EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, March 12, 1997

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[English]

The Chairman (Mr. David Walker (Winnipeg North Centre, Lib.)): Pursuant to Standing Order 108(2), a review of section 14 of the Patent Act Amendment 1992, Chapter 2, Statutes of Canada, 1993, the committee resumes its work through hearing witnesses.

We have with us today seven witnesses who are each being asked to outline their views in about five minutes. After that we'll open it up to questions from the members. Witnesses can feel free to respond when the question is directed to them by a member, but also if you feel you have something to contribute when another witness is responding, put up your hand to get the attention of the chair, and we'll make sure you have an opportunity to speak.

Without further ado, I call upon Helen Heeney, chairperson from the Stories Project/Life Before Medicare.

Welcome. We're happy to hear from you.

Ms Helen Heeney (Chairperson, Stories Project/Life Before Medicare): Thank you. I have just come from a meeting with Prime Minister Jean Chrétien at which we presented him with the book Life Before Medicare. The book was funded by New Horizons, Health Canada. During our conversation about the National Forum on Health, he reiterated his intention to pilot pharmacare as an extension of medicare. The stories in this book will convince you that Canadians need affordable drugs to control their cost to the public-funded part of medicare.

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We were fortunate in obtaining stories from well over 100 people from across Canada, from the Atlantic provinces to British Columbia, when we compiled these stories. You may ask what this has to do with the review of Bill C-91. Some present-day stories closely resemble the disasters of those times. I urge the committee to consider the 3.6 million Canadians who currently have no drug insurance but are nevertheless trying to bridge the treatment gap in our health care system in the face of increasing drug costs.

Here is a story from the book, written by Mrs. Donalda Pilling of Brandon, Manitoba. The following story took place when she was a small child, and it made a lasting impression on her. It was just before World War I, when rural Canadians were reeling from the Depression.

A young neighbour lady was diagnosed as suffering from cancer. In that era there were no treatments or cures; it was known as the death sentence. The victims usually spent their remaining weeks in the hospital with large doses of morphine being administered. With no help for medical bills, this usually meant the victim's family lost or had to sell everything to pay the outstanding medical bills.

This young woman refused to leave her home, and as the disease progressed the pain was excruciating. When her husband went out to work, she had him lock the door so nobody could come in to answer her calls and her screams of pain. Her screaming and suffering lasted for two months, but she never gave in. Her whole being was dedicated to saving her husband and family the debt of medical care that would have ruined him.

Such debt exists today. We can compare that story to that of the 51-year-old man, Mr. C., with three teenagers, who was diagnosed with cancer and recently received chemotherapy. Although employed, he, like 3.6 million Canadians, has no drug plan and the estimated monthly cost to his family is in the thousands. Even for side effects to the daily chemo, the price of the anti-nausea drug Zofran, for instance, is $20 per eight-milligram tablet, or $60 a day. Compute that into months and years. How can the ordinary patient manage it on top of other living expenses and care? The cost to his family haunts him, stalling his recovery.

Another story in our book is by a public health nurse, Mrs. Lemke. She says:

In 1951 I worked in the East End as a public health nurse. ... I had as client a family with
3 children living in a basement apartment which was damp, cramped and not healthy for children. Their youngest child, about 1 year old, was on medication for a heart problem. She required admission to the Hospital for Sick Children (HSC) frequently for pneumonia. This family was trapped in this living situation because of the expense of caring for this child. The father worked two jobs trying to get ahead.

That's not unusual today. She continues:

There came a time that HSC would no longer admit the baby until the bill was paid.

That doesn't happen now, but then it did. She says:

They had to try different hospitals that they didn't owe money to.

As a public health nurse I felt powerless to help them. We tried to get community agencies to help. We did get glasses for one child it was a band-aid approach.

In our city of Orillia, asthma is on the increase, as is cancer, but young Crissy, age eight, has a very serious case. She must carry an Epipen to school and everywhere with her. She has missed26 days this term and frequently needs hospitalization. She's very bright and she loves school.

This single mother also has a younger child. Her $10-an-hour wage is not adequate to provide any frills because of the high cost of Crissy's medication. She pays $269 a month and more when she replaces the Epipen at $60. Work that out for a year. Crissy takes Pulmicort, Becloforte, Ventolin, Seravent, and Atrovent, and needs a Combicent mask. The nasal spray she uses costs $30 a month as well. Crissy's grandparents are very watchful and make sure she has adequate nutrition since this expenditure for medication means that food choices come last in the family.

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Here's a story about a cancer patient on Zoladex. It raises a lot of ethical questions. This is the medical treatment of choice for Mr. M. He has cancer of the prostate. He takes this injection once a month. He is 60 years of age and is not on a drug plan, but he found that about $500 a month, or $6,000 a year, was a devastating expense. The couple has since lost their home. The kindly urologist, Dr. D, informed Harold about the side effects - hot flashes, changes in sexual ability, worsening of pain for several days, decreased appetite, dizziness, difficulty sleeping, and nausea. Harold had them all in spades, but the greatest misery was the erosion of the nest egg he and his wife were saving for retirement. Zoladex, however, was to be taken for the rest of his life.

When I last contacted Harold, he said that he had discontinued treatment. He is now impotent. His tumour has vanished, and his doctor monitors him regularly. Harold's desperation in disregarding instructions to take Zoladex for the rest of his life was a result not only of the expense and side effects; it also stemmed from a deep suspicion that he did not need it for the rest of his life.

Although Dr. D has two other patients who have discontinued injections, so far Harold has not been approached about any long-range study on Zoladex. That's an ethical dilemma, yes, and a great expense for the taxpayers.

Telemedia has also arrived at the hospital in Orillia, the sunshine city, as the doctors from Sick Kids view Amanda's swollen ankles on a television screen and speak reassuringly to the mother of the 10-year-old girl through a telemedia exchange. Amanda's bone marrow transplant is keeping acute leukemia at bay. She takes drugs, Thalidomide among them, amounting to $1,200 a month, or $14,400 a year, and her mother is desperate. She quietly asked the administrator, who was standing near me, where she could get help paying for her child's prescriptions. None of these children wants to return to Sick Kids for their treatments, because instead they could go to school, stay with their friends, and sleep in their own beds at night, but the cost is therefore transferred to the family instead of being taken up by the hospital. The kids have taken to the new technology and everybody else has too.

The drug Thalidomide, however, considering its past disastrous history, raises questions about Amanda's future, which nobody but God can answer. OHIP has picked up the burden of the costs.

The Chairman: Excuse me. I intervene very rarely when witnesses talk. The way you use your time is up to you, but if everybody uses ten or twelve minutes, we simply won't finish with the witnesses, let alone have time for questions.

Ms Heeney: I'm sorry if I ran over.

The Chairman: I would really like everybody to get a chance to speak, and I'd like us to get a chance to ask a few questions. We'll come back to you. There will be lots of time to come back to you. It's just that it's been over ten minutes now, so that with seven witnesses that adds up to 140 minutes. That will take us past the vote.

Ms Heeney: Mr. Walker, may I give you one of these books.

The Chairman: Absolutely.

Ms Heeney: These stories will show you how much Canadians and seniors need medicare and presently how much a universal program on pharmacare is needed, as recommended by the National Forum on Health.

The Chairman: Thank you very much, Ms Heeney.

[Translation]

Ms Liliane Lecompte (President, Association québécoise de défense des droits des personnes retraitées et préretraitées): Any stand the AQDR takes will always be in favour of the consumer.

Millions of Canadians remember that the Liberal government promised to abolish the drug patent monopolies. This is why the AQDR has been studying the controversial patent protection issue, and has taken the position described in this brief.

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Bill C-91 has taken millions of dollars out of the Canadian health system and put it in the coffers of multinational pharmaceutical companies. The Canadian health care system as we knew it has gradually disintegrated, and now all taxpayers - including the poorest - have the burden of funding these huge billion-dollar pharmaceutical companies.

Why are drug prices constantly increasing? First, because there is no control of the prices or profits from drugs sold in Canada. Through foreign governments, multinationals put pressure on the Canadian government to adjust its policies in the interest of the pharmaceutical industry. The government, with responsibilities to the health care, trade and finance sectors, regularly decides in favour of the latter two - trade and finance. It puts industry first. Taxpayers and the sick find themselves at the bottom of the priority list, and generally neglected except when it is time for them to pay the bill.

Pharmaceutical companies invest a great deal of money in very subtle promotion and marketing campaigns. Sales go up, as does drug consumption. We are seeing doctors overprescribe medication; this leads to over-consumption, as well as poor medication use.

These days, medication is no longer considered a public good to which everyone is entitled. Medication is a consumption good, like any other. The focus is on the good of the industry, not the good of the person who needs it. Medication must be consumed, because that's good for the industry.

Have we made the right choices? According to the National Health Forum, medication spending has gone up from $1.1 billion to $9.2 billion. The 1996 statistics on total health care costs in Canada were released to the public by David Dingwall. Total health care spending in 1996 was $75.22 billion, of which $10.84 billion went to medication. Mr. Dingwall pointed out that spending associated with pharmaceutical products went up faster than any other type of health care expense. In his opinion, the cost of pharmaceutical products will very likely not stop going up.

Now let's consider how multinational companies are treated. Why do many of them call Canada the multinationals' taxpayer paradise? Because, in our opinion, they have too much protection. In Canada, multinationals enjoy the lowest corporate tax rate of any G-7 country, and the lowest payroll taxes in any G-7 country. They can declare a large proportion of their research spending - up to 40% - as expenses. They can also deduct a variety of expenses for government lobbying, the promotion of their interests, advertising, and other forms of promotion.

Statistics show that profits in the pharmaceutical industry are significantly higher than the Canadian industrial average, even without drug patent protection.

And the pharmaceutical companies' profit margins have withstood the recession; in the early 1980s, when average profits in Canadian industry felt to 5.4%, pharmaceutical companies' pre- tax profit never fell below 30% on shares.

The increase in medication prices represents a threat to people's quality of life in Canada. Canada is considered one of the best countries in the world in which to live. But ironically, at the same time that the pharmaceutical industry is pressing for extended drug patent protection, business people and government are praising the benefits of greater competition. There is a major contradiction there.

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The AQDR is therefore asking the federal government to ensure that medical care remain free, universal and accessible, according to the principles in the Canadian Health Act. They ask that the government comply with these principles whenever funding is allocated to any part of the health care sector.

The AQDR would like all taxpayers to have access to equitable medication, whenever it is required.

The AQDR is also asking that the government establish a price and profit control system for drugs sold in Canada.

The AQDR is wondering about the real role of the Patented Medicine Prices Review Board, and questioning its neutrality.

The AQDR would like the government to cut short the patent protection so that generic drugs could get on to the market as quickly as possible.

The AQDR would like the federal government to put as much effort and enthusiasm into dealing with advertising by the pharmaceutical industry as it has into dealing with advertising by the tobacco industry.

These are the AQDR's principal demands.

The Chairman: Thank you for your brief and your very interesting presentation.

[English]

I think our next witness is Ms Connie Delahanty from the Older Women's Network. Welcome. We would like to hear your views now.

Ms Connie Delahanty (Ottawa Director, Older Women's Network): Thank you. The Older Women's Network is a group of some 600 politically active women.

We are aware that the purpose of this review is to determine whether to retain, repeal, or extend Bill C-91. We have weighed the conflicting claims for generic and brand-name drug manufacturers on everything from profit, foreign ownership, jobs, drug efficacy, and research and development.

We believe the monopoly now held by the brand-name drug companies is one of the major factors that has led to an increase in the cost of drugs in Canada and consequently to the increase in the cost of health care. Since older women are among the most prescribed-for sector of the population, as well as one of the poorest groups due to their more traditional roles in the past and the systematic discrimination of women in the Canadian workforce, we have a particular interest in this process.

With the decrease in health care spending and the closing of general hospitals, mental hospitals, and chronic care facilities, we as older women will continue to be over-prescribed and hustled into cheaper long-term care facilities instead of receiving the comprehensive treatment we require as we and the population age.

Our position is clear. We object to longer periods of patent protection being granted to multinational corporations and strongly encourage a shorter period of protection in order to increase the production of lower-priced drugs in Canada.

We encourage the reinstatement of some form of compulsory licensing to permit the earlier introduction of generic drugs with royalties that reflect the real cost of the development of such drugs.

We believe changes are needed to eliminate the more controversial provisions of Bill C-91, such as the ability of patent drug companies to block early introduction of generic drugs instead of later legal action against patent infringements, a provision not part of other types of patent legislation. Where the bill retroactively revoked licences, a provision called repugnant by our current Prime Minister, they should be restored.

These are not simple issues and we know there are no simple answers. The evidence so far favours the generic manufacturers as the group whose activities are most beneficial to Canada's internal interests. However, the crux of this issue is that this battle between two groups of industrial giants is not going to solve the problem of drug prices, whatever the decisions of this committee.

It is clear all drug companies, generic as well as brand name, and currently prominent biopharmaceutical firms are among the most profitable investments possible, despite the fact that very few new drugs are developed in Canada. The promised research and development funds spent in Canada by brand-name companies are not, for the most part, for ground breaking research but for getting drugs approved for sale, which is a form of marketing.

Drug prices do not reflect the cost of manufacturing and developing drugs, and the so-called price controls administered by the Patented Medicine Prices Review Board are only to maintain drug pricing relative to other similar drugs, not, as in the case with other Canadian regulatory bodies, to reflect the fair price for the product. In fact, new, so-called breakthrough drugs are priced only relative to their prices in other countries, usually by the same multinational marketing the drug in Canada, a self-reflexive exercise at best, which only serves to prevent these manufacturers from charging Canadians even more.

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Because much of the cost of drugs is already paid through the health care system or is deductible through the taxation system, patent protection given to the multinational drug industry is a form of subsidy to an industry that is already one of the most profitable in Canada. We believe this money should be returned to our health care system and spent on research into the causes of diseases, not more patentable drugs.

Even better, and I quote the 1997 final report from the National Forum on Health, ``we believe Canada should take the necessary steps to include drugs as a part of its publicly funded health care system''.

Finally, the debate around Bill C-91 is referred to as a consumer issue, with Canada's senior population seen as a major consumer group lobbying in its own interest. Senior Canadians do have an interest in this issue, as do all Canadians. However, the word ``consumer'' is misleading. Used in this context, it suggests a market model. Those of us for whom medication is prescribed or ordered are not consumers in the accepted sense of the word. We have virtually no choice. Even choosing a generic substitute over a brand-name drug is not always an option, nor does it always have the same effectiveness as the brand-name drug.

The marketing of drugs takes place at a level of manufacturing, delivery, promotion, and advertising within the drug industry itself to doctors, pharmacies, and hospitals, and not at the level of the so-called consumer.

