[Recorded by Electronic Apparatus]
Wednesday, March 19, 1997
.1531 
[English]
The Chairman (Mr. David Walker (Winnipeg North Centre, Lib.)): Order. 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 is ready to proceed.
Is Ron Thorpe here?
Mr. Ron Thorpe (Program Consultant, Marc Garneau Collegiate Institute): Yes, sir.
The Chairman: Mr. Strachan and Mr. Heller aren't here.
Who are you, sir?
Dr. David J. Cox (President, Apotex Fermentation Inc.): David Cox.
The Chairman: You are not a witness today, sir.
Dr. Cox: I was invited, sir, by Ellen Savage.
The Chairman: I'm sorry, but you're not a witness on this matter, so would you just step aside? We'll deal with it later, okay?
Mr. Thorpe, welcome to the committee. As you can tell, we have only one person here for the so-called round table. This happens when you have a large number of witnesses. There's always shuffling around. I want you to feel very welcome here in this opportunity to make your presentation.
We have representatives from each of the three parties here. I'll put on my other hat for now and we'll start. A bell for a vote will ring for half an hour, so we're going to stay here for 25 minutes. I think we'll be able to get a lot of our work done. We'll give you a chance to answer questions from the parties, and if we haven't finished we'll have you come back and we'll continue after the bell.
Mr. Thorpe, perhaps you can tell us a little bit about yourself and begin your presentation.
Mr. Thorpe: Thank you.
I'm a biology teacher at Marc Garneau Collegiate Institute in East York in Toronto. I currently have two portfolios, one as a science consultant and one as a regional director for the Canadian Space Resource Centre in Ontario. I have 26 years of experience in a variety of science education settings and I'm part of a group of educators, university people and industry people who have sponsored the Connaught Student Biotechnology Exhibition for the last four years in the greater Metro Toronto area.
My reason for appearing here today is to share with you what is confronting our students, particularly those in the sciences in my own school and at other schools, in terms of their uncertainty and concern for future job prospects.
About ten years ago, in 1984, the Science Council of Canada published a report entitled Science for Every Student, an initiative for the renewal of science education in Canada.
Many of you know that science educators and provincial ministries of education across Canada are responding with new curricula trying to address the recommendations in that report, and others, particularly to encourage our young people, especially girls, to continue with science throughout their schooling, and we are trying to teach about Canadian contributions to science and how science has affected Canadian society.
I and many of my colleagues in education have addressed that report, and in my own case at Marc Garneau Collegiate I've worked closely with the space and aerospace communities to develop educational opportunities for our students.
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Many schools in Toronto and the surrounding area are offering unique programs like biotechnology. In my own school I have an ethics and astronomy program. And in other schools in the metro area - such as Martingrove, and Northern Secondary School - there are currently biotechnology programs in place.
Why should science educators like me, who are involved with the teaching of science, especially in a Canadian context, be concerned about Bill C-91?
One of the three objectives before this standing committee is the support of the pharmaceutical industry in Canada. My colleagues and I recognize that the issues before this committee are very complex. We've heard members of this committee state that balance is important and that trade-offs such as product costs, stimulation of Canadian research, quality, patent protection, market share, etc., must be considered.
I'm here and my group is here really to address only one piece of the puzzle. It's an important one from our perspective. We're here to support the colleges, universities and community colleges that are dependent upon partnerships with industry and government to support research and teaching.
We are here to support the biotech industry that's predicted to be a $1 billion industry in my area by the year 2000. As you know, there are many biotechnology research centres in my province of Ontario. In addition, in my city we have programs for my students in three community colleges. Recently, biotechnology has begun to flourish in Ontario, and in the greater Toronto area a large health care biotech community has developed, which represents roughly 7% of the North American biotech industry.
With a strong research base - the universities, the community colleges, several of our health centres - and a strong business and financial community, the biotechnology industry offers employment opportunities for an educated and skilled work force.
We in science education see the field of biotechnology as a career area for highly skilled research positions or technical jobs for young, aspiring scientists, engineers, technicians and support people. We're concerned about having high-tech, knowledge-based jobs in the field of biotechnology and in other fields to provide adequate opportunities in Canada for young Canadians to learn to aspire to science and technology careers.
Many reports, including the Ontario Premier's Council report, conclude that ``the industrial competitiveness of Canada, more than ever before, is influenced by its capabilities in science and technology.'' That same report indicates that our science and technology performance is below the level of other leading industrial economies.
I think you know the numbers. Our spending on research is at 1.3% of GDP. Science and technology comparisons between Canada and other industrial countries reveal that research and development spending is clearly below internationally competitive standards. Low resources devoted to R and D correlate with low numbers of scientists and engineers per 1,000 people in the labour force.
A study done for the Canadian space industry entitled ``Space Education: A Self-Preservation Strategy'' reported that Canada has about 30 scientists for every 1,000 workers compared with 34 in Britain, 49 in West Germany, 62 in Japan, and 65 in the U.S.A. For every 500 fifth graders in my school system, 18 will earn a science degree and 1 will be awarded a PhD degree in the natural sciences and engineering.
A troubling conclusion of this study is that the situation facing Canada's space community is one of a declining domestic labour pool that in any event has always been hard-pressed to meet demand for skilled workers, combined with greater difficulty recruiting offshore workers. And this is not an isolated case. In the biosystematics and taxonomic communities, research is diminished to the extent that very few students select these areas for careers, as I did.
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Partnerships between schools and business have been growing in the last decade in Canada. In my school, we started in about 1986 with four companies, Spar Aerospace being one. At Marc Garneau Collegiate Institute our list now includes over 25 organizations and individuals, including the Canadian Space Agency, that have entered into strategic partnerships providing students with cooperative education programs, access to skilled professionals and mentors, technical and resource support and, most importantly, opportunities to do real science, to do real technology and to demonstrate competency in real situations.
The Chairman: Why don't you just skip to the section on skilled workers just to make sure we have lots of time to ask you questions?
Mr. Thorpe: Okay.
It should be clear from the Premier's Council report and other reports that Canada should aggressively enhance our science and technology capabilities. That will require an ongoing national commitment to help industry maintain or advance its strategic technologies. The biotechnology community, like the computer and aerospace industries, is highly reliant on community colleges and universities to solve manpower problems.
However, post-secondary educational institutes are facing a period of declining science and engineering enrolments. Students are turning away from science, according to a recent study on science education for the Ontario Ministry of Education and Training.
Somewhere between 11% and 13% of students choose science as an area of study in first-year university. As compared with all other degrees, the figure of between 86 and 95 Canadian science and engineering degrees remains static at 11%. To maintain our competitive edge internationally Canada needs to increase the flow of students into post-secondary science, technology, engineering, computer science and math programs. The root of this problem lies in elementary and secondary schools, and so does part of the solution.
Industry needs to expand its traditional area of support in elementary and secondary sectors to expose students to career opportunities, to support skill development of our educational community, to provide research opportunities for teachers and students alike, and to provide Canadian students of today with the jobs of tomorrow.
In conclusion, I'd just like to say that for my students, life is more complicated than it's ever been for students in the past. They are affected by change and uncertainty in technology, in economics, in social structures and in education. Today's students experience anxiety as a result of changing job expectations and concern for future job prospects. This worry is compounded by current economic trends that have resulted in corporate downsizing and changes to continental trade.
Canadian students need certainty and they need an opportunity to be productive members of society in a field coincident with their capabilities and interests. Science educators like myself see the growth of new technologies and knowledge-based industries such as biotechnology, computers, microgravity science and others as career areas where our students can make meaningful contributions to Canadian society and can experience success.
I'm here to support the biotechnology industry that is going to provide jobs for the students of today who will become the scientists and technicians of tomorrow.
Thank you.
The Chairman: Thank you very much, sir.
[Translation]
Mr. Brien, do you have any questions?
