[Recorded by Electronic Apparatus]
Thursday, March 13, 1997
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[English]
The Chairman (Mr. David Walker (Winnipeg North Centre, Lib.)): Pursuant to Standing Order 108(2), we are reviewing section 14 of the Patent Act Amendment 1992, chapter 2, Statutes of Canada, 1993. The committee resumes its work by welcoming our witnesses this morning and entering into another round table as part of our series of round tables in the review of Bill C-91.
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I'd like to welcome witnesses from the Canadian Union of Public Employees, from the Kingston and District Labour Council, and from the CAW.
I believe we're going to start this morning with Mr. Stan Marshall as the first presenter. I would like you to spend five minutes, not much longer, if you don't mind, outlining your position. We'll hear from each witness, then we'll turn to the opposition parties who will ask questions, and then we'll turn to the government. I hope we'll have an interesting and informative round table.
Mr. Marshall.
Mr. Stan Marshall (Senior Research Officer, Canadian Union of Public Employees): Thank you very much. It's a pleasure to appear before you.
The Canadian Union of Public Employees represents approximately 460,000 members across the country, in a variety of sectors. One of those sectors is the health care sector. We represent approximately 140,000 members in that particular sector.
Of course our members all have families, so the number of people affected by coverage under our collective agreements is considerably larger when you consider that, especially when we are talking about issues such as drug coverage.
There are really two points I want to make this morning. The first relates to jobs. I suppose one of the major rationales at the time of the passage of Bill C-91 was that there would be a significant number of jobs created in research and development within the brand name pharmaceutical industry in Canada. The Canadian Health Coalition has already appeared before you and given some indication that these promises really have not been kept. The number of jobs that the pharmaceutical industry indicated would be delivered has not been. Furthermore, the investment in research and development that was promised was also not delivered.
At the same time, the health care system has been squeezed considerably, and the major rationale for that is that there is not enough money for our health care system. The cuts to the health care system implemented under the Canada health and social transfer, which are continuing today, are significant. The result of those cuts and the result of not having dollars available, I believe - because in some parts of health system costs are out of control, such as in the drug part of health care - has been massive job losses in the health care industry.
This affects our members very directly, but it also affects members of the community in the way that service is delivered and in the way the local economy is affected when you take that kind of money out of the system.
I went to Statistics Canada to determine how many jobs have been lost in the health care industry, and I found that between 1991 and 1995 job losses were in the order of 38,000. Those are jobs that have been taken out of your ridings. And the jobs that supposedly were going to be created by PMAC are not going to go back into those ridings anyway, except - possibly - for Montreal and Toronto.
If we just look at the hospital component, from 1991 to 1995 public hospital employment in Canada decreased by over 32,000 jobs. That's a 5.7% decrease. That is until 1995. Because I know that many of these cuts have been coming out subsequent to 1995 - in other words, in 1996 and in 1997 - I wanted to have some idea of what kind of job loss has occurred over that time. Statistics Canada also provides numbers that deal with that. I found there have been approximately 32,000 jobs lost between October 1995 and October 1996 in health and social services alone, 19,000 of those in hospitals.
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I guess I would like to ask you how we reconcile a position that says we will have certain conditions under Bill C-91 that will create a small number of jobs - the 2,000 that were promised. At the same time, the cost of creating those 2,000 jobs, or more appropriately the promise of creating those 2,000 jobs, is in the end billions of dollars. Those billions of dollars could and should have been reinvested in the health care system to ensure that jobs weren't taken out of the health care system in an ad hoc manner without any plan for what health care should look like. This money should have been reinvested in the quality of health services in this country.
Bill C-91 isn't the only factor involved here. I understand this. But we are talking about an area we can make a difference in. Billions of dollars could go back into the system to ensure we're not making a really false trade-off.
I believe there is a fundamental contradiction between supporting the kind of patent protection the drug companies have and the cost this has for Canadians, while at the same time ravaging the health care system and causing tens of thousands of workers to be out of jobs bacause of the impacts on health care and local economies.
The second point I want to make very quickly is that Bill C-91 has had a tremendous impact at the bargaining table. I assume there are others at this table who are going to be able to give you more detailed statistics on it than I am. But I know our employers, when we go to the bargaining table, are asking for concessions. And they're asking for concessions because, especially under our health benefit plans, drug costs are too high. It's a major reason why they're coming to the table and saying: we want you to give us something back, whether it is wages, whether it is having co-payers on plans, higher deductibles or flexible benefits. None of this really works to the advantage of employees and their families.
At the table we're facing very directly the impact of Bill C-91. There are some numbers we can point to. Green Shield says the cost of employer health plans has increased by 26%. Between 1990 and 1994, per capita spending on drugs grew by 26%. Our employers don't want to shoulder those costs. They're passing them on to us, the employees.
Unfortunately, some employees in our organization aren't covered by drug plans and their employers are unwilling to negotiate them at the table. In cases where our members don't have drug plans, and we have approximately 90,000 in that category, those members must pay out of pocket for their drug costs. Every time drug costs increase, they are making a choice between having a drug or not having it and spending their money on some other essential amenity in their lives.
That's a choice none of us should have to make. It is a choice put upon us because we haven't paid attention to drug costs and we now have the rare opportunity to do this and to make changes.
I think I would like to wrap up by saying that the National Forum on Health talked at considerable length about the social determinants of health. What I have just outlined, both the employment situation in the health care sector - or more appropriately the unemployment situation in the health care sector - and the ability of our members to negotiate adequate drug provisions at the bargaining table, are directly related to the social determinants of health. The National Forum on Health states very clearly that unemployment does not contribute to your health status.
Why are we throwing tens of thousands of workers out of jobs, and thereby contributing negatively to their health status?
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The national forum also says your income, job security and control over your life has a very positive effect on health status. When you have a collective agreement and you have a well-paying job, a unionized job, you do have some control over your life. You have at least a better chance at some job security, a better chance at being able to not worry about whether you're going to be able to pay for this drug or going to have to pay for some other part of your life that is an essential element. This plays directly to the national forum's discussions and recommendations on the social determinants of health.
We shouldn't be trading off the health and jobs of Canadians for the profits of the drug companies in this country.
This is where I'd like to end. Thank you.
The Chairman: Thank you very much, Mr. Marshall.
Now I'll turn to Mr. Hope from the Kingston and District Labour Council. Welcome.
Mr. Len Hope (Kingston and District Labour Council): Good morning. Thank you.
The Kingston and District Labour Council represents a large number of people in Kingston and district, from active workers to pre-retirement workers to people who are now retired. We appreciate the opportunity to come before the committee and present our views.
We strongly oppose Bill C-91. Bill C-91 has created a situation where we find a lot of our members have very skimpy plans for health care and prescription drug programs where they can't afford the drugs. We find it difficult to believe because in the past we've listened to some of the people from the Liberal Party say they would actually oppose Bill C-91, oppose the whole concept of increasing the cost of prescription drugs for people in this country. Now we turn around and we find ourselves in a position where we're sitting with the minister saying Bill C-91 doesn't look as if it's likely to change.
I urge the committee to take a really strong look at the changes required to bring us back to a point where we're going to have a prescription drug program in this country that is actually going to help the public rather than increase the cost.
In the collective bargaining area with the industry in Kingston, the collective bargaining that goes on is in many cases with small employers who can't afford the cost of the prescription drug programs. The prescription drug program is something everybody should be able to have to increase their chances of living longer and living a better life if they have to have the prescriptions. But when drug prices are so high, it makes it very difficult for any of us to try to bargain a collective agreement.
The Canadian Auto Workers have a program that tries to eliminate the misuse of medications. In this program they try to make sure people who are on prescriptions understand that even if a doctor says they have to take four or five prescriptions, if they change their lifestyle perhaps they can actually try to improve their health to the point where they don't have to take as many prescription drugs.
This program has been going now for some five years and has proven it's not always necessary to have the prescription drugs people are told they have to take. They don't have to take them all the time. In many cases, if they're taking five prescriptions, for example, they actually only need two prescriptions. The other three are counteracting the first two. Those kinds of things can be alleviated and changed.
However, when we're taking a look at going into the workplace and we have to put programs into place to try to counteract situations created by some of the people in the medical profession, it makes it very difficult to try to bargain with employers.
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We believe the Canadian Health Care Coalition five-point plan is something that should be seriously looked at - and where we can, establish national universal health care insurance to ensure that generic drugs reach the market more quickly than they do today.