This is not the kind of choice an individual should have to make. Prescription drugs and health care are not consumer issues. They are political issues and human issues and should not have to be debated in the context of a standing committee on industry.

Thank you.

The Chairman: Thank you very much for your opening remarks.

That's the first standing ovation.

I'll now turn to Gisèle Bérubé from the Coalition of Quebec Seniors.

[Translation]

Welcome before the committee. Please begin.

Ms Gisèle Bérubé (Coalition of Quebec Seniors): Mr. Chairman, when we come to the questions, I hope you will allow David Woodsworth, who is here with us today, to take part in the debate.

[English]

The Chairman: That's fine with the committee.

[Translation]

Ms Bérubé: The Coalition of Quebec Seniors believes that prescription medicine should not be governed in the same fashion as other products, whose prices and uses are determined by the market. People do not prescribe medication for themselves. They do not have the information they need to shop for their own medication.

The 20-year patent protection granted to patented medication by Bill C-91 is justified on the basis that research and development are both costly and risky, and that jobs generated by pharmaceutical companies would be at risk if their patented products were not adequately protected. However, we know that less than 12% of sales revenue is allocated to research and development; of that amount, only 22% is set aside for basic research, while the rest goes to applied research and preparation for production.

And as for jobs, the Canadian Health Coalition has shown that the total number of jobs generated by members of the Canadian Patented Drug Manufacturing Association has declined since 1993- 1994. In addition, because of the high cost of medication, thousands of other jobs in the health care sector have been lost. This means that the job protection argument should be viewed in perspective, in relation to the general job situation, particularly in Quebec.

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We have recommendations to make. First we need a review board that will look not only at the price of patented medicine, but also at the price of generic medicines. The board should review medication costs and benefits, taking possible substitution into account. It should also inform and educate the public on these issues.

One of the purposes of the review board would be to assess medication use and costs for specific population groups, for example those who use large amounts of medication, such as seniors and those who have diseases requiring very expensive medication, such as AIDs patients.

The board would also promote the development of information programs for doctors, pharmacists, other health care professionals, and the general public. It would provide comparative information on the use, cost, advantages and limitations of medicines available on the market. The information program should include assessments of new medications, including brand-name and generic products.

For some time now, manufactures have been spending a great deal on advertising and public relations. They frequently give samples to physicians in order to promote sales. Physicians may even receive other goods and services. We recommend that such practices be discouraged, for the same reasons underlying restrictions on cigarette advertising, as Ms Lecompte suggested.

The Chairman: Thank you, Ms Bérubé. I'm certain that members will have many questions for you.

We will now be hearing from Jean-Guy Soulière,

[English]

who is from the Federal Superannuates National Association. Welcome, and we'd like to hear your presentation now.

[Translation]

Mr. Jean-Guy Soulière (Executive Director, Federal Super-annuates National Association): Thank you, Mr. Chairman.

[English]

I represent the Federal Superannuates National Association, which has 100,000 members. These members are retired from the public service, the Canadian Forces, and the RCMP. These are people who have served Canada well, and today they are very concerned about their fixed incomes being eroded by the increase in the cost of drugs.

We have tabled a more detailed presentation for your committee to consider. I will only highlight the main points of that presentation.

Hopefully, there is room for this committee to make recommendations and to change some of the sections of the proposed legislation. In fact, I think the minister responsible introduced that possibility when he was a witness at this committee.

We're going to look at this situation from perhaps an historical perspective. In 1993, FSNA pointed out in a letter to the former Prime Minister that under Bill C-91 the cost of drugs to consumers would increase substantially. Sadly, our prediction was right. The cost of drugs, for example, in the Public Service Health Care Plan, which is partly a drug plan, has increased by 13% a year between 1991 and 1995.

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In 1987, when Bill C-22 was introduced, the government of the day said it would have little or no effect on Canadians because 95% of seniors and 85% of all consumers were covered by a drug plan. FSNA at that time took exception to this approach. The fact that drug plans would cover the increase in costs would only result in consumers paying the cost in increased premiums. This is happening, especially today. This approach was both shortsighted and misleading.

While Bill C-22 gave seven to ten years of patent protection in terms of market exclusion of generic drug manufacturers, Bill C-91 completely abolished compulsory licensing. In addition, under current regulations it is possible for brand-name drug manufacturers to stretch the patent protection for a further 30 months if an appeal is initiated. So what do they do? They appeal. There are currently 103 appeals before the Federal Court. During those 30 months that it takes for the Federal Court to get to the case, the patent protection continues.

We also find the government's position on the protection for patented medicine tenuous. The Liberal Party of Canada agreed with us and many others in 1992 that Bill C-91 seemed excessive in its scope. In two letters to us in 1992 and 1993, the then leader of the opposition stated that the Liberal Party opposed Bill C-91. He further stated that Liberals would be carefully monitoring the effects of Bill C-91 on Canada's health care system and on the costs of drugs to Canadians.

Four years after the implementation of Bill C-91, our fears of increasing drug costs have come to pass. Many provinces, including Quebec, Ontario, and Nova Scotia, have introduced restrictions and/or premiums on their drug plans that affect seniors. Supplementary health plans, such as the government's own public service health care plan, have had to increase premiums and deductibles as a result of continuing increases in the cost of drugs.

I'm sure you're all aware of the study undertaken recently by Queen's University in which the practice called ``evergreening'' is exposed. This basically consists of taking an additional patent on a drug to extend its life under the protection given by the Patent Act. The government must take some actions to prevent abuse by patented drug manufacturers and stop them from using every loophole available to increase the life of their protection under the act and under regulations.

The victim here, as always, is the consumer, who must pay higher drug costs. The senior, who is also a consumer, is even more at risk, given fixed income and limited flexibility.

We are supportive of reasonable proposals to give the developers of new drugs patent protection that would see their cost of research and development recovered before generic manufacturers are permitted to produce generic copies of patented drugs. We are not, however, supportive of blanket protections that are used solely with the intention of preventing market access to manufacturers of generic drugs.

We are also aware that drug manufacturers operate in a global marketplace and that treaties must be respected. Nevertheless we think there is room for improvement and for efforts to reduce drug cost increases in the future.

We have four specific recommendations for you to consider: first, a return to the provisions of compulsory licensing as instituted under Bill C-22 of 1987; second, an end to the process of ``evergreening''; third, an expansion of the quasi-judicial powers of the Patented Medicine Prices Review Board to monitor all drugs, not just 44% of drugs currently under their jurisdiction; and fourth, a review of all regulations to remove those that appear to extend the life of patent purely on an administrative basis.

We feel if these recommendations are included in Bill C-91 it will be fair and equitable to all parties and stakeholders.

Thank you.

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The Chairman: Thank you very much, Mr. Soulière.

Our next witness is Ms Mary Eady, who is from Seniors on Guard for Medicare. Welcome. We'd like to hear your presentation now.

Ms Mary Eady (Executive Director, Seniors on Guard for Medicare): Thank you very much. I'm substituting for our president, who is not well - Mr. Arthur Kube. With me is our chairperson, Romeo Maione, who may want to make a comment when I've finished.

Seniors on Guard for Medicare is a group of senior citizens coming from varying backgrounds, committed to protect and enhance medicare. It was our generation who fought to establish medicare. Most of our members were born before 1930. We represent a part of Canadian history where there was sickness and no medicare, where the pain of the Depression was felt, and many of our members fought in the Second World War against fascism and for the preservation of democracy. Because of that history, our generation built this country into a more caring and democratic society, we hasten to add, and believe us, it wasn't easy.

However, in the last few years we have not seen any enhancement, but rather an erosion of medicare due to underfunding, user fees, and outright fleecing by medical specialists and drug companies. We can understand the attack against medicare coming from certain segments of the medical profession - the American private health sector and the Fraser Institute - but we can't find any political party leader who doesn't at least twice a day profess to be in favour of medicare. Therefore it is really disturbing to see changes to federal transfers, legislation like Bill C-22 and Bill C-91, Bill 26 in Ontario, and similar legislation in other provinces. Is this what we are seeing - an attempt to kill medicare through the back door?

We understand that you're not here to discuss the Canada Health Act. Therefore we will address the issues arising out of Bill C-91 and the fleecing of the health care dollar by the pharmaceutical manufacturing industry. To illustrate our point, we would like to quote some Health Canada statistics.

In 1975, total Canadian health care expenditures amounted to $12 billion or 7.1% of gross domestic product, and it was spent as follows: roughly 44% for hospitals; 15% for physicians;9.7% for other institutions; 8.9% for drugs; and for other costs, capital costs included, 21%.

In 1993, total Canadian health care expenditures amounted to $72 billion or 10.1% of gross domestic product and was spent as follows: 38% by hospitals; 15% by physicians; 10% by other institutions; drugs, I'll have you know, 15.1%; and others, including capital costs, 21%.

As you can see, not only did health care spending increase in real terms by approximately 40%, but expenditure on drugs during that time increased its share of the pie by 66% - in dollar terms, from $1 billion in 1975 to $10 billion in 1993.

We suggest that the causes of these massive increases were Bills C-22 and C-91; excessive sales pressure by drug salespersons of patent drugs; oversubscribing of drugs by physicians; and the lack of consumer information about all drug-related issues.

Let us hasten to add that unless Parliament does away with the patent protection offered to drug companies under Bill C-22 and subsequently under Bill C-91, the spiral of drug expenditure costs will continue.

The impact on seniors resulting from this massive increase in drug costs has been very negative. Most drug programs for seniors are no longer universal and now also have user fees for which seniors never planned. These drug cost increases also represent a real danger to the survival of medicare, because a lot of especially chronically cared-for seniors' drug costs are a charge to the public purse. It is therefore incumbent on this committee to make recommendations that would do away with or drastically alter Bill C-91.

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We told the previous Conservative government that Bill C-22 and Bill C-91 would increase the cost of prescriptions drastically without any benefit to Canadians. The then leader of Her Majesty's loyal opposition, the Hon. Jean Chrétien, agreed with us.

Hiding behind the smokescreen of protection of intellectual property rights, the pharmaceutical industry is mining these patents for everything the unsuspecting public can be fleeced for.

It reminds us of the three-year tax exemption for a new mine. What mining companies did was to mine the same ore body through five different shafts, therefore getting a 15-year tax holiday. That's where the expression of ``getting shafted'' must come from.

Some hon. members: Oh, oh!

Ms Eady: The head of the Pharmaceutical Manufacturers Association of Canada, Judy Erola, coming from Sudbury, should understand that well.

If there's someone who thinks that drug patents are only given to new drugs, then there's a bridge we'd like to sell you. Over 90% of all new patents are minor variations of established drugs. As a matter of fact, most breakthroughs in medicine have come from publicly financed research that has been transferred at bargain-basement prices to private corporate domains.

The fact that pharmaceutical companies spend $1 billion per year on product promotion and only $89 million per year on research should put an end to some kind of hollow intellectual property rights argument. We think a much stronger moral argument for price controls on drugs can be made because medicine is not a luxury but a life-sustaining necessity for which people should not be and cannot afford to be fleeced.

The popular argument of Bill C-91, which is that the drug industry needs the additional revenue, doesn't hold water. The average return on equity before taxes in the pharmaceutical industry between 1990-1995 was 29.6%, which compared more than favourably with the average of all manufacturing industries in the same time period of only 10%.

The Tories, in passing Bill C-91, made a lot of the role of the Patented Medicine Prices Review Board. I understand that the members of that board appeared in front of your committee and informed you that they were able to stop the drug companies from charging the highest drug prices.

Somebody should tell them that Canada, prior to Bill C-22, had the lowest drug prices in the OECD. Now we're jockeying for the top position. The Patented Medicine Prices Review Board is a lot of window dressing and does not make Bill C-91 any more palatable.

We understand that the Minister of Industry appeared in front of your committee and told you that all is well, and that even if all wasn't well, nothing can be done because restrictions would run afoul of the World Trade Organization.

The last time we looked, Italy was part of the WTO, and it has very tight restrictions on drug pricing. It replaced Canada within the OECD as the country with the lowest drug prices.

We also understand that the Minister of Health is to appear, or has appeared, in front of your committee. Just recently, the National Forum on Health - its chair is the Right Hon. Jean Chrétien and its vice-chair is the Hon. Mr. Dingwall - issued a report - I won't go into detail, I'll try to hurry it up - that we support for the development of a pharmaceutical policy. Obviously, we would support the question of a national drug plan.

Should you, however, buy into the Minister of Industry's line that everything is well, then you can stand deservedly accused of undermining medicare and serving the interests of a largely foreign-owned pharmaceutical industry. The choice is yours. Just remember that you have to live with it, as will the rest of us.

All of this is respectfully submitted as, we hope, sage advice by Seniors on Guard for Medicare. Thank you.

The Chairman: Thank you very much, Ms Eady.

The only comment I would have is that since I also am from Sudbury, we have a finely honed sense of being shafted.

Now we'll go on to our final presentation. Mr. Bruce Mutch is from the Coalition of Senior Citizens Organizations.

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Mr. Bruce Mutch (Representative, Ontario Coalition of Senior Citizens Organizations): On behalf of Canadian Pensioners Concerned, National; Canadian Pensioners Concerned, Ontario Division; the Ontario Coalition of Senior Citizens Organizations; the Toronto Mayor's Committee on Aging; and the Alliance of Seniors for the Protection of Canada's Social Programs, I wish to thank the committee for making it possible for me to represent those organizations and to appear in this review process.

The organizations I'm representing today on this occasion are all non-profit and non-partisan ones. They are all working to ensure that the necessary systems to support health and well-being are in place and implemented responsibly for all Canadians.

Although our emphasis is on issues that affect senior citizens, such as health care, housing, transportation, and income security, we are also concerned for the well-being of our children, our grandchildren, our friends, and our neighbours. In other words, we work for the establishment of a caring society in this country, which we have helped to build and dearly love.

We have asked to appear before this committee today because we believe strongly that Bill C-91 is detrimental to the health of our country.

Our interest in Bill C-91 is not of recent origin. We registered our concern about the negative effects of long-term patent protection for brand-name drugs before the bill was passed. Within two weeks of the last federal election, we wrote with high hopes that the new Liberal government would fulfil its obligations to the Canadian public by rescinding such negative legislation as Bill C-91.

We remembered in the fall of 1993, and we remember now, that in opposition, Liberals, including our present Prime Minister, the Minister of Health, the Hon. Lloyd Axworthy, and many others, were eloquent in their speeches against the proposed Bill C-91. Therefore, when we congratulated the new federal ministers, beginning with the Prime Minister, in the fall of 1993, we did not think we were proposing changes that would be considered beyond the pale when we said we looked for the rescinding of Bill C-91.