Mr. Pierre Brien (Témiscamingue, BQ): Welcome to the committee. I would like to mention a comment made by those who would decrease the current patent protection and who say that the concept of intellectual property should not be applied to the same extent to the pharmaceutical industry because of its repercussions on health-care costs.
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Do you agree or disagree with this type of view?
[English]
Mr. Thorpe: I'm afraid I don't understand the question. I'm sorry.
[Translation]
Mr. Pierre Brien: Let me repeat my question.
Those who would like us to reduce the present period of patent protection, claim that the pharmaceutical industry should be treated differently from other sectors of the economy. How would you answer the people who say this?
[English]
Mr. Thorpe: I don't know whether or not I have an opinion on that at this point. I would only say that I think it has to be equitable and fair to industry and to the people of Canada.
[Translation]
Mr. Pierre Brien: You are no doubt aware of the current legislation, that is to say Bill C-91 passed by the previous Parliament. Do you believe that the present rules for patent protection are close to providing the desirable balance between a fair return on investment, or the protection of intellectual property, and the repercussions that these measures have on the cost of our health-care system? Does the current legislation provide that desirable balance?
[English]
Mr. Thorpe: I think it does. Based on my experience, the only area that I can judge is the fact that in my own city and in dealing with the industry, I've certainly found a significant increase in activity in the biotechnology industry in the Metropolitan Toronto area. I see that as very positive from an intellectual point of view, because it offers students and teachers opportunities to learn more about the industry. It promotes science and technology education so that those students can actually find careers and have opportunities for their own personal growth and development.
[Translation]
Mr. Pierre Brien: Several people believe that the level of basic research currently being done by the pharmaceutical industry is insufficient. Should we consider requiring further or more precise commitments to certain types of research in order to increase the amount of basic research being done?
[English]
Mr. Thorpe: It's very hard for me to judge, because I'm really not close to the research aspect of the biopharmaceutical and biotechnology community. I certainly believe they have obligations to maintain and to increase research, but I cannot give you more than a feeling that we should be promoting as much research as we possibly can, not only within that industry but also within many industries - and within government, in fact - to ensure that there is this cadre of technical expertise in this country, and that this cadre will not leave.
From what I have seen, in my own experience, with the aerospace industry, we are continually losing expertise. My basic concern is that we have opportunities for scientists and engineers so that they will stay in this country and can mentor my students and those people who choose to go into science and technology careers.
[Translation]
Mr. Pierre Brien: Thank you.
[English]
The Chairman: Mr. Mayfield.
Mr. Philip Mayfield (Cariboo - Chilcotin, Ref.): Thank you very much, Mr. Chairman.
I'd like to thank you for appearing before our committee today. There's one question that I want to ask you, and it's probably elementary for you. What are ``biosystematics'' and ``taxonomics''? What do those words mean?
Mr. Thorpe: Biosystematics is a field of classification. It essentially looks at the flora and fauna of Canada, for instance, and categorizes them according to certain traits and characteristics so that you can tell a tulip from a chrysanthemum, for instance, on the basis of those different features and characteristics. It's a way in which we organize organisms into groups called phyla and genera and species.
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Mr. Philip Mayfield: Those are words I understand.
Mr. Thorpe: It's being able to tell barley from wheat, or maple trees from balsam fir.
Mr. Philip Mayfield: So that's taxonomy. That was just for my own personal interest.
What I would like to know from you today, sir, is the core of the message you are bringing to us. What influence would you like to make on this committee? I'd like to hear you lay it out for us, if you could.
Mr. Thorpe: Well, I know the issues here are extremely complex.
Mr. Philip Mayfield: Make them simple for us.
Mr. Thorpe: I don't know whether I can, sir. All I'm trying to do today is provide you, as parliamentarians, with the perspective that we in education are really concerned about research and development in this country. We see there have to be opportunities for companies.
My experience has been with the Connaught Student Biotechnology Exhibition and some of the work that has been done there. My message to you would be to try to be as fair and equitable as you possibly can in order to ensure that this legislation will enable companies to be competitive; to ensure that it will allow us to maintain the intellectual property in this country; to ensure that it will allow us to have sufficient jobs and opportunities for our graduates; and to ensure that it will let this country retain a cadre of the Lap Chi Choi and the real world-class researchers in order that our students, as they graduate and move into university and post-secondary positions, will have the opportunity to learn from these people. I was fortunate enough to be able to do that when I went through my university career.
I'm really concerned that we're losing a lot of intellectual property in this country. There seems to be more and more pressure for industry to start picking up some the slack, to be more active in retaining scientists and technologists. If industry has to play an increasing role in that area, then it has to be given an opportunity to do that fairly and equitably compared with other countries. I don't want to see our scientists and engineers and biologists moving to the States or to Europe or to wherever else. I want to keep them here in Canada.
Mr. Philip Mayfield: From some of the questions that I've asked of other witnesses in regard to statements that have been made by people from the biotech and major pharmaceutical firms, I'm sure my fellow committee members would understand my concern that the extended patent protection period that comes under Bill C-91 has made it possible to begin their research, development, and hopefully marketing, particularly for the smaller companies. The majors' language has been more along the lines that Bill C-91 has provided an economic environment in which they feel they can come and prosper. Others have said that what they mean by ``prosperity'' is more than the rest of us can afford to pay them.
The other side of what they're saying is that if this environment is not continued, if they're not able to have the period of patent protection that they now enjoy - and some are even saying it needs to be extended - there are other parts of the world to which the majors can go to make the kind of money they want to make. The smaller firms have said it's economically not viable for them to stay here.
You're a teacher with a relationship to these technologies and these researchers. Do you share a concern that this is the real stuff they're telling us? Or is it as other witnesses have said, that the firms just say this in order to continue the advantages that they have when they can't afford to leave? From your position, how do you size this up?
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Mr. Thorpe: This is an exceedingly difficult question. All I can say is that I am a science teacher, so I make decisions on the basis of what evidence I have in front of me. I have done some reading around the bill and I have talked to some colleagues in the universities and in business. The feeling I get is if we don't extend the patent legislation for a sufficient amount of time, then the industry will suffer, as you have alluded to, and the end result will be that we will lose a lot of our intellectual property in this country.
Now, I have to rely, as you do, on whatever information I can get to bring me to those conclusions. I understand it's very difficult for you and others to weigh the competing views around the table. All I can say is that on the basis of what I've been able to ascertain, I would agree with what I've said previously.
Mr. Philip Mayfield: Yes. You've raised a dimension I have not spoken about here, but it does concern me. You've mentioned the aerospace industry and the research and development losses we've had in this area. I've heard the Chalk River researchers on the radio talking about looking for places in Texas and other places in the world where they can continue their research now that it's being closed down here. This certainly lays out a continuing pattern in Canada of losing some of the brightest and the best plus the most advanced research we have and the intellectual property that follows those people.
I appreciate you raising this issue for us, but you're right, it is a real Gordian knot to try to sort out because the interests here are competing very vigorously and this kind of competition doesn't worry me at all. What does concern me is the responsibility the committee has in making recommendations to the government about this.
Besides the majors, the biotechs and the consumers, one of the other competitors is the generic industry. They play a large part in providing the medications and drugs used by Canadians. They have provided those drugs at a lower price and competitors like those low prices. Do you have any thoughts you'd like to share with us about the use of the generics, of other people's intellectual property, and how soon this use of this property should begin?
Mr. Thorpe: I appreciate your question. It's a very difficult one for me to ascertain the answer to or to make a comment on. I just do not know enough. I do not have enough evidence to be able to make an intelligent comment.
The Chairman: You're an exceptional witness.
Mr. Philip Mayfield: Almost everyone has known everything.
The Chairman: Mr. Mayfield, I wonder if I might ask for your indulgence. There are two other witnesses here.
Mr. Philip Mayfield: Yes, I'm happy to back off and let somebody else go after this.
