[Recorded by Electronic Apparatus]
Monday, February 17, 1997
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[English]
The Chairman: Order, please. Good evening, ladies and gentlemen.
Pursuant to Standing Order 108(2), we will be reviewing section 14 of the Patent Act amendment 1992, chapter 2, Statutes of Canada, 1993. The committee will now begin its work on what is more popularly known as the review of Bill C-91. This review will commence with research of witnesses.
We've had an announcement from the clerk and from the chair about the dates by which witnesses must let the committee know whether they wish to appear and the date for submission of written presentations. If any of you need more information about that, please see the clerk at the end of the meeting.
All views are welcome in this committee. I think we all understand the importance of this review. The steering committee has met and talked about it. All members of this committee appreciate the seriousness of the work in the coming weeks, and we welcome as wide an approach as Canadians think necessary to make sure that we fully understand the implications the act has had on several important industrial and health issues.
Tonight we begin by hearing two of the ministers most responsible for issues related to Bill C-91. I'd like to welcome to the industry committee the Hon. David Dingwall, Minister of Health, and the Hon. John Manley, Minister of Industry.
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We also have with us from the Department of Industry Mr. Andrei Sulzenko, Assistant Deputy Minister of Industry and Science Policy. He's on the witness list, so I assume he's here.
I think we'll begin by having opening statements from the ministers. I believe, Minister Dingwall, you're prepared to make the first opening statement. Then we'll proceed to Mr. Manley.
Mr. Dingwall, please.
Hon. David Dingwall (Minister of Health): Thank you, Mr. Chairman and colleagues.
The tobacco legislation we're reviewing tonight -
The Chairman: That's what you do for recreation.
Mr. Dingwall: Mr. Chairman, I have an apology to extend to you and members of the committee. I've been under the weather for the last day or two. As you know, I wasn't in the House today, so my statement tonight will be relatively short, as you are aware. I have given an undertaking and will give an undertaking to members of the committee to return for more comprehensive intervention on some of the issues that obviously affect the health of Canadians and the concerns they express.
This committee has a challenging task ahead of it. Four years have passed since the Patent Act was amended by Bill C-91, so I think it only appropriate, Mr. Chairman and colleagues, that the time has come to take stock. This means both examining what has occurred since the legislation was passed in 1993 and looking ahead to where we want our drug patent policy to take us in the future.
The government is seeking this committee's advice on the role of Bill C-91 in achieving the objectives of Canada's drug patent policy. These objectives are: to support the development of the pharmaceutical industry in Canada, to ensure that patented drugs are available at non-excessive prices, and to ensure conformity with Canada's international obligations.
Bill C-91 included a number of provisions. My colleague the Minister of Industry will be describing them to you in detail. It will be your task to examine them in a comprehensive, thoughtful and, above all, balanced way.
The government is committed to ensuring that Canadians have the opportunity to express their views on Bill C-91, and you will no doubt be hearing the views of numerous stakeholders on whom the legislation has had an impact. All will have their own perspective on the legislation and their own issues and recommendations to bring before the committee.
It has been my experience, Mr. Chairman, that discussions on Bill C-91 are often - if I can use this phrase - wide-ranging, potentially encompassing a much broader range of issues than those related strictly to drug patents in the legislation itself. I believe this is inevitable, and in fact from my perspective as Minister of Health I think it is desirable in light of the important role that pharmaceuticals play in the health system in this country.
Therefore, Mr. Chairman, it should not surprise you that some stakeholders may well raise these broader issues when they come before this committee, and I look forward to these issues being identified and described in your report.
Last year, I and my provincial and territorial counterparts began to examine a broad range of pharmaceutical issues. These include drug prices, utilization, marketing, consumer education, wastage, and research and development. Although the list is not exhaustive in itself, I think it is an important milestone that we focus on those issue.
Bill C-91 touches on some of these issues, and I therefore look forward to hearing the views of many of the stakeholders who will appear before this committee.
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Mr. Chairman, as I said at the outset, I will be returning in the near future to present the broader health perspective in a more detailed manner. In addition, I have asked the chair of the Patented Medicine Prices Review Board, Dr. Robert Elgie, who reports to me as Minister of Health, and he will be pleased to appear before you to provide information on the PMPRB, its role, and its performance.
Furthermore, Mr. Chairman, you might avail yourselves of the opportunity...and it is not for me to suggest to committee members, but I perhaps make this as a gratuitous suggestion to committee members. Most of you will recall with great clarity the recommendations contained in the recent report of the National Forum on Health, when it made specific mention of the cost of pharmaceuticals in this country.
It may be of some value to the committee that I could perhaps provide the background papers it has prepared for the purposes of its report. If the committee deems it to be appropriate,Mr. Chairman, I would ask, on your behalf, to have these representatives come forward and exchange their views and their various recommendations with committee members.
Mr. Chairman, the task before this committee is a very important one. I'm looking forward to hearing what all stakeholders have to say as well as the committee's conclusions and its reports to the interventions that will be made by the stakeholders.
Mr. Chairman, I want to thank you for allowing me to make this brief statement. I want to assure you that I shall return with a much more detailed presentation and some documents that I think committee members might find helpful in their deliberations.
The Chairman: I'd first like to thank the Minister of Health for joining us when he is not feeling well. I appreciate the offer of PMPRB. We are in the process of contacting them and we hope they will be able to make an appearance shortly in front of us.
Second, if your office could forward the documentation you referred to to the committee at its earliest convenience, we would very much appreciate it as part of our considerations.
Thank you. We look forward to your coming again as a witness and reviewing the health issues in more detail.
Minister Manley.
Hon. John Manley (Minister of Industry): Thank you very much, Mr. Chairman, and colleagues.
[Translation]
Thank you for this opportunity to meet with the committee as you begin the parliamentary review of Bill C-91, the Patent Act Amendment Act.
One of the clauses of the bill mandated a parliamentary review after four years. The law came into force in February 1993, and now we have the opportunity to look at its impact in detail.
[English]
This is a very important review. Four years ago, parliamentarians looked ahead at what the impact of the bill would be and they speculated. Many serious concerns were raised about how such a change to our intellectual property regime would affect Canadians. Today we can look back at what Bill C-91 has done and deal with the facts.
Bill C-91 forms the basis of Canada's drug patent policy. This policy has three key objectives, as the Minister of Health has just outlined: to support the development of the pharmaceutical industry in Canada, to ensure patented drugs are available at non-excessive prices, and to ensure conformity with Canada's international obligations.
The challenge for the government is to strike the right balance when meeting these objectives. But there are various interests that often compete on many levels. Let me name a few. We have strong brand-name and generic manufacturing sectors and a rapidly emerging biopharmaceutical sector. Patent policy has an important impact on their respective businesses. Drug manufacturers seek a reasonable return on their investment, but consumers want low drug costs. At the same time, consumers also want access to newly developed drugs. We have chosen as a trading nation to enter into the NAFTA and the WTO agreements and have benefited immensely from them. With these benefits come certain obligations.
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When balanced appropriately, our drug patent policy objectives work together to ensure a good health care system and a healthy pharmaceutical industry. In conducting this review, you should keep in mind the question: has balance been achieved?
In Canada the pharmaceutical industry is a major research and development performer. While the pharmaceutical industry accounts for only 1% of manufacturing sector shipments, it performs 10% of all industrial research and development. Of the top 100 R and D spenders in Canada, 26 are pharmaceutical companies.
What is a reasonable return for those who invest in the search for new drugs? How do we respond to the needs of those who provide or want access to lower-cost alternatives?
Bill C-91 was introduced in June 1992. It led to spirited debate. Many were concerned that the benefit would accrue solely to the multinational pharmaceutical companies. They felt it would increase the price of patented drugs for consumers and the health care system. They feared that new patent protection would damage the Canadian generic industry and that the NOC link regulations would significantly delay generic market entry past patent expiry.
