nation's pharma heartland — were the attacks on Canada's attempts to get drug pricing under control, which U.S. pharmaceutical companies see as a threat.

Canada's effective "invalidation" of U.S. drug patents has caused "falling research and development" spending there, PhRMA argues, in a report showing Canada drug-development spending has dropped each year since 2008. The number of clinical trials in Canada also dropped in the late 2000s.

Does Canada see this as a problem? Apparently not. Public-policy discussion up there centers on how to get drug prices down further.

The nation has a board that sets prices for newly patented medicines "at the median of the public list prices" in other developed countries. according to a recent report by Colin Busby and Ake Blomqvist at Canada's C.D. Howe Institute. The board is thinking about dropping the U.S. from the comparison list, because drug prices here are so much higher than anywhere else.

Busby and Blomqvist say dropping the U.S. comparison won't actually drop Canada drug prices much because it's just one country under comparison, out of several. They did suggest that the board do a better job finding the actual prices foreigners end up paying for drugs, which it says are lower than reported sticker prices in most of the world.

"The current view is that Canada has not gotten enough return from holding back on price reductions," Toronto trade and investment attorney Mark Warner told me, in sum. "This is much disputed by the Big Pharma brands. But that's the state of play."

Another way to look at the struggle: Worldwide, drug makers who want to maximize profits are struggling with drug consumers who want to minimize costs. In the U.S., drug makers are winning; in other countries, drug consumers more successfully pressure politicians to make medicine more affordable to them.

The result, according to the Howe report: "High drug prices [for U.S.-made drugs] mean that a disproportionate amount of the money to finance pharmaceutical R&D comes from U.S. patients and insurers, public and private."

We — you and I, sick Americans, and our employers and our taxes — are financing drugs, and drugmaker profits, so the rest of the world (Canada too) can benefit from socialized or price-controlled medicine.

Someday, U.S. voters will refuse to continue paying extra, the report's authors conclude, and other nations will have to do their part to pay for new drug development. Action for Trade is hoping Trump will help ensure that day doesn't come in his presidency.

(In earlier versions of this column, complaints about Canada's intellectual-property practices were directly attributed to Action for Trade. The attribution has been clarified in this updated version.)