The review of Bill C-91 presents the federal government with an opportunity of recommending changes to the legislation so that it will reflect liberal understanding prior to the passing of the bill and will be good for our society as a whole. We look for the protection of Canadian citizens who need quality medication at reasonable costs.

We believe that the well-being of Canadian citizens should have priority over the for-profit drug companies with headquarters in foreign countries. It is a question of the health of Canadians and of Canadian society.

Even before these hearings began, it was reported that a government official said first that the government cannot change the patent protection legislation because of obligations under the North American Free Trade Agreement and regulations of the World Trade Organization, and second, that the clock cannot be moved back.

Concerning the first point, Robert Waspe, president of the Generic Pharmaceutical Industry Association in the United States, stated in a forum in Montreal in January that there are no regulations in NAFTA that prevent the Canadian government from amending Bill C-91 in order to create a more balanced environment for Canadian-based generic drug manufacturers.

At the same conference, Greg Perry, director of the European Union and Generic Medicines, stated categorically that there are no regulations of the World Trade Organization that keep the Canadian government from changing Bill C-91 so that fair competition between the brand-name manufacturers and the generic manufacturers could take place. This would be a means of stabilizing drug prices and helping to control the prices of new drugs coming on the market.

As for the comment that the clock cannot be moved back, we presume that to mean that the present government cannot or is not willing to change legislation enacted by the former government.

Our reaction to that is: why on earth would we have voted for a change in government if it was not to bring about a restoration and improvement of things that were eliminated or destroyed by such an unpopular government that only two of its members were returned to the House of Commons?

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To rescind or modify Bill C-91 so that Canadian-based and Canadian-owned companies are favoured rather than foreign-owned multinationals and so that Canada's universal health care system is not bled to death by the high cost of brand-name drugs would not turn the clock back, but would repair the clock so that it keeps correct time.

The daily press reported on March 4 that the Hon. David Dingwall told MPs that Ottawa could not shorten the patent period because it was enshrined in trade agreements. However, Bay Street lawyer Barry Appleton said that this was just not true. Continuing with what he said, I quote:

I know the NAFTA and the WTO and there are exceptions and there are exemptions that would allow the committee to do the things they wanted to do.

In other words, it would not be turning the clock back.

In meetings with seniors on other issues in Victoria, Vancouver, Edmonton, Winnipeg, and Toronto this past November, the negative views of participants against Bill C-91 surfaced automatically. Seniors in Newfoundland, Nova Scotia, Prince Edward Island, and New Brunswick have also made their opposition clear, as well as their hopes for changes that will benefit all age groups, help to stabilize the health of universal health care, and foster improvements to the general economy of Canada.

In the period leading up to this review process, both the brand-name pharmaceuticals and the generic manufacturers have presented their views to our organizations. We have piles of information on both sides.

We have studied the publications. We continue to believe that it is the duty of our elected representatives to modify Bill C-91 so that, first, Canadians of all age groups needing medication will be able to purchase quality drugs at reasonable costs that are lower than that of presently priced drugs.

Second, Canada's health care system will not be downsized further than it is by the costs of brand-name drugs, which are presently out of control and increasing by approximately 10% to 12% per year.

Third, at a time when Canadians have been asked to sacrifice their quality of life by cutbacks in every field, it is not acceptable that the government should be protecting foreign-owned multinational corporations when we have Canadian-owned manufacturers that can produce the same products for almost half the cost.

A poll by The Toronto Star two weeks ago made it clear that those opposed to Bill C-91 constitute 84% of those questioned. The poll was of all adult age groups, not only seniors.

Thank you.

The Chairman: Thank you very much, Mr. Mutch.

I'd like to thank all the witnesses, before I turn the questioning over to Mr. Brien, for your diligence in making sure your ideas were put across. I know how hard it is and how much work each of your organizations have put into your briefs. It's appreciated. We finished in a reasonable time so as to leave the members time to ask questions.

[Translation]

Mr. Brien, would you like to begin.

Mr. Pierre Brien (Témiscamingue, BQ): Thank you, Mr. Chairman. First of all, I'd like to welcome you to the Committee on Industry, though I know that some of you would have preferred to appear before the Health Committee.

Before putting my questions, I'll make two remarks. There are some points on which we will agree very quickly. Our health care system has been declining for some years now, largely because its funding has been severely cut. This, to a large extent, is the result of cuts in health transfer payments to the provinces.

I also understand the problem you are having in following the Liberal position. We have had the same problem with the GST, free trade and other issues. There is no remedy for that, or at least, we have not found it. No doubt, some researchers will be looking at the problem.

Some honourable members: Oh! Oh!

Mr. Brien: I would also like us to agree on another principle. Every one wants access to medication at the lowest possible cost. But, before medication can be bought, it has to exist. People tell us - and I want to know whether you agree with them - that when a new drug is discovered, some treatments are often modified. Let's say that a given disease required surgery. But then a new drug, which can effectively treat the disease, is discovered - so no surgery is needed, and health care costs drop.

I have heard all of you say that all the drugs which are discovered are pushing up health care costs. But do you concede that these new drugs may also, in some cases, contribute to reducing health care costs?

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Would anyone like to answer? This question is not to any of you in particular, but since your briefs were so alike - Mr. Chairman, we could perhaps begin with Ms Lecompte.

The Chairman: Ms Lecompte, do you have an answer to that?

Ms Lecompte: There is no doubt that some new medicines could have a positive impact on health care costs, provided that they really are more effective than existing medication. There is no clear evidence that all new medicines really do improve health and reduce health care costs.

People tend to think that new medicines are always more effective in treating the conditions they target, but that is not always the case.

Mr. Brien: Yes. However, you know that, before granting a patent, the Commissioner of Patents assesses other products on the basis of specific criteria. These criteria include one specifying that the product should do something new. So there is someone there with a specific mandate of insuring that a product does provide some new and significant benefit, before a patent is granted.

In other words, you are questioning the efficiency of the Commissioner of Patents. You are saying that he's granting patents that he should probably not be granting.

M. Lecompte: What I'm saying is that new drugs are not necessarily superior to old drugs. They are not always unfailingly superior to existing drugs. Do you have any statistics to show that new medicines brought on to the market are unfailingly superior to those that already exist?

Mr. Brien: No, that's not what I'm saying, nor am I saying the opposite. But if we can agree to say that some discoveries do result in lower health care costs, this means that we must grant researchers sufficient protection to provide an incentive to carry out research.

Of course, our society could decide that it wants nothing to do with research, and that it just wants an industry that copies brand-name drugs. That is a choice. However, making that choice would not necessarily result in lower health care costs, for two reasons. First, we could enter into international agreements allowing companies who discover new drugs elsewhere to sell them in Canada. The price of drugs would remain essentially the same. But we would lose the benefit of having research conducted here: we would lose jobs, we would lose researchers, and the rest. We would lose all that.

With today's international economic environment, losing the infrastructure that attracts researchers and industries would mean losing the researchers and industries themselves. They would simply manufacture their products elsewhere, taking those benefits with them, and simply sell their products here.

Ms Lecompte: Yes. But in our brief, we all said that pharmaceutical companies were making huge profits, even before they were protected under the Patent Act. It has been demonstrated that pharmaceutical companies would be in excellent financial health even without the comprehensive protection they are afforded in Canada.

[Someone in the room applauds]

Mr. Brien: Someone in the room agrees with you.

I would like us to discuss some points very frankly. Both sides - generic drug companies and brand-name companies - are huge corporations. One side is not in greater trouble than the other.

Ms Lecompte: No.

Mr. Brien: Generic drugs are very profitable. In Canada, the market is dominated by two companies: 75% of all generic drugs are made by two companies. So competition in the generic drugs sector in Canada is fairly limited. It will be increasingly less limited as generic drugs are imported from other countries. At present, however, there are two major players in the generic drug industry.

What's happening elsewhere is what's going to happen here one day: mergers. Brand-name manufacturers who do the research are going to buy up generic drug companies, and have it all. We are not going to escape that trend.

So here is the choice we are left with: if some protection is provided, the system would not necessarily be in line with international standards. The system you want is the one that results in the lowest possible health care costs, regardless of the fact that it will lose us jobs.

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Mr. Lecompte: Mr. Brien, you do us great honour by asking us such long questions. Now that we are at the end of your question, I find I have forgotten the beginning.

You will not force me to take a stand in favour of generic drugs and against brand-name drugs. What we are asking the government to do is simply this: to develop a policy that best serves Canadians and consumers.

Mr. Brien: Fine. We can agree on that. But I felt that your brief showed a strong pro-generic tendency, and that's why I put my question. But you say that you are not necessarily in favour of generic drugs.

Yes, Mr. Soulière. I will have one other question, a somewhat more technical question on one of the briefs.

Mr. Soulière: Some aspects of the issue are not presented in your brief. With regard to the cost of medication, we recommend that the system be fair. Who says that 20 years is an appropriate period for patent protection? It seems very long indeed.

If you let generic drug manufacturers copy drugs after a given number of years, sell them, but ask that they pay the brand name manufacturer a sum to compensate for research, we might see medication costs go down. One of the issues here is the additional 30-month protection period, which can be obtained only on appeal. People don't like that. Those are 30 extra months that don't cost the manufacturer anything.

You are asking technical questions that would be better answered by people in the field. We receive all kinds of statistics and statements from both sides. All kinds of contradictory political statements are made, even within a single party. It's a bit difficult for people - this is what counts for seniors, whether we accept it or not: medicines are more expensive for them, in a system that is not fair to everyone. That, I believe, sums up the recommendations made by everyone around the table.

Mr. Brien: I'd like to ask you a question on one of the points you made. You present many statements as facts, including the one you made on automatic appeal of a notice of compliance, which extends patent protection for 30 months. I understand your problem, because we have the same one. We hear diametrically opposed arguments from both sides. We are a bit like a group of judges, who have to come to some decision when all the arguments are heard. I'm sure that you are feeling the same pressure.

You say that patent protection is granted for an additional 30 months automatically whenever a notice of compliance is appealed. But let me explain that here, in Canada, we allow generic drugs to be produced before the brand-name patent expires. Only two countries allow this: Canada and the United States.

So when a notice of compliance is appealed - and that is the 30-month extension you're talking about - two parallel processes are triggered: approval of the generic drug by Health Canada, and debates before the courts, which usually last about 26 months. The approval process takes less than that. This means consumers don't lose anything, since in any case they would not have access to a generic drug before it was approved by Health Canada.

This is one of the arguments put forward by generic drug manufacturers, and we see it in your brief. You have just stated it yourself. Were you aware of the other side of the coin? Did you have the information?

Mr. Soulière: We were more or less aware of it. We know that, when an appeal is filed, it takes quite a bit of time for the case to come up before the federal court. Yes, we knew that. We know what it implies, as well.

As I've said, we are not pharmaceutical experts. That is why we recommend that you consult experts before assuming your very important role - making decisions.

Our recommendations are aimed at ensuring that the system is fair to everyone, and particularly to Canadians who cannot afford the 13 or 15% annual increase in drug prices.

Mr. Brien: One last quick question, Mr. Chairman. A lot of ideas have been put forward but not explained.

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For the most part, you represent senior citizens. You have often said that more information on medication should be available. Do you have anything specific in mind? Do you have any suggestions to make as to how this could be achieved? What kind of information should be made available, and how should it be presented so that your members, and consumers in general, can make enlightened choices? What exactly do you have in mind?

Mr. Soulière: As an example, I'll explain how our health plan works. I'm talking about the public service health care plan, which is also available to retired public employees. There is a rule that generic drugs must be provided if they are available. Under the plan, the physician is notified that he must recommend a generic substitute unless the brand-name drug is absolutely essential.

The Chairman: Thank you.

[English]

Ms Eady, I'll get back to you in a minute. I want to proceed with the next set of questions.

Mr. Mayfield.

Mr. Philip Mayfield (Cariboo - Chilcotin, Ref.): Thank you very much, Mr. Chairman.

I want to begin by thanking you, ladies and gentlemen, very much for your presentation. I understand that you speak on behalf of your constituents and come here with a degree of concern expressed to you by them and sincerely offered by you.

You have perhaps begun to learn some of the difficulties that we as a committee are having in listening to the various interests. I want to say to you, as I begin asking a couple of questions, that I don't feel like an expert in this. What I most would like to arrive at with the committee is a solution that is fair to everyone involved, and I'm sure that's your point of view too.

It's hard to do, though, when you listen to companies on both sides saying they have to have a certain base and certain conditions, and if they don't have those in the world marketplace, their companies will not be here. I hear that too, and I hear you clearly saying that consumers must have products they need and can afford at the same time.

A word has been mentioned, not only by you today, but by other groups that have come in, and that is ``over-prescription''. I really would like to understand why that word has been brought into this conversation as we talk about a review of the Patent Act.

I think I understand what over-prescription means. I'm aware of people who have two or three conditions and they get a pill for this and a medicine for that and a medication for something else, and the combination of these drugs doesn't seem to do that person too much good.

I'm wondering how you are expecting us as a committee to deal with the matter of over-prescription, which I understand is a matter basically between the patient, the patient's family, and the prescribing physician. Can you tell me why we're talking about over-prescription?

Mr. Mutch: In a very important sense, over-prescription is not really an item for your committee, but it has been brought up. The Pharmaceutical Manufacturers Association is pushing the notion that the reason for the rising costs of drugs has to do with people, especially seniors, taking too many drugs.

Seniors do not take any prescribed drugs that are not prescribed by doctors; that's one thing. For the pharmaceuticals to bring this up at this point is to deflect from the real issue of their patent protection.

Just yesterday in my mail I received from Madam Erola a study that has been done on behalf of the pharmaceuticals that really lays the blame for the question you're facing on over-prescribing. I don't think you should accept that as a primary issue.

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Mr. Philip Mayfield: Is that a response that you all basically agree with?

Voices: Yes.

Mr. Philip Mayfield: Just as I understand it, I'm prepared to leave it at that.

With regard to the patent itself and the length of the patent, we've heard the patented drug manufacturers talk about the difficulties they have with the infringements on their patents and the difficulty of enforcing the patents under Canadian law. They say they have an easier time of doing this in the United States.

We've heard the generic manufacturers talk about the unfairness of the 30-month injunction.

I'm wondering if you come with any specific ideas or proposals on what would be a fair way of resolving this dilemma.

[Translation]

Ms Bérubé: I think that 20 years of patent protection for new medicines is much too long. I'm sure that the companies don't need 20 years for their experiments and tests. Saying that companies need 20 years and even more to produce brand-name drugs is exaggerating. That has to be cut short, and the system must be based on the principle that brand-name medicines should not be costing consumers - and particularly seniors - so much money.