In some cases, employers are saying to their workers that if they want to have a prescription drug program they must first go and buy generic drugs as opposed to buying name-brand drugs. If they have to buy the name-brand drugs, they'll have to prove that they need those drugs, and if they need those drugs there will be some supplement against the cost. That's showing you that employers are actually, including the federal government, indicating to the people who work for them that generic drugs are as good and that they should be using generic drugs as opposed to using the name-brand drugs in order to keep the costs down.
If one considers the cost of the prescription drugs that are in the health care system today and we were to design a program where we could use the government, whether federal or provincial, to standardize, to ensure that regulations were put in place for the use of proper prescription drugs, using one administration the size of the government itself, I think ways could be found of decreasing the cost of health care with regard to prescription drugs, rather than using Bill C-91 and letting the people who are creating the profits for themselves lead the way, thereby increasing the cost of medicare to the health care system.
We believe that to commit sufficient resources to ensure the quality and effectiveness of research and development would be an asset and would also create jobs. The federal government, with Bill C-91 being passed, were told that the name-brand drug companies were going to increase the number of jobs being put into this country. In fact, they have actually reduced many of the job positions in this country and have not kept to their commitment.
The approval of a safe and publicly accountable system should be put into place so that we can ensure the safety of the pharmaceutical industry in this country. Prices for all medicines, including generics, should be watched to make sure that prices are not escalating, including those who manufacture generic drugs.
In conclusion, I want to make our health care system less expensive for all Canadians and make sure that as a nation we can provide pharmaceuticals for everybody at a fair price, not at an inflated price to increase the industry's profits.
I want to tell you a story that I heard less than a couple of years ago. We were at a forum listening to people tell about problems they were having. At the time I was working with some people who were unemployed or underemployed and a woman got up and started to tell her story.
She went to a doctor because she had three sick children. The doctor gave her a prescription for each child. She didn't have enough money to pay for the three prescriptions for all the children but she had enough money to pay for one, so she split the one prescription among the three children. Her three children became slightly better before they became an awful lot worse than they had been in the first place, at which time they had to be admitted to hospital.
The hospital took care of them and nursed them back to health. But if you look at the cost of that.... I mean, the prescriptions were highly priced and the woman couldn't afford to pay for them all. On the other hand, the care that had to be given because of the children having to be admitted to hospital to bring them back to health was even more expensive. That added costs to the health care system.
I don't think we really want to have a system in Canada that allows that kind of thing to happen to Canadians.
Thank you.
The Chairman: Thank you very much, Mr. Hope.
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I now turn to Ms Jo-Ann Hannah, national representative of the CAW. Welcome.
Ms Jo-Ann Hannah (National Representative, Canadian Auto Workers Union): Thank you. Hemi Mitic, who is the assistant to the president, was also planning to be here. He sends his apologies. He can't be here because there was an urgent situation on a picket line and he had to go there this morning. He also had the brief. I want to thank the clerk for making copies very quickly and distributing them to you.
I'm Jo-Ann Hannah. I'm with the pension and benefits department at the national office and I'm very pleased to be here to present our brief.
The Canadian Auto Workers represents 215,000 members across Canada in various sectors of the economy. We also have a very large and active contingent of retired workers. Over 35,000 of them voluntarily pay dues to the union. Our members are not employed in the health care sector but they are employed in very stressful, often unhealthy workplaces. Unfortunately, drugs form a major part of the health care plans that we bargain.
We have made presentations on previous drug patent legislation, Bill C-22 and Bill C-91. We opposed those bills, and we're also here to speak in opposition to maintaining Bill C-91. Like Stan Marshall and Len Hope, we are very concerned about the cost of drugs and know that with the 20-year patent protection we're going to see even greater increases in drug costs.
I think there's ample evidence to show that drug costs are going up. I've included those in our submission. But just to run through the recent Queen's University study, which confirmed an earlier study done by the U.S. researcher Schondelmeyer, it says that under the patent protection provisions we would see cumulative costs of up to $7 billion under Bill C-91.
Green Shield, which is the carrier for many of the drug plans that we bargain, has said that the new brand-name drugs coming on the market are 2.2 times the cost of the current generic drugs that are on the market.
We very much see the problem of higher drug costs at the bargaining table. As my brother from CUPE said, the employer comes to the table demanding concessions around the drug plan. They say the drug plan has gone up 150%, and then we argue over that. Eventually they say ``Okay, but it's still a big number and it's a concern to us and we want to see a cost saving''.
We have refused to pass those costs on to our members. There are all kinds of consultations with these plans for flex benefit, increasing the co-pays, increasing the deductibles and so on, which is simply passing the price of drugs on to our members, and we're not prepared to do that. What we have done, though, in recognizing the problem is to try to do two things. One is to deal with the issue of the prices. We did bargain a limited formulary. What we were trying to do was ensure that people would be taking the generic drug - the lower-cost drug that was just as effective - rather than automatically getting the brand-name drug. We didn't want to see our health care dollars going to the profits of the brand-name corporations, so we did make an effort to limit the formulary. That was a disaster. It didn't work and we had to go back and bargain changes in that.
The other issue is over-prescribing. I think the National Forum on Health described the situation extremely well. You have doctors on a fee-for-service basis who want to see as many patients as possible, and the drug manufacturers come in and say this is the drug you ought to be prescribing. We know the brand-name companies are very aggressive and very active in reaching the doctors to promote their brand drug, so you have a situation where you're going to see over-prescribing. Len Hope talked about it.
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What we did was bargain the CAW medication awareness program with the employers. We first bargained it at Falconbridge in Sudbury for the retirees. We wanted to encourage the retirees to ask questions of the doctor, not simply take a prescription because the doctor handed it to them. We wanted them to be more active in looking at their own health care. And that program has been quite successful. We're pleased with the results.
However, we certainly recognize that there are limits to what we can do at the bargaining table about drug costs. With Bill C-91 there are going to be very few low-cost alternatives available on the market and we're going to see the increase in the drug plans.
And that means we're going to lose in other places. There are going to be demands for less in wages or there is going to be a taking away from other parts of the health care plan in order to maintain the drug plan. It's going to create tensions at the bargaining table. It's already very tense at the bargaining table these days and it will get worse.
We have another concern. While about 60,000 of our members have very good drug plan coverage, with the 35¢ deductible and access to a wide range of drugs, there are others in our union who do not have this kind of coverage. They may have very high co-payments. In fact, co-payments may be so high that they can't afford to purchase the drug. These workers tend to be in lower wage jobs. And this is an inequitable situation. It is unfair.
The national drug program, which was recommended by the national forum on health, would be an important way of creating equal access to drugs for all workers and their families, and we support this recommendation.
However, we do see a problem: if it is the government that's funding the drug insurance program and we still have the patent protection with the higher cost brand name drugs being on the market, won't Canadians then be seeing more of their health care dollars going towards drugs and fewer dollars available for other parts of health care services?
In effect, our health care system will be eroded as more dollars go towards the profits of the brand name drug manufacturers, corporations that are predominantly U.S.-owned and already highly profitable. We see this as a real concern and as a threat to the medicare system that we very strongly support, as so many Canadians do.
The Canadian Auto Workers is a member of the Coalition for Health Care and we endorse the five-point plan that Len Hope outlined. We hope the committee will give very serious consideration to the plan.
I want to conclude by saying that we do not accept that trade agreements tie the government's hands on compulsory licensing. John Dillon, of the Ecumenical Coalition for Economic Justice, has proposed several options for the government. Again, we hope the committee will give very serious consideration to these proposals.
Thank you.
The Chairman: Thank you very much, Ms Hannah. I'd like to thank all three of you for your very concise and very persuasive presentations.
I'd like to turn it over now to
[Translation]
Mr. Brien, who will ask the first questions.
Mr. Pierre Brien (Témiscamingue, BQ): Thank you for your presentations.
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I would like that the issue be a little more broadly addressed in the first place. I understand your concerns about the tensions which may exist between you and your employers at the bargaining table, but the basic principle underlying drug patent protection is the recognition of intellectual property.
For any kinds of products, a twenty-year patent protection is granted to those who make discoveries. Drug manufacturers are provided a similar protection, but since the development of a pharmaceutical product is a very lengthy process, the patent protection is in fact not effective for more than 10, 12 or 14 years, depending on the circumstances. Essentially, you are telling us that you wouldn't want this intellectual property protection principle to be applied in the area of drugs.
[English]
The Chairman: Ms Hannah, do you want to go ahead and answer?
Ms Hannah: The Eastman commission very carefully reviewed this very question that you're raising: it is important to recognize the time and the energy researchers put into developing a drug, and they need a certain amount of time in order to do that developing. The Eastman commission said that four years is a sufficient amount of time.