The Chairman: I want you to stay at the table, because the government people are going to wait and ask you questions as the other two witnesses come up. I'm going to ask the other witnesses to come up now.
We have Mr. Cox from Apotex and Mr. Wagg and Mr. Lang from the Congress of Union Retirees of Canada.
For the new witnesses, we don't know what the situation is with the bells. When the bell starts ringing, it's likely to be a long bell. It's just a dinging that takes place and that's our life, so we just keep on going and we can stay for a long time before we have to go.
Mr. Wagg or Mr. Lang, one of you makes an opening statement. Please keep it within five minutes. Then we get into some good discussions with members of the committee who are very interested in what you have to say.
Mr. Cox, you have come up from Winnipeg. I welcome you to the committee. We have heard testimony from your company, so while I'm listening to the other people, I would like you to take into account that we heard from your president and from an employee yesterday. We heard one of your colleagues and we've heard from one of your sister companies.
.1600
So please take into account in your remarks that the members already have a lot of the testimony. Keep your remarks to things that are new to the debate. We appreciate your participation and we appreciate your understanding that we're searching out new evidence and not for people who have told the story before.
Mr. Larry Wagg (First Vice-President, Congress of Union Retirees of Canada): Thank you, Mr. Chairman. With me is my colleague, Ron Lang, our eastern Ontario representative. I've given the clerk our brief but I have an opening statement and I hope members of the committee will have an opportunity to examine the documents.
The Congress of Union Retirees of Canada is about four years old now. We're organized from coast to coast and have representative groups in every province affiliated with provincial federations of union retirees. We have about 400,000 members at the present time.
The Congress of Union Retirees of Canada is adamantly opposed to Bill C-91 because it is not in the best interests of Canadians in general and of pensioners in particular.
It represents a direct threat to our system of medicare and has been central to the introduction of a regressive system of user fees across Canada. It discriminates against Canadian-owned and -controlled generic drug manufacturers in favour of multinational brand name producers.
It places Canada at the mercy of foreign-owned multinationals for our supply of drugs at prices they wish to charge.
It increases the cost of drugs at a time when our medicare system can least afford it.
It is contrary to the long-standing Canadian public policy of providing drugs to Canadians at a reasonable cost while fairly compensating the innovator and producer of drugs.
It dramatically increases our balance of payments deficit in pharmaceuticals.
It limits job creation by Canadian-owned firms to the detriment of unemployed Canadians and it does absolutely nothing to encourage and promote basic research on new drugs in Canada.
As CURC sees it, the real issue here is a lack of political will to stand up to the multinationals and to protect our medicare system and Canadians from the high cost of drugs.
The 1968 government did have the political will to do this, even in the face of intensive lobbying by the Pharmaceutical Manufacturers Association of Canada, with the result that Canada had among the lowest drug prices of all nations of the world. In 1968 PMAC and its multinational membership predicted all sorts of dire consequences would follow. Plants would close down and leave Canada. Canada would no longer have access to life-saving drugs. Research and development would suffer. None of these came to pass. We still had access to new drugs. The multinationals stayed in Canada and prospered. But more importantly, we fostered a dynamic and progressive generic drug industry that had the potential to grow to the point where they too would become innovators. This legislation will prevent that from happening.
This present government opposed Bill C-91 when it was in opposition. We are asking it to live up to its promises by reintroducing compulsory licensing as of right after four years. We are asking the government to change the regulations by abolishing the section 55 note of compliance requirements. We are also asking the government to implement the recommendations of the National Forum on Health.
The Chairman: Thank you.
Mr. Cox.
Dr. Cox: With your indulgence, I would like to point out I'm not an employee of Apotex. I'm the chief executive of Apotex Fermentation, which, although it is a wholly-owned subsidiary of Apotex, is an arm's length company and an entirely different company from Apotex in terms of its business.
.1605
We're a fine-chemical company using the techniques of biotechnology to produce products. We're not a final-dosage form manufacturer. We don't make drugs. We don't make pills, capsules, tablets or anything like that.
When I indicated to your staff that I would like to be present at the biotechnology round table, it occurred to me to be an opportunity to bring a different perspective to the committee, because I'm involved in the fine-chemical business. I also wanted to take the opportunity to illustrate the integrated nature of the Apotex group of companies, of which my company is but one member.
I want to make it clear that we're a biotech company. We use biotech to research, develop and, were it not for Bill C-91, actually sell products in Canada and internationally. Our products happen to be non-infringing versions of already available drugs, but we still use biotechnology to both develop and manufacture those drugs.
Our core technologies are microbiology, genetics, chemistry and of course fermentation. We operate the largest fermentation facility in Canada, the only fully integrated fermentation and downstream facility producing bulk drug substances in Canada. We employ 110 scientists, technicians, engineers, in well-paying jobs in Manitoba. Our annual operating expenditures are $12 million, thus far all of it on research and development. We've invested over $25 million in state-of-the-art facilities in Winnipeg. Thus far we've spent over $70 million on R and D and facilities without a single dollar returned as revenue - not one dollar. In a moment I'm going to explain why this is the case.
Another reason I wanted to appear before you is because it was my understanding this was to be a biotech round table. I wanted it to be clear that the Industrial Biotechnology Association of Canada does not speak for all Canadian biotechnology. We're one of the largest biotech companies in Canada with one of the largest R and D budgets, and I've tried more than once to join IBAC but have not been welcomed. Why? Because IBAC is dominated by the PMAC companies. All you have to do is look at its membership to realize that. It doesn't represent Canadian biotechnology; it represents the biotechnology interests of PMAC and those companies that depend or hope to depend on the foreign-based multinationals for financial support.
My company, of course, is owned by Apotex Inc. - I've made that clear - so you'd expect me to be aligned somewhat with the CDMA position. But there are some aspects of Bill C-91, some elements, that are hurting my company in a very obvious and dramatic way, something I have to live with every day. I want to point these out to you.
First and foremost are the section 55 notice of compliance regulations. With your indulgence, I want to explain to you how they affect me and my staff on a day-by-day basis.
Our lead product is lovastatin. It's a generic version of Merck's mevacor. It is used to reduce cholesterol levels in blood. Merck does not have a patent for lovastatin in Canada. It has a patent for a process to make lovastatin. We have invented and refined a completely different process for producing this substance, one that absolutely does not infringe on Merck's intellectual property rights in Canada, and for which we have our own patent issued in April 1995. Yet we're unable to sell this product for manufacture into dosage form by our parent because it has been tied up under the provisions of subsection 55.2 since 1993, far longer than the supposed 30 months that the regulations provide for.
During all of this time, Merck has not been required to advance any evidence that there's any infringement of their rights. Why would they? They only have to allege it, and the federal government does the rest.
Even though the Federal Court of Appeal ruled in February that the Health Protection Branch should end this nonsense and finally issue an NOC for the product, HPB within days managed to find a further technicality to decline this order. So once more we're forced into court to prove our innocence of infringement. This abuse of the regulations means I'm spending $1 million a month making a product that I've spent four years developing, confident that it's non-infringing and willing to defend myself in a proper action, if necessary, but a product I can't sell because of flagrant abuse of already badly flawed, unnecessary regulations.
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I have to assume that without any change to Bill C-91 the same thing is going to happen to my follow-on products. I have four follow-on products. There are very serious grounds to suspect that I'll never be able to make a business in Canada from the development and manufacture of non-infringing fermentation pharmaceuticals, at least while the deck is stacked in favour of the foreign-based companies.
What options do I have? I either have to close or I have to find other ways to develop my business, other locations in which to develop my business. I have no choice as long as section 55.2 pertains and is being manipulated in this way.
Last year I developed plans for a major expansion in Winnipeg with full manufacturing facilities. It would be the largest fermentation plant in Canada manyfold, one of the largest in North America. It would be 10 times the size of my existing facility. I've already bought the land for it; I've already bought lots of the equipment for it. There's no way I can implement these plans in the current climate of uncertainty. If the uncertainty is not removed by the rescinding of section 55, then Canada will lose this project to a site elsewhere. I have no choice, as you can plainly see. I've already been forced to explore some contingency options.
