The effect of pharmaceutical patent term length on research and development and drug expenditures in Canada

While pharmaceutical patent terms have increased in Canada, increases in patented drug spending have been mitigated by price controls and retrenchment of public prescription drug subsidy programs. We estimate the net effects of these offsetting policies on domestic pharmaceutical R&D expenditures and also provide an upper-bound estimate on the effects of these policies on Canadian pharmaceutical spending over the period 1988-2002. We estimate that R&D spending increased by $4.4 billion (1997 dollars). Drug spending increased by $3.9 billion at most and, quite likely, by much less. Cutbacks to public drug subsidies and the introduction of price controls likely mitigated drug spending growth. In cost-benefit terms, we suspect that the patent extension policies have been beneficial to Canada.