The other point is that we are talking about drugs, a very important part of the health care system in Canada. So to say that it's the same as developing computers or radios or something like that...I don't think it is the same thing. In fact we prefaced our submission with a quote. Let me read it to you. It's the test question that is used in Kohlberg's theory of moral development, and anyone who's taken a Psych 100 course will be familiar with it:
- Hans' wife is dying from a rare disease. The pharmacist has the drug which will cure Hans' wife
but he wants too much money for it. Hans cannot afford the drug. Should Hans break into the
pharmacy and steal the drug?
[Translation]
Mr. Pierre Brien: Let's keep on that. You referred to the Eastman report, but it has to be placed in its actual context. As I recall, that report was released in 1984 or 1985. The rules of the game have changed a lot since then, and the context as well. We are now operating in a global environment. Whether you are in favour of it or not, that environment is there. International rules have been set and commitments too.
I know that some people are challenging them, but it seems quite obvious that those commitments are there. Even the two ministers have been quite clear on that: those commitments must be honoured. Within that framework, if there are commitments at the international level to recognize intellectual property, wouldn't it be in our best interest, in order to see jobs created here, to put in place in Canada a framework similar to the one which exists in other countries? If the research was done in other countries, we would have to buy the same drugs and pay the same price for them, but the jobs would go elsewhere.
[English]
The Chairman: Mr. Marshall.
Mr. Marshall: I'd like to respond to a couple of points. In fact I think a lot of research and development is being done outside of Canada right now, irrespective of the intellectual property protection the brand name drug companies have. I haven't seen a considerable increase in their R and D in this country. I think that question is a moot point. I don't think it really applies at this time.
Second, the Eastman proposal does recognize intellectual property, as sister Hannah has pointed out, but we also have to recognize that after the four years of protection they still will be paid royalties. It's not that they get nothing after four years. They will still be paid royalties under that proposal. It's something that has been looked at very carefully.
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I don't think the times have changed all that much with regard to the international environment. I think that certainly there are economic policies and trade agreements in place, but I think the Eastman proposal still addresses that change.
The other point I'd like to make is that when we talk about introductory prices of new drugs onto the market, there are agreements in place, but there is also this basket of seven OECD countries that sets the prices of drugs onto the market, and that basket of seven is a flawed basket. It really sets an inflated price for new drugs coming onto the market.
Not all changes that have happened since 1984 have been positive or beneficial. I think that we still have a reasonable proposal in the Eastman proposal.
The Chairman: Mr. Brien.
[Translation]
Mr. Pierre Brien: Yet, a major change has occurred in the international environment. You must recognize that some international free trade agreements have been signed. I don't necessarily mean the one with the United States, but NAFTA and the World Trade Organization agreement. I understand that you question the fact that we may withdraw from those agreements, but it would be a new parameter. If we cannot withdraw from them, it's something different from what it was in 1984 and 1985.
Mr. Marshall, I have the impression that many points in your presentation are not necessarily without links with what we are discussing here. As for the job losses in the health care area, you seem to put the blame mostly on bill C-91.
We are all aware of the context in which those transfer payment cuts occurred in the health care sector and the dynamics in which provinces found themselves - they had to make very hard fiscal choices and so on - and I think that you put a lot of blame on bill C-91, because, from what we have been told, drugs - I don't even mean only patent drugs, but all drugs - account for around 12% of the expenses in the overall health care system.
How can you put on that single legislation such a huge amount of blame for the jobs lost in the overall health care sector?
[English]
The Chairman: Mr. Marshall.
Mr. Marshall: Before I address the job loss issue, I would like to address the trade issue.
There are options and legal opinions on those options that are available, and the Canadian Health Coalition has presented at least one of them to this committee. The paper submitted by John Dillon, which was referred to earlier, and the opinion and testimony given here by Barry Appleton certainly address those trade options. Certainly I think this committee should seek further legal opinions on this matter if they don't see those as being adequate.
The point of job loss is that I don't attribute all of it to Bill C-91. Certainly there are lots of things happening, including, as I mentioned, the cuts under the Canada health and social transfer and putting provinces in the position of downloading onto other local governments and onto individuals and their families with regard to providing health services.
However, Bill C-91 is part of the problem. It's not the only part of the problem. It's part of the problem because it does take billions of dollars out of the system and doesn't reinvest them usefully or meaningfully back into the health care system. Secondly, it strikes me that when we're looking so desperately for savings in the health care system, there is this one area that is so easy to change, and we should be taking advantage of the timing and the opportunity and we should have the political will to make that change because it will benefit the health of Canadians in the longer term.
[Translation]
Mr. Pierre Brien: My question will be twofold. You are talking about two things, particularly about benefits to Canadians. We must keep in mind that seventeen thousand people are working in the patent drug industry. Therefore, I am not sure they would all agree with your analysis. There must certainly be some of them who belong to other unions.
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First of all, if changes were to be brought to that legislation and if your suggestions were to be implemented, are you telling us that it would have no impact on the jobs of those who are doing research and development in the pharmaceutical companies?
Secondly, do you admit that the development of certain kinds of drugs could lead to a decrease in health care costs? When a company discovers a new drug which can prevent hospitalization because it brings an alternative to surgery or other treatments, the stay in hospital is shortened if not completely avoided.
In several cases, the use of sophisticated drugs can bring about a reduction of costs in the health care system. Do you agree that the development of drugs which require a great deal of research can lead to a decrease in health care costs?
[English]
Mr. Marshall: I'll deal with the second part first.
Certainly there are medical discoveries that do exactly as you say - reduce stays in hospital and provide alleviation of conditions for individual Canadians in terms of their health. I don't believe the kinds of positive changes to Bill C-91 that we're proposing will mean those medical discoveries will no longer happen. Those medical discoveries will occur, perhaps in Canada, perhaps not.
You've already heard testimony from people with more expertise in this area than I have. That testimony will tell you that drug companies do not develop new drugs for the Canadian market. The market is just too small to do that. They're developing drugs for a worldwide market, and the Canadian market is certainly part of that. But I don't believe that as a result of the changes we're proposing there's going to be any reduction in medical discoveries that will benefit Canadians.
With regard to whether or not jobs will be lost or negatively affected in the patent drug industry, I'm not inside the boardrooms of PMAC, of course, so I don't know what kinds of considerations they may look at. Certainly they are going to say they will be negatively affected, but we're talking about a relatively small number of jobs that will be negatively affected. They already have been, even under Bill C-91.
There are many other conditions other than Bill C-91 that are going to affect those jobs. Some of those conditions are internal restructurings within the pharmaceutical industry itself. They will seek more efficiencies, and they may do that independently of what happens in Bill C-91.
Of course I can't give you assurances that there wouldn't be some changes, but I believe those changes are minimal with respect to the benefits that we would gain.
The Chairman: Mr. Mayfield.
Mr. Philip Mayfield (Cariboo - Chilcotin, Ref.): Good morning. Thank you very much for being here to meet with us as we discuss this.
I have listened to what you have to say with a good deal of interest. Thinking about what others have said before you came, it seems as though much of what you're saying is swimming against the information that has been provided by many others, including - but not limited to - those principally interested in this, the generics and the patent drug companies.
From what we've heard, it's my understanding that the standards for increased jobs, increased investment, and expansion of facilities has been more than met by the companies involved. In fact the generics that were most worried about the extension of the patent protection period have done very well themselves, even going into areas of research they were not into before. So I was a little surprised to hear you say that.
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You raised the issue of cuts to the health care system and the number of jobs lost. I can think of other reasons that I would consider more significant. I think of government spending priorities, for example, where we have a government that makes grants and subsidies to corporations that, in my mind, are excessive and that could be going into health care, instead of cutting the transfers to provinces and from there to the hospitals and the medical system. I was a little surprised to hear you say that.
One other thing that really struck me in your presentation from the Kingston and District Labour Council is that you emphasize that you strongly oppose drug patent protection. It's in your statement here. I'm wondering how you would expect to have people invest their time and thought in developing this intellectual property if they're not able to protect it in such a way that they can make a living from it.
Are you able to respond to these concerns I have about your submission?
Mr. Hope: We oppose the patent protection that we're talking about, a 20-year protection for name-brand drug companies to manufacture at will different kinds of products. It could be as simple as taking one small component of a current medication and perhaps putting a buffer coating around the particular item being dispensed and saying that's a new product. It takes no research and development. They put that on the market and they up the price. If they have a 20-year period to do that, they can go through all of their products and do those simple things, and that takes no research.