I have only one other remark, Mr. Chairman, with your indulgence.
The second area that impacts me on a daily basis is the question of export. My business is bulk pharmaceuticals derived by fermentation. In this business, the only way you can survive is to use the economies of scale and sell to international markets. That's why I need such a large plant. If the plant is to be in Canada, I simply can't get into a situation where I have to stand idly by and watch my Chinese, Indian, or in the case of biotech products, American, competitors move in and dominate markets for newly genericized products whose patents have expired across most of the world except in Canada. They usually expire later in Canada than elsewhere.
CDMA tells me they have a strong legal opinion that Canada can enact export exemptions without being in conflict with international trade agreements. I urge you to consider these deeply. The long-term growth and survival of my company and other fine-chemical companies in Canada depends upon it.
Thank you, Mr. Chairman.
The Chairman: Thank you very much, Mr. Cox.
[Translation]
Mr. Brien, do you have any questions?
Mr. Pierre Brien: Won't you start off with my Liberal colleagues?
[English]
The Chairman: Mr. Murray or Ms Brown, would you like to ask questions of any of the three witnesses?
[Translation]
Mr. Pierre Brien: My question is for our last witness, the representative from Apotex Fermentation Inc. You seem to be saying that maintaining the current legislation would have disastrous effects, but the figures have shown that in the course of the last few years there has been considerable growth in the generic and biotechnology industries. If the legislation is that disastrous, how do you account for the growth of this particular industry?
[English]
Dr. Cox: It's quite straightforward. First, just to reiterate, my business is not generic drugs, my business is using biotech to make biotech products. In that context, I'm one of the few companies in Canada that is actually manufacturing biotechnology products for sale. In fact, I'm not sure there are any others, with the possible exception of Cangene. So we are now facing difficulties that are brought about by those that are in the manufacturing business.
Secondly, my specialty is not drugs that are off patent, my specialty is drugs for which the patent is not a product patent but is a process patent. Many, many fermentation products and other biological products have process patents, not product patents. In our case we have invented several processes that are not infringing on the rights of the innovator or the originator. Therefore, we're not making generic drugs, necessarily; we're making alternatives, using techniques that don't infringe on the innovator's intellectual property rights.
[Translation]
Mr. Pierre Brien: I would appreciate your giving us further details on that point.
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As a consumer, I do not really care whether the process has been patented; what matters to me is the end-product which I buy. When you work with process patents rather than with product patents, is that not an indirect way of doing what you are not allowed to do directly?
[English]
Dr. Cox: I'm not sure whether I understand the specific question.
[Translation]
Mr. Pierre Brien: You say that you are not infringing any patents because you use a different process, this being particularly true of fermentation. But in the final analysis, and for certain products, is this not simply a roundabout or indirect way of doing something that you are not allowed to do directly, that is to say copying a product which still enjoys patent protection?
[English]
Dr. Cox: I'll say again that the products are not protected by patents. The products that are the core of my business are not protected by patents. The processes for manufacturing them are protected by patents, but not the products themselves. Therefore, there are legitimate targets for my company to invent and develop new processes that do not infringe on the orignators' rights. The perspective behind my answer is we're not in the same business as Apotex Inc. We are in a much more similar business as the biotech companies, and we're one of the few biotech companies that are actually making products.
[Translation]
Mr. Pierre Brien: Who are your usual customers? Whom do you sell your products to?
[English]
Dr. Cox: We would give first priority to Apotex Inc. as our final-dosage form partner.
[Translation]
Mr. Pierre Brien: What percentage of your production do you sell to Apotex?
[English]
Dr. Cox: Because of section 55 I have not yet sold a single gram of products. I am enjoined from selling products because my lead products are tied up by section 55.
[Translation]
Mr. Pierre Brien: In its brief, the Congress of Union Retirees of Canada states that the current legislation, Bill C-91, increases the cost of pharmaceuticals at a time when our health care system can least afford it. Do you agree that the discovery of certain medicines or pharmaceuticals often provides an alternative to surgery and that pharmaceuticals that require a great deal of research and development can often contribute to a drop in our health-care costs? Do you admit as much although it seems to go against the spirit of what you have said here?
[English]
Mr. Wagg: We have no problem with that. What we do have a problem with, however, is that Bill C-91 increases the cost of your life-saving drugs. That has been shown dramatically ever since 1968, when compulsory licensing first came in. There's no question about that. Historically that's very accurate.
We have no problem that they do save lives. We have no problem that they are available in Canada. But we do have a problem, as I say, with having no way of knowing how much the research and development costs have been on that drug. The U.S. multinationals, foreign multinationals, and members of the PMAC have historically set the price of drugs in Canada at what they think the market will bear. It's not based on the question of cost of R and D or any other costs.
They look at Canada as an extension of the U.S. market. They always have. That's documented in our brief. So life-saving drugs have always been available to us in Canada. Before Bill C-91 came into effect - when compulsory licensing was in effect - we had no problem getting life-saving drugs. We got them at a lower cost. We developed a generic drug industry in this country that, as we said, is capable, or will be capable if this legislation is rescinded, of producing life-saving drugs on their own and of doing the development and research with the high-paying jobs that will be available in Canada.
At present there is no basic research and development done in this country by the multinational firms. The research and development done by the multinational firms - the brand name companies - is only that which is required to get a drug approved by the Health Protection Branch.
.1620
[Translation]
Mr. Pierre Brien: It seems a bit of an exaggeration to say that there is no basic research going on at all; some basic research is being done. And then, you cast doubt on the effectiveness of the Patented Medicine Prices Review Board whose job it is to evaluate research and development initiatives and to supervise price increases and the price at which new medicines are introduced. Would Bill C-91 be more acceptable to you if we tried to find common ground and provided the Patented Medicine Prices Review Board with a different mechanism for evaluating the price at which that type of product is introduced, which would go along with what you said in the first part of your answer, in order to ensure that prices would be strictly proportional to the research and development efforts and that type of thing?
[English]
Mr. Wagg: No, I will not agree with Bill C-91 in any of its major aspects.
The only figures the board has to work with are those supplied by the brand name manufacturers. Historically the brand name manufacturers have not been completely honest with any regulatory board whenever they have manufactured a drug in this country. Let me tell you that in the U.K., starting with the Sainsbury back in the early 1960s, the Department of Health and Social Security of the British government devoted a complete department to try to determine what the true costs of research and development are and what the costs of drugs ought to be. They couldn't do it. They negotiate drug prices in Great Britain, because the government purchases the drugs. The ABPI, Association of British Pharmaceutical Industries, must negotiate a price for the drugs with the British government. The British government has lowered the cost of drugs, but it required a bureaucracy to do it.
The board in Canada, with almost no resources whatsoever, is completely dependent upon the industry for all of the figures they have. Drugs come in and the board itself has said that the drugs are introduced into this country at a high price, and they don't fall. If they fall, they fall very slightly. The board will have absolutely no effect in controlling the cost of drugs in this country - none whatsoever.
The Chairman: Mr. Mayfield, please.
Mr. Philip Mayfield: Thank you very much, Mr. Chairman.
Mr. Cox, I'd like to go back to the situation you laid out for us. I regret that I feel a little fuzzy in my grasp of what you have said. The question in my mind relates to the legislation. We tend to talk in fairly black and white, clear-cut terms. We talk about 20 years, patent protection ends, and the property rights being opened up to others. But I think there are more subtleties in this than what we are talking about, as you described your situation.
I recall an earlier witness making some very general comments about the differences between the patent legislation in the United States and that in Canada, and I believe the comment was to the effect that it's much easier for problems such as those you're experiencing to be sorted out with the legislative formulas in the United States than it is in Canada. Is it faulty legislation or is it the principle on which the legislation is based that is hurting you?