In Quebec, seniors have to pay 25% of their medication costs. So the more expensive drugs are, the more seniors have to pay out of their own pockets. If we want to protect consumers, there should be some way of preventing pharmaceutical companies from making huge profits at our expense.

[English]

Mr. Philip Mayfield: The pharmaceutical companies have said to this committee that in fact, while there is a 20-year patent protection period, the period they're able to market that drug for is much less than that. Some have said they may have only 8 or 10 years of that 20-year protection period in which they have a licence from the authorities to market the drug, and that in fact that period of time is not long enough for them to recapture the costs and make a reasonable profit on the developments they have made.

In fact they have compared it to some other countries, and they say that by extending it for drugs that take longer to develop, perhaps it should be more like 14 years instead of 10 years of protection while it's on the marketplace, which would mean an extension from 20 to 24 years.

I know that probably is not what you'd like to hear, but how long a period of time would you say would be fair for a patented drug manufacturer to have protection in the market for their product?

[Translation]

Ms Bérubé: I don't know how long. But you, who are the elected representatives of the people, should represent the people and not companies who are making money. We are telling you that medicines cost too much. It's up to you to come up with some way of controlling the pharmaceutical industry so that consumers - the people who elect you - pay less for drugs. That is our message to you.

[English]

Voices: Hear, hear!

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The Chairman: Mr. Mayfield's time is just about up, but I'll take two more interventions at this point.

Mr. Soulière, followed by Mr. Mutch.

Mr. Soulière: I understand where you're coming from and the difficulty you will be facing, but I don't think you can ask people from our associations whether or not 10 years or 14 years is too long or too short. The fact of the matter is that since this drug protection has come into effect, there have been large increases in the cost of drugs. As the study by Mr. Mutch indicates, we were the lowest in terms of the cost of drugs, but now we're one of the highest.

The second point we raise is that the pharmaceutical drug manufacturers tell you it's easier to get a patent in the States or somewhere else than it is in Canada. I wonder what they say when they make their presentations in the States. Who's to say they're not saying the same thing? These are multinationals. They know the words and they know how to present them to various politicians. They might be saying exactly the same thing in the United States, that it's easier to get a patent in Canada than it is in the States. I would check that out before a decision is made.

It's also my understanding that if a patent is granted in the States, it's automatically an official patent in Canada. It's my understanding of this. If you make a patent in one of the countries, the other country respects that patent. Am I right?

The Chairman: I don't think that's correct.

Mr. Soulière: My understanding is not correct then.

The other point you make is the time it takes between the patent and the health department's acceptance for the purpose of the drug's marketing. In your process of understanding, perhaps in order to get this product on the market as soon as possible, maybe there should be a simultaneous review of the drug by Health Canada and by the patent office. Instead of waiting for the patent office to finish its work, which might take two or three years, and then to pass it on to Health Canada to see if it's good for Canada, there should be a simultaneous process. That's administrative and might reduce the cost.

The Chairman: Thank you very much.

Could we have a brief comment from Mr. Mutch, please?

Mr. Mutch: Mr. Chairman, I wish to apologize. In order to catch my train, I must leave within minutes. I would like to respond to you, though, sir.

In what you have asked us, I feel there is a resistance on your part to changing or modifying the bill so that it protects Canadians. It seems to me that when you're... I don't have a brief for either of the players in terms of cost, but I think the cost of drugs should come down.

None of our organizations is being funded or given grants from either of these drug groups. It seems to me, though, that if you have doubts, you should be supporting a Canadian-based, Canadian-owned group rather than multinationals.

The Chairman: Thank you.

Mr. Bodnar.

Mr. Morris Bodnar (Saskatoon - Dundurn, Lib.): Thank you, Mr. Chairman.

I don't mind the idea of supporting a Canadian company or a Canadian group of companies as long as those companies are also not, to use the words of one of the presenters, ``ripping off the public''.

I'm trying to be as objective as possible in looking at this, but I think one of the expressions used was very close to saying that we shouldn't be representing the big companies; we should be representing the public. Those are the people we represent, but we have to realize that the public involves seniors; the public involves people who work for these companies - for both sides, the generics and the patent drug companies; and the public involves everybody who lives in Canada and is a Canadian citizen.

I just want to clarify something before I ask my first question, and that's with respect to some of the comments that were made by the now Prime Minister prior to the last election. There have been some comments thrown around, so maybe I'll just give you a comment from a newspaper of December 5, 1992. It said:

Liberal Leader Jean Chrétien says he's opposed to the government's bill to extend prescription drug patents but he can't promise to repeal it if he becomes prime minister.

There was not a promise to repeal it.

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He then goes on to say:

But noting that both the proposed North American Free Trade Agreement and the draft General Agreement on Trade and Tariffs require elimination of compulsory licensing, Chrétien suggested it may be impossible for a Liberal government to resurrect it.

In other words, he left the whole matter completely wide open. I just want to make that clear.

One quote from the Prime Minister's letter was given in the presentation made today byMr. Soulière:

Liberals will be carefully monitoring the effects of Bill C-91 on Canada's health care system, and on the cost of drugs to Canadians.

That's what we're trying to do here, and we need as much information as we can get. I can tell you that, at least from my perspective, I do not have my mind made up on anything. I come in with a completely open mind, which is why I need information.

Here is some of the information that I have received here today, and I've tried to read it over quickly. It's from the Seniors on Guard for Medicare, and it deals with the cost of drugs over the period 1975-1993, with the drugs being at 8.9% in 1975 and 15.1% in 1993. The problem I have with those figures is that they don't give me a breakdown between the generic drug industry and the patent drug industry. As you probably well know, we have no jurisdiction over the generic drug industry. It's completely provincial. I would therefore appreciate some of your comments as to whether or not they should be under the auspices of our price review board in order to control their pricing, as the patent drug companies are. Anyway, we don't have a breakdown.

Secondly, this deals with the percentage of money spent; it doesn't tell us the percentage of increase in price. In other words, cost and price aren't the same thing. Costs can go up because of increased sales, even though the price may have gone down. So I don't have a breakdown of that either. That's the type of information I'm looking for, but I'm not getting it. I'm wondering if you have such information, and if you do, can it be made available to us?

The Chairman: Is that directed to Mr. Soulière?

Mr. Morris Bodnar: No, it's to the lady who presented the paper for the Seniors on Guard for Medicare.

The Chairman: Mrs. Eady, do you want to make a comment?

Ms Eady: Yes. We had to try to keep the brief short, but we do have some of that information. I'd be happy to supply it to the committee.

Mr. Morris Bodnar: If you could supply it to the clerk, we could then have it distributed to everybody.

Ms Eady: Certainly, but I would also like my colleague to give a personal example of the impact of the cost in a personal way.

Mr. Romeo Maione (Chair, Seniors on Guard for Medicare): I should think that those statistics would be easily obtained by the federal government just by contacting the provincial governments. To ask people who are working in the field to actually do work that the government should be doing - that's just asking too much of us.

Mr. Morris Bodnar: Sir, I never asked you to get the information for me. I asked whether or not you could supply it if you have it. If you don't have it, tell us that, and we will get that information from other sources.

Mr. Maione: We understood that you wanted the information from us.

Mr. Morris Bodnar: Now, also in your paper, you make a comment that ``in the last few years we have not seen any enhancement but an erosion of Medicare, due to under funding'', etc. The National Forum on Health says that our medicare system is not underfunded, it's just mismanaged. What do you say to that comment by the National Forum on Health?

Ms Eady: I think the question becomes... There's a lot of restructuring going on across the country. Many of the citizens feel the services they used to have are no longer there. It's not always clear to the members of the public. We're volunteers in our organization, and we're spending our time trying to figure our way through many of the things that are going on.

I think the underfunding is there in terms of the incremental costs. The provinces have been given less in the sense that they may have the same amount of dollars, but those dollars may not necessarily be for the same purposes. In other words, the Canadian health and social transfer changes the way in which many of the social programs in the country were in fact funded.

Hospital beds have been closed all across the country, and I think that's a worry that we feel in our organization. If the system isn't changed - and we're certainly supporting thought-out changes. Our concern is that many of these changes, particularly those going on in this province at the moment, have not been thought through as to their long-term implications.

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Mr. Morris Bodnar: One of the problems - and again I speak from personal experience on this matter - more than anything is on the pricing. It seems every time you buy drugs or get a new prescription they seem to be a higher price. That's the experience I have. Yet some of the information we have on patent drugs is that they've gone down in the last couple of years.

Then I find out that even though I need my medication on a permanent basis, on a yearly basis, and my prescription is for a full year, it's broken down into 12 so there are 12 separate prescriptions given to me, and there is a separate dispensing fee charged every time. That dispensing fee is 25% of the cost of my medication - the dispensing fee alone.

Again, that's not a matter within our jurisdiction. It's completely within provincial jurisdiction. That is not something we can blame on the generic firm, because it's a generic drug I use. I don't want to blame Apotex at all for this particular price, or any other company. This is a matter of the regulation within a province.

So I ask all of you who want to respond, dealing with generics in particular - and I've mentioned this before - do you believe the price for generic drugs or the pricing of drugs generally should be regulated by the Patented Medicine Prices Review Board or by a similar agency? Are there any comments on that?

The Chairman: Have you given this any thought?

Mr. Soulière.

Mr. Soulière: I'll give you a solution to your problem of paying 12 dispensing fees. There are all sorts of ways you can go around it. For one thing it depends on your pharmacy, but you probably could get...and you're probably paying more than $7 a prescription or whatever it is. At some of the drugstores such as...I won't mention names here because I don't want to publicize them, but you can get them for as little as $3. There is also a mail order process. If you have a continuing need for the drug, they'll deliver it once a month or they'll deliver a three-month's supply of the drug and charge you one dispensing fee. There are ways of doing this. If Canadians knew more about saving, the costs would go down.

In terms of who should do what, it's always the same question in Canada. You're asking more than a fundamental question. For the person who is retired and on a fixed income, he or she really doesn't care. Somehow, somewhere, we'll have to look at the health care situation as a whole and not as little bits and pieces here and there and who should be doing what. If it is going to save money to the person who needs it, and if we are going to protect our health care system, everybody has to work together towards this. Regardless of where the protection comes from, it could be a joint process.

In our brief we recommend that all drugs be reviewed by one body, because we don't think this is a political decision. This has to be a decision on our health care system. Surely, when you think about it that way the politicians have to get together and make some kind of a system work whereby it's going to save money for our seniors.

The Chairman: David Woodsworth.

Mr. David Woodsworth (Chair, Social Policy Committee, Coalition of Quebec Seniors): In its brief the Coalition of Quebec Seniors has tried not to take a position between the generics and the patented drug manufacturers. But we do think the price review board should be given extended powers. We've recommended that both in the control of prices and the limitations of prices, but also in an extension of their authority to assure the continued quality and the uses of drugs.

One of the major things, which somebody asked a question about, is over-prescriptions. It's not only over-prescriptions, but misprescription, misuse and misinformation. There is obviously a need, whether it's under the price review board or the Ministry of Health I'm not sure. I would think it would be a condition of continued patenting or the issue of patents that there should be adequate assurance of proper information about the purposes for which a drug is issued, for what it is to be used, and the dangers of the possibility of misuse, because we have had figures indicating that something of the order of possibly 25% of hospital admissions of seniors are because of misapplication of drugs. I think it's a very serious question of cost for the individual and for the state.

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So I'm not sure exactly what the authority of the price review board is, but I would think we should consider the possibility of whether patents should be linked in some way, not only in regard to cost, but in regard to quality control.

The Chairman: Thank you very much, Mr. Woodsworth.

I'm going to go to Mr. Ménard and Mr. Murray. Mr. Lastewka has his hand up. Mr. Mayfield, did you want one more word? Then I think we will be into the bells and we'll make a decision at that point.

[Translation]

Mr. Réal Ménard (Hochelaga - Maisonneuve, BQ): Thank you for being here today.

I would agree on two counts. First, the profits and practices of multinational corporations should be questioned, both for brand- name companies and generic companies. We should certainly not be making things easy for them, and I think you are quite right to be concerned.

You are also quite right to ask for a campaign to prevent over-consumption of medication. I think this is a very honourable goal.

I have four questions for you. The first is on PMAC, who published a letter in the newspaper, stating that it was campaigning to invite consumers, particularly seniors, to moderate their intake of medication. Do you think this is a common practice? Were you associated with the campaign? Were you aware of what they were doing? Don't you feel that, in the past few years, some manufacturers are becoming more aware of the fact that no one wins when people abuse medication? That is my first question.

If you don't mind, I'll put all my questions at the same time, and I'll try to be clear and concise.

I'll put my second question. You are, and quite rightly, very critical of the Patented Medicine Prices Review Board. But I would like to see some data from you. I'm not asking this out of laziness; we do have the feeling the Board may be able to help. According to the Board, a comparison between Canada and other industrialized countries shows prices of medicines have gone up much less in Canada than elsewhere. And the Board can quantify that statement. I know that none of you have the technical expertise on an individual basis, but if you could refer us to experts who could explain why the Board's assessment could be erroneous, you would be helping us in our consultation.

My third question...

The Chairman: You just have two minutes left. Do you want to put the question, or do you want to get the answer? It's up to you.

Mr. Réal Ménard: I just have one question left. The first witness suggested that advertising by pharmaceutical manufacturers be restricted. I find that an interesting notion, but I would like to know what you object to in their advertising, which you consider excessive. Could you please elaborate on this?

I have finished, Mr. Chairman.

[English]

Ms Delahanty: I think one of the things you're speaking about, over-prescription and advertising, should be directed at the medical profession. We simply take the prescriptions we're given. We don't have any idea of what they are. It's the medical profession that must not over-prescribe. Who else? People take prescriptions because they are given them. They don't always understand the balance between them. We don't always understand. We're not stupid, but you take what you're given by your doctor.

So it's the doctors or physicians who should have this. This advertising is directed to them from everywhere, from all kinds of generic and brand-name... They just take what sounds good and prescribe it to us. As I say, we're not the consumers in this issue.

[Translation]

Mr. Réal Ménard: Do you think that PMAC and some of its representatives are aware of drug over-consumption and really want to stop it? I agree with you that doctors have some responsibility in this matter, but I know seniors who do not accept advice, even in my family. We must not be naive and we must realize that there are some seniors who demand drugs. Nobody is forcing any one to swallow pills.

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Doctors and manufacturers certainly do have some collective responsibility, but this responsibility must also be shared by the consumer.