When you put 20 years on that and say that the Canadian generic drug manufacturers can't compete in that particular field, what you're saying is that the name-brand drug companies have total control over how the drugs are going to be manufactured. They may have competition among themselves, but among themselves they're keeping a lot of the drug prices up.
It was recognized in the 1960s that the lack of proper protection was giving Canada one of the highest costs for selling drugs. That's why in 1984 the Eastman commission came in with recommendations to put some controls on that. Those controls said that the name-brand drug manufacturers were going to pick up some royalties for their research and development. But they weren't able just to go out and charge what they wanted at will over today's 20-year period and to say that's all for research and development.
It's an actual fact that the name-brand drug companies spend a lot of time and money advertising. Today doctors don't go through a school to understand exactly what each and every medicine that's dispensed on an ongoing basis does. They don't know exactly what those prescriptions do. So you have these men and women coming in from the name-brand drug companies to tell them what these prescriptions are. Now, that's where a lot of money is spent. It's not spent on research and development. A lot of money is, but it's not all spent there.
To go even further, when Bill C-22 came in, it wasn't enough for the name-brand drug companies that they were going to be allowed a four-year period to market their products exclusively. We then went to a minimum of seven and up to ten years. Then a little bit further on they talked to you about what they wanted to do, and in 1993 we started a 20-year period where they have the exclusive right to market their product.
Now, in those particular areas we're not in agreement with what's happening today, or even the seven years. I think we should be looking at protection that would be no more than what the Eastman report put together.
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Mr. Philip Mayfield: That statement you made is itself not quite correct, sir. You say that they have a 20-year period to market their product. They have a 20-year protection on the intellectual property. How long they have to market it depends upon how long it takes to improve the product to the point where it is marketable, and what is left is the period of marketability. What we hear the companies saying is that many of the drugs are complex enough that they do not have a sufficient period of time to reclaim their costs and to make the profit they need in order to be viable in the business. In fact the companies in some instances are saying that some products take such a long period to develop that they need to have an extension beyond the 20 years. So I don't think it's correct to say that they have 20 years to market it.
I don't have anything to do with the drug companies. I like cheap drug prices too. But I'll tell you what I do want. I want to have those drugs available to the people in Canada who need them, and I want the research facilities in Canada, because we have scientists, both young and old, who are highly qualified even on the world market. I believe we have a contribution to make, and I want that to take place.
When I hear that the prices are in fact more stable now than they were before and that competition has had more effect on controlling prices than cost controls themselves, I'm wondering if you have any evidence that would contradict or refute the evidence that has been brought to us previously.
Ms Hannah: One of the things, I would say, is that when the Eastman commission looked at drug pricing, they concluded that competition was not an effective way of keeping drug prices down. So there you have a royal commission that looked at the situation very carefully and decided that having the generics have the compulsory licensing was a more effective way of keeping drug costs down.
The other thing is that I'm really curious, because I cannot believe that the Canadian Drug Manufacturers Association came in and told you that Bill C-91 was okay, that they were doing well under Bill C-91, because that's not what I've heard from them at all.
When you say that the brand-name drug manufacturers, PMAC members, say that they have to have this 20-year protection in order to make the profits that are necessary for them, what is an acceptable level of profit? They have a 29% profit margin after their research and development costs are taken into account. Somewhere we have to say that this is excessive. There are not a lot of companies on the market that have a 29% profit margin.
The final point I would make in response to the issues you've raised is that less than 5% of the new drugs that came on the market over, I believe, a seven-year period were considered to be breakthrough drugs that had any real new therapeutic value to add to what was already on the market.
The Vice-Chairman (Mr. Walt Lastewka (St. Catharines, Lib.)): Thank you,Mr. Mayfield. I'm sure we'll be able to come back.
Mr. Murray.
Mr. Ian Murray (Lanark - Carleton, Lib.): Thank you, Mr. Chairman.
Good morning to the witnesses.
I just want to start off with a point of clarification with Mr. Hope. Do I understand correctly that you believe that both the brand-name manufacturers and the generic companies are earning excessive profits? Is that what you're saying?
Mr. Hope: No, I'm not. I think the brand-name companies are earning excessive profits. The generic companies are restricted to such a degree that they couldn't earn excessive profits.
Mr. Ian Murray: How do you know that? They're not publicly held companies in most cases. How aware are you of their finances?
Mr. Hope: I'm not aware of the specifics. I've talked to people who work with the generic drug manufacturers, and they have indicated that with the restrictions under Bill C-91 and the periods of time they've been held back in court from trying to prove their case, they can't market all of their products. They're going to be restricted in marketing their products. Because the name-brand companies are up front, they're the ones that have the right to put their products on the market first for the next extended period of time.
Mr. Ian Murray: So you've just bought those comments at face value, and you've seen nothing to back them up.
Mr. Hope: No.
Mr. Ian Murray: Thanks.
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Mr. Marshall, I was interested in your dismissal of the R and D being done in Canada by the brand-name companies. I'd like to know what you've done to familiarize yourself with the kind of research being done by those companies in Canada.
Mr. Marshall: Well, I have two choices. I can listen and believe everything that PMAC tells me, and they've certainly done a massive advertizing campaign both in television and in newspapers to convince me that they are spending incredible amounts of money. I'm not privy to their financials and to their books any more than anyone else. I can believe them or I can consider, and I have considered, the views of others who have studied this in far more depth than I have, such as Dr. Joel Lexchin, who I believe is one of the most expert persons in drugs in this country who is not connected directly to PMAC or to a pharmaceutical company. He tells me that he has evidence that they're not spending the kind of money they claim in R and D. And we do have some numbers that the Canadian Health Coalition has provided to you that indicate that.
So those are the choices I have. Quite frankly, at this moment I'm inclined to believe Doctor Joel Lexchin and the Canadian Health Coalition.
Mr. Ian Murray: We take this response very seriously. We have to delve into this whole issue. Committee members really want to get all the facts on this and we get to the point where we have to know what figures we can believe.
It was interesting. One of the witnesses yesterday who'd agree with the positions of all three of you on this whole issue was referring to a Bay Street lawyer who shared their views. Now we have government lawyers who have a different view on this whole question of whether Canada must abide by what we see to be the rules as laid out by the World Trade Organization and NAFTA.
In the same sense on the question of prices, we have to believe somebody. We have all kinds of figures from the PMPRB. It's a government body and essentially disputes an awful lot of what we've been hearing this morning in terms of brand-name prices and generic prices. Essentially, as you are I'm sure aware from PMPRB figures, brand-name prices have actually decreased while generic prices have increased an average of, I believe, 3.2% since 1989. These figures just don't square with what we're hearing.
Do you believe in or trust the figures that are given to us by the PMPRB?
Mr. Marshall: Let me put it this way. The PMPRB appeared before you and gave you those figures, and I believe them to the extent that they have been able to try to meet the mandate that was given to them. I believe them on this front: that the cost of prescription drugs that are not new drugs onto the market has been kept under the rate of inflation. I don't dispute that for one second.
However, the real problem here is the cost of new drugs coming onto the market. That's where employers tell us is the major cost of drugs in the plans they have to pay for. A Conference Board of Canada survey of 401 businesses tells us that. Employers believe this is the major contributing factor to increased drug costs. So that is an issue the PMPRB has to address, the new drugs onto the market, not necessarily the drugs that are already there, and the prescribing costs that have gone up.
The second point I'd like to make - and this is included not necessarily in my brief but certainly in the Canadian Health Coalition brief and other materials they provided to you - is that we are looking for control of prices in generics as well as brand names. We're not trying to say they shouldn't be controlled as well. We'd like to see the PMPRB have the teeth to be able to do the kinds of things they need to do to control drug prices across the board.
Mr. Ian Murray: You just saved my next question, because I know the other two witnesses have mentioned that, and I just wanted to confirm that you support that as well.
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I'll now ask Ms Hannah a question. As I say, we've had a number of witnesses and some very interesting witnesses over the last few weeks. We had a group representing the biopharmaceutical industry in Canada. A number of them, quite new companies doing some very exciting work, made it very clear to us that if the current patent protection, which is essentially an international standard, no longer existed in Canada, they would not be able to continue to do their work in Canada; they would not be able to attract the investment they need to do that work. Are you willing, Ms Hannah, to sacrifice that industry in the interests of having perhaps lower drug costs?