Dr. Cox: I think there are two things. The first is that, with respect to the section 55 regulations, the basis of the regulations is that the generic is guilty until proven innocent. The burden of proof is upon the defendant in this case rather than the plaintiff. That's one aspect of the legislation that is troublesome.
.1625
As well, I think we're experiencing some echo from the transition from Bill C-22 to Bill C-91, where we find ourselves today, in that we have a hangover, if you like, of a whole set of patents that are not product patents but process patents for which the originator does not have rights to the product, just to the method of manufacture.
So I think that's probably inevitable, given the transition that Canada made in 1987 and 1993, but the thing that's not inevitable is the section 55 linkage regulations, whereby we have to go to court to prove we're innocent. To me that's a fundamentally inappropriate act to have to do.
Mr. Philip Mayfield: I have a hypothetical question. If in your mind the company that is blocking your process is completely off base, what happens if you tell them that it's too bad, and if they don't like it they can sue you?
Dr. Cox: I wish.
Mr. Philip Mayfield: I'm asking you to explain what happens.
Dr. Cox: Let me have a go. The injunction, if we can call it an injunction - technically it's not an injunction, but for all intents and purposes it is - is not against my company or against a final-dosage form partner, Apotex; it's against the federal government itself. In effect it issues itself an injunction that prevents itself from issuing a notice of compliance. Previously the notice of compliance.... All we had to do as a generic competitor was to prove safety and efficacy, that the drug did what it claimed to do, that it was safe, and that it wasn't going to hurt Canadians. Separately one would deal with any legal issues directly with the originator.
Now these two things have become confused. The Minister of Health cannot issue the permission to sell the drug that should depend on safety and efficacy until this question of section 55 has been cleared up. So the injunction that's going to get served is against the federal government itself, preventing it from giving us permission.
Mr. Philip Mayfield: This brings me back to my first question. Is it the problem with the way the legislation is drafted, or is it more fundamental than that?
Dr. Cox: It's the problem with the section 55 regulations. They're not necessary. They're completely inappropriate within our legal system, and they're being abused and manipulated. I don't believe they're serving the purpose for which they were originally intended, which was flawed in the first place.
Mr. Philip Mayfield: Thank you very much.
The Chairman: Mr. Mayfield, before I turn to Mr. Murray, Mr. Brien and I are staying to finish up the round table. We're not going to the vote. These two are going to the vote. I suppose you're going to the vote.
Mr. Philip Mayfield: Yes, I'm going to the vote.
The Chairman: I just wanted to tell you that we're going to finish up the round table with these people. There are thirteen minutes left to go, so please watch the clock yourself. You have about seven or eight minutes left. Just because I'm sitting here playing possum doesn't mean you should sit here and miss the vote.
Murray.
Mr. Ian Murray (Lanark - Carleton, Lib.): Thanks, Mr. Chairman.
Dr. Cox, I think I'm missing something here. If I understand correctly, you've not sold anything yet from your plant in Winnipeg. In other words, that plant was established just to develop this process to produce lovastatin. Is that correct?
Dr. Cox: And other compounds. They're not necessarily related compounds, but they are other compounds that are protected by process patents.
Mr. Ian Murray: In other words, you were very sure of yourselves - or your parent company was, I guess - before this was set up that the process would not infringe on a patent. Otherwise this rather large investment would not have been made.
Dr. Cox: Absolutely. We know it doesn't infringe on the patent. We don't have an opportunity to show that and prove that in court.
Mr. Ian Murray: It seems you're blaming the Health Protection Branch and not Merck in this case. Going by your statement, the second page of your brief indicates that ``HPB within days managed to find a further technicality to decline the order of the court''.
Dr. Cox: Right.
Mr. Ian Murray: There are usually two sides to every story. Let's assume that if they saw that there was reason to agree with the court order and your position, otherwise well-meaning federal public servants would go along with that. What is the hold-up, as you understand it, in the Health Protection Branch?
.1630
Dr. Cox: I can have a go at explaining it, if you like. I've had it explained to me many times, and I still can't avoid the conclusion that it's a technicality.
The letter from Justice says something - and I grossly simplify it - like the following. There were in fact two impediments to the issuing of the notice of compliance. There was the original application that was put in in 1993 by Apotex to sell lovastatin based on the process developed by my company.
In 1995 Apotex, I understand, with the cooperation and collaboration of the Health Protection Branch, asked also for an alternate supplier to be added to the application so that if there were some difficulties with the Winnipeg plant, they would have an alternate source of supply.
What Justice says in their interpretation of the Court of Appeal order was that the judge only removed the first impediment, so the second one remained. I'm sorry, I should explain a little more. They considered those to be two separate applications. They said that the judge had removed just one, and the second one remained, the 1995 request to add an additional supplier to the final-dosage form manufacturer. So Apotex said, fine, we'll withdraw that one, and Justice said, sorry, you can't withdraw that, only Merck can withdraw that application.
So they're saying that the clock starts ticking again from the date of the second application, which in fact wasn't an application at all. It was, I understand, an alteration to the application. So that's my attempt to explain what I call a technicality.
I don't think the spirit of the regulations was to try to find a way to prevent a generic manufacturer from coming onto the market, and that's what has happened.
Mr. Ian Murray: Again, I don't know how aware you are of Apotex parent company's purchasing practices, but if you're not provided anything from your operation in Winnipeg, do you know if they source fine chemicals offshore, or are they sourced mainly in Canada? Do you have any idea?
Dr. Cox: In general they can if the patent is not in force, but where there's a patent situation prevailing in Canada, they can't do that, whether or not it's non-infringing.
Mr. Ian Murray: I'm talking about the chemicals that go to make up the drugs.
Dr. Cox: Let me answer more directly. Apotex can't import lovastatin from China or India or somewhere like that.
Mr. Ian Murray: Sorry, I wasn't talking about lovastatin. I was talking about other drugs that they -
Dr. Cox: Yes, they do. If the patent is not in force, then it's typical to source fine chemicals on an international basis.
Mr. Ian Murray: Would that be the majority of the fine chemicals they'd use, do you think?
Dr. Cox: I would guess so.
Mr. Ian Murray: On this question of the export exemption, if you were operating in the U.S. would you face the same obstacles you do while operating in Canada? Now, you mentioned that the patents typically expire later in Canada than elsewhere. But if you were operating in the U.S., would you face the same rules?
Dr. Cox: I think that's the situation, yes.
Mr. Ian Murray: Okay.
Perhaps I should give Ms Brown a chance to ask questions, because we are pressed for time.
The Chairman: I'm sorry that the afternoon has been so broken up between the votes and the witnesses, but I do want to mention that the chamber of commerce is still scheduled to appear at 5:15 p.m. So we'll start with that witness right after the vote, if you don't mind coming back. So there will be a single witness appearing right after the vote.
I'm sorry, Bonnie. Go ahead.
Ms Bonnie Brown (Oakville - Milton, Lib.): Thank you, Mr. Chairman.
The short form of your name is CURC. We had CARP here before.
I want to know a little bit about your organization. We have had many seniors groups appear before us, and I often wonder if two people, the president and the vice-president, get together and write a brief and then just arrive here or if the brief is actually put before the board of directors for approval.
The other thing I want to know is if your members pay dues to belong to this organization. Do you have a newsletter through which you keep them informed? Just how active is this group? How many times a year would the board of directors meet? Perhaps you can just give me a few facts about that.
Mr. Wagg: I would be pleased to. That information is included in the first part of our brief, a copy of which I supplied to the clerk. We didn't have the opportunity to present our brief.
Ms Bonnie Brown: Could you tell me, though, if your board approved this brief?
.1635
Mr. Wagg: At our last convention in 1995 - we have a biannual convention - a resolution was endorsed calling for the repeal of Bill C-91, and since that time we have been conducting a campaign with our membership that is based across Canada.
