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Eli Lilly & Co. has added schizophrenia drug Zyprexa to its NAFTA challenge of its loss of Canadian patents.

JB REED/Bloomberg

U.S. pharmaceutical giant Eli Lilly and Co. has escalated a challenge it launched last year against Canada's patent rules under the North American free-trade agreement, and is now demanding $500-million in compensation after the company lost its Canadian patents on two drugs.

Indianapolis-based Lilly has expanded the NAFTA case over the loss of its patent for Strattera, a drug used to treat attention deficit hyperactivity disorder, to also include Canada's invalidation of the company's patent for Zyprexa, which is used to treat schizophrenia.

This latest move follows the Supreme Court of Canada's decision in May to not hear Lilly's appeal of the revocation of its Zyprexa patent.

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The drug giant alleges that the loss of its patents violates Canada's obligations under international treaties, including NAFTA, which, under that agreement's controversial Chapter 11 provisions, allows foreign investors from member countries to sue governments for allegedly violating the treaty.

Lilly claims that Canadian Federal Court judges, using what the drug company calls a "promise doctrine," are demanding that patents include too much scientific proof of the efficacy of a drug at early stages.

The company's NAFTA filing says 19 pharmaceutical or biopharmaceutical patents have been struck down in court challenges launched by generic drug companies in Canada on this basis since 2005.

Eli Lilly's chief executive officer, John Lechleiter, told a meeting of The Globe and Mail's editorial board earlier this year that the trend could force his company out of Canada, and that the rulings have cost his company more than $1-billion in revenue.

Spokespeople for the generic-drug industry have said Eli Lilly's claims about Canada's patent regime are exaggerated, insisting that the rules over all are actually more favourable toward Eli Lilly and other brand-name pharmaceutical companies.

McGill University law professor Richard Gold, who has done extensive research on Lilly's efforts to keep patents valid in Canada, disputes the company's claims that Canada's treatment of patents violates any international treaty or is outside international norms. He said complex patent rules vary from country to country, and that the number of patents struck down on these grounds in Canada has decreased in the past few years.

"There are whole bunch of better explanations for what's going on than Eli Lilly's," Prof. Gold said.

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