Ms Hannah: That's a thing we face all the time in bargaining: that the employer is going to close up shop, they're going to pack up and move away. We deal with this very situation all the time. And quite often you find that when you push a little further they are prepared to stay, that there are some other reasons. Of course they're going to come forward and say this is totally unworkable and they're going to leave if this legislation is put in place - or in this case, if Bill C-91 isn't maintained. They're going to say that. But I think there are other considerations, that they will stay and do business in Canada, and there are other factors here that are extremely important around providing affordable drugs for people. I know it's a difficult situation, but, as I say, it's one we confront every day.
Mr. Ian Murray: That's a risk you're willing to take.
You mentioned that you don't believe that the pharmaceutical industry, when it comes to intellectual property, is the same, for example, as the computer industry. But human nature governs a lot of what we do in business, and people are not going to invest in companies where they see a high risk factor if there's not some protection.
I'm really trying to get at this question of whether you believe we should try to maintain an innovative drug manufacturing industry in Canada or not. If not, what guarantees do you think we have that we would have access to the latest medicines at reasonable prices from elsewhere in the world?
Ms Hannah: I don't believe that the brand-name drug manufacturers, although they like to call themselves innovative.... As I said, less than 5% of the new drugs that came on the market over a seven-year period had anything significantly new to add that wasn't already on the market. So I don't think they have a great track record as being innovative.
Again, going back to the Eastman commission, which was a very thorough study that was done, it was recognized.... As I said in my remarks, yes, the researcher does need to have some recognition for that time that is put into creating the new drugs, but to extend it to 20 years.... We have to decide what is a reasonable amount of time, and four years is a reasonable amount of time.
Mr. Ian Murray: Mr. Marshall, you made a number of statements. I just jotted down some notes. Again, I'm trying to relate this back to Bill C-91. You talked about throwing tens of thousands of people out of jobs. You're talking about billions of dollars that could be put back into the health care system. I guess I come back to a question Mr. Brien asked earlier: how does that relate to Bill C-91?
Mr. Marshall: Let me try to state this as simply as I can. The health care system is strapped for cash. We're taking measures that are quite devastating right now for workers' jobs in health care and for health services. There's a lot of rhetoric about rebalancing the system. I heard it at the national forum consultations for two years that the health care system is out of balance and we need to rebalance it. There's one way to start rebalancing it in terms of the money that is required to provide adequate health care, and that is to lower the cost of drugs. That's the most obvious and easiest way to do it at this time, and what the mandate of this committee is addressed to do.
It won't save all of those jobs and it won't restore the health care system to the way it should be or could be, and it won't expand the health care system. What it will do, however, is put us one really firm, full step ahead in trying to achieve that.
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The cumulative cost of Bill C-91 will be billions of dollars. That money is going to the profits of drug companies right now, when it could be going to provide for health and jobs for Canadians.
The Vice-Chairman (Mr. Walt Lastewka): Are there any comments? Mr. Brien.
[Translation]
Mr. Pierre Brien: I have a question for Ms Hannah. I have some difficulty. I understand your interest and your concern about health care costs. Everyone will agree on that. But there is something I find inconsistent in one of your statements.
You said that for the last six or seven years, only 4 to 5% of the new patent drugs on the market added something significantly new. If such is the case, it means that patents on other similar products will soon be expired and that there will be other generic products available on the market.
If it is true that the new patent drugs don't add anything, people can take generics and get the same effects. Therefore, there are no reason to think that patent drugs will cause a soaring of our health care costs, since they bring no significant benefits for health. People will just have to use substitutes. Would you explain us what does all that mean?
[English]
Ms Hannah: In the first place, if there is patent protection, the brand-name drugs will come out and there won't be generic drugs to compete against the brand-name drugs.
As Len Hope described, the big companies change a name-brand drug slightly and put it on the market as a new drug. As the National Forum on Health reported, you then see very aggressive brand-name drug manufacturing companies using a very aggressive sales approach. They go to the doctors and say that this new drug is what the doctors want to prescribe, because it's better. Of course they're going to say it's better. They're trying to promote the drug to the doctor, and the doctor prescribes that new brand-name drug at a higher price. The patient then goes to the pharmacist and buys that higher-priced drug.
The concern is that if we do not have the generics that are able to copy, those brand-name drugs are going to be the ones that stay on the market. But I can see your point that if it doesn't add anything new, you could just use the old generic. Is that what you're saying? It's because you will have this promotion of these new drugs, and doctors will be prescribing them. They are going to dominate the market, and it's these drugs that people are going to be using.
[Translation]
Mr. Pierre Brien: But then, we are talking of a different issue. If more efforts were made in promotion and information to settle the problem... We can blame our doctors for all kinds of things, but, even so, they surely had the occasion to give some opinion about the therapeutic effects of drugs. It would be much better to give them appropriate information. Then, we could stop that cycle of upwards pressures on costs. We could settle the problem you are referring to by doing something else than changing the legislation. Do you agree on that?
[English]
Ms Hannah: Who would get the information? I didn't quite follow that.
[Translation]
For example, doctors could get it. Drug companies could be asked to provide that information to the Medical Research Council of Canada, who could then inform doctors about the therapeutic effects of drugs.
It is something I am throwing in the air, but there must certainly be some other means to settle the issue that you are raising without shaking up the whole industry that we have been trying to build for so many years in Canada, without putting those companies in jeopardy. We could settle the particular problem to which you are trying to find a solution.
[English]
Ms Hannah: I think you are endangering the generic industry, which was also built over a number of years in Canada. It has provided a number of jobs, and it has been very successful in Canada with this patent protection.
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Again, the National Forum on Health came out with a statement about the idea of educating doctors. I am not knocking doctors, but I acknowledge that given the way the system is set up, if doctors are paid on a fee-for-service basis, then their research is going to be what's in the ads for the medical magazines and the last salesperson that came to their door. So whoever has the most aggressive marketing campaign is going to be the one, essentially, that's providing the education for the doctors.
Yes, doctors go to university, but when they come out, there is often not enough time to keep up with the current medicines.
As to whoever is funding the research.... I'll leave my comment there.
If I may say one last thing, though, when the national forum addressed this issue, their solution to the information problem was that if you had a national drug program, then you could have a computer system set up that would provide on-line information to doctors and consumers.
[Translation]
Mr. Pierre Brien: I'll come back later.
The Acting Chairman (Mr. Nick Discepola (Vaudreuil, Lib.)): Thank you, Mr. Brien. We'll give you a chance to ask your questions later on. We still have much time left.
Mr. Volpe.
Mr. Joseph Volpe (Eglington - Lawrence, Lib.): Thank you very much, Mr. Chairman.
[English]
I know I'm not going to have enough time to ask the questions I want to ask. This preamble is going to use up some of that time, but be patient with me, please.
Lady and gentlemen, you've raised something that was raised last night with us; that is, the question of costs and social benefits, how to measure them. One of the things you've addressed today that's of particular concern to me is the issue of health and jobs associated with health. I wonder how we're going to measure some of these issues.
There's a standard that's used, and we use it politically for the number of jobs relative to sales, that ratio of jobs created to sales. In your business, what do you accept as a standard? What's the jobs-to-sales ratio that you think ought to be translated and realized in the marketplace for $1 billion in sales?
Mr. Marshall: I'm sure you'll be well aware that when we're dealing with the public sector, that's a very difficult question, because we don't have a sales item to measure against.
Mr. Joseph Volpe: Government expenditures of $1 billion.
Mr. Marshall: I don't know. I don't have a firm answer to what the standard is, and it probably varies considerably from public sector service to service. In some parts of the health care system it's more -
Mr. Joseph Volpe: Bear with me if I press you a little bit further. I don't want to be antagonistic; I just want to get a particular sense, because you - especially you,Mr. Marshall - brought out a series of numbers of dollars and jobs lost. So I don't mean to pick on you; I just want to get a better handle on this.
You indicated at one point here that there's an estimated cost of Bill C-91 to the Canadian public of between $3.6 billion and $7.3 billion per annum by the year 2010. I'm going to use the lower figure. It comes out to about $360 million a year. If I infuse that $360 million a year into the health care system, how many jobs would I expect to create, keeping in mind I want to be sympathetic and say I want to save some of the jobs that are working in the system?
Mr. Marshall: I don't know that I can give you a firm answer to that. It depends on where that money is reinvested back into the health care system.
Mr. Joseph Volpe: Nursing.
Mr. Marshall: I still can't give you a firm answer because I don't know that you're not going to say okay, we're going to use this money to.... What you're going to have to do is say where in the health care system am I going to put this money? Am I going to put it into hospitals? You're probably not going to do that at this point, but are going to close.