Ms Lecompte: We are aware of the efforts made by PMAC. We have in fact read its documents and viewed the video cassette it produced. Moreover, we are going to pass this video cassette around our chapters. Indeed, this video cassette targets neither under- consumption nor over-consumption but advocates adequate consumption, proper consumption. I think that this is positive and is truly indicative of PMAC's desire to avoid both under and over- consumption.

I would like to go back to what the lady just said. We can't talk about drugs without talking about health and we can't talk about health without talking about medical practices. This is why we would advise you to talk about over-prescription also when you talk about over-consumption.

[English]

The Chairman: I'll go to Mr. Woodsworth for a final comment on this. Thank you very much, Mr. Ménard.

Mr. Woodsworth: We have talked about the need for some limitation of the advertising thing. I think it's perfectly true that some of the companies would cooperate to a degree in a voluntary way to limit their advertising, but on the whole I think, as someone said, they are in the business of making money and you don't expect them to limit it too far.

It's for that reason we have drawn a parallel with the tobacco industry. The government has taken a fairly strong position in regard to the limitation of the use of tobacco for obvious reasons.

We think the same situation exists with regard to the misuse of drugs, and that companies should not be left free to promote their advertising in the face of public ignorance about the consequences of the use of drugs. Therefore, we think there is a place for government intervention, whether through the price review board or whatever agency, in the limitation of the nature of advertising on drugs.

The Chairman: Thank you.

Mr. Murray.

Mr. Ian Murray (Lanark - Carleton (Lib.)): Thank you, Mr. Chairman. There have been a number of rather bold statements made this afternoon by some of the witnesses. I'm sorry Mr. Mutch had to leave, but perhaps if he checks the transcript later he'll see that I was concerned about one of his statements, which was... He was talking about the system being bled to death by the high price of brand-name drugs. I think he used the figure of 10% to 12% a year as the increases. But in fact, as we have been informed by the PMPRB, the price of brand-name drugs has actually fallen, at least in two of the past three years, and if you look at the last four years, annual sales growth of generics has been 26.4% while the brand-name growth has been 1%. I thought I'd mention that. He may want to see that in the transcript and respond to me at some point.

Ms Delahanty, you made a statement that the evidence shows that generic manufacturers' activities are the most beneficial to Canada's interests.

Ms Delahanty: Internal interests.

Mr. Ian Murray: Internal interests. Well, Canada's interests.

I would like to know how much you know about the profitability of generic companies.

Ms Delahanty: That's what I've been told.

Mr. Ian Murray: And what's that?

Ms Delahanty: That it's very great, but it's not as great as brand-name companies because they're held back. I don't know a lot more.

Mr. Ian Murray: I'm sorry. Who's held back?

Ms Delahanty: They are held back because of brand name.

Mr. Ian Murray: Even though the brand-name drugs are regulated and the generics are not?

Ms Delahanty: Yes.

Mr. Ian Murray: That's interesting. On the same idea, Madam Lecompte, you made a statement that profits are going to pharmaceutical companies who are billionaires.

Do you have any idea how much the owners or principals of generic drug manufacturing companies pay themselves?

[Translation]

Ms Lecompte: I will respond by talking about the profit level of the Canadian pharmaceutical industry. Whereas the profit level of the Canadian industries dropped to 5.4%, the profits realized by the pharmaceutical industry never fell beneath 30%. It would appear that the pharmaceutical companies were sheltered from the recession.

I can't answer your question by providing you with a figure, but I do think that if the profit level of industries everywhere in Canada dropped to 5.4% whereas the profits realized by the pharmaceutical industry have never gone below 30%, we should not be feeling too sorry about this industry's financial situation.

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[English]

Mr. Ian Murray: Again, you're making a statement that it's the pharmaceutical companies that are profiting immensely, when you don't know the facts about the generic manufacturers.

[Translation]

Ms Lecompte: I can provide you with an immediate answer pertaining to both the generic and patented drugs. When these companies talk to you about reasonable profits, do they give you any figures? What do these companies mean by reasonable profits? I do not think that the consumers and the pharmaceutical companies view this term the same way.

We agree that these companies must be able to make a profit, but I am sure that what seems to be reasonable to them would certainly appear to be excessive to us.

[English]

The Chairman: Mr. Maione would like to jump in at this point.

Mr. Maione: On this thing of over-prescribing -

Mr. Ian Murray: I wasn't asking about over-prescribing.

Mr. Maione: I just want to present to the committee members that they should read this document I received -

The Chairman: You can place the document -

Mr. Maione: - two days ago. It's the only copy I've got. I don't want to give it away.

The Chairman: The clerk will make copies right away.

Mr. Maione: It's from the government. It's from our government on the Public Service Health Care Plan. It tells me changes are coming.

The Chairman: Sir, we -

Mr. Maione: It touches the essential question. Did Bill C-91 raise drug costs in this country? The government tells me - Treasury Board tells me:

The PSHCP Board of Management has taken immediate action to respond to the significant financial impact caused by the continuing escalation of prescription drug costs and changing provincial health plans that have resulted in substantial shifting of health care costs to private plans.

The Treasury Board then goes on to say that starting January 1 your deductibility will go from $40 to $100 and your pension premiums will go from $25.59 to $34.21.

This is an increase of 50%. Why? Because of escalating costs. Treasury Board tells me this. I might not even know.

Finally - just one more little thing - it says:

...talk to your doctor and pharmacist about using the lowest cost drug alternative...or a generic drug...

It also says to shop smartly for the lowest dispensing fee.

In other words, the government on one hand is giving us Bill C-91, which increases the price of drugs, and on the other hand is telling me to buy generic drugs, when Bill C-91 is delaying the coming of generic drugs for 20 years or 14 years or whatever it is.

The Chairman: Thank you, sir.

Mr. Maione: I would like you to call the PSHCP to answer this, because I think this is an essential thing. On one hand, they're taking away, and on the other hand, they're trying to give it back to us.

The Chairman: Next we'll have Mr. Mayfield, Mr. Lastewka, and Mr. MacDonald. The vote is in 12 minutes or so. Govern yourselves accordingly. Help each other out, if you don't mind.

Mr. Philip Mayfield: I regret when I hear someone like Mr. Mutch - and I wish he himself were here to hear me say this - say I'm sort of backing one up. My intention is to try as fairly as I can with my committee members to understand what a reasonable and fair solution to the problem is.

The problem, as I understand it, has to do with the length of patent we're looking at. My concern, as I talk about being fair to everyone...it's okay to say they're making enough money. My concern is the need we have for drugs to replace the antibiotics that are not effective for some of the mutant diseases that are hurting our people. I am aware of the cost of AIDS. I am aware of the things that are happening in transplants and the drugs that are required.

There's a whole burgeoning world of exploration, and somebody's going to pay for it. I don't think we can just say damn the pharmaceuticals, because they are providing a service we need. I would be very loath to see these companies that we depend upon walking out of our country and saying they can't make it here, so they'll do it somewhere else.

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I understand what you're saying. These companies don't vote for me either. My constituents vote for me, and they have the same concerns you do. Believe me, I'm trying to be fair in this. You have come here to talk about a fairly technical and complex problem. When I ask, you say I have to make up my mind. You are here to help me and this committee to make up our minds on this.

I want to come to the problem of the length of the patent. I want to talk about it with you and I want you to think about it. I have enough old people in my family to know that they have a lot to offer. I'm expecting that of you too.

The problem, as I understand it, is that we have in our legal system in Canada put companies in a position in which they are not able to sort out their problems. Whether the Liberal government - this government - or the next one is going to change it, I don't know; I'm not a member of the government side. But I do want to know how we can look at this problem and fairly come to a decision. Everybody knows that in a good deal everybody wins. That's what we have to come to: the generics, the patent manufacturers, and the consumers, who are the people who depend upon these drugs.

The Chairman: That's a very good point, Mr. Mayfield. Perhaps we can ask the participants if they have a response before your time is up.

Mr. Philip Mayfield: I think that's fair, Mr. Chairman, thank you.

The Chairman: Ms Eady, I'll start with you, please.

Ms Eady: I have a quick suggestion, I hope. When I read the report of the National Forum on Health, it seemed to me in this section they had a lot of good recommendations. There were things that are going to take a bit of time to sort out and are going to take cooperation between the various people. They don't offer a cut-and-dried solution, but they do offer some principles as the parties work toward the solution on this question. It's not just Bill C-91. Other things, which have to be in place in order for it to work, are involved, in my opinion.

I think the question of research and development has been vastly overstated by the brand-name drug companies. If they're spending all that money, I think it should go into a fund, as is suggested in the National Forum's report, and then be dispensed to universities and places where most of the original research takes place. It doesn't take place in the laboratory of the pharmaceutical company. If they're spending all this money, the question occurred to me, why would they need twenty years before they can develop another one that would be even better? I just don't think they're spending it on creative development as they should be.

All those things need to be looked at, but I think there's a lot of food for thought in this report. I suggest that people look at it closely and discuss it with the parties that have to be part of the solution.

The Chairman: Mr. Soulière.

Mr. Soulière: I sympathize with your problem, but I don't think you identified the right problem. The problem is not the length of protection, the length of the patent; the problem is increasing drug costs. The consumers who pay for it see that experience has shown that since 1987 drug prices have increased. They increased when patent law was changed to extend the length of the patent and when licensing was taken away. That's how they equate it, however else they look at it. That's the experience.

You have to study this and ask what the other causes of the drug increase are. You have to see whether it's the length of the patent or the licensing. That's the challenge.

The Chairman: Is there a comment on Mr. Mayfield's point? We'll have one final comment, and then we'll go to Mr. Lastewka.

[Translation]

Ms Bérubé: In answer to your question, I would say that it is true that we are not experts. We can therefore not really determine whether a 20 or 24-year period is adequate. But I think that we all agree on one thing: we want drugs to cost less money. That's the first thing.

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Therefore, we have to find a way for drugs to become less expensive. Moreover, we, the seniors, need more information so that we can ask our doctors to prescribe the least costly drug.

We are therefore asking you to divide the pie, by giving advantages to both the brand manufacturers and the generic product manufacturers. We are also saying that the two must continue coexisting because they provide jobs to our children and our grand- children. We do not, of course, want to see advantages going only to the companies that manufacture innovative drugs. In addition, you must also take us, the consumers, into account.

[English]

The Chairman: Thank you.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Mr. Chairman.

I really appreciate your last comment. It answers a few of the questions we had before, so I really appreciate your bringing it out.

I want to summarize a number of items, and if I have any time left I'll share it with my colleague Mr. MacDonald.

Ms Heeney made it very clear to us about a pharmacare program. I understand that. A number of the witnesses talked about generic drugs and being covered under the PMPRB. One of the questions I had - and I'm not sure that Mr. Mayfield got his question on it answered - was whether you have discussed with the provincial governments including this in the PMPRB. Have you had any discussion with the provinces as far as it concerns rolling the generic drug companies into that program?

A witness: We haven't had the opportunity.

Mr. Walt Lastewka: You haven't had the opportunity. Are you willing to do it?

Ms Delahanty: After some thought, yes.

Mr. Walt Lastewka: I think it would catch all the manufacturers.

We had witnesses here the other day from CARP, which represents I guess in the neighbourhood of 270,000 people. Their main message to us was that they agreed the brand-name companies had to have some patent protection, but their concern was that once the patent had been completed, a smoother process be put in place so that generic companies could participate in those drugs immediately after the patent expired. I'd ask for your comment on that. Do you agree with them or not?

Mr. Woodsworth: Speaking of numbers, Mr. Chairman, I don't think we mentioned that the Coalition of Quebec Seniors represents about 350,000 members.

I think, in principle, we would agree with what you have said about the CARP position. It's difficult to answer the question about how long, whether it's 20 years, 18 years, or whatever. That's a very delicate question, and we have been reluctant to put a time limit on it. In principle I think we would agree that they need protection of a certain length but relative to the cost factor.

The phasing-in question, the relationship between the generic companies and the patented companies, is something that does need adjustment. It's not just a question of fairness between types of producers but also a matter of cost control. Again, in terms of cost it has been shown that generic drugs are considerably less expensive than patented drugs. The question of how long protection is needed is a moot point, but we do think there should be a better phasing in for the generic manufacturers who put it on the market.

Mr. Walt Lastewka: I have one more question before I pass this over to my colleague.

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The people from Seniors on Guard for Medicare made a statement that the pharmaceutical companies spend $1 billion per year on product promotion and only $89 million per year on research. All I ask is if they could provide some data on that and where they got that information. It would be very handy for our deliberations.

The Chairman: Thank you very much, Mr. Lastewka.

We'll have Mr. MacDonald for a couple of questions and then we'll try to end around 5:30 p.m. or so.

Mr. Ron MacDonald (Dartmouth, Lib.): Thank you, Mr. Chairman.

I am very pleased with the presentations I heard today. I was starting to think this was just going to be a mammoth battle between the appetite of the generics and the appetite of the patented pharmaceuticals companies. I'm very pleased with the tenor of the presentations today, because you took the interest that we're supposed to be looking after and put it front and centre, and that is the consumer interest.

This is a very difficult debate. I went through it in Bill C-91. I have to tell you that all the usual suspects seem to be around the room, as they were back in Bill C-91. But the consumer interest has to be the overriding interest for this committee, and the presentations I heard today gave me a ray of hope that some people are still concerned about consumers.

One thing I do know - and I have a couple of questions - is that a lack of competition keeps prices higher than if competition were present. When you talk about extending patent periods, which I think some members of the Bloc Québécois would like to see done... They want to see patent periods extended in some cases even further than what Bill C-91 did. It's called patent restoration.

I know when you deal with a monopoly product in the market, if you don't have competition, you have to have a strong regulatory regime to make sure there's no price gouging or fleecing, as one of the members said. I'm concerned that the current regime we have under Bill C-91 does not anywhere, even with the PMPRB, compel the drug manufacturers, the patented medicine companies, to justify the entry-level price they have on drugs.

We asked the other day, and the PMAC guys who were here talked about averages; they said it takes about an average of $500 million. But when they submit a drug to the PMPRB, they don't have to justify what their entry-level price is. They just have to show that it's pretty much on average with seven other countries. Can somebody give me a comment on whether or not you think that's a fair way for our PMPRB to ascertain whether or not a price is fair?

The Chairman: Would anybody like to start? Does anybody have a comment? It doesn't require a professional opinion, just an opinion.

Mr. Maione: It would be good to ask the big drug companies, if they're going to come here, exactly how much money they spend on educating doctors about new drugs. We say we have$1 billion, and I calmly say that for every three doctors, there's one drug pusher. That's what they are. They're pushing drugs. They may be legitimate drugs, but they're pushing drugs.