The bill became law in February 1993, and its major provisions were the following:
1. The elimination of compulsory licensing;
2. The introduction of exceptions to patent infringement for regulatory approval and for stockpiling;
3. The introduction of patented medicine's notice of compliance regulations; and
4. The strengthening of the powers given to the Patented Medicine Prices Review Board, the PMPRB.
Let me look at each of these points in more detail. First, Bill C-91 targeted one of the anomalies in the way that Canada treated intellectual property for drugs by removing the ability of generic companies to obtain compulsory licences.
To this day, compulsory licences can still be issued in rare circumstances in compliance with WTO and NAFTA obligations. They are granted through a judicial process by the Federal Court or through a quasi-judicial process by the commissioner of patents to cure cases of abuse. For the most part, brand-name manufacturers can now count on a 20-year patent term, just like inventors in any other field of technology.
It is important to note that this 20-year term is the minimum patent term required under Canada's obligations under the World Trade Organization agreement. In fact, our major trading partners such as the U.S., Japan and the European Union provide for extensions of up to five years of the basic 20-year patent term for pharmaceuticals to account for delays caused by lengthy development and regulatory approval.
What does the patent year term of 20 years mean for a drug company in Canada, Mr. Chairman? The committee is no doubt aware that it does not mean 20 years in which the company has an exclusive market for its product, free from competition. In fact, the development and regulatory approval of a drug in Canada takes an average of 8 to 12 years before the drug goes to market.
The resulting period of market exclusivity under Bill C-91 varies therefore from drug to drug. Estimates vary greatly on the period of market exclusivity, with the brand-name manufacturers estimating an average of 8 to 10 years and the generic manufacturers estimating 12 to 14 years.
Another effect of Bill C-91 was to introduce exceptions to patent infringement for regulatory approval and for stockpiling. This permits generic manufacturers to do the work necessary to get to market as soon as the patent expires. They can begin manufacturing their version of the product before the brand names' patents expire in order to have it tested by Health Canada. They can also stockpile quantities to be ready to enter the market immediately after the patents have expired.
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I would point out to this committee that the U.S. is the only other country that has a regulatory approval exception and no other country but Canada has a stockpiling exception. Considering the time it takes to obtain regulatory approval, these exceptions are important to the generic manufacturers' ability to introduce their products as soon as the relevant patents have expired.
Are these exceptions reasonable? Should they be eased? Should they be strengthened? The committee will have an opportunity to call expert witnesses and to draw its own conclusions.
Another element of Bill C-91 that has been the subject of much public discussion is the notice of compliance regulations, also known as the NOC link regulations. A notice of compliance, or NOC, is the certification by Health Canada that a drug meets the standards for safety, efficacy and quality and therefore can be marketed in Canada.
The NOC regulations link the issuance of the NOC certificate to the status of the patents on the drug.
Mr. Chairman, this gets a little complicated, but I want to warn the committee that there will be a test administered after the conclusion to see whether you were all listening.
The purpose of the regulations is perhaps best explained by the accompanying regulatory impact analysis statement, which was issued by the Department of Consumer and Corporate Affairs in 1993. This statement indicated that in general judicial remedies were sufficient to address patent infringement. However, by creating the exceptions to patent infringement that I just described, Bill C-91 removed a right otherwise available to patentees. The regulatory impact statement went on to indicate that the NOC link regulations had the purpose, and I quote from their statement:
- to ensure that this (regulatory approval) exception to patent infringement is not abused by
generic drug applicants seeking to sell their product in Canada during the term of their
competitor's patent.
The patentee then has 45 days to decide whether or not it will initiate court proceedings. If the patentee decides to initiate court proceedings, at this point the Minister of Health cannot issue to the generic manufacturer its NOC until the parties reach agreement, the listed patents subsequently expire, the courts render a decision, or a period of 30 months elapses, whichever comes first. I told you it was going to get complicated.
The court proceedings run in parallel with Health Canada's approval process. A controversial aspect of the regulations is this 30-month stay, described by some as an automatic injunction that is imposed upon Health Canada once the patentee begins a court proceeding. When in court, if the generic company wins it may enter the market as soon as Health Canada has issued the NOC. If the patentee wins, the generic manufacturer must wait until patent expiry before receiving its NOC and entering the market.
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[Translation]
There is no doubt that you will want to look at the fairness of these regulations. It is true, as some claim, that traditional injunctive relief in Canada is not sufficient to address pharmaceutical patent infringement? Do these exceptions, or even the dynamics of our industry warrant these regulations?
[English]
In examining this provision of Bill C-91, I would encourage the committee to examine a wide range of factors. These are: claims made, in particular by the brand-name drug companies, that the traditional injunctive relief in Canada is insufficient to address pharmaceutical patent infringement; claims made by the generic industry that the linkage regulations have been applied in a frivolous manner by the brand-name company in order to prevent non-infringing products from entering the market; the actual time it takes for Health Canada to do its due diligence in the issuance of a notice of compliance; and the amount of time it is taking the courts to render their decisions.
You're probably aware that the NOC link regulations have resulted in a significant amount of litigation. Since the act came into force four years ago this month, there have been 103 cases commenced. Court decisions have been rendered in 30 of the cases; 22 have been withdrawn, leaving about 51 ongoing.
Obviously this dilemma has many facets. If I have summarized the debate correctly, you will no doubt hear conflicting views on this controversial aspect of Bill C-91. Hopefully, Mr. Chairman, some constructive ideas will emerge on how to deal with these contentious issues.
A fourth change introduced by Bill C-91 was to strengthen the powers of the Patented Medicine Prices Review Board, the PMPRB. The committee is no doubt aware that the board regulates the introductory prices and annual price increases of patented medicines. The board ensures that these prices are not excessive.
Prior to Bill C-91, the PMPRB had the ability to grant compulsory licences to another party as a remedy for excessive pricing by a patentee. It had no power to use monetary penalties. Bill C-91 removed the ability to use compulsory licences in this way. To give the PMPRB some teeth, it was given the ability to order monetary penalties, such as fines and price roll-backs, to offset excess revenues when the price of a patented drug exceeds its guidelines.
I encourage the committee to meet with the PMPRB, and I'm glad to hear the Minister of Health indicate that they will be attending in the near future. The committee will likely want to consider whether these changes have been effective in helping the board to perform its mandate. Are their powers sufficient or should they be increased? Are the reporting obligations adequate or are they too onerous?
Mr. Chairman, I've been dealing with the changes that were introduced in Bill C-91 as part of the legislation itself. However, the bill had another major impact that was not included in the legislation but that was contingent upon it.
Prior to the passage of the bill, the organization representing the brand-name manufacturers, the Pharmaceutical Manufacturers Association of Canada, said that in return for intellectual property laws that would protect the innovative efforts of its members, the member companies would maintain their 10% R and D to sales ratio and, in addition, would make other investments.
A letter from the president of PMAC, the Hon. Judy Erola, to the Hon. Michael Wilson outlining these commitments is enclosed in an information package that is being made available to the committee this evening. As well, the government has commissioned an independent evaluation of these commitments. The study, prepared by Ernst & Young, is also available.
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There are 62 PMAC member companies, Mr. Chairman. They represent most, but not all, of the brand-name manufacturers. According to the PMPRB, in 1995 the ratio of research and development to sales for all pharmaceutical patentees was 11.8%. For PMAC companies the ratio was slightly higher, 12.5%, which surpassed their 10% commitment.
In 1995 the brand-name companies invested $624 million in R and D. These figures have increased since 1993, when all pharmaceutical patentees invested 10.6% of their sales, or a total of $503.5 million, in research and development. The 1993 ratio for PMAC members was 10.7%. All of this is included in your information package.