The unfortunate thing in the restructuring that's going on now is that there's no plan to deal with people who are being kicked out of hospitals quicker and sicker. You're going to say ``I think we need to infuse this money into the health care system in a place that's going to look after some kind of community care for these individuals''.
The creation of a comprehensive system of community health centres across the country is a lot different from saying you're going to put it back into hospitals, because we don't have a comprehensive system of community health centres where you might have doctors on salary, where you might have nurse practitioners who actually carry out a lot of primary care delivery in that centre, where you might have a team of social workers who are dealing with social problems individuals come in with that are directly related to their health.
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That's the creation of a lot of jobs that I don't have a measure for, because, believe it or not, no one is planning that stuff, even though we're making these other changes. So $360 million is going to provide a considerable number of jobs and I think will go a long way in creating a system of community health centres in this country that will create jobs and will also benefit the health of Canadians.
That's the best I can do.
The Acting Chairman (Mr. Nick Discepola): This is your last question, Mr. Volpe.
Mr. Joseph Volpe: I want to pursue the business of jobs and trade-off in the health care system.
You alluded to a study from the Canadian Health Coalition. I believe that study makes a claim that as a result of decreased spending - I think they make the same association you made, that there's more money being spent on drugs and therefore less on the system itself - that's going to result in...I believe the figure was 14,000 job losses in Quebec, and we heard last week about 6,000 additional job losses in Ontario as a result of hospital closings because of the lack of funds available.
So I want to pursue that business of job trade-offs. I'm going to ask you again how we're going to come up to those numbers, because you've also used numbers here that relate to - you've accepted somebody else's figures, obviously - the numbers of jobs lost in the pharmaceutical sector as a result of Bill C-91.
I did a quick calculation. It comes out to about 2,500 jobs per $1 billion of sales in the patent sector, and about 5,000 jobs per $1 billion of sales in the generic sector. I'm using PMPRB numbers. I wonder, if I saved $1 billion - you've used billions, I'll use one - how many jobs I would create in order to offset those losses or that average.
Mr. Marshall: I know that Informetrica uses a formula for the number of jobs -
Mr. Joseph Volpe: Another 1,000 jobs per $1 billion of sales.
Mr. Marshall: Is that what Informetrica uses?
Mr. Joseph Volpe: Yes.
Mr. Marshall: Fine, then use that number; I don't know.
I'll be really frank with you. We're trying to compare the provision of public services to a business, and I think that's a false comparison, because the money is not spent in exactly the same way, it's not invested in exactly the same way, and the number of jobs created aren't created in exactly the same way.
The Acting Chairman (Mr. Nick Discepola): I think, Mr. Marshall, one of the focuses of your presentation was the effect of Bill C-91 on jobs, and if you could take the time over the next several days to give us some accurate figures in regard to what Volpe has raised, we'd appreciate it.
Mr. Marshall: By all means. I'll undertake that and get back to the committee.
The Acting Chairman (Mr. Nick Discepola): Thank you.
Mr. Mayfield, you have five minutes, please.
Mr. Philip Mayfield: I'd like to speak to you, Ms Hannah, if I could, on some of the comments you've made.
You mentioned that 5% or less of the drug products are new and innovative. As a person who has been close enough really to welcome some of these new innovations, innovations that have made transplants possible, and in talking to someone in the palliative care unit at St. Paul's Hospital last week, being told that on that day there were no AIDS patients on the unit, these are the benefits of some of the new innovations.
It strikes me that if we had a percentage of say 50% of the products each year are new and innovative, I would think, my gosh, I'd have difficulty believing that. The kind of tedious progress needed to come to some of those innovations makes me wonder if 5% may not be a reasonable figure.
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Your point is well taken, in that you can shift the ground a little bit and make an old product look new, and we've heard instances of that too.
I'm inclined to give at least my family physician a little more credit than you're giving the doctors for doing that. He has said to me a couple of times, ``Here's a sample that I got. Why don't you try it and tell me how it works?''
Anyway, I'm wondering if you really do feel that 5% of innovation out of a company per year is.... What do you think a proper percentage is? What would be a good benchmark to hold up for a pharmaceutical company?
Ms Hannah: I don't know if I could put a percentage on it. What I find dismaying is that an industry that has massive profits is only coming up with 5% new, innovative products, and that was over a seven-year period. I find that distressing.
And contrary to what you're saying, I don't think it is a long and tedious process. I think this is an area that should be very exciting. In fact if I were to believe the commercials that PMAC is putting on the television, they take a lot of pride in coming up with these new drugs that they think are helping people. I don't think it is a tedious process. I think it's one of those areas of highly skilled research that should be very exciting and that people want to be involved in.
Again, I acknowledge that there has to be a certain period of time to protect that researcher in order to get the product developed. Then it goes on the market. I don't deny that it is important to have these new developments, but I think there are people who will be interested in creating these new drugs, and they do not need to have a 29% profit margin in order to make the investment in that kind of research.
Again referring to the National Forum on Health, its recommendation was that a certain amount of profits from the drug companies be invested through an arm's-length organization such as the National Research Council to fund research at the universities. I think that's a very good idea. I think you would see a lot of creative developments coming from that, because there are people in the universities who are excited about doing research and who need the funding.
Quite frankly, I bet that a lot of the research people are doing now is tedious, because the drug manufacturers want to come up with something slightly different so they can put it on the market at a higher price and make a better profit. It's profit that is motivating the research in this case.
The Vice-Chairman (Mr. Walt Lastewka): Mr. Discepola.
Mr. Nick Discepola: Thank you, Mr. Chair.
It seems to me that negotiators usually have a tendency - and I think it's justifiable - when they're trying to bargain for their own membership to compare various benefits and various salaries, for example, with other comparable associations, depending on what they're negotiating with. I think it's normal. I do that with my children every time I negotiate their curfew. They'll compare with their friends and they'll try to justify why they should....
What I'm leading up to is that I think one of your main preoccupations.... There were two of them: one was health care costs and one was the jobs issue. However, on the jobs issue, when you state to this committee that you would like to see patent protection, in essence, marketability of new drugs, limited to four years, and you also claim that you'd like to see many jobs created in this country, I see a disequilibrium there.
To use the bargaining analogy, if we look at this country - and you stated yourselves that Canada represents a weak 2% of the potential marketplace - from a bargaining perspective we're not very strong. Yet when you look at it worldwide, better protection is offered. I've referred to many of the industrialized countries that offer seventeen or twenty years. I think the average right now is twenty years. On top of that, other countries are now offering even better protection, to the tune of up to four years' added protection.
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You come to this committee and tell us to keep the jobs here in Canada. You tell us that you like those high-quality, high-knowledge-based jobs with good protection. But you also tell us that we should reduce the patent protection. Under what pretext do you state that? Are you concerned about health care costs, or is your concern a desire for a more competitive, innovative industry that we can be proud of in Canada? Can we keep the jobs here in Canada yet still meet one of your comments, which is to try to keep more jobs here in Canada? How do you rationalize your request with the desire to have more jobs? Aren't the two competing?
Mr. Marshall: I don't think the two are competing at all. In fact I think we look to see what the best deal is in any negotiation. We compare in negotiations and we compare when we're shopping.
Mr. Nick Discepola: But if I'm a worldwide producer of manufactured drugs and I'm trying to compare and shop around, and if I see one country in which I can only penetrate 2% of the marketplace while being offered less benefits and services, am I going to be encouraged to invest in that country?
Mr. Marshall: I didn't understand what your question was then, but I can come back to it when I finish my original train of thought.
There isn't a disequilibrium between the positions we're taking. We do want to keep jobs in Canada, it's true. But we also want to have health care in this country that is quality health care for Canadians. We don't believe it's just a jobs or trade issue. We believe it's a health issue, and we believe the task of this committee is to deal with Bill C-91, which is part health, part business, and part economy.
When we're considering this, we need not only consider the economy, we need to consider the health of Canadians. To quote from the National Forum on Health, one of its recommendations was that ``all government economic policies (both fiscal and monetary) be analyzed explicitly from the perspective of their impact on health''. Well, throwing Canadians out of work in the health care sector negatively impacts their health. While it would be desirable to have good high-tech, well-paying jobs, creating jobs in the pharmaceutical industry doesn't seem to be in the cards. I don't see that there's a significant creation of jobs in this industry.
So I don't see that there's a disequilibrium in the position at all. In fact I think it's a very consistent position that analyses things in a more complex way than what is being proposed, mostly on the issue that we either create the jobs and keep the protection the way it is, or we don't. I'm afraid the issue goes a lot deeper than that.