Yes, we have a membership fee. We have both individual members and affiliated members. At the moment, most of our membership is in the affiliated base. They are people who are retired from such unions as the CAW, United Steel, and our largest affiliate is the National Superannuates, the federal government employees.
Ms Bonnie Brown: Thank you.
Can I tell you that most of the seniors' groups that have appeared before us, either in person or by telecommunications, have had a similar if not identical position to yours? Do you know anything about this other group, CARP? They are the only group of seniors who are in favour and support Bill C-91. Have you ever run into them?
Mr. Wagg: Certainly we run into them. I am not here to be critical of another organization, but my understanding is that CARP doesn't have annual meetings or meetings of any kind. They're not that type of based organization.
Our executive meets nationally at least three times a year, by constitution. Our convention will be this October, when we'll have 300 to 350 delegates from all across Canada. That determines our policy.
One of the things I will tell you is that some of the people in some of the seniors' organizations may be supernumerary at times, because activists are activists. But we have our own policies, and that's how ours are evolved.
And, yes, the brief was approved by our executive.
Ms Bonnie Brown: Thanks very much.
The Chairman: Thank you, Ms Brown.
Mr. Mayfield, I gather you're going to stay.
Mr. Philip Mayfield: I'm going to stay, yes.
The Chairman: Great.
I'm trying to understand this business. If you were operating in the United States, do you know offhand if you'd be able to export out of the United States were patents still held in the United States but didn't hold in another country?
Dr. Cox: I think that's the same question that was asked a moment ago, Mr. Chairman. The answer is, I don't believe I could, no.
The Chairman: Do you know of any other country that would have you do it?
Dr. Cox: I think it's possible in certain states in Europe, part of the European Union.
I don't mind pointing out that I don't think this is common practice across the world. In our opinion it would be an opportunity to provide a Canadian solution to a Canadian situation and to recognize the fact that the patents in Canada tend to expire later than in other G-7 countries.
The Chairman: But you don't want to solve one problem by creating another problem. The people you are competing against.... For example, you mention the Chinese. The whole world is spending a tremendous amount of energy trying to get China to agree to the concept of a copyright and the concept of a patent. They can't join any world trading organization because they don't agree with the concept. They're not only in your industry but just about any industry. They are tough competitors because they don't agree with patents in general. It doesn't matter where you start from, they're going to beat you because they don't believe in the basic patent.
Dr. Cox: Whether or not they believe in the basic patent, the products that my company is developing are, first, highly innovative products. These are not easy products to make. That's why we spend so many tens of millions of dollars in making them. I know for sure that the Chinese would kill to get hold of the technology and the strains we use in order to use them themselves.
So we don't see the Chinese as a competitor across the board. In some areas they compete. In other areas they don't compete.
We have a technological advantage. Our strains are more productive. Our techniques are more sophisticated. Our process is more effective. But at the end of the day, if we can't ship a single gram outside of Canada to meet those markets, then we'll never have an opportunity to compete with the Chinese. Even if they do come in line with the so-called international agreements ultimately, there'll still be a long period of grandfathering where they will be able to just keep us out of business.
.1640
The Chairman: Is your company subject to the section 55.2 provisions, or is the parent company subject to them?
Dr. Cox: The parent company.
The Chairman: You, in your process patents, are not affected, but the parent company is affected, because it can't get its end product on -
Dr. Cox: Right. I don't need a notice of compliance. The final-dosage form manufacturer needs the notice of compliance.
The Chairman: In the structure of the companies, is it just in the way it's evolving that the only market you have is the parent company?
Dr. Cox: The only customer I could possibly have would be a Canadian final-dosage form manufacturer, since my process is only non-infringing in Canada because of the process nature of the patent. Therefore, I have to go to a Canadian final-dosage form manufacturer, all of whom are going to run into the same problem with the notice of compliance. Of course, because of the ownership of the company, we're dealing as a priority with Apotex Inc.
The Chairman: In the end, either we have to help facilitate your company increase your exportation capacity by changing our laws, or you have to develop a sister company and strategy for production while you keep the R and D in Canada.
Dr. Cox: The only other realistic option, if there's no change, is that we may be able to keep the R and D in Canada but we'd have to transfer the manufacturing offshore.
The Chairman: Thank you.
[Translation]
Mr. Brien.
Mr. Pierre Brien: I have a question for Mr. Cox. Earlier on, you said that the brief submitted by the representatives of the biotechnology industry had been very much influenced by the fact that several members of the PMAC also belong to that association. Does the same not apply to your own testimony in view of your very close ties to Canada's largest generic drug company? In the same line of thought... Are you not in fact suggesting that we not take into account the point of view of the biotechnology industry?
[English]
Dr. Cox: No. I think what I was saying is that the Industrial Biotechnology Association of Canada does not speak exclusively for Canadian biotechnology, because it doesn't speak for me and it doesn't represent my interests. That's the only point I'm trying to make. Of course, as I freely admit verbally and also in my written brief, my views are coherent with the CDMA views to a very large extent.
I simply wanted to explain to you that my company is a biotech company, and biotech as a technology can be used in support of brand name innovative-type activities, or it can be used in support of generic alternatives, technologies or many other things. There isn't necessarily a natural bridge between biotechnology and any one sector.
[Translation]
Mr. Pierre Brien: You would like to see the corresponding regulations amended, or even rescinded. As far as I can tell, these regulations have a direct influence on the early production of generic drugs.
If you had to choose between the current situation and doing away completely with the early production of generic drugs and the corresponding regulations, in which case you would not be able to produce generic drugs before the patents expire, which would you chose?
[English]
Dr. Cox: I have to say again it's not a question that is relevant to my situation. In Canada there are two types of patents at the moment in products that are of interest to my company. There are product patents and there are process patents. My company is developing competing products that are protected by process patents, not product patents. I don't have to wait for the patent to expire. It's not necessary if I can develop - at great cost, I might tell you - an alternative method of manufacture.
If I want to use the same method of manufacture as the innovator, then I have to wait for their patent to expire. If I use a different method of manufacture, then I can sell, and in any other country in the world I could sell. Then if the originator still believes there's infringement, there's normal recourse through the process of law. But that choice doesn't face me right now. All I'm seeing is that I spend $1 million a month manufacturing a product that I cannot sell, because of alleged infringement, and I have no opportunity to defend myself.
.1645
The Chairman: I asked you before whether or not you were subject to section 55. You said, no, it was your parent company. But when you say ``me'', do you mean you or do mean your parent?
Dr. Cox: I can't sell the product to my parent because my parent can't make it into a final-dosage form and distribute it across Canada. The whole chain comes to a stop right there.
The Chairman: More accurately, your parent won't buy.
Dr. Cox: Right. The end result is the same to me.
The Chairman: It depends on your relationship with your boss.
[Translation]
Mr. Pierre Brien: I would now like to ask the representatives from the Congress of Union Retirees of Canada to explain further some of the things they said earlier on.
In your presentation, you mentioned job creation. The abrogation of Bill C-91 would have significant effects on the industry, on the innovative sector of the pharmaceutical industry which currently employs close to 17,000 people. Can you suggest something to help us improve the job situation? There is no way we will manage to preserve the 17,000 jobs if we abrogate C-91.
[English]
Mr. Ronald Lang (Eastern Ontario Representative, Congress of Union Retirees of Canada): Let me answer your question this way, if I might. I have studied the pharmaceutical industry since the mid-1960s. I have studied its behaviour in a number of countries. I wrote my doctorate, at the London School of Economics in London, England, on the drug industry, drug costs and pricing. Since retiring, I may be a little rusty, but historically I think I know the industry fairly well and I think I know its method of operation.
In the old Harley parliamentary committee in 1968 when they made their report, Dr. Harry Harley chaired the committee on health. They looked at drug patents at that time, and the industry mounted what must have been the most intense and heavy lobbying Parliament has ever seen. They lobbied MPs in Quebec, in Montreal and in Toronto, where they had their base of operations.