The PMAC brand-name companies employed nearly 18,000 Canadians in 1995, and more than 3,000 of these were in highly skilled R and D jobs. According to IMS Canada, brand-name companies account for over 60% of the number of prescriptions filled in 1996. Although significant in numbers, they are only one of the players in the pharmaceutical industry in Canada.
The generic industry is also an important player. It is mostly Canadian owned and saw substantial growth under the compulsory licensing environment. The two leading generic companies, Novopharm and Apotex, have become significant international players in their field. They have created jobs for Canadians and have helped the health care system by providing lower-cost, high-quality generic drugs. The benefits that this sector of the industry brings to Canadians should not be underestimated.
The generic industry remains vibrant today, four years after Bill C-91. Member companies of the Canadian Drug Manufacturers Association, CDMA, which represents most generics, employed 3,630 Canadians in 1995, Mr. Chairman. That is double the number of jobs in 1990. According to IMS Canada, again an independent consulting firm that gathers and publishes statistics on the Canadian pharmaceutical industry, sales of generic drugs in 1996 amounted to $973 million, an annual increase since 1993 of more than 25%. In 1996 generic companies accounted for nearly 40% of all the prescriptions filled in Canada, making generic penetration in Canada among the world's highest.
R and D by generic companies has grown as well. According to the CDMA, in 1993 generic industry R and D expenditures were $79 million; in 1995 they were estimated at $127 million.
[Translation]
But the value of a strong generic industry in Canada isn't measured simply by the number of jobs and the increase in investment. We can see it as well in its impact on the health care system. The use of lower cost generic drugs helps reduce overall drug expenditures.
I have talked about the generic and the brand name sectors in the Canadian pharmaceutical industry. But I also want to make sure that the committee understands that there is another sector of the industry - a key third player whose interests were less clear when C-91 was passed, because the sector was then in its infancy.
[English]
This is the biopharmaceutical sector, Mr. Chairman. We in Industry Canada have compiled data on 64 companies that are directly involved in biopharmaceutical drug development. These companies are mostly Canadian-owned, innovative SMEs. They rely heavily on patent protection. Last year these companies employed nearly 4,000 Canadians, with over 1,600 in research and development. According to Contact Canada, a division of Contact International that is devoted to providing information on the Canadian biotechnology industry, the sector invested $251 million in R and D in 1995.
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In spite of the relative newness of the biopharmaceutical sector, it has quickly become a major player. This sector has attributed much of its ability to attract investment to Bill C-91. Its interests must also be taken into consideration when reviewing the impact of drug patent laws.
It's a matter of balance, Mr. Chairman, not just balance within the industry, including the interests of the three sectors, but balance between building a competitive industry and keeping health care costs in line. Rising health care costs are a significant concern for Canadians. Drug costs are a part of this overall cost, and according to IMS Canada, manufacturers' sales of drugs, excluding mark-ups and dispensing fees, amounted to $5.8 billion in 1994.
The amount of money that Canadians spend on drugs depends on two major factors: price and utilization. The overall price of drugs includes both patented drugs and non-patented drugs. Bill C-91 relates to patented drug prices, and it is this aspect only that is under the control of the PMPRB. Any discussion of pricing of non-patented drugs must necessarily involve the provincial governments, given their constitutional authority in this area.
According to Health Canada and the PMPRB, patented drugs, excluding mark-ups and dispensing fees, represent about 3.3% of Canada's health expenditures. Since 1988 prices of patented medicines have increased on average at a lower rate than the price of all medicines. They have increased at a lower rate than the consumer price index. Since Bill C-91 came into force, the prices of patented medicines have actually declined on average. In 1995 they dropped by 1.75% following a decline of 0.42% in 1994.
The utilization of drugs also has a significant impact on health care costs. Utilization, however, is not directly affected by Bill C-91, and as he indicated in his remarks, my colleague the Minister of Health has a number of initiatives under way that examine the utilization issue in some detail.
In addition to balancing the industrial and health objectives I've just talked about, Canada's drug patent policy seeks to ensure that we are in conformity with our international obligations. Canada as a trading nation has benefited from trade agreements such as NAFTA and the WTO. They contribute to economic growth by ensuring access to global markets and promoting competition. Having an internationally competitive intellectual property regime has encouraged research and development in Canada in many sectors.
In these agreements there are certain rules according to which we and our trading partners must live. Our ability to change our patent law is defined by these obligations. We must give all patentees, pharmaceutical or otherwise, a minimum 20-year patent term. It is not possible to return to our pre-1993 compulsory licensing regime and remain in conformity with our international obligations. Any recommendations should be looked at in the context of these international obligations.
Mr. Chairman, many people have different views on the impact of Bill C-91. The issues are complex and often, as I've demonstrated tonight, rather technical. Depending on your perspective, small nuances can significantly alter the balance.
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[Translation]
I hope the committee will deal with the facts of what has happened over the past four years. Have we achieved balance, and is that balance reasonable? I look forward to your views on how Bill C-91 has impacted on the objectives of Canada's drug patent policy, and, particularly to your recommendations.
I would like to leave you with an information package which provides some factual data on C-91 and the industry. Furthermore, my officials are at your disposal to provide you with any additional information you may require. They will provide you with a complete summary of all research that is done or in progress relating to your work. I hope you will find it useful.
[English]
With that, Mr. Chairman, if there is the odd question I'd be happy to entertain it.
The Chairman: Thank you.
Just before we begin the questions, I'd like to thank Minister Dingwall again. I understand your departure and we'll see you again before our committee with lots of answers for our questions.
[Translation]
Mr. Leblanc, you are first this time.
Mr. Leblanc (Longueuil): I would have liked to have Mr. Dingwall stay because I have a few questions to ask him. Is he absent?
The Chairman: He is ill and has to leave.
Mr. Leblanc: I hope he'll have good medication to get better. I simply want to say that the lead member on this issue for the Standing Committee on industry will be Mr. Pierre Brien. That is why he is here tonight for the first time.
Mr. Chairman, I was here when Bill C-22 was passed and I want to tell you that during that time, the Conservative government had to deal with the Official Opposition - the Liberals - who worked very hard to prevent increasing the duration of drug patents to 20 years.
This has been a heavy burden for the government of the day, because the Liberals were really against Bill C-22. That is why I will be very cautious and a very good watchdog together with my colleague, Mr. Brien, to ensure that the government does not fundamentally change Bill C-91.
I would have a brief question before giving the floor to my colleague. We all know that in Canada, the time necessary to issue a license for new drugs is considerably longer than in the United States or Europe. I'm wondering if the minister has considered, in the case where the Minister of Heath does not succeed in issuing licenses more quickly, extending from 20 to 23 or 24 years the time needed to guarantee patents in order to compensate for the time that Canada requires to issue licenses compared to the United States, Europe and Japan.
Mr. Manley: First of all, with regard with the time lapse required for the Department of Health to examine licence applications, I would like the committee to ask these questions to the Minister of Health.
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From the standpoint of industry, we are obviously in favour of an efficient system, but the Department of Health must test the products, as required by law, to determine the effectiveness of a drug, etc.
With regard to extending the period, it is true as I said in my speech that other countries have an extension system. However, perhaps they don't have the effective regulation system we have here. Therefore, the committee must hear witnesses and discuss this with them in order to advise us on the best possible balance to be achieved among all the interests of all Canadians.
You will be considering the interests of pharmaceutical companies, industrial policy as well as the issue of having generic drugs as soon as possible and delays for patents. Therefore, I await the recommendations of the committee.
The Chairman: Mr. Brien, you have ten minutes.