Mr. Nick Discepola: I'm trying to understand the rationale for proposing patent protection that is less than the worldwide average. Is it to create jobs? Is it to reduce health care costs? What is your main motivation for proposing that?
Mr. Marshall: The main motivation would be to reduce health care costs.
Mr. Nick Discepola: That's what I thought.
If you take a look at the PMPRB report - and in answering an earlier question, you said you tend to believe the report - it shows that drug costs represent roughly 10% of the total health care costs, and patented medicine drugs represent only 3% of that total. So when you say you would like to see generics, I presume it's because you believe that in producing generic products we'll reduce health care costs - or drug costs, to be more specific.
As a committee - and as you said before - I think we have to have a proper balance. We're going to have to try to encourage innovation and encourage new patent drugs to enter the market, because if we have no new drugs created or discovered here in Canada, we're obviously not going to have a generic industry. By inference, if you're leading us to believe that generic products are much cheaper and will save drug costs, then we have to have a good balance.
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One of the things that strikes me is that if it takes roughly $500 million to $600 million to develop a new drug, and one in ten of these makes it to market, yet the generic can come in and and introduce a copy of it - we've had figures in the $500,000 range for this - why is it that you haven't come to this committee saying maybe the generic prices should be lower than the 25% of the brand-name products?
The Vice-Chairman (Mr. Walt Lastewka): Who would like to answer this question?
Mr. Marshall: I'll take a stab at it.
We haven't come here to say that the generic industry should be protected from the PMPRB. By all means, we want to control prices of drugs, including generics. I could just leave it at that.
The Vice-Chairman (Mr. Walt Lastewka): Thank you.
Mr. Brien.
[Translation]
Mr. Pierre Brien: I have a short question for Ms Hannah. You mentioned a couple of times that drug manufacturers had a 29% profit margin. Do you mean that the company who sells a patent drug on the market makes a 29% profit?
[English]
Ms Hannah: Yes, those are the brand-name drug manufacturers.
[Translation]
Mr. Pierre Brien: You agree that many products will never come out. Therefore, the profits made on a product compensate for the losses sustained on all the research which does not lead to a breakthrough.
[English]
Ms Hannah: But my understanding is this is the profit they make after they take into account research and development that may have gone nowhere. Even if there was a loss there, I would think they're still making very generous profits.
[Translation]
Mr. Pierre Brien: Then, I would urge anyone to invest in the drug industry. All the mutual funds would have a 29% return on investment. It seems to me that it is a bit too high. Anyway, if you happen to have more details on that, I would be interested in knowing them.
I would like to come back to your suggestion concerning compulsory licensing and the payment of royalties after four years. If we ever adopt such a system, the price of generic drugs will go up. Money will have to be found somewhere to pay for those royalties. So, the price of generic drugs will be higher than what it is now. Do you agree on that?
[English]
Ms Hannah: I think we've already made the case that we think there should be price regulation for the generic drugs as well. It's not like we're supporting profits for one over the other. We believe there should be controls on drug prices.
[Translation]
Mr. Pierre Brien: Yes, but I am trying to understand. Having a background in economics, I am trying to see how we could achieve savings within a system providing for compulsory licensing and mandatory payment of royalties. Generic drug manufacturers would have to add that component to their costs. Those companies would not pay for it themselves. They would rather raise their prices to offset their royalties. Generic drugs would then cost more than now.
You are highly concerned about the excessive profits made by the multinational companies. Therefore, we would take the profits made by those brand-name drug manufacturers to put them in the hands of the generic companies. We would take money out of one place to put it elsewhere. As for me, I hardly believe that generic drug makers are altruistic companies whose purpose is to do philanthropy. I guess they are in business to make money.
[English]
Ms Hannah: If I could respond, the generics do have cost savings. They are not duplicating the research that was done to develop the brand-name drug. This is a considerable saving. It is also a benefit to society that you do not have this kind of wasteful duplication going on in trying to do the research and development to copy. So there is a saving there to the generic companies.
The other place where there is a saving is because they are generic and they're not a brand-name drug. There is a saving in the marketing and the advertising as well that can be passed on to the consumers.
Mr. Pierre Brien: But they have to pay royalty.
Ms Hannah: Yes, but even under this current situation where they are paying the royalty, their products are still at a lower price than the brand-name drugs.
The Vice-Chairman (Mr. Walt Lastewka): Mr. Marshall.
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Mr. Marshall: Perhaps I can add one thing. I think one of the key points about changing the patent protection is to get generic drugs onto the market faster. The saving will be there, as well.
While it is true they will pay royalties, we won't be faced with paying what we believe is an inflated cost for new drugs coming onto the market because of the OECD seven-country basket. We will certainly be paying less for a longer period of time than we are now. There will considerable savings in having generic drugs onto the market faster.
The Vice-Chairman (Mr. Walt Lastewka): Mr. Volpe.
Mr. Joseph Volpe: Thank you very much.
I'm going to pick up where we left off, if you don't mind. Perhaps I wasn't really clear. I want to explore this business a little bit further because in all three of your presentations you gave me a sense that we should be taking a look at this issue in the context of negotiations around the table.
You want to bring savings to your consumers and your workers by negotiating drug prices. You're asking us to consider that reduced patent protection will entice competition to come onto the marketplace, and at the very least you're going to come forward with a 25% saving. This is what I'm hearing.
I also heard you say the converse of that, obviously. You said continued patent protection really puts the government in a position where it must protect one of the partners at the table from your negotiating practices. Essentially, you can't ask for lower drug prices at the table because the drugs over which you have some influence aren't in the marketplace by virtue of legislative protection.
Mr. Marshall: I'm not entirely sure I understand the question. However, I think you have some misconceptions about our position.
We arrive at a negotiating table and we want to ensure our members and their families have access to the kind of health plan they need in order to live quality lives. In the course of doing this, our employers are telling us they can't give us what they have been giving us. We can't negotiate what we have been negotiating under the current set-up because the costs of new drugs onto the market are driving our health plan costs up.
I don't know who we expect the government to be protecting at the table. Quite frankly, I think you're protecting everyone by considering changes to Bill C-91. I can't imagine an employer in this country who will come before you and say they're happy with the cost of drugs right now. I just can't imagine that they're going to say this, because it causes them one hell of a problem at the negotiating table, and it does the same for us.
I don't know if they've come forward or will come forward. It boggles me why they wouldn't want to come forward to do this. I know you've heard from Green Shield. I didn't hear what they had to say, but I'm sure they've had a lot to say about this.
We know there will be savings despite the trade-off or the cost of jobs and other things in the patent industry. Well, first of all, the jobs haven't been created there, so we're not really trading off much.
Mr. Joseph Volpe: Madam, I thought I saw you wanted to respond as well.
Ms Hannah: I was just going to respond to why the employer isn't here. I don't know, maybe some of them are.
When Bill C-91 and Bill C-22 were being reviewed, we tried to get the big three auto manufacturers to come with us to make a joint presentation, because they're always hammering us over the prices of drugs. They would not come forward.
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Part of the reason they won't come forward is because a number of years ago when we tried to implement a generic drug plan - this was before it was automatic that the pharmacists would look at putting a generic substitute on a prescription - we tried to bargain with the big three that we would take the first step and implement a generic program. This was a number of years ago. Both parties agreed that's what we were going to do.
The auto manufacturers got so many letters from the brand-name manufacturers saying if you do this, we are going to do everything possible to boycott your product, cars, that they backed down. So I don't think they're going to step forward because they're fearful of doing so.
The Vice-Chairman (Mr. Walt Lastewka): We'll allow you to ask a short question,Mr. Volpe. But before you do I'd just like to introduce and welcome the Forum for Young Canadians, who are here. They're students from across the country learning about things happening on Parliament Hill.
Mr. Volpe.
Mr. Joseph Volpe: In the responses I think we've come back to this business of cost. Rather than aggravate the frustration of both the witnesses and members around the table, I'm just going to make a comment, and maybe we can leave it at that.
We're coming back to a distinction between prices and cost. I'm hoping that as a committee we'll be able to examine that, with costs being the overall health care costs in the country as opposed to prices of a product that comes on, where we examine the percentage of increase or decrease in the introductory prices.
I just want to leave it at that. If we have another round, then maybe I'll pursue that a little further.
The Vice-Chairman (Mr. Walt Lastewka): We're getting close to the end. Did you want to ask a short question?
Mr. Joseph Volpe: No, I'll give somebody else an opportunity to ask a question. I'll just leave it at that.
