As we all know, when a patent on a drug expires, the generic drug companies come into the market with generic versions of the drug. 

To fend off the generics, the big pharmaceuticals would "evergreen" patents, in which you add a new patent for an existing drug as the old patent expired, such as for the easy-swallow coating, and so protect the entire product.  By put on a new patent just as the old one expired, the patent protection would go on indefinitely (hence the patent is "ever green").

Faced with a never ending string of patents, generic companies would release drugs ahead of those expiry dates, arguing that the patent is not violated because of differences in the products.

To fight back, big pharmaceuticals could submit an application on the basis of patent infringement that then would automatically freeze sales for two years:

Under the Regulations, a brand-name drug company can automatically keep a lower-cost generic drug off the market for two years or more by starting a court case asserting that a proposed generic drug infringes its listed patents – even if their patents are not infringed or are simply invalid. This automatic stay has been described as “draconian” by the Supreme Court of Canada and is unique to patentees in the pharmaceutical industry.

At the end of the two years, a determination would be made of the original application was valid.  If not, the generics could compel the big pharmaceuticals to pay for lost profits.  In practice, the generic drug companies won more of these fights than they lost, perhaps because evergreening results in frivolous patent defenses.

In 2006, the Supreme Court put an end to evergreening pharmaceutical patents:

The Supreme Court of Canada tossed another salvo into that litiginous world Oct. 3 by ruling that the controversial practice of evergreening — which allowed brand-name pharmaceutical firms to obtain an automatic 2-year extension on the term of patent protection by filing new patents of an altogether marginal nature, such as the shape, dosing range or colour of a pill, and then claiming infringement on its original patent — should not have been allowed under Health Canada’s old drug regulatory regime.

In his October decision, Mr. Justice Ian Binnie wrote that “Given the evident (and entirely understandable) commercial strategy of the innovative drug companies to evergreen their products by adding bells and whistles to a pioneering product even after the original patent for that pioneering product has expired, the decision of the Federal Court of Appeal would reward evergreening even if the generic manufacturer (and thus the public) does not thereby derive any benefit from the subsequently listed patents.”

A hit against big pharmaceuticals?  For certain, since now only the original patent mattered.

But then the bureaucrats at Health Canada offered up a consolation prize. Just after the Supreme Court ended the use of evergreening to extend patents, the regulations were changed so that these patent fights posed no risk for the pharmaceutical companies.  How?  If the big pharmaceutical lost, the generic was not allowed to demand that lost profits be paid back.  In other words, the big pharmaceuticals lost the ability to extend patents, but were handed the consolation prize that they would not be penalized for engaging in patent fights when the generics came on the market (and shutting them out for two years).  Essentially it was a no-cost two-year extension to the patent:

To discourage abuse, section 8 was included in the Regulations to allow generic companies to collect “damages or profits” from the brand-name company when the generic drug was wrongfully kept off the market by the automatic stay. Cases under the Regulations can cost generic manufacturers millions of dollars to litigate, and the generic company had the option to claim either its own out-of-pocket damages or could elect an accounting of the brand-name company’s profits during the wrongful delay.

In October 2006 the Regulations were amended to remove the words “or profits” from section 8. Brand companies no longer can be penalized with the loss of their profits during the period in which a court finds the brand has abused the automatic stay provision.

Remember, the Supreme Court did not demand this "adjustment" as part of its legal findings in the case.  As far as the court was concerned, justice was served with the elimination of evergreening -- nothing else was required.  It was unilaterally handed to the pharmaceutical companies via a regulatory change.

Why?

Because big pharmaceuticals routinely threaten to pull their research money out of Canada.  If it isn't the pharmaceutical companies themselves lobbying hard, universities pick up the slack, fearing that they'd lose their grants.

Evergreening sounds a  lot like millions in loan guarantees given to auto manufacturers to build a plant.  Without the guarantees, new and existing operations would disappear.  Of course, the loans don't actually prevent the companies from leaving when it suits them.  The difference here is that the loan guarantees and the factory closedowns are widely reported, and all the players end up looking bad.

The pharmaceutical shenanigans with evergreening and other patent actions tend to happen behind the scenes.

So why does this matter now?  Two years have passed, and another part of the regulations are coming into play:

While putting the brakes on evergreening, the October, 2006, amendments included a grandfather clause that allowed new patents filed before June of that year to stay on the books.

So the last of the evergreen patents are expiring, so the generics are going to be able to get in the game.  Except that the regulations are being changed again, this time to bring back evergreening:

Proposed amendments to Canada's drug patent rules will force consumers and taxpayers to pay monopoly drug prices on top-selling prescription drugs for longer than they should by reopening loopholes that allow brand-name drug companies to unfairly keep competition from lower-cost generic prescription medicines off the market.

The Government of Canada published draft regulatory amendments to the Patented Medicines (Notice of Compliance) Regulations of Canada's Patent Act on Saturday, April 26, 2008. The changes would allow brand-name drug companies to list patents that are irrelevant to their products and get an automatic injunction preventing Health Canada's approval of lower-cost generic versions, even though the relevant patents have expired.

The proposed amendments would override a November 3, 2006 ruling by the Supreme Court of Canada. In the decision, the Supreme Court ruled that brand-name drug companies were being incorrectly allowed to abuse the patent system to the detriment of consumers and generic pharmaceutical manufacturers, a practice known as "evergreening." The proposed amendments would allow that abuse to resume.

The government admits that this is being done just in time to spoil a win by the generics two years ago:

"The Government recognizes that one possible consequence of the proposed amendments is that some generic drug companies may not be able to enter the market with a generic version of a patented drug on the same date as had been expected if the Federal Court of Appeal's decision were left to stand. While this could result in delayed savings to consumers and provincial drug plans, the Government considers these potential costs to be counter-balanced by the above-mentioned benefits..."

I'm pretty sure that the "consolation prize" of not being forced to pay for lost profits in those cases when a generic drug does make it on the market and a patent infringement fight is lost is not being clawed back either.

Call it the influence of big pharma, or call it the inevitable consequence of the market distorting effects of the Canadian socialized health care system, but whatever it is, it's costing taxpayers millions.