Mr. Brien (Témiscamingue): Minister, you said that there were three key issues in this area: the development of the industrial structure, access to high quality drugs at affordable prices and compliance with international obligations.
When you talk about international obligations, are you hoping that we will make recommendations with a view to aligning ourselves with international standards, which goes beyond the obligations that we have under the current framework of NAFTA and the World Trade Organization? Do you want us to provide protection similar to that afforded by our economic competitors, namely the United States and European countries?
Mr. Manley: I will try to explain the limits of the recommendations that I could consider. We have international commitments and we feel that the treaties are beneficial to Canada. We will therefore live up to our commitments, with a minimum of 20 years.
We cannot reduce the period to 15 years, for example. It cannot be reduced, but it can be extended. Since the adoption of Bill C-91, Canada already has a stronger system than that required by the GATT treaty.
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Mr. Brien: The regulations include two elements. It allows for production before the expiry of the patent, but on the other hand, the regulations prohibit sale of the product before the expiry of the patent. Those two elements are linked.
To your mind, are the regulations part of the international commitments? Is it your opinion that the regulations cannot be amended without violation of international agreements?
Mr. Manley: The ability to manufacture pharmaceutical products before the expiry of patents, which plays in favour of generic drug companies, and the regulations, which favour international companies, are not provided for in the international commitments. Therefore, it is possible to abolish regulations. That is not an international commitment.
Mr. Brien: We would like you or your Department to shed light on the contradictory figures that will be given to us. When you talked about the effective protection of patents, you mentioned eight to ten years in the case of patent drugs and 10 to 12 years for generic drugs. We would like to know what the Department of Industry has to say about this.
Mr. Manley: I would like you to put questions to both groups, when they appear, in order to determine why there is a difference between the two. We feel it's a bit too early to determine that because we don't have enough experience with the 20-year system.
The Chairman: Mr. Brien, do you have a very brief question?
Mr. Brien: Minister, if it is difficult for your Department to evaluate this, imagine how difficult it will be for us, as members of the committee. We will not obtain a very precise answer about that.
Mr. Manley: Mr. Brien, in the past three years, I've heard many arguments on certain aspects of Bill C-91 and it's always difficult to determine who is right. That's why we are well paid as members of Parliament. It's up to us to decide.
[English]
The Chairman: Mr. Schmidt, are you the lead for the Reform?
Mr. Schmidt (Okanagan Centre): Yes, Mr. Chairman, thank you. I'd like to introduceDr. Grant Hill as a member of the committee.
The Chairman: Welcome to the committee.
Mr. Schmidt: I will split some of my time with him at the initial speech here.
The Chairman: Yes, please.
Mr. Schmidt: First, I noticed that the Ernst & Young study they did is a very interesting statement, and I would like to ask you, Mr. Minister, if you could tell the committee exactly how you would define research and development.
Mr. Manley: How I define it or how Ernst & Young define it?
Mr. Schmidt: No, I know they defined it simply on the basis of how PMAC defined it. They simply put the numbers together and asked whether they work out arithmetically, and of course they do. But there are a number of facets of research and development, some of which are basic research, if you will, the curiosity-driven thing, and the others are developmental research, and then of course there are the clinical tests, which are really what they have to do in order to comply with getting the licence from the Department of Health.
Mr. Manley: I guess what you're implying, Mr. Schmidt, is ought we to place a valuation on different categories of research. I think perhaps we should, but to be very precise, the reason for the study was in order to obtain at least some objective view on whether the obligations that were contained in the PMAC letter to Michael Wilson were fulfilled. So given that this is what was being evaluated, it seems appropriate that they would use the very broad definition.
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From my point of view - I'm just a simple tax lawyer - I personally like the definitions contained under the Income Tax Act for the scientific research and experimental development tax credit. If you wish to suggest that perhaps companies ought to be performing more of a particular type of research, then I'd welcome that comment.
Mr. Schmidt: No, Mr. Chairman, my concern is in a slightly different area.
In your introductory remarks, Mr. Minister, you indicated to us that this was a commitment that hadn't been there before, and so somehow I came to the conclusion that these companies hadn't been doing as much research in the past as they are now going to do.
In other words, it's additional research. Yet it seems to me quite clear that in doing the clinical tests and the necessary research to qualify for the licence, this is not new research; this is something they were doing as a matter of course in their daily routine. So the question really is: are we counting dollars twice here? First, in getting ready for the certificate to get the licence.... Second, you say they did 10% of the sales, when in fact they haven't done anything of the kind. They really only spent 10% of their total sales on research, some of which they would have done anyway, so there's no new commitment here, which I think was the intention of the amendment in 1992.
Am I correct? Is that your understanding as well?
Mr. Manley: My understanding is that the reference that we asked Ernst & Young to verify was the commitment that was contained in the letter that is before you now. That's really what was being looked at.
Mr. Schmidt: No, I'm going well beyond the study.
Mr. Manley: If the question is whether it was a high enough commitment, given the obligation to do existing research anyway, I guess I'm the wrong person to ask that. Would I like more research and development done in Canada? Yes, I would. Is it clear that they are doing more in the sense of lab research that wouldn't otherwise be done? Some of that is coming, and it shows up in the investment figures that are there.
There's no question there has been investment, which is leading to the kind of research that you're talking about. There have been other investments made, in part, through commitments to the MRC. And would I like more? Yes, I would like more.
Mr. Schmidt: Okay.
The Chairman: Mr. Hill, would you like to take the floor.
Mr. Hill (Macleod): Thanks very much.
Mr. Minister, I heard you say that our international obligations bind this committee quite significantly. A cynic might say that this review, then, might not change very much.
There are two other things that I suggest might point in that direction. The timing of tonight's meeting, just before the budget, is interesting to me. I believe we're also likely to see an election soon, and I would be hard pressed to find time for this review to take place before that election.
I'd also note that while in opposition, not you particularly, but your party really did take a strong position against Bill C-91. Would you say that position was uninformed or opportunistic?
Mr. Manley: Could I categorize your question first by the same criteria?
The Chairman: Please, Mr. Minister.
Mr. Manley: First of all, Mr. Hill, I'm sorry I was obliged to change the timing of this appearance, but I had been asked to do a few things on Wednesday afternoon that obliged me to ask the chairman if he could accommodate me earlier in the week. I'd be happy to invite you along, if you like, to a press conference that's preoccupying me. I asked for the change in time because I have some responsibilities, which I'll be fulfilling, that flow out of the budget, and that's why I asked for this evening.
With respect to the review itself, it's in the statute that was enacted in Parliament in 1993, four years from the date of enactment. You might ask Mr. MacDonald why it's four years. I wasn't on the committee or engaged in the discussions - he was. But it happens to be four years. We've known for four years that it was going to be this month, so here we are.
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The Chairman: Thank you. Mr. Hill.
Mr. Hill: To the specific issue, then, of the change in the position, let me use two quotes to make that very plain. This is from the Minister of Health, who I had hoped to query specifically. I quote:
- The government is ready to proceed as Santa Claus will proceed on Christmas Eve -
It is tax under Bill C-91 in order to facilitate the objectives of the multinational corporations whose primary concern as we all know is the bottom dollar. That is not fair.
This is from Hansard, December 10, 1992.
He said just recently in a PMAC meeting, and I quote again:
- This government believes that intellectual property rights are important and they ought to be
protected and enhanced at every opportunity in this country.
Mr. Manley: I think the explanation is in what you stated. You're talking about a period of more than four years that have passed. In that period of time we've undertaken important international obligations under the Uruguay Round as well as under NAFTA. As well, we've had the very dramatic change in the biopharmaceutical sector, as I explained to you in my opening statement, which essentially wasn't a factor at all in 1992.