Can you imagine a poor doctor having to go out for a meal once a month with one of these guys and that's where they're going to pump the information into the doctor about what this drug does, etc.? If you want to stop over-prescription, all the money that's spent on educating doctors shouldn't be looked at as an expense. In other words, it shouldn't come off their taxes. I would start controlling that. We might have only one drug pusher for every five doctors then.

The Chairman: Do you want to have a final comment, Mr. MacDonald?

Mr. Ron MacDonald: Yes, I want a comment from somebody up at the front there.

One of the things we have to do is work with the provinces on their provincial formularies to try to get the price of prescription drugs down - generic and patented drugs, prescription drugs generally. Would it be the view of the panellists we have at the back that the federal government should make a move to establish a national formulary so we can do that?

Ontario's done it well. Ontario, because they're a big consumer, basically tells a lot of the drug companies what they're prepared to pay. They do reference pricing in other provinces. They don't do that in Quebec yet. Do you think a national formulary would work, where the federal government works with the provinces so we can force both generic and patent companies to make bulk purchase buys to get the price of drugs to consumers down in the health care system?

Mr. Soulière: You raise a valid point, and it's an extension of what I was mentioning earlier.

The danger with this committee and with other committees also is that we look at parts of the health care system in isolation. This is drugs; it's only part of the total health care system. The answer to your question is broader than that. Provinces and the federal government must look at the health care system as a total program. They must look at what is happening with the transfer of funds and the changes in the health programs across the country, such as closing hospitals in Ontario and the new medication program in Quebec - creating all sorts of things. You could start with this as an attempt to get a national look at drugs, but look at it in terms of the total health care program. There are some recommendations related to that in the National Forum on Health that take a broader view of it.

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The Chairman: Thank you very much, Mr. Soulière and Mr. MacDonald.

I'm speaking on behalf of the whole committee when I thank you very much, not only for the preparation of your briefs but for your very straightforward answers and, as Mr. MacDonald said, for reminding us who we're here for, because it is an industry committee and it is an industrial confrontation, but at the heart of it is the health care of every Canadian. We appreciate you bringing this to the table and making sure we remember that. Thank you again.

Is Mr. Chiles from Green Shield, our next witness, in the room? Okay. As soon as the vote is finished, which will probably be within 25 minutes, we'll meet to hear this witness. We originally had three witnesses scheduled for tonight, but two cancelled on us. We're unable to reorganize, so we're just going to deal with the one witness right after the vote.

Thank you very much. The committee will reconvene in this room as soon as the vote is finished.

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The Chairman: I would like to welcome, on behalf of the committee, Mr. Vernon Chiles, vice-chair of the board from Green Shield. He has a presentation of about 15 minutes.

I welcome you to the committee, sir. Thank you for waiting for us while we disposed of a vote.

Other members will be joining us, but feel free to begin now.

Mr. Vernon K. Chiles (Vice-Chair of the Board, Green Shield Canada): Thank you,Mr. Chair, for the opportunity to appear before the committee. My name is Vernon Chiles. I am the vice-chair of the board of Green Shield Canada.

Green Shield was founded 40 years ago in Windsor, Ontario, as the first North American prepaid private sector drug plan. As Canada's only national not-for-profit health carrier, we offer a full line of health benefits coverage through our offices in Windsor - our head office - Toronto, London, Halifax, and Vancouver.

In addition to administering health benefits for the private sector groups and individuals, we also operate the Ontario Ministry of Health drug benefit network, which links pharmacies with the Ministry of Health and does drug utilization review.

Our private sector claims in 1996 numbered some $3.6 million and the Ministry of Health claims numbered in excess of $40 million. None of the information I'm going to allude to in my remarks nor in the written presentation includes Ministry of Health data.

Our founding goal was to provide people access, through the prepayment mechanism, to therapy they might otherwise not be able to afford. Drug therapy, as the National Forum on Health has noted, is part of primary care. We agree with their statement that drugs should not be considered to be a commodity on a par with, as they say, quoting Lewis Carroll - and I'm sure you've heard this quote - ``shoes and ships and sealing wax''. Drugs are different, and access today is even more important than it was 40 years ago. This is the case because we have more effective drug therapies and therapies for more conditions than we had then. From an economic point of view, we have drug therapies that can save us money in hospitalization costs and in time lost from work. Green Shield,40 years later, still focuses on access. In addition, we focus on quality and care and cost of care.

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Green Shield recognizes the need of pharmaceutical manufacturers to reasonable patent protection and profits, but we're not here to side with any group in this debate.

We make our submission in the interests of our clients, who are concerned about the costs of the drug benefits provided. We're concerned that excessively high costs, where they are excessively high for the drug benefits, lead to measures that can compromise access. This is our perspective and this is our bias.

In 1992 we presented our view to the House of Commons committee on Bill C-91 and data from a comprehensive study of the factors affecting average drug claim costs. This was the first study of its kind. It was updated in 1994, with two more years of data covering the years 1988 to 1993. I have distributed, for the information of the committee as background material, copies of that 1994 report in both languages.

I'm going to highlight a little bit of data very briefly. I don't want to confuse people with numbers so I'm going to just round numbers rather than giving you so many cents on everything, and so on.

Our 1994 study showed the drug cost in the average prescription claim rose from $12 from the base year of 1987 to $24 in 1993, an annual rate of increase of 11.6% compared to the inflation rate in the period of 3.8%. When I'm referring to drug costs in the average prescription, I am referring to the cost of the drug component, including cost of distribution but not including the pharmacist's fee.

Of the increase in the average drug claim cost, 54% of that increase was due to the introduction of new drugs over the period. Prices in the same period of time only rose by 2.9%. The main reason for the difference between the 2.9% for prices and the 11.6% for costs is that more costly drugs replaced older, less costly drugs.

I can illustrate by saying that the new drugs introduced from 1984 to 1993...in that six-year period...by the year 1993 they rose to comprise 49% of the costs. That's a remarkably high acceptance rate of the newer and more costly drugs. In that period, patented drugs by 1993 had an average $46 cost per claim compared to non-patented drugs of $16. Patented drugs that were first marketed from 1988 to 1993 had an average cost of $56 compared to $36 for those marketed prior to 1988.

These data illustrate that patented drugs cost about three times as much as unpatented. Not surprisingly, newer patented drugs cost more than older patented drugs.

I'd like to turn now to a little more recent data, in section 3 of the submission. The average cost has increased from 1992, the year prior to the passage of Bill C-91, from $22 to $30 in 1996. This is an annualized rate of increase of 7.8%. The rate of increase in the drug costs is much lower than the 11.6% shown in our 1994 study, but it still exceeds the 1.7% annualized inflation rate by about three times.

In our submission you will find reference to a study of the 200 highest-volume drugs in 1996. These represented 69% of all drug costs in the Green Shield claims that were paid. Of all those costs, drugs on the market more than 10 years represent only 32% of the market value, and those on the market over 15 years a meagre 18% of market value.

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In the submission we also illustrate with a few examples how some new drugs replace older drugs that have a much lower cost. For example, a new ulcer drug that costs $72 replaces an older one that costs $8; a new depression drug at $53 replaces an older one at $2; a new drug for infection at $48 replaces an older one for $3; and a new drug for sleep at $10 replaces an older one at $1.

There is no intention to imply that the drugs are exactly equal in all cases - obviously that's not the case. It just shows the differences in the costs, to bring it down to individual drugs rather than aggregate data.

Our submission also presents data to show that as important as drug prices are, they really obscure the true costs of drug therapy. We recommend that this committee focus not only on the price issue but also on the broader issue of the costs of drug treatment. Specifically, we recommend that the mandate of the Patented Medicine Prices Review Board be expanded to include non-patented drugs, and to examine the issue of costs and not just prices.

The one-dollar-a-day drug that replaces the one-penny-a-day drug may not have an excessive price in terms of what Bill C-91 says, or in terms of the mandate given to the PMPRB. The cost may be excessive if it is commonly used when the one-penny-a-day drug works just as well or better. On the other hand, the $1 cost may be reasonable if the drug is used appropriately and provides health benefits that justify the cost.

From society's point of view, the cost of research does not justify the cost; rather, the health and economic benefits are what justify the cost. This balanced view of costs is what we would hope for from a PMPRB with an expanded mandate.

Some of the market responses to Bill C-91 are outlined in our submission. It covers things like changes in formulary management strategies, such as restrictions on drugs that are covered in formularies; the use of prescribing guidelines; and reference-based pricing.

In addition, many employers and provincial governments have increased deductibles and co-payments as cost-sharing or cost-shifting strategies. It would be an exaggeration to say all these were caused by Bill C-91; I'm not saying that. But in part they are a reaction to costs and perceptions of higher costs.

With respect to the measures in C-91, our submission urges the committee not to extend patent protection beyond the present 20 years. Manufacturers have many ways to increase effective market life or market monopoly. These include the use of additional patents on the same drug; the addition of new patented formulations such as the long-acting capsule; the marketing of the originator's own generic version in advance of other generics; and defending their exclusive right to the unique appearance of the original product.

A drug that maintains market exclusivity for 10 to 15 years lives out most of its market life without any generic competition. Any extension beyond the 20 years from date of filing period would give monopoly protection for virtually the full life of most drugs. For Canadians who have access to lower-cost products, while they still have a significant market share, the period of exclusivity must not be excessive.

The early working and stockpiling provisions of Bill C-91 allow Canadians access to lower-cost versions soon or very shortly after the original patent expires. For a generic company to have a product ready to sell, it must go through the process of formulation, bio-equivalent studies, submission to Health Canada, and manufacturing.

The PMAC submission to this committee states that the early working provisions allow a generic manufacturer to enter the market up to 60 months earlier.

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Now, in some of their information the generic industry says six or seven years. I wouldn't be qualified to say what the number is, but at Green Shield we certainly feel that the early working and stockpiling provisions should be retained. An extra five years of market exclusivity would mean that very few drugs would ever have a lower-cost, generic version during the period in which it is significantly used.

In some provinces lower-cost versions of drugs cannot be readily used by pharmacists until the provincial authorities rule on the basis of the same evidence Health Canada reviews prior to issuing a notice of compliance.

In our submission we recommend that a mechanism be found so that comparable brands of a drug that have already been reviewed by Health Canada can be readily available in all provinces and territories.

In our submissions to parliamentary committees in 1969, 1987, 1992, and 1993 we supported compulsory licensing. Although this still might be our preference, we note the decision of the government, as expressed to this committee through Ministers Manley and Dingwall, that Canada's international agreement makes such a course impossible.

In his presentation Minister Manley noted: ``Depending on your perspective, small nuances can significantly alter the balance.'' Balance for the brand industry is balance on the world stage in terms of patent protection. Balance for the generic manufacturers is a move to less patent protection so that they can maintain and enhance their market share. Balance for us at Green Shield is the need for reasonable patent protection, which also acknowledges the need of Canadians for access to medications at costs that are affordable to employers, individuals, and governments.

As the committee considers the technical argument and the rhetoric - and I'm sure you've heard a lot of both - we suggest that the perspective ought not to be that of any interest group, but rather that of the broader need of Canadians for access to affordable medication.

Mr. Chair, I'm happy to participate in the discussion and to respond to questions.

The Chairman: Thank you very much, Mr. Chiles, for a very clear presentation. I'm sure the committee members will have lots of questions. I'll begin

[Translation]

by Mr. Ménard. Do you have any questions?

Mr. Réal Ménard: Yes, Mr. Chairman, I have a question.

The Chairman: A list of questions or only one or two questions?

Mr. Réal Ménard: One question, Mr. Chairman.

In your brief you stated that your organization had been in existence for over 50 years and that you did not want to take sides. However, I feel that your words betrayed a certain favouritism towards the generic industry, which I understand perfectly well since this is also your area of specialization.

I would like to ask you one question initially. If you are familiar with the way that the Patented Medicine Prices Review Board works, you will know that it has the status of a quasi- judicial tribunal and that every year it must submit a report containing two types of data: the introduction of new drugs and the evaluation of the patentee's research and development work.

I would therefore like to ask you whether you feel that the cost of drugs has accelerated more quickly in Canada than it has in other countries. My question pertains to patented drugs, but if you have other information on non-patented drugs, you could tell us about it. Do you feel that Canada is in a non-competitive position in terms of the rising cost of patented drugs?

[English]

Mr. Chiles: I'm not in a position to be able to respond in detail on what prices are in other countries. I know that the Patented Medicine Prices Review Board has provided some information on that. I have their report here, but I can't really recall all the details of that.

.1840

I did notice one part of their report, which I thought was interesting. Over the last five-year period the price of patented medicines in total had increased 14%, whereas unpatented medicines had increased 39% in Canada.

That's one reason for one of our recommendations, that the mandate of this agency be expanded so they would deal not only with the 44% of drugs that were going up by 14% in that period, but also with the 56% that have gone up by 39%.

Would you like me to expand on that? That gets beyond your question; I'm sorry.

[Translation]

Mr. Réal Ménard: I think that this is quite possible. One must never presume to know what will come out of this committee and it is very possible that you will not be disappointed by the decisions that this committee may make, namely, not restricting the Board to merely assessing patented drugs, and broadening its mandate.

Did I also understand that you would like to see the Board assess another criterion as well, namely drug utilization frequency? You would like to see more balance in the Board's evaluations, is that not right?

[English]

Mr. Chiles: Yes, we feel that as important as the focus on prices by the review board is, when it looks at introductory drugs and assesses the price in terms of international comparison...fair enough.

But if you look at the value that a drug brings to society, you really have to look at the costs, how the drug is used, and how it compares to other drugs in related classes, or in the same class. To quote my example of a $1-a-day drug replacing a lower-cost drug, is it really worth that much to society, or is it only worth it in a small percentage of cases?

When Bill C-91 was going through, I suppose you could say, its gestation period in 1991 and 1992, there was a new science sort of getting going, called pharmaco-economics. Now, several years later this science of pharmaco-economics is much more developed. Some of the assessments of the value of medications and where they fit, both from an individual health perspective and from a societal perspective, can now be made. They're difficult, but we're moving in the direction of being able to make those assessments.

So we feel there is a role for the review board to look at the value of a new medication when it's looking at the cost, not just to look at the narrow issue of price.

[Translation]

Mr. Ménard: You would therefore like to see the Board use the criterion of drug utilization frequency. That is one thing. You also said that pharmacoeconomics, a science that appeared in 1969, has now reached its cruising speed and enables us to have a better insight into the consumer. And finally, you said that if the Board could add a new evaluation criterion to its mandate, namely drug utilization frequency, that this would be good for the consumers but not for the manufacturers. Did I understand you correctly?

[English]

Mr. Chiles: Yes, that's right, I agree. That's a good summary.