The Vice-Chairman (Mr. Walt Lastewka): See how lenient your vice-chairman is.
Mr. Joseph Volpe: I just wanted to take the time to make that comment. Thank you.
The Vice-Chairman (Mr. Walt Lastewka): As vice-chairman of the committee, many times I don't get a chance to speak. I'm going to take the liberty, as we get close to the end here, to ask a couple of questions, if I could.
To Ms Hannah, the 35¢ co-payment with your big three, how long has that been in place?
Ms Hannah: It goes way back, I think maybe to 1978.
Mr. Philip Mayfield: I have a point of order. Would you repeat the question? I didn't hear it clearly.
The Vice-Chairman (Mr. Walt Lastewka): On page 10 of the presentation that Ms Hannah made on behalf of the CAW -
Ms Hannah: I stated it. It's not in the submission.
The Vice-Chairman (Mr. Walt Lastewka): It is.
Ms Hannah: The 35¢?
The Vice-Chairman (Mr. Walt Lastewka): Yes. That's where I picked it up from. It's on page 10, Mr. Mayfield.
Mr. Philip Mayfield: Thank you very much.
The Vice-Chairman (Mr. Walt Lastewka): I was just asking how long that plan for 35¢ has been in place.
Ms Hannah: We go through this in every round of bargaining, when did we set up that 35¢. We think it's sometime back in 1978. It may even be before then.
The Vice-Chairman (Mr. Walt Lastewka): Okay. I asked the researcher to get some information. You've provided information concerning who's in private insurance plans and so forth, and I just wanted to find out where you got that information. Could you table that with us so that we could have it as a reference point? It's in the paragraph just above.
Ms Hannah: It's Joel Lexchin, the health researcher.
The Vice-Chairman (Mr. Walt Lastewka): Thank you very much.
Unless there are any more questions, I think we're at the end.
Mr. Philip Mayfield: I would like to ask some further questions, sir.
The Vice-Chairman (Mr. Walt Lastewka): Go right ahead, Mr. Mayfield.
Mr. Philip Mayfield: Thank you very much.
What I would like to do is just to clarify in my mind what your position is. I want to say how grateful I am that you've come and stated your position so that we can hold that up with the other positions that have been presented here. It seems to me - and I would be happy to have you say I understand you or I don't understand you, because it's clarity that I want right now - that you have said that you would like to have price controls. I'd like to have you talk a little bit about how you think those price controls should be implemented.
I think I heard you say that there should be four-year patent protection. I'm not sure if you meant four years in total of patent protection when you mentioned that. I'd like to have you clarify that.
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Could you just speak to those two questions please? Am I accurate in understanding you on those two points?
Ms Hannah: Yes, and those are part of the five-point plan that the Canadian Health Coalition has put forward and that we endorse. We had discussions with the Canadian Health Coalition, and we endorsed those positions.
The four-year patent protection is out of the Eastman commission.
Regarding price controls, you would have to speak to someone who is an expert in this field. Where we differ is that you have a very different view of what kind of incentives have to be in place in terms of profits in order to get people to develop products.
Mr. Philip Mayfield: I have not discussed that with you, so I would just as soon you not tell me what I think.
Ms Hannah: I apologize.
Mr. Philip Mayfield: I think that's a bias you perhaps would regret if you did understand what my position was. But I would appreciate hearing your stance, please.
Ms Hannah: As I said, we support the five-point plan with price controls in place. You would have to, though, talk to the Canadian Health Coalition to get more details about how that mechanism would actually be in place. But from my point of view there is room for a company to make profit off the development of their product and still have limits on what the market price is. It should not be set at simply what the market will bear, because you have to weigh the health care needs of the Canadian people.
Mr. Philip Mayfield: Let me talk about my bias for just a moment, if I may. My bias is that we have a viable industry that provides costs at the most advantageous position for the consumer. In a sense we're all consumers in this. We all depend upon these things. We all depend upon these drugs for the health needs of ourselves and our families. I don't wish to see anyone deprived of what they need for good health.
But what does concern me as we talk about say the four-year total patent protection period is that as I have listened to other people who have come here, even if the development period of some of these products is less than four years, my understanding is that the time for approval, the trials, and the testing frequently, if not most often, take longer than the time you're giving for the total period including marketing. I'm wondering if you really believe that is fair for those who have invested the money and hired the people to do this kind of research. It strikes me as a very short period of time, and I'm wondering how you justify that.
Ms Hannah: I think it is a fair amount of time. Again, I'll refer to the Eastman commission that reviewed this situation very carefully and determined that four years was an appropriate length of time. They also determined that having the compulsory licensing in place did not seriously detract from the profits of the brand-name manufacturers.
Mr. Philip Mayfield: The other point I'd like to have you discuss just a bit, if you would, is how you would go about implementing price controls in this area here.
Ms Hannah: As I said, I'm not an expert in this field. I think the Canadian Health Coalition has put much more time into looking at this, and I would certainly refer it to people who are more knowledgeable than I am.
Mr. Philip Mayfield: Thank you very much.
The Vice-Chairman (Mr. Walt Lastewka): Mr. Volpe.
Mr. Joseph Volpe: I'm wondering if in the interest of fairness it might be more appropriate to clarify the question that has been raised and answered about three or four times already. It relates to what Mr. Mayfield said. I don't mean any disrespect, but I think what the Eastman commission said, among other things, was that an appropriate period of patent protection for the recovery of costs and reasonable profits was that four- to five-year period that would be the period of market exclusivity once that whole development period had gone on. He suggested that once the whole research development, including the regulatory process, had been exhausted and the product came on the market, a four- to five-year period was reasonable and fair.
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I'm wondering whether I'm doing injustice to either the presenters or to Mr. Mayfield by asking if that clarification I'm trying to make is an accurate reflection of your understanding of the Eastman commission report.
Mr. Marshall: Yes, it is my understanding that the Eastman commission recommended four years after the product was approved, so your clarification is appropriate.
Mr. Joseph Volpe: So that resolves some of the problems associated with the question of how long the patent period ought to be. We're just talking market exclusivity, period. Thank you.
The Vice-Chairman (Mr. Walt Lastewka): Would anyone else like to comment on that? If not, I'm going to close by asking a question.
I would like to ask each of the witnesses to summarize for me your number one priority point or message you want to leave with this committee. I would ask you not to link five messages, but what is the one message that you want to leave with this committee?
I will start with Ms Hannah.
Ms Hannah: I would say it is the concern that having privatized drug plans in place - that is, the for-profit drug sector - as part of our health care system, that as the costs are increasing for drug care, it is going to erode our medicare system and is a threat to the medicare system we have in place today. I would say that's the most troubling aspect of this.
The Vice-Chairman (Mr. Walt Lastewka): Thank you. Mr. Hope.
Mr. Hope: I would agree with Jo-Ann that having a privatized group putting their drugs and products on the market increases the costs to the medicare system. At this time when all of the provinces are out trying to slash the cost of health care, if we really took a look at the pricing and made sure that the generic forms of the same drugs are on the market to take care of the public, and make sure that the public is going to have a fair and cheaper price for the pharmaceuticals they need, it will help to decrease the cost of health care in the provinces, and the money that is saved could be spent elsewhere.
The Vice-Chairman (Mr. Walt Lastewka): Mr. Marshall.
Mr. Marshall: I would say, by way of linking my four or five points, that I agree with the two previous speakers, as well as -
The Vice-Chairman (Mr. Walt Lastewka): If you go to two or three, I'm going to cut you off. I want your priority item, the message.
Some hon. members: Oh, oh.
Mr. Marshall: - as well as an affordable, readily accessible universal drug plan, which would necessitate changing Bill C-91 to include generics to make it the most affordable.
The Vice-Chairman (Mr. Walt Lastewka): The reason I asked the question is because sometimes when we hear witnesses - and there has been a lot of dialogue and clarification this morning - I want to make sure that we at least attempt to get a single message. The committee will have many discussions on what the witnesses said, so I appreciate it. I apologize for putting you on the spot, but I know with your background that's not the first time.
I would like to conclude this meeting by reminding the committee that the next meeting is a video teleconference on Tuesday, March 18, starting at 8 a.m. and going until 10 a.m. in Room 371 West.
Mr. Philip Mayfield: Could you remind us of who we're looking at on the teleconference?
The Vice-Chairman (Mr. Walt Lastewka): We are starting in Newfoundland and working across the country. There will be various witnesses from all sectors. The clerk will try to get that information out as soon as possible.
Thank you, Mr. Mayfield.
I declare this meeting adjourned.