So I think that when you deal with the change in circumstances, you deal with the file that's before you. I know you're interested in the medicare system, you're interested in health. We're dealing with international obligations. I'd like to hear whether it's your position that we should withdraw from our international obligations in order to restore compulsory licensing. If that's your view, it's an interesting one, but is that what you're arguing for?
Mr. Hill: It's sounding more and more like Question Period here.
The Chairman: Mr. Hill, you may have one last intervention and then your time is up. Do you want a last quick intervention?
Mr. Manley: My view, Mr. Hill, is that we're here to try to deal with the review of Bill C-91. We have certain parameters. You can make a constructive contribution to the review or you can read quotes from 1992. That's your choice. I think that given the international obligations we have, I've tried to set out where we have limits on what we can do and where there's opportunity.
In looking back, as I explained to Mr. Brien, in enacting Bill C-91 the previous government did not simply fulfil the obligations that exist currently under Bill C-91, they went beyond them. They certainly went beyond them with respect to the effective date. A considerable amount of money was affected by the choice of date they made. They made the abolition of compulsory licensing effective the date of the tabling of the Dunkel text in the WTO negotiations in Geneva. That never did become one of our obligations, and yet it was a choice they made. It's not an option for me to change that, but it still is quite an appropriate reference point for the kind of quotation you've read. Let's go from here and deal with what the law should be.
The Chairman: Thank you very much, Mr. Minister.
Mr. Lastewka.
Mr. Lastewka (St. Catharines): Thank you, Mr. Chairman, and thank you, Mr. Minister, for taking the time tonight. I appreciate your remarks, and you have thrown a lot of information at us.
I would like to do my questioning on three items.
One item is the PMAC obligations and commitments as a result of our approving Bill C-91. Looking at the graphs there, or the page where you've outlined the commitment and the status for Ernst & Young, I take it that of the six items, five of them have been met. Is that right?
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Mr. Manley: Can you tell me what page you're referring to specifically so that I can -
Mr. Lastewka: Unfortunately, there are no pages on it, but it's on one, two -
Mr. Manley: This is in the package?
Mr. Lastewka: That's right, the Ernst & Young package.
Mr. Manley: You're in the graph, the chart?
Mr. Lastewka: Yes.
Mr. Manley: And the question was, have they fulfilled all their commitments other than one?
Mr. Lastewka: Other than the one.
Mr. Manley: Which was what? MRC, I think.
Mr. Lastewka: That is correct.
Mr. Manley: That's the Ernst & Young report?
Mr. Lastewka: Do you have any more information on that that you could share with us?
Mr. Manley: Yes, we do have more information on that.
Mr. Lastewka: I take it from the chart that there was to be a number of partnerships and support for research and training in universities and related institutions to the tune of $200 million over five years. The contribution to date is around $78 million.
Mr. Manley: There is information contained in the broader package as well. I'm not sure if I know precisely what it is you're asking. Are you asking if there is an update on the contributions of PMAC to MRC?
Mr. Lastewka: That is correct. These numbers are dated the middle of last year, 1996.
Mr. Manley: I know what you're referring to, but I think I have seen an updated number to the end of 1996. We'll have to see if we have that -
Mr. Lastewka: Okay. Well, we can get that provided for the committee.
There's been a number of discussions already - and Mr. Schmidt asked the same question - concerning drug approvals, and we seem to go from one extreme to the next on the time limits. Is it the same in other countries with that information, on why it takes Health Canada so long for the approvals? I know the minister has left because of his sickness -
Mr. Manley: Yes, I thought I had found this. On page 8 of the information package there was an update to December 31, 1996, which shows $120.2 million. Why does it take longer in Canada than in the United States? Again, you would want to put that question to the Minister of Health, who has responsibility for the licensing review.
Mr. Lastewka: Okay. My third and last question is this, and I'll share it with my other colleague here if I have any time left, Mr. Chairman. Bill C-91 was approved in early 1993 and then the WTO was approved some nine months later, probably. Could you be a little more specific on those items that, as a result of the signing of the WTO, are affecting Bill C-91 that weren't anticipated before?
Mr. Manley: Primarily the obligation, which is in both the WTO and NAFTA, is the end of compulsory licensing save in very exceptional circumstances, which I mentioned in my remarks, and secondly, the minimum 20-year life of a patent, not just for pharmaceuticals but for all patents. Now, prior to the obligations we entered into under NAFTA and WTO, we were not subject, for example, to the 20-year patent limitation and we were free to continue the compulsory licensing regime.
Mr. Lastewka: So basically, since we agreed on NAFTA, there haven't been any additional items within the WTO other than those that were removed -
Mr. Manley: They parallel, that's right.
Mr. Lastewka: Thank you.
Mr. Manley: The only difference, really, is that the implementation date of NAFTA was earlier than the implementation date of the WTO.
Mr. Lastewka: Thank you.
The Chairman: Thank you, Mr. Minister.
Mr. MacDonald, you're going to be splitting it, so there are just under five minutes left in this timeframe.
Mr. MacDonald (Dartmouth): Thank you very much, Mr. Chairman.
Just to answer the question of one of the opposition members - and I'll ask the question to the minister - before your review, a mechanism was put in the act after considerable debate on Bill C-91 to ensure that the commitments that were made by the industry could be reviewed to see whether or not they had been fulfilled, as well as to revisit the whole issue of drug patent prices on the regime in Canada. For the members of the committee, that's why we're here now, because it has been four years. I think it might have been my amendment that got us here four years later. I don't know if I should seek forgiveness for that or not.
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Minister, I have a couple of things. I was very heavily involved with Bill C-91 and the issues around drug patent prices. I think it's fair to say that at that point in time we had not had an agreement on the GATT, and the government of the day were working well within their rights and obligations domestically and internationally. But with the advent of the GATT and the TRIP agreement, which is a side agreement, it effectively means that compulsory licensing as an idea is something that does not work in the international context if you're an adherent to the WTO.
So as much as some days I hate to admit it, the days of compulsory licensing as a regime are gone. But I would say, Minister - and I ask for your guidance here - a number of issues continue to be discussed, some of them controversial, with respect to the operation of the patent and non-patent industry in Canada. No surprise to you or, I think, to most in the room, there have been complaints about notice of compliance, some of the regulations, whether or not the regulations have led to a lot of litigious behaviour within the industry, and whether or not that's of benefit to consumers. A number of issues, which I'm not going to go into today, were raised at that point in time, and I think hopefully this review will be able to look at them.
What I want to ask you specifically, Mr. Minister, is this. When you look at this review and the framework we're in, are there some items you would wish specifically to look at so that we can better understand what types of witnesses we should be calling here? Clearly this Ernst & Young report is going to be a key document for us, and I would think, Mr. Chairman, we would want to have somebody here to answer some of the questions about the conclusions that were reached.
But I want to ask the minister about things such as the notice of compliance and some other things that are related, such as a national formulary - I know it doesn't come in his department, but it's a matter of public policy - things such as colour, shape and size, PMPRB changes if they're required. Is this the range of things you'd like to see the committee seize, so that when we make recommendations at the end of the day we're not doing it narrowly just on the bill, but perhaps more broadly on some of the health issues that fall out of Bill C-91 and the PMPRB and, indeed, patent and non-patent drug prices in Canada?
Mr. Manley: First I have to say I'm concerned about the level of knowledge of this particular member, Mr. Chairman, because he lived and breathed this file for quite a few months. At that time I was his seat mate and unfortunately I had gone deaf in my left ear at that time, so I didn't really hear what he was saying, but his knowledge is formidable.