[Translation]

Mr. Réal Ménard: It seems to me that the witnesses that have appeared before us come from two schools of thoughts. Some have said that, even with important advances made in research and development, that only 8% of the drugs introduced on the market, especially new patent drugs, provide any breakthroughs in terms of therapeutic effect. The other 92% are therefore drugs that have no new therapeutic value.

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Your conclude that the so-called advances, in terms of research and development, made by the brand name drug companies, with their investments in excess of $600 million since C-91, are not what they are made out to be and that, in fact, there are very few new drugs on the market. Having made this observation, you are inviting the committee to become much more liberal in the philosophic sense of the word, towards the introduction of generic drugs.

[English]

Mr. Chiles: I'm asking that they review not just price but cost and benefit, the cost of the new medications that come along and the benefit.

Now, with respect to the small percentage you alluded to that are...I think the term they use is breakthrough drugs, I'm not implying that the other drugs that come along that aren't in that small group of breakthrough drugs don't have value. They often have some improvements over drugs that were formerly available. I'm just suggesting that when one looks at these drugs, one looks at the cost, at the way they're going to be used in society, what they're going to cost, and what the benefit of those drugs will be to society, not just the price.

[Translation]

Mr. Réal Ménard: May I ask one final question?

The Chairman: No, you'll have another opportunity.

Mr. Réal Ménard: Really?

The Chairman: Yes.

[English]

Mr. Mayfield, please.

Mr. Philip Mayfield: Sir, I apologize for not being here when you began your presentation. In a sense I'm playing a bit of catch-up, but maybe you'd be patient with me.

It seems to me you mentioned that we should focus on offering a broader access for drugs to Canadians. I'm wondering just exactly what you meant by that and how we would do that.

Mr. Chiles: I'm concerned that Canadians have access to medications. A number of steps have been taken in various provinces to make sure citizens have access to drugs in catastrophic situations. In Ontario there's the Trillium Drug Fund, Saskatchewan and British Columbia have plans, and there's the new plan in Quebec.

So those plans are in place, but sometimes they have very high deductibles. For certain citizens it's difficult, and because of the costs of some of the medications, some people probably are still doing without medication. We're concerned about access.

I'm not sure what you're leading to. Did you want me to comment on the National Forum recommendations or -

Mr. Philip Mayfield: No, I just wanted a clarification on what you said really.

Mr. Chiles: Is that adequate then?

Mr. Philip Mayfield: Yes.

Mr. Chiles: Thank you.

Mr. Philip Mayfield: I want to continue a bit along the theme of therapies and drug utilization. I kind of suspect that maybe you're a person's brain that we should pick while we have the opportunity.

I'm wondering what your impression is of what the brand names and generic companies are doing in terms of disease management and providing effective drug therapies for that. Do you have any comments about that?

Mr. Chiles: I'm not aware of disease management activities among the generic companies. I could be wrong on that, but certainly the brand-name companies are doing a lot in that area.

If their products, for example, are in the diabetes area, or in high blood pressure or asthma, they're trying to put together treatment models, and they work with governments, employers, and so on, to implement the prescribing and treatment guidelines that go along with those conditions. That's a major area of focus, not just in Canada but in the United States.

.1850

Mr. Philip Mayfield: Just to press on with that, just to try to open it up a bit more, it occurs to me that we've been told that since 1992 the generics have been involved more in research than they were previous to that. You don't have any sense that they're involved in this in their research?

Mr. Chiles: I know the generic companies are now researching drugs. If you want just an historical aside, many years ago, 50 or 60 years ago, a number of brand-name companies started out as what you might call generic companies, and then they became brand-name companies. I'm not sure that's going to happen all over again; it's just an aside.

Certainly I'm aware that generic companies are now looking at patenting their own drugs, doing research, and so on, but I'm not intimately knowledgeable about that.

Mr. Philip Mayfield: Okay. On the other side of that question I'm wondering if you could make some comments about brand names and generic companies. What are they doing about, say, over-prescribing or over-utilization of drugs? Have you seen this concern raised by these companies?

Mr. Chiles: Yes. Through their associations the manufacturers certainly are trying to work with different organizations in the community to improve the way medications are used. When we use the term over-utilization...yes, there's a lot of over-utilization, I suppose, but there's also under-utilization and inappropriate utilization with medications.

That's why we hear so much talk about prescribing guidelines, evidence-based guidelines for treating various conditions, and using a class of drugs in a certain way, as opposed to another class, and so on. That's very much what is happening in medical and pharmaceutical circles these days, and obviously manufacturers are part of it.

Mr. Philip Mayfield: Could you be more specific in terms of some of the activities involved, how they would be approaching this?

Mr. Chiles: I noticed in the PMAC brief, for example, that they're working on some project with physicians on antibiotic guidelines in one community in Ontario. The Ontario government has been active in setting up these guidelines for the use of antibiotics, drugs for infection. They've distributed them widely to pharmacists and physicians, and they've taken the initiative on that.

So the manufacturers are now saying, yes, it's a good idea, and they seem to be buying into that. I think you should ask the manufacturers for more detail on that; I'm probably not qualified to speak for them.

Mr. Philip Mayfield: I guess I'm looking at you as someone who is involved in paying for a lot of this stuff, and you may have an interest in it.

I'm also wondering if you have any comments about what, let's say, Health Canada is doing about over-prescribing or over-utilization. Have they any concern about this that you're aware of?

Mr. Chiles: I'm not sure about Health Canada, about what they're doing, other than that I know they have consumer information things, and so on.

Just to get back to the other point, you were saying we have an interest in what's happening, and we were talking about antibiotics, for example. Certainly with appropriate prescribing guidelines, if there's a $3 drug that will do the job just as well as a first-line treatment, a $40 drug, we're very interested in the $3 drug being used.

I'm sure that when a government is paying for it, instead of an employer through Green Shield, they're very interested in that, as well. On the other hand, we're also interested in quality, and when the individual patient needs the $40 drug, that's the one they should have.

Often the way medications are promoted is that the new drugs get promoted very heavily to prescribers. Physicians probably tend to use more of the new, more costly medications than they really should in many cases.

The Chairman: Do you have a question, Mr. Mayfield?

Mr. Philip Mayfield: I just want to ask the same question about medical schools and universities. What are they doing about this problem, if it is a problem of over-prescribing and over-utilization?

Mr. Chiles: I don't think I can speak to that.

Mr. Philip Mayfield: You don't have any idea about that then?

Mr. Chiles: No, I don't think I can comment.

.1855

I am aware that, for example, at McMaster University they have some detailed guidelines for the circumstances under which undergraduates and residents in medicine should be dealing with manufacturers' representatives and so on. They're concerned that they might be getting a misleading view from the manufacturers. I know that's happening, but as to what they're doing in terms of course work, I'm not really qualified to speak to that.

Mr. Philip Mayfield: With the problem of the antibiotics and diseases that are not touched by them now, with the mutations it's likely to be a subject of more and more interest.

Mr. Chiles: That's true.

The Chairman: Mr. Volpe, please.

Mr. Joseph Volpe (Eglinton - Lawrence, Lib.): You touched on at least three of the issues that are of interest to this committee. I hope you'll bear with me as I explore at least three of them.

Before I begin, your interest in this is that you're paying the bills?

Mr. Chiles: Yes, on behalf of the employer or the individual.

Mr. Joseph Volpe: Your recommendations are then coloured by the interest you see from a bottom-line perspective.

Mr. Chiles: Yes.

Perhaps I should clarify, if I might. For most of the plans Green Shield has, we make a charge for administering on a per-claim basis. Part of our business, but a small part - about 20% - is on a premium basis. Most large employers pay the bill for the claims and then there's a percentage added on. Actually it's not usually a percentage; it's a fixed amount.

So really it's in our clients' interest to prevent over-utilization or excessive cost. That's our bias. I stated that up front.

I'm sorry if I digress.

Mr. Joseph Volpe: No problem.

One of the statements you made - and you made it while I was trying to read through some of your presentation - is that a pharmaceutical or drug that comes on the market really has an effective life of about 10 to 15 years, when it can recoup appropriate profit. I think that's what you said.

Mr. Chiles: Those weren't my numbers. The brand-name industry uses the number of 10 years and I think the generic industry uses 12 to 14 years, depending on whose number you believe. I'm not qualified to say on my own. That's the period of market exclusivity.

The other point I was making is that only about 32% of the high-volume drugs that are being used have been on the market for 10 years or more, and when you get to 15 years it's only 18%. So if a drug, let's say for the sake of argument, has an effective market exclusivity period of 15 years, then the vast majority of drugs aren't going to have much market share left after that period of time.

Mr. Joseph Volpe: In that same vein but just shifting gears for a moment, the provincial formularies have a large impact on how that market share, that exclusivity, plays itself out. They're not all the same. For example, Ontario has a system that's different from the one in Quebec, which is different from the one in Saskatchewan and the one in B.C. Is that a fair perception?

Mr. Chiles: Well, it's true that there are relatively minor - not major, I don't think - differences among those formularies. What I'm saying is that for the drug that comes on the market today, it's not likely that in 15 years' time it will be used much any more, not because it did or did not get into an individual provincial formulary, but rather because it was superseded by another one.

Take, for example, the drugs that were introduced last year for AIDS. I'm not an AIDS specialist and I don't know much about it, but I know how quickly the field is changing, and I would doubt that in 10 years those drugs will still be used. There will be better ones that have taken their place.

.1900

Mr. Joseph Volpe: How long does it take in your experience for a drug to get on a provincial formulary once it receives the notice of compliance from Health Canada?

Mr. Chiles: Some of them never get on. You could probably get a precise answer to that from the Pharmaceutical Manufacturers Association, but if you want a ballpark estimate, I would say at least six months. Sometimes they really rush it and get it on in six months, but it's usually more than that - up to two years for the ones that do get on. Some just don't get on at all, because the assessment of their review committees is that it doesn't offer enough value for whatever reason to be added to that formulary.

Mr. Joseph Volpe: It doesn't prevent them from going on the market.

Mr. Chiles: People can still get it outside the plan, but they would have to pay for it. It wouldn't be covered.

Mr. Joseph Volpe: You made a series of other statements. One of them, and I think I'm quoting you correctly, but, again, please say if I'm not, was that R and D is not what should justify a price but the cost or the benefit to society.

Mr. Chiles: What I'm saying is from a societal perspective the value a drug brings should determine what the cost is to society, not just the amount that goes into research.

Mr. Joseph Volpe: How do you measure that at Green Shield?

Mr. Chiles: We don't. We're not able to do that in a comprehensive way. We can to a certain extent. We can rely on other authorities like provincial formularies, but we can't sit down and do the pharmaco-economic science because we don't have the resources at Green Shield to do that.

Mr. Joseph Volpe: Do you do an analysis of what you think are the hard costs of the drug itself when it comes down the market?

Mr. Chiles: Sometimes we do, but let me back up a little. Until a few years ago most drug plans, not just Green Shield, automatically added new drugs as they came on the market. It was just automatic. No thought went into it.

A few years ago many people were concerned about costs. They thought it's the new expensive drugs that are costing so much so we'll just freeze our formularies and we won't let any new drugs be added. This was the benefit we negotiated for our employees so we won't add any new drugs. Another approach that was taken is that they said they'd only pay for the drugs in the provincial formulary and they wouldn't add new drugs beyond that.

Now there is another approach that some employer groups such as the major automotive manufacturers have taken. Drugs must be assessed for value before they get added to the formulary. Whereas we never used to do any of that, now we are in a position where we're having to assess these for many of our employer clients. Some of that can be done internally, based on widely available references, but we don't have enough resources internally to do it all so we engage the assistance of outside research organizations to help us with that.

Mr. Joseph Volpe: When the PMPRB was in your place about a week ago the chairman said there have been only about 32 or 33 breakthrough drugs in the last five years. The rest of the drugs essentially represented a variation of an existing therapy.

Do you make an assessment of whether these drugs actually have a different value from the one they're going to replace?

Mr. Chiles: For the latter group I was referring to, yes. If it's a new drug that is not a breakthrough drug, if it's a me-too drug...I'm sure you've heard that terminology.

Mr. Joseph Volpe: No, only as it applied to competition.

Mr. Chiles: If it's another drug in the same class and it isn't very much different, we will then consider whether or not it is worth adding to these formularies. If the cost is higher, then it won't get on. If it's the same price and equally effective, it probably will. If it has a lower cost, it definitely will.

.1905

For example, in the cholesterol-lowering drug field one of the brand-name manufacturers, a few years ago, came out with a me-too drug, one that the PMPRB would have been speaking about. It was just another drug in the same class, but they brought it out at half the price, so there was no hesitation in making sure this was allowed.

The Chairman: Thank you.

Mr. Lastewka, are you ready for your questions? Then we'll go to Mr. Ménard, and thenMrs. Parrish. If you have any questions, make them known. Perhaps you would like a question,Ms Brown. We'll just have some quick questions after that and then we'll call it a day. Okay?

Mr. Walt Lastewka: I believe part of my first question was starting to be answered there, but I just wanted to go back at it again. I'm going back to your recommendation number one, that the committee should consider not only prices but the cost impact of patent protection in formulating its recommendations.

Could you expand on that a little bit more? What exactly do you mean by it, and what do you think we should be doing?

Mr. Chiles: When I say we should be focusing more on cost rather than prices, I'm referring to the expensive medication that replaces the lower-cost medication.

So if you have a dollar-a-day drug that is taking the place of a penny-a-day drug, what happens is you have a lot of new claims for the dollar-a-day medication and a decreasing number for the lower-cost medication. The overall cost goes up quite dramatically, but the price probably doesn't go up. The more expensive medication may stay the same or actually go down a little bit, and it certainly wouldn't be deemed by the PMPRB to be excessive, but the cost can go up a lot.

If the medication is being widely used in society for the way it's supposed to be used and not being used inappropriately or overused, then that cost may be justifiable; it may be acceptable.

I'm looking at focusing on the cost versus the benefit. If it's being widely used where it ought not to be used, whereas the lower-cost alternative is the right choice, then we're looking at very excessive costs, but not excessive prices, necessarily.

Mr. Walt Lastewka: Is this not where the doctor who is doing the prescribing plays a very important part?

Mr. Chiles: Yes, it is.

Mr. Walt Lastewka: And whether a drug goes on the formulary or not... Decisions are being made there that are getting at the root cause of what you're just saying: replacing a penny drug by a dollar drug.

Mr. Chiles: The drug I have in the back of my mind when I use those numbers is a drug that is used for high blood pressure. It's also used for congestive heart failure. It's a very good choice for congestive heart failure and it's a great improvement. The manufacturer could probably make an excellent case that the price is not excessive for that.