They threatened to leave. They said jobs would be lost. They said Canada would not have access to life-saving drugs. They tried to do all sorts of devious things that amounted to, it seems to me, nothing short of blackmail on our members of Parliament, who represent the Canadian public. This is all documented history. They didn't pull away. We didn't lose their jobs. They continued to stay here. They continued to manufacture here.
This bill represents absolutely nothing in terms of the retention of jobs in Canada, absolutely nothing where the brand name manufacturers are concerned. Where it does represent jobs is in the generic industry, which was growing. This bill has the capacity to slowly starve and diminish the generic industry's capacity to operate in this country. They are Canadian firms. They were developed in Canada and they were doing very nicely. In fact, they supplied the lowest-cost drugs in the world to Canadians, which we enjoyed.
If you want to talk about exporting jobs, Biochem Pharma in Laval developed the AIDS drug. But where is it manufactured? It's manufactured by Glaxo Wellcome in Great Britain. Where are our jobs out of that one? Not a single job there. In the last year they got $57 million in royalties from Wellcome Corporation and the sale of the drug worldwide was $270 million.
Now, it doesn't seem to me that was a very smart thing to do. I think that's exporting jobs from this country, and I think Apotex in Winnipeg is going to be another example of jobs lost, opportunities lost. This is where we're coming from as a retirees' organization.
.1650
[Translation]
Mr. Pierre Brien: As one who has been studying the issue for a long time, would you say that Canada's signing the World Trade Organization and NAFTA agreements constitutes a new factor that must be taken into account, compared to the 1968 and 1984 situations where a report was written, that is to say compared to the last time a committee considered this industry? Do you believe that we must take that into account or do you think we need not worry about it or even consider it? Have you taken into account this new reality of, let us say, on the one hand our international obligations and, on the other, the overall international situation? For example, a much greater quantity of generic drugs will be imported within the next few years.
[English]
Mr. Lang: Many more generic drugs will be...? I didn't catch that.
[Translation]
Mr. Pierre Brien: More generic drugs will be imported since the market for these products will be more open. It is not so obvious that, in the future, this sector will be dominated by Canadian firms.
[English]
Mr. Lang: Generic drugs imported from where?
Mr. Pierre Brien: Anywhere.
Mr. Lang: The brand name manufacturers are the ones controlling the drug industry in this country and elsewhere in the world. You're not going to have any generic drugs imported into this country as long as the multinationals hold the patent on it. If that were the case, why don't our own home-grown generic firms manufacture the drugs? Because they're forbidden to by patent.
[Translation]
Mr. Pierre Brien: When patents expire, generic drugs grab market share. It is nonetheless an important industry. And yet the trend, these last few years, has been a drop in market share as far as the principal Canadian players are concerned, and in particular Apotex and Novopharm. Their market share might drop further within the next few years.
[English]
Mr. Lang: There's no question that their importance is going to decrease over the next few years, because there's going to be far fewer drugs for them to manufacture and to copy. There's no question about that. That's what Bill C-91 does. That's why we're here protesting against Bill C-91.
But you mentioned earlier the question of international trade obligations. We're not convinced that Canada cannot reintroduce compulsory licensing under the WTO and NAFTA.
Furthermore, I remember very clearly the Prime Minister of this country, when he was in opposition, standing up in the House and saying that the opposition, his government, was opposed to Bill C-91, and they wanted changes in Bill C-91. He also said that they were opposed to signing the NAFTA unless they got changes in it that were in the national interest.
Well, did he sign NAFTA without getting the changes? He seems to have done that because the Minister of Industry, the Hon. John Manley, comes before this committee and says we're prevented from doing it because of international agreements - namely, NAFTA. It seems to me they can't have it both ways. You want to protect our national interests, which you didn't do when you signed NAFTA, or NAFTA allows us to have compulsory licensing in this country. One way or the other, a promise has been broken.
[Translation]
Mr. Pierre Brien: You will have to take that up with them. We made no such commitment.
[English]
Some hon. members: Oh, oh.
Mr. Lang: My own sitting member, Mr. Ian Murray, left, and I wished he had stayed.
The Chairman: He had to go to vote, sir.
Mr. Lang: I understand that.
The Chairman: Let the record show that you're cutting corners there.
Mr. Lang: Oh, oh.
[Translation]
Mr. Pierre Brien: I do have a brief question on that point, in fact a complementary question. You have dealt with the subject before, and you state that we should either amend the international agreements or go back to compulsory licensing without amending the WTO and NAFTA.
.1655
[English]
Mr. Lang: I am saying that I do not think the international agreements under NAFTA and the WTO would prevent us from having compulsory licensing in this country. The minister says otherwise.
Well, the only thing I'm suggesting is that maybe his advisers should do a little more homework. I can't say any more than that, but I'm in fundamental disagreement with the fact that we can't do something that is in the national interest.
The Chairman: Mr. Mayfield.
Mr. Philip Mayfield: While we're on this subject, I'd like to reiterate my colleague's comment that this is an argument between you and the government.
But I want to ask you if you had done some thinking or have some thoughts about what would happen if we go back, as some have suggested, and look for amendments in the NAFTA agreement. What would be the consequences for Canada, not only in the pharmaceutical markets but in the whole NAFTA contract? Or would there be consequences? Do you have any thoughts on that?
Mr. Lang: I'm not an expert in trade law, but it seems to me that Canada going back and asking for changes won't get those changes. I think that door is closed.
We're saying that we think there are still avenues, and with a little ingenuity we can go back to some form of compulsory licensing and strengthening.
Mr. Philip Mayfield: Are you in a sense contradicting yourself there?
Mr. Wagg: No. Our organization is saying that we believe, under NAFTA - or under WTO, for that matter - there is still room for the government to make moves when they're doing it in the national interest.
In fact, I sat in on hearings in the other building when the Canadian Health Coalition brought in an international trade lawyer, a Mr. Appleton, who gave that opinion. But we also checked some other sources. Our legal advice was that it was possible, that there is no way of...let me give you maybe the other offshoot. Do you think the United States try in NAFTA...and that prevents them from making all those moves they make in their national interest from time to time?
The Chairman: I want the witnesses to be careful here. We're building a very difficult case in a very difficult area. When people introduce legal advice, either they do it directly on the record...or not as hearsay. Because I don't want a trail of unpresented evidence that something can be done. So either you have evidence and legal opinions you wish to present, or you don't. I want to be very careful here, because I don't want somebody to say that you had ten opinions, of which we didn't see any.
So if you have something you want to contribute from a legal point of view, please do - and Mr. Appleton is on the record - but this is a very contentious area.
Mr. Philip Mayfield: Thank you.
The other question I want to ask you, and I ask it in response to your remarks that you have studied this issue for a long time and in an intense manner, is the issue of how long is an appropriate period of time for the patent protection to continue. We've had some say it should be four years; some say it should be four years of marketability after the approvals are completed. With your experience and years of thought on this, what would be an appropriate period of patent protection?
Mr. Lang: I would say four years upon payment of royalty established by the Commissioner of Patents. But having said that, I would say the absolute outside maximum should be no more than seven years.
Mr. Philip Mayfield: Of marketability.
Mr. Lang: Of marketability, and then a compulsory licensing as of right upon the payment of a royalty. Again, as I say, this is established by the Commissioner of Patents, as it was under the 1969 legislation.
.1700
Mr. Philip Mayfield: Without quibbling, I will accept your answer as you state it.
I raised the question previously about perhaps coming to an agreed-upon period of marketability as the method of determining it, so that however long it takes to develop a drug the patent would continue for a designated period beyond that while the company has an opportunity to recoup its expenses and claim its profits before the protection is lifted. I see some difficulties with it, but do you see this as an alternative to the period we have now of, say, twenty years?