I would say that a number of the issues he has raised are ones that I think the committee could usefully pursue. Clearly with respect to the complaints I received from the generic drug manufacturers, the NOC link regulations have been at the top of the list. I mentioned that it has resulted in a great deal of litigation. Despite my own training as a lawyer, I've never favoured legislation that led to a lot of work for judges. It's okay if the lawyers have to work, but if it gets into court it generally indicates that the legislation is, in some fashion, not fulfilling its purpose.
In this case I would note that the amount of litigation was much higher in the first year after the bill was enacted and has declined somewhat. But I would encourage you to look at that issue of the reasons behind the litigation, whether there are ways in which the regulation should be altered in order to ensure that it is more effective or, indeed, whether it should be repealed absolutely.
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As I mentioned in response to Mr. Brien's questioning, the regulation is essentially there in order to try to get the right balance. Having accepted that you have the 20-year patent and having accepted that in favour of generic manufacturers you will permit stockpiling in certain circumstances...it therefore becomes a matter of great concern to the brand-name companies that this stockpiled generic product not enter the market prior to the lawful termination of the patent. It's a question of balance. At the same time, it's in the interests of Canadians to ensure that when the patent expires the cheaper generics are available as quickly as possible.
So what we're engaged in here is an attempt to achieve the right balance. If the 30 months are resulting in a denial of the right to a product that is no longer patent protected, then there's something wrong with the regulations and they should be fixed.
Could I just finish before I lose my voice totally, Mr. Chairman? I'm not sure whether it was the Minister of Health who was sick or me.
The question of the national formulary, as you put it, or pharmacare, as Mr. Dingwall put it, raised by the National Forum on Health is a very important issue. It offers many possibilities for potentially saving costs in the health care system. I'm sure he will want to pursue that further with the committee when he is here. Trade dress issues are before the courts at the moment and therefore I won't comment on them. If the committee wants to look at the issue of size, shape and colour in the context of this review, I'd be happy to take into consideration your comments, together with the views of the courts.
On PMPRB, it is interesting that price regulation in Europe, for example, extends to all prescription medicines, not only to patented medicines. As I mentioned, I'm not sure that constitutionally that's within our power; however, the question of the board's ability to document information and make it available is something you may also want to consider.
The Chairman: Thank you, Minister, and thank you, Mr. MacDonald.
[Translation]
Mr. Brien.
Mr. Brien: Minister, it's quite clear that once the 20-year protection is granted, the debate does not stop there. You've said so and even your colleagues who are now converted to the benefits of patent protection refer to the 20-year period as a minimum. Therefore, the debate should be about regulations.
Now, you've just said that you don't like a lot of legal problems surrounding the adoption of a bill. I somewhat share your opinion. However, where there is money, there are lawyers. And they will be there no matter what regulations are adopted.
If there were no liaison regulations, there would still be many cases brought before the courts before if a product is copied and its copy marketed while the patent is pending, legal proceedings will be undertaken to establish that there has been violation of a right and to determine payment of damages. Therefore, regardless of the system adopted, we cannot escape legal debates that can surround these issues and involve an enormous amount of money. Do you agree with that?
Mr. Manley: Yes, but we must also consider that in European jurisdictions, they do not have regulations like we do here. However, they use other methods. International corporations say that our legal system here in Canada is not adequate with regard to the use of an injunctive order to protect patents, especially since there are very few buyers here. Indeed, provincial drug plans generally require that a generic product be selected when it exists.
Are the courts adequate? If that's the case, we don't need regulations. If it's not the case, we need regulations, but that leads to lawsuits. That's something for the committee to consider.
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Mr. Brien: So if I understand you correctly, if the interlocutory injunction is effective, you would still want the 20-year period to provide effective protection and be met so as not to lead to violations with damages as a result.
Mr. Manley: Of course, according to the international corporations, the possibility of an injunction is not adequately addressed in our system of law.
Mr. Brien: Let's turn to price monitoring, which you have identified as an issue. In any event, we will examine this in greater detail during the debate. The Board monitors the prices of patent drugs, but concurrently, we do not have any monitoring of generic drug prices. However, we do know that in Canada, this industry is dominated mainly by two major players who control almost 80% of the market.
Monitoring prices is useful in a monopoly or oligopoly situation. This is what happens for patent products. It's a monopoly situation. In order to ensure proper protection of health care costs, would you also advocate increased monitoring of non patent drugs sold in the market place?
Mr. Manley: As I told Mr. MacDonald, that's also an issue the committee may want to examine. In Europe, the price regulation system applies to all prescription drugs. Here in Canada, the right to determine prices is left to the provinces, although we have a constitutional right to legislate on patents. That's why the Board only deals with the prices of patent drug products. If the provinces wanted to give the federal government the right to regulate those prices - if you want to propose it - perhaps we could consider the matter.
Mr. Brien: It's late in the day, but it's rather early for dreaming, Minister.
Some honourable members: Oh! Oh!
Mr. Brien: I have one last quick question. You alluded to the amounts earmarked by the generic industry for research and development. Unfortunately, these are private companies therefore these figures are not verifiable. Did you simply take their data at face value or did you decide that the amounts they declared must have been audited and that you could submit them as objective data rather than association data?
Mr. Manley: I believed that all the figures quoted in our document indicated the source from which they came.
Mr. Brien: Exactly, it's the association that's the source. Therefore, this is not data that you have verified.
Mr. Manley: Yes, that's right. The only objective audit was done by Ernst & Young.
[English]
The Chairman: Mr. Mayfield.
Mr. Mayfield (Cariboo - Chilcotin): Thank you very much. Mr. Manley, there were some expectations when this bill was passed four years ago, particularly with regard to the increased number of drugs available as a result of the research. Another expectation was that there would be perhaps more jobs built into this.
In a report about 10 days ago, I read that of 81 new drugs introduced for sale in Canada in 1995, 34 of these were what were called ``line extensions'', usually new dosages. Forty-five others offered either moderate or no improvement at all, which leaves two that were actual breakthroughs. 1994, the year before, was very similar. Of 64 new drugs reported, only 3 fell into the new drug category.
With regard to jobs, it seems as though the pharmaceutical manufacturers and the generic drug industry indicate there's about 5,000 new jobs created. But in comparing these statistics with those from Statistics Canada, the reporter said the pharmaceutical sector itself fell by 1,500 jobs between 1991 and 1995.
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Now, you have said there's no way we can go back on the legislation for decreasing the length of patents. But I want to ask you what other remedies might be available to help this committee point to ways of meeting the expectations in these two areas only, for example.
Mr. Manley: Thank you for the questions. I'll take them in reverse order, the jobs and then the new products.
The impact on jobs is an area that I think is very important. I'm told there has been some reduction as a result of international restructuring of the way the pharmaceutical industry carries on business. There has been, of course, in Canada a significant growth in the biopharmaceutical sector, which really in 1992 was almost a blip on the screen and today we're estimating about 4,000 jobs in that sector. It's an important sector, and its growth in Canada is by no means assured. It's an area that needs attention, that needs the resources of institutions like the MRC - good university-based science - and as well, I expect they will tell you, patent protection.
On jobs generally, my belief - and you've heard this from me in other sectors - is that if we aggressively go after the high-value-added jobs that frequently are characterized by intensive research and development, advanced technology, that is key to enabling Canada to be positioned to create wealth in the 21st century. Each of those jobs, by our estimate, will result in as many as three to four other jobs in the economy, based on the fact that these good jobs, or high-paid jobs, are there. When it comes to jobs in a sector, I don't think you can take a period even as long as four years and say that this indicates a downward trend. I think you have to take a longer-term view of it. I'm convinced that if we aggressively seek the high-value-added jobs, that's where the pay-off will come from in the future.