On the other hand, where it's used for high blood pressure, where the lower-cost alternative works just as well, or perhaps even is the first choice, then that's a great waste of resources. That's the kind of thing I'm getting at.

I apologize that I can't give you more specifics in terms of structurally how you would do that with the PMPRB. They have some qualified staff who might be able to assist in terms of how to achieve these things in more detail than I can provide to you, but I'm sure the resources they can bring to bear on the issue would be a great benefit to society.

.1910

Mr. Walt Lastewka: I was going through your recommendations three and four. If we maintained the 20-year patent protection, your recommendation three says we should maintain the early working and stockpiling provisions. Your recommendation four basically says we should repeal or modify the not-linked regulation to make sure that generic drugs can get into the market faster. Is that fair? Is what you recommended in numbers three and four fair? I'll pick the brand side this time since I've been on both sides.

Mr. Chiles: Our view is that the 20-year protection from the date of filing is an adequate level of protection. If you were to take away the early working provisions in Bill C-91, that would give probably about five years. And that's the PMAC number. I really can't state that on my own. I'm just quoting them as a reference.

Mr. Walt Lastewka: I purposely didn't touch that one. I didn't say anything about early working. I just meant the stockpiling one.

Mr. Chiles: The number that was given was taking those two together.

Mr. Walt Lastewka: Oh, I see.

Mr. Chiles: With respect to the notice of compliance link regulations, I don't think Green Shield and myself are in a position to give any detailed comment on that. Our only concern is that to the extent they delay the availability of lower-cost generic versions, then they're a problem. We're not saying necessarily to abolish the regulations, but if there's some way to modify them so that you can greatly decrease the amount of litigation and prevent the delays...I'm not an expert on this, but I have a feeling that when they were designed they were focusing on the first patent on the drug. The way they're being implemented now, there are a lot of patents on drugs, and that's where it gets very confusing and hard to administer.

Perhaps there's some way that Health Canada or Industry Canada and the Patent Office could work out better procedures so that they could focus on the first patent of the drug. I think that's fair. It's unfair if a generic comes on the market before that first patent applies, and that's what those regulations were trying to achieve. But when there are subsequent patents, that may not be fair.

I don't want to spend more time on this because it's not my area of real expertise.

The Chairman: This is the final question.

Mr. Walt Lastewka: I thought your report and your presentation were absolutely excellent. It gave me a little bit of confidence seeing and hearing what you were saying. This is actual data from the results of your organization. Then I read your news release. It says that high-cost patented drugs decrease access and the main problem is costly new drugs, usually patented, replacing lower-cost drugs. I suppose you can read into it anything you want.

Mr. Chiles: When you have one-liners, news releases are more misleading than when you read the full thing.

Mr. Lastewka: Is that what you meant in your recommendation number one, when employers -

Mr. Chiles: No, that was not the recommendation. That's just a background summary to lead into the recommendations.

What we were getting at is that the higher costs have put Canadians in the mindset that they're focusing on costs. People are taking drugs out of formularies where perhaps they ought not to be. People are not getting access to these drugs in their employee benefit plans, for example, so they may not buy them on their own. Sometimes people are not getting access to these drugs and it's because the costs have gone up. To the extent that patent protection has caused that, that's part of the cost.

Mr. Walt Lastewka: Thanks very much.

[Translation]

Mr. Réal Ménard: Thank you. I would simply like to say, and I hope that I have understood correctly and because I believe that you're going to make an important recommendation, that you would like to see the Board exercise its remedial powers with respect to companies that have not followed its guidelines and which have put exorbitantly priced drugs on the market.

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You may know, as our listeners will learn, that the Board uses three criteria, established within its guidelines, to determine whether the price of a drug is excessive.

First of all, the Council states that the price of any new drug may not be higher than the price of drugs already available on the market for the same illness. Secondly, prices set in Canada must not be higher than the average price set in other industrialized countries. Thirdly, prices must not increase more rapidly than the consumer price index.

You would like to see a fourth criterion added to these three, but I don't think that it would be fair to your testimony to call it "the cost of drugs". If it were dealing simply with the cost of a drug, the Board would have to take all of the inherent variables within its production into account, from the manufacturing process the ingredients involved. In my opinion, this would make things extremely difficult.

It would seem, basically, that you would like us to take the social usefulness of the drug into account, not only the value of its curative effect but also its social effect. That is perhaps something that should be envisaged. It is obvious that a pharmaceutical company which markets 3TC for example - that's just an example chosen at random - which will probably be made more widely available, and which will be covered by provincial insurance plans, must take these factors into account when setting the price for this medication.

Therefore, do I understand correctly that it is not so much the cost of production of the medication that must be evaluated, but rather its social usefulness? That is my first question and I will ask the second one now so that we don't have to come back to me.

You would like us to look into the whole issue of humanitarian access to drug. Today, as I am feeling comfortable with this group, I am going to tell you something that is very near to my heart: I have tabled a private member's bill on this topic.

You talked about the cost of humanitarian access to drugs. I would like you to tell us quite clearly whether we're dealing with licensed drugs or not.

If you are talking about non-licensed medication, I think that you will accept my proposal which would be to give additional power to the Board. Pharmaceutical companies will never tell you that the bad apples are side by side with the good. There are some excellent corporate citizens, such as Glaxo Wellcome, who have offered humanitarian access in an extremely generous fashion, while others, such as Abbott, are absolutely hateful and have offered practically no access.

If you feel that my bill deserves support, I would be very grateful to you if you would state that clearly to the committee so that it may appear in the final report that we will be adopting. Thank you.

[English]

The Chairman: A short response to the question.

[Translation]

Have you already tabled your bill?

Mr. Réal Ménard: I would like to appear as a witness, Mr. Chairman.

If you would alow me, my colleague will table a motion allowing me to appear as a witness to introduce my bill. I feel that this would be useful.

The Chairman: I would prefer just to see the private member's bill.

[English]

Mr. Chiles: You mentioned the drug 3TC, for example. Yes, I think it's not just a matter of looking at the international prices and so on. I think the review board should be looking at the cost of the medication and the benefit, and they don't really have a mandate to do that sort of thing at the moment.

The other point I was making about the Patented Medicine Prices Review Board that I didn't want to get lost is that it should also look at the brand, for the non-patented medications as well as the patented ones.

Mr. Chair, did you want me to respond to the other point? I wasn't quite sure.

The Chairman: No. He just likes to involve the spirit of whether or not this particular pursuit has been followed by your company and the other companies.

.1920

Mr. Chiles: In our case, we have fairly specific contract language with our employers, and sometimes involvement with the unions as well, dictating what we may or may not pay for. But many of our employers are quite compassionate themselves and they want us to use our best judgment to allow things in exceptional cases. So we do get into some of that. I don't want to spread that too widely, but we do try to be compassionate. Let's put it that way.

[Translation]

Mr. Réal Ménard: You do know that this is being broadcast on television.

[English]

Mr. Chiles: Yes, but we try to be compassionate when we can.

Mrs. Carolyn Parrish (Mississauga West, Lib.): Welcome.

I grew up next door to Bud Willis. He was at Green Shield years ago. He was a good family friend.

Mr. Chiles: Oh, yes.

Mrs. Carolyn Parrish: I want to pick up on two points. One is the recommendation that the role of the Patented Medicine Prices Review Board be expanded to include unpatented drugs and the cost of drug therapy. Obviously, as a broker for primarily prescriptions, you're more concerned about paying out on prescriptions than you are, for example, paying out $1,000 a day or $2,000 a day for a stay in hospital.

Mr. Chiles: That's right.

Mrs. Carolyn Parrish: So in this cost of drug therapy, it wouldn't be within your purview, but would it not be reasonable for this review to go into the costs, for example, of the new ulcer medication you mentioned, even if it's $10 a day as opposed to a $1,000-a-day stay in hospital? Would you consider that reasonable?

Mr. Chiles: Yes, I think you have to take the societal perspective.

Mrs. Carolyn Parrish: And also days of lost work. I'm sure the people who hire your corporation would be very interested in how many days people are off work.

Mr. Chiles: Yes, that's right.

Mrs. Carolyn Parrish: I have a father-in-law who has a heart problem, and whenever he has an incident he used to go in for five, six, seven, or eight days. Now he goes in for a day and he's out. They've also changed his medication so that instead of timing his medications all day, he takes one pill in the morning. It's a very expensive pill, but it's making his life a lot better. Would that be part of what you look at?

Mr. Chiles: You'd ask if that is a significant advantage to people generally and how much the cost is for that additional advantage. Sometimes it's worth it and sometimes you may argue that it's not because it will be widely used when it isn't really necessary and the cost... It's one of those things you do a detailed analysis of.

Mrs. Carolyn Parrish: One of the things I was interested in, and I wanted to make sure I heard it correctly, was that you said a lot of drugs that start on the market as new patented drugs no longer appear 15 years later because they're replaced by a better drug. Is that what you said?

Mr. Chiles: Yes.

Mrs. Carolyn Parrish: For example, Mr. Mayfield pointed out that if you have a mother who uses $3 prescriptions of penicillin, and over-uses them, you get super infections and you may need the $48 prescription to fight that.

Mr. Chiles: That's right.

Mrs. Carolyn Parrish: I really like that recommendation, Mr. Chairman. I think the idea of looking at the cost savings on days in the hospital and surgery and all the other things that are replaced by patented drugs should be part of the review.

The Chairman: I'll call Mr. Mayfield for the final questions of these witnesses.

Mr. Philip Mayfield: I have questions on a couple of details. You mentioned that after 10 years of use a drug was probably no longer needed and 15 years was probably the extreme length. How do you make that determination?

Mr. Chiles: That wasn't quite the way I phrased it, but -

Mr. Philip Mayfield: You're probably correct that you did not phrase it this way, but I'd be happy to have you phrase it in your own terms at this time of the day.

Mr. Chiles: We looked at our highest volume drugs, and of those high-volume drugs we looked at how long they have been on the market. Of those drugs, 32% had been on the market over 10 years and only 18% have been on the market for 15 years or more. I'm just extrapolating from that to say that after 15 years or so the market share remaining for a drug that's been on the market for15 years is not that great for most drugs. That 18% at 15 years...those drugs still had a significant market share.

Mr. Philip Mayfield: I appreciate that.

Mr. Chiles: Does that clarify it?

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Mr. Philip Mayfield: Yes, thanks.

I'm aware that drugs come and go. Just as a side note, I have relationships that go back toSt. Paul's Hospital in Vancouver, particularly the palliative care unit there. An interesting conversation was that at that particular moment, there were no AIDS patients in that unit, which I thought was marvellous, a real testament to the value of drug therapy. Hopefully other drugs will go beyond where these have gone.

In talking about drugs and their prices, I'm wondering about the PMPRB. Do you have any idea how they go about calculating price increases that are allowable?

Mr. Chiles: My understanding is that increases can't be greater than in the consumer price index.

Mr. Philip Mayfield: Is that what it is? Okay.

Mr. Chiles: I'm pretty sure that's it. I don't think there's any other criterion. I could be wrong on that, but I think that's it.

Mr. Philip Mayfield: Prices increase, and I'm wondering what has been the true increase in drug prices since this legislation came into effect. Do you have any idea about that?

Mr. Chiles: In their report to this committee, the PMPRB gave detailed information on the price increases for all drugs, and then for the drugs that are not patented and for the drugs that are patented. Certainly the prices of patented drugs have increased at a lower rate.

Mr. Philip Mayfield: I think it's a price increase of either 20 to 32 or 22 to 30. Is that what you were referring to?

Mr. Chiles: Yes, that's the price increase issue. In the submission, the figure I'm giving for the last few years is that the average cost of a claim has gone up by 7.8% per year annualized. When you look at the detail of it, it's not quite that high; it's actually 6%, I think, because the average prescription size has increased. So it's not really fair to say it's gone up by 7.8%, but the detail is there.

Mr. Philip Mayfield: What powers does the PMPRB have? What kinds of sanctions are available when firms are found to be overcharging?

Mr. Chiles: Well, they have legal powers to go ahead and do that. I don't think I'd like to try to summarize them, because that's not really my area of expertise, but I know they can take the manufacturer to court and recoup the damages and double if necessary. So they have fairly strong powers.

Mr. Philip Mayfield: They come under the provincial domain, but what price regulation do the generics face? Do you have any idea about that?

Mr. Chiles: They don't have any regulatory scrutiny, such as the PMPRB. They do have scrutiny in that provincial drug plans try to put pressure on them to keep their prices down. Also the market helps to keep their prices down. As more generics come onto the market, the prices typically tend to fall.

Mr. Philip Mayfield: I want to conclude by thanking you very much. I appreciate your presence here very much.

The Chairman: We'll have one last question from Mr. Volpe, very quickly.

Mr. Joseph Volpe: I thank you in the same spirit.

By the way you were responding, you raised a question in my mind about the market share and the typical lifespan of a drug on the market. As a committee, one of the things we've heard is the importance of getting new drugs onto the market. From your perspective, with the historical information you've been able to provide to us, do you think extending that period has any kind of behavioural consequence on companies' desire to bring new products onto the market?

Mr. Chiles: You're talking about the period of time from which the manufacturer makes their submission to Health Canada until it's actually approved?

Mr. Joseph Volpe: Well, no. If a drug is on the market for 10 years, I think you said, in the main it's fulfilled its market life. It might go to 15 years, but probably not much more than that.

Mr. Chiles: A few go longer. There are some that are much longer.

Mr. Joseph Volpe: I know that, but you said it's really in that range; it might be a little bit more or a little bit less. Is there an incentive for a company to come out with a new product if legislation extended that period beyond that 10 to 15 years or a little bit more, or if you had an effective market exclusivity that went beyond the 15-year period? Are you legislatively preventing or providing a disincentive for a new product to come on the market?

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Mr. Chiles: You might be with respect to an individual company. That company might ask what the point is in bringing out another drug when it already has one out there, or it might delay the drug. But there are lots of companies on the market, and their competitors would say... Because of the number of manufacturers that would like a chunk of that business, I don't think it's a major concern. But that's just a guess.

Mr. Joseph Volpe: I just wanted to get your perception.

Thank you very much.

The Chairman: Thank you very much. Let me echo what two members have already said about how much we appreciate your coming here. You've been with us for more than an hour tonight. You've been very generous with your time and in your answers, and we appreciate your forthrightness and your written brief. Judging from the reactions of the members here, I can tell you that you'll have a great impact on how we begin to formulate our response to this very difficult question.

Mr. Chiles: It's been a pleasure.

The Chairman: For the committee members, before we adjourn, I want you to note that tomorrow morning

[Translation]

we will begin at 9 a.m., and not at 9:30 a.m., in the same room.

[English]

The committee is adjourned until 9 a.m., room 253-D, Centre Block.

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