Mr. Lang: I can't foresee this doing the job that my organization wants done with respect to health costs and the costs of drugs. I think the only realistic and available option is compulsory licensing after four or seven years, with the payment of a royalty. That is time enough, because these drugs are marketed worldwide in order for the brand name manufacturers to recoup all of their research and development costs and make a very healthy profit that is as high as any in the manufacturing industry. It's somewhere around a 13% or 14% return on equity, which to me is pretty healthy.
Mr. Philip Mayfield: Some of the researchers in Canada - and I have letters from a couple of them - are concerned about shortening the patent protection period. There is one from the University of Ottawa and another one from Vancouver. What they're concerned about is that the money they receive from the majors, which is making their research possible, may not be there if the protection period is shortened. They see a threat to their research projects if the company's profits diminish or if the company leaves the country. They feel threatened by this.
I must say, I have a concern about our long tradition in Canada of letting some of our brightest and best in the research area go - and not only in medicine or pharmaceuticals, but in other areas - because of the economic circumstances within the country or because of government policy or for some other reason. Over the years, we have had an enormous brain drain that has left us much the worse, in my estimation. Do you have any fears about this happening? I presume you've answered that before.
Mr. Lang: I have been a staunch nationalist all of my life. I'm a Canadian to the core.
Mr. Philip Mayfield: I'm glad to hear you say that.
Mr. Lang: I do not want our young and our brightest leaving this country. I want them to stay here and I want them to make a contribution to this country. I think that can be done, and I think that has been done under previous drug legislation.
The nature of the industry is that basic research...they do research and development in this country, but it's not basic research. They bring the chemical ingredients into this country and package them into final-dosage form.
Mr. Philip Mayfield: But did you not say that the AIDS drug research was done in Canada?
Mr. Lang: That's the only patent that has been taken out in Canada, and where is it manufactured? It's manufactured in Great Britain, not in this country. Now where are our best and our brightest in that case, since you bring it up again?
But the nature of research and development is that it's done in the home country. That's where the basic research takes place but not in this country. The only companies that have the chance of doing basic research in this country are the generic firms in the developing bio-generic drug industry in this country. That's where you're going to get your basic research. You're not going to get it from the multinationals, which have traditionally done it offshore.
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Mr. Philip Mayfield: Mr. Chairman, don't let me use up my whole time on this line of questioning, because I want to ask Mr. Cox a question. If you give me a warning when it's time to shift gears -
The Chairman: Warning.
Voices: Oh, oh.
Mr. Philip Mayfield: Okay.
The Chairman: Go ahead and ask Mr. Cox a couple of questions, and then we should wrap it up. We've kept the witnesses here a long time.
Mr. Philip Mayfield: Indeed, but this has been an interesting discussion.
The Chairman: Yes.
Mr. Philip Mayfield: Mr. Cox, the question I have for you is very brief. I believe you said you had no alternatives in other countries, but perhaps some of the European states...what prevents you from going to the United States to set up a process there?
Dr. Cox: I don't think I said I had no alternatives. I don't think it's international practice to supply export exemptions for companies from the originating country where the patent was still in force to export to countries where the patent has expired. I don't think that is common international practice. My remark was that it's appropriate for Canada because of the Canadian circumstance and because of the fact that patents expire later in Canada than they do elsewhere.
Now that I've clarified your opening remark, I can't remember your question.
Mr. Philip Mayfield: I want to know why you could not go to the United States, say, and do your process there.
Dr. Cox: We prefer not to go to the United States to do anything there because we're a Canadian company. We're committed to Canada. We want to develop in Canada. We've spent a lot of money on R and D in Canada and we think it's right and proper that we be given an opportunity to get a return on our R and D investment in Canada.
Mr. Philip Mayfield: I'm not suggesting that you should go to the States or that I would want you to go to the States, but is there a legal impediment to doing so?
Dr. Cox: There is no legal impediment. The States wouldn't be particularly attractive to us because it's more common in the United States now to have patents on products rather than processes, except in some of the biotechnology areas and the genetic engineering areas where they have both.
So if we were to go to the United States and attempt to be a fine-chemical manufacturer, our business would probably be restricted to old products for which the patents had expired, and as you will recall from my earlier remarks, our focus, at the moment at least, so that we can get ourselves going, is to target those products that are protected by process patents, not product patents.
Would you like to hear my opinion on the R and D question?
Voices: Oh, oh.
Mr. Philip Mayfield: I suppose I'll leave you in the hands of the chairman at this point.
The Chairman: I think that's it.
I want to clarify something with you, Mr. Cox. You deal with processes, as has been explained to us. Do you use patents for your new processes?
Dr. Cox: We have our own patents.
The Chairman: What do you consider an adequate time for the protection of your own patents?
Dr. Cox: For a patent that is developed by Canadians in Canada and filed in Canada, twenty years, with no possibility of compulsory licensing, just like it prevailed under Bill C-22.
The Chairman: Okay.
Second, I want to clarify this. You mentioned that you are not a member of the Biotechnology Association of Canada. I wasn't clear about whether they formally rejected your efforts to be a member or whether it was your decision not to be a member.
Dr. Cox: They didn't reply to my written application.
The Chairman: How long ago was that?
Dr. Cox: Two years. Since then I've consulted with staff and members of the board probably five or six times and I'm generally told that Cangene is a member. That's the standard answer.
The Chairman: What's your relationship with Cangene?
Dr. Cox: The major shareholder of Cangene is my parent company.
The Chairman: Thank you.
Thank you very much to the witnesses, as Mr. Mayfield has said. I'm also speaking for Monsieur Brien. It's been excellent having you here.
Mr. Thorpe, thanks for staying. I hope you've enjoyed it. It's sort of an educational process. I hope you bring it back to your students, too. The committee members did a major science and tech study in the fall, and many of the issues you've raised were also raised in the fall. We very much appreciated your presence here. You should get a copy of the science and tech study, because we do talk about what we want from our young people and we do hope that they make careers in science. Your perspective was very much appreciated. It reminds us of what this is all about.
Thank you, Mr. Wagg.
Thank you, Mr. Lang. It was interesting to hear from somebody who has a PhD in this area and is well respected. We appreciate your contribution.
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Mr. Cox, thank you very much. I'm sorry about the confusion at first. We very much enjoyed your testimony.
The committee will now hear from the Canadian Chamber of Commerce representatives, who have just arrived.
I'm sorry. I've just been told I have to go to the vote. My apologies to everybody.
Committee activities are suspended for half an hour.
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The Chairman: I would like to thank the witnesses for their patience in waiting for us. At least one of you knows what it is like to have votes around.
Mr. Reid, Mr. Mayo, welcome. Our normal strategy is to have you quickly read an overview or introductory remarks and allow all the members to get into questioning. If that's satisfactory to you, I'll turn it over to you and away we go.
Mr. Timothy E. Reid (President, Canadian Chamber of Commerce): Thank you very much, Mr. Chairman. The Canadian Chamber of Commerce welcomes this opportunity to express its views on the protection of intellectual property in Canada.
With me is Bill Mayo, a lawyer with Newbridge Networks Corporation. Newbridge is a Canadian company headquartered in Kanata and is a world leader in the research, development and marketing of sophisticated communications equipment. He is responsible for patent and other intellectual property matters at Newbridge.
Prior to working at Newbridge, Mr. Mayo practised law with a private firm here in Ottawa and was active in cases involving pharmaceuticals and the NOC link regulations. He is here with me today in his capacity as the chair of the Canadian Chamber of Commerce task force on Patent Act review.
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Before Bill gives the position of the Canadian Chamber, I would like to say that we believe the Canadian Chamber, by finding people in the business community who are very knowledgeable on these issues, and having them involved in our policy development work, together with resolutions from our local chambers, and having them come to you, with us, is, we hope, a value-added that the Canadian Chamber can give to the work of the committee.
I'll conclude my remarks by saying that
[Translation]
The Canadian Chamber of Commerