The morning after reaching a free-trade agreement with the United States, Canadian negotiators demanded the removal of a section pledging Canada to change its drug patent laws, administration and industry sources said yesterday.
Top Reagan administration officials, headed by Treasury Secretary James A. Baker III and U.S. Trade Representative Clayton K. Yeutter, bowed to the Canadian demand and allowed the section on the drug patents to be removed. The provision would have called for greater patent protection to U.S. pharmaceutical firms.
The decision by the U.S. officials to yield came after negotiations that ended almost 24 hours after the original agreement was reached six minutes before the deadline at midnight on Oct. 3. The deadline was set for expedited handling by Congress.
Word that Canada's pharmaceutical patent laws were part of the agreement created an uproar in Canada, where opposition politicians have vowed to kill the pact. They have raised the issue all week in the House of Commons' question period, charging that the free trade pact contains secret agreements that surrender Canadian sovereignty.
The Reagan administration had pressed for the inclusion of changes in the drug patent laws to buttress pledges that Prime Minister Brian Mulroney had made earlier. Legislation to make the changes has been passed by the House of Commons, which is controlled by his Conservative Party, but the nonelected Senate, dominated by Liberal Party members, had blocked final approval of the bill.
U.S. drug companies have complained that present Canadian law, which gives them four years to sell a new product without competition before they must make it available under license to other firms, does not allow them enough time to recover research and development costs. Mulroney, in the hopes of attracting new research to Canada, supports granting 10 years of exclusive sales.
Finance Minister Michael Wilson, who headed Canada's negotiating team here, acknowledged in Parliament Thursday that the section regarding the changes in the drug patents law was in an early version of the pact that was initialed by lower level Canadian negotiators.
But Wilson, daring the opposition to call him a liar, denied that the drug patent issue was part of the package that he and Trade Minister Pat Carney approved in Washington.
John Fieldhouse, spokesman for the Canadian Embassy, said he did not know at what point that section was removed from the agreement. But he said it was not signed by either country at the Cabinet level until Sunday.
Reagan administration sources who were close to the final negotiations said the drug issue was part of the deal when Wilson stepped to the window of the Treasury Building just before midnight Saturday and gave a thumbs-up sign to signal there was an agreement.
By Sunday morning, however, the Candians had a change of heart, the U.S. sources said, and insisted that the drug section had to be dropped from the agreement.
That demand was a subject of tense talks throughout the day, interrupted late Sunday afternoon for a joint U.S.-Canadian press conference hailing the agreement. No mention was made at that press conference of the continuing dispute over the drug issue, which was not resolved until 10:30 Sunday night when the United States gave in.
But a U.S. summary of the agreement, released at 6:30 Sunday evening, said the accord contained a clause "to make progress toward establishing adequate and effective protection of pharmaceuticals in Canada by liberalizing compulsory licensing provisions."
And a midafternoon draft of a briefing paper for Yeutter and Baker referred to the provisions on changing the drug patent law, calling it "one of the principal and longest standing trade irritants in our bilateral relations."