On new products, I've heard this issue expressed sometimes as ``evergreen'' patents, where in other words there aren't really substantive breakthroughs or changes to what's patented, but minor changes. It's something that really lies within the discretionary purview of the commissioner of patents who reviews a patent application. There are provisions. I confess I'm not a patent lawyer by any means, but for a patent to issue there are requirements that it be new, that it be innovative, and that it be substantially different. The law prescribes that. The commissioner of patents determines whether or not an application meets those tests. There should be no reason why in Canada we wouldn't be seeing our share of innovative new pharmaceutical products and, of course, biopharmaceutical products coming down the stream.
The Chairman: Mr. Mayfield, just a very short intervention now.
Mr. Mayfield: If I may, I'd like to press on that same question again.
It seems that when this legislation was brought forward under the previous administration, the reasons given were more research, more jobs, more drugs, and more benefit. I would like you to answer this question if you could, sir: if this pay-off is not forthcoming - they've asked for the carrot and they've got the carrot - is there any means, other than going back to shortening the patent period, that we might say a bit more insistently that we're not happy with the progress if that turns out to be the case?
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Mr. Manley: Certainly, as I've said, the 20 years isn't on the table because I think the substantial benefits from our trade agreements make it unlikely that we'll choose to opt out of them. Even if we thought it was the best thing to do on this single file, Canada is far too trade dependent to take that position with the rest of the world, whether we wanted to or some people wanted us to or not.
But the regulations are not part of our international obligations. The commitments that were made at the time of Bill C-91 can easily be looked at in the light of the current time and can be sought to be improved upon or further developed.
You may hear requests, as Mr. Brien has already intimated, for patent term restoration or extension of patent. There are other issues, as Mr. MacDonald indicated in his questioning, that need to be considered and looked at. Some of them are within the narrow focus of the Patent Act itself, but some of them are related to the broader range of issues that this touches upon, whether it's a national pharmacare, whether it's the size, shape and colour, whether it's issues related to the usage of medication. Some of those may become relevant in the course of your deliberations and lead to suggestions or to other commitments being made.
The Chairman: Thank you, Mr. Minister.
[Translation]
Mr. Patry, do you have any questions?
Mr. Patry (Pierrefonds - Dollard): Minister, when Bill C-91 was passed in 1993, there were only two major stakeholders: patent drug companies and generic drug companies. In your presentation, you refer to the biopharmaceutical sector, which wasn't really on the scene in 1993.
Are these companies in the biopharmaceutical sector satisfied with the current legislation? Are the provisions of the current legislation suitable for these pharmaceutical or biopharmaceutical products that depend on innovations in biotechnological procedures rather than in the products themselves?
Mr. Manley: The representations I've received from the biopharmaceutical sector up until now seem to indicate that they support the provisions of Bill C-91. I'm waiting for this group to appear here in order to explain what it does in terms of research and development and explain their plans for the future and their views on Bill C-91 as well as other issues raised this evening.
Mr. Patry: Thank you.
The Chairman: Mr. Leblanc.
Mr. Leblanc: I was in the governing party for six years and I know that the role of the committees that hear witnesses is quite significant. I also know that the government has often made up its mind before the committee starts its hearings. Knowing that, I'm asking the current Minister if he believes that the four-year period set aside here before review of patent drug regulations is sufficient to justify foreign investors coming to Canada to develop new drugs or whether we should extend that period to provide greater security to investors. I think this length of time is quite short, when you know that it takes about ten years to develop a drug, but regulations can change. The government maintains the privilege of changing this every four years. Would an investor who wants to come to Canada feel secure with this? I suppose the government already has a good idea of what it must do in this regard.
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Mr. Manley: Of course, it's my friend Mr. MacDonald who's at the source of a review every four years. The international situation and our international commitments have changed since 1993 and we have radically changed our drug patent system. We have introduced systems such as the regulations and increased the powers of the Patented Medicines Prices Review Board. In light of our four years of experience, we could proceed with an evaluation of these aspects of Bill C-91. It may be a bit too early to do so because of the limited business cycle and to properly evaluate issues such as the one Mr. Mayfield raised regarding employment in the sector. I think this is a long term issue. That's also the case of innovative products that have not been developed because of this bill. However, I believe that we can have quite a useful discussion with the information we have to date.
Mr. Leblanc: Minister, you said that it was the Minister of Health who had to issue licences for the marketing of a new product. You handed the ball over to the Minister of Health, but let me ask you the question again. If the Minister of Health continues to take as long to issue a licence, are you prepared to extend the duration of patents from 20 to 22 or 24 years?
Mr. Manley: I'm aware of your long experience on the government side, but I must admit that I have not yet made a decision regarding the extension of patents. I would like to hear the recommendations of the committee. I would also like to point out as I did in my speech the importance of the generic sector in Canada. We're talking about Canadian companies that have conducted research and development here, in Canada, and who play an increasingly important role on the world scene. It is necessary to balance these interests. It is very important, as I explained toMr. Mayfield, that Canada follow a job creation policy with value added in the research and development sector. That will be the way to create the capacity to generate wealth in Canada for the 21st century. As in other areas of law, we must balance the interests. We have examined bills on copyright and other aspects of intellectual property; it's always a matter of balance. It's a zero-sum game. I would appreciate your advice.
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[English]
The Chairman: Thank you.
Next we have Mr. Volpe, Mr. Schmidt, and then Mr. Ianno. If anybody has any final interventions, perhaps they would like to bring them to my attention. We'll then have a very quick final question for anybody else.
Mr. Volpe, please.
Mr. Volpe (Eglinton - Lawrence): Thank you, Mr. Chairman.
I'm encouraged by the kinds of questions we've heard but I want to make one or two comments, because issues have been raised already about fast-tracking the approval process. Reference has been made to Health Canada and its procedures. Unfortunately the minister is not here to respond, but I think all members around the table would want to take cognizance of the fact that Health Canada has an obligation, first and foremost, to ensure that any product that comes onto the market is safe for consumption and, secondly, that it is effective.
If some of the members around the table want to suggest that somewhere along the line Health Canada shortcut that system without regard to those two items, I don't think the Minister of Industry would approve of that, either. But if that lengthens the approval process, I think members around the table would also be pleased to know that Health Canada is taking all measures currently to ensure that the process time, both for the patentees and for the generics - in fact, for anybody associated with this industry - is being shortened in the most effective way possible. I think it's important for us to keep that in mind.
I want to address this to the minister, because there's a trade-off, I think - and I'm encouraged by what the minister said a little earlier on when he acknowledged this - that whatever industrial objectives we might have, there's also consideration for the cost both to the consumer and to some of our other programs, including the health care programs. I'm hoping the committee will also address this.
Since it has been raised a couple of times, I want to refer the minister to the great success of the biotechnological and biopharmaceutical firms that have emerged over the course of the last four or five years. It seems that they've sprung up from nothing. It's almost like Jason and the Argonauts chasing the Golden Fleece and suddenly somebody sprinkles a little bit of magic dust and warriors appear out of the sand. These companies must have had a particular incentive. There must have been something there that caused this mad rush, a happy mad rush, to appear on the Canadian industrial and scientific scene.
We've heard statistics tonight in excess of $250 million, I think, in pure investment by those firms. The amounts by the generics and the patented companies don't come close to that, not in proportion nor in absolute numbers for basic research. In your estimation, Mr. Minister, is it Bill C-91 and the patent regulations or the patent legislation that drives this great innovative industry? Or is it a series of other government programs and incentives, probably under the guidance of Industry Canada, that has nurtured this phenomenon? If so, could you share that with us so that committee members will be able to balance the figures we're going to hear against this kind of scenario?
The Chairman: I don't know how you divide five minutes in half after that, but perhaps you could get to your point so the rest of the people could have a chance for their questions, too.
Mr. Manley: Don't take so long to answer is what you're saying. You're polite, at least.
I'd like to say it was the election of a Liberal government in 1993 that gave rise -
Some hon. members: Hear, hear!
Mr. Manley: First of all, I expect they will be here and you can put questions to the biopharmaceutical sector. I think they provide very exciting prospects for growth and jobs in the future in Canada. But as with any of these things, it's not a simple equation. They will be able to weight the import of Bill C-91, but I think it would be wrong to isolate that factor.
The fact is that biopharmaceutical research is booming around the world. It's a new growth area. Canada's position in it is not that of world leader, but we're in the leading countries. Because of a lot of the investments we've made over a lot of years and good university infrastructure, and the fact that we've attracted a lot of smart people - Dr. Michael Smith brought home a Nobel Prize for his work in related fields - this is a sector that is becoming key to important growth.
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We are finding biotechnology having implications in a lot of other fields, many of which we had never thought of as being related to it in the past. That research is going to continue to boom, not just in pharmaceuticals but even in the cross with such areas as telecommunications and computers.
I'm sorry about the long answer. I know you warned me already. But there are some very interesting things going on. All of that contributed to the growth, but based on the representations I've received from them, they will tell you that they consider that respect for patent protection is one of the things that keeps their research in Canada.
The Chairman: Thank you, Mr. Minister and Mr. Volpe.
Mr. Schmidt.
Mr. Schmidt: Thank you, Mr. Chairman.
Mr. Minister, I think I heard you say that the 20-year patent period is not on the table.
Mr. Manley: Right.
Mr. Schmidt: I would like to now ask you very specifically, what is on the table? In other words, are you prepared to consider everything else in this act and also in the regulations? Is that the only thing that's not on the table? In other words, is this committee really doing honest work that you'll be able to deal with?
Mr. Manley: Far be it from me to comment on the honesty of the committee, but as I said toMr. Leblanc -
Mr. Schmidt: If we do honest work, will you listen to our recommendations?
Mr. Manley: I will certainly listen to your recommendations. I never guarantee I will accept them. I will examine their logic and I will consider them in light of everything else that I need to consider, but I welcome the fact that this committee is going to hear witnesses, many of whom I have listened to frequently over the past three and a half years and had the opportunity to test their evidence in questions. I will be very anxious to see what consensus you can develop out of it in order to give recommendations. As I went through a list with Mr. MacDonald, I saw there's quite a broad range of things for you to consider. Obviously certain of them, namely those that affect the patent law specifically, are ones that are within my jurisdiction to do something about.
Mr. Schmidt: Okay. Does that mean, then, that you will not influence the work of this committee in any way or try to shape its direction or discussion or its conclusions?
Mr. Lastewka: So help me God!
Mr. Manley: I spent a lot of time preparing my remarks for tonight. I hope I've already influenced it.
The Chairman: Mr. Ianno, for a final question.
Mr. Ianno (Trinity - Spadina): Thank you, Mr. Chairman.
Mr. Minister, you stated that Canada's drug patent policy has three key objectives. Of course, the pricing one we understand. But to ensure conformity with Canada's international obligations and to support the development of the pharmaceutical industry in Canada, what I'm curious about is how you build a competitive industry yet don't get away from protectionism. With that, considering that all industry likes to be treated equally, why is the pharmaceutical industry, when it comes to patent disputes in terms of court action, treated differently in terms of the onus being on the generic versus the patentee?
Mr. Manley: Let me see if I understand your first question. You're putting the building of an industry in the context of how you do not do it with protectionism.
Mr. Ianno: Yes, taking into account WTO and NAFTA and looking at the culture industry, where there are a million jobs, and the pressure there from the international market, and then looking at the pharmaceuticals from a different perspective, with the multinationals asking for specific protection. Could you differentiate?
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Mr. Manley: Basically, where we've come to in many of the advanced technology sectors is that Canada needs to compete on comparative advantage. Essentially we've moved away, especially with the most recent round of trade agreements - and this weekend an important one in the telecommunications sector under the auspices of the WTO - from protectionism. It is simply not an approach the developed world and, to a great extent now, the developing world are pursuing as a means of improving their economic performance.
In this sector, as with the rest of high technology, the comparative advantage for Canada is, yes, in part that we've adopted the regime of patent protection, but frankly, everybody has it now.Mr. Leblanc will probably want to argue before you're done that we ought to be extending it in order to be more competitive in that framework legislation. But we build it on the basis of the fact that we have excellent universities and we have lots of smart people who are capable of undertaking the research and development that's necessary. We have a public health care system in Canada that provides us with a buying opportunity, which is very significant in building a domestic industry.
I think those - and I'm sure you can come up with many other comparative advantages - are going to ensure that the Canadian health care industry, not just pharmaceuticals but appliances, know-how in managing health care.... These are exportable goods and services too.
The market in Canada is not insignificant, because we are a wealthy country, but compared to the market that's outside, when you look at the world, it's small. We have the capacity to make a major impact in markets of the world, and when we're looking at the questions of jobs and economic growth, I think that ought to be figuring in the equation. We don't need protectionism, we need access, because we have the skills so that, if you give us access, we're going to win.
On the second part of your question, you're going to hear a lot about that. In my speech I tried to give you, in as neutral a way as possible, the rationale that existed at the time the NOC link regulations were brought in, that being that in light of the exceptions for stockpiling and for regulatory approval, it was thought that - and these exceptions do not exist, for example, under the European system - it was necessary to find another means of ensuring that the life of a patent was fully respected.
There's a debate now about whether it is 20 years or it is more. At the time of Bill C-91 we asked if it was 20 years more or less. It's 20 years. Now the question is how you ensure on the one hand that, as soon as 20 years is over, the public has access to generic products, because the price is going to be lower.
Frankly, in every area of intellectual property a patent is a restriction on competition. It's a product monopoly that we've decided in developed countries is worth giving because it encourages research and development. Otherwise, people wouldn't be encouraged to do it, because as soon as they developed something at great expense, it would be stolen by others and used for profit. Therefore, there's the same argument as you have in the discussion of copyright.
There's an interest, then, in exploiting the product of that research and development generally as soon as the patent ends. Likewise, if you're going to have a patent law, you must have it respected to the end of the patent. So the question is what's the best mechanism for doing that? In Europe it's the courts, pure and simple; if somebody infringes your patent, you take them to court.
Well, the previous government concluded that in Canada that was not adequate, that in fact they would essentially put a process in place that when you went through that long series of events I described, if an action were taken.... Essentially, there is an injunction until the courts resolve it.
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Are the exceptions enough reason for having that? That's one of the things I expect the committee to provide me advice on. What I've already said to you is yes, they are on the table, and secondly, from my point of view, legislation or regulations that generate a lot of litigation are generally not good legislation.
So we'll take it from there.
The Chairman: Thank you, Mr. Minister.
This is a good reminder that I would never have Mr. Volpe and Mr. Manley lead off a question and answer session in any given committee.
Mr. Schmidt: Good for you, Mr. Chairman.
Mr. Manley: Mr. Chairman, you're just lucky that Mr. Dingwall left.
The Chairman: Through you, on behalf of the committee, I'd like to thank you, Mr. Minister, for showing up - and through you, to your colleague and to the officials who have been here to help you.
May I just say to the committee that our next meeting is scheduled for Thursday, February 20, at 9:30 a.m. It's not a Bill C-91 issue. Mr. Mayfield, you've been asking for the Canadian Tourism Commission. They will be here on Thursday morning, a long-scheduled meeting.
I'd like the committee members to keep their schedules open this week in case some witnesses are arranged on Bill C-91; if not, a list of witnesses will be prepared for you by the end of this week, and the week after the break we'll begin seriously with a long list of witnesses and begin to move through the agenda.
Thank you again, Mr. Minister.
The meeting is adjourned to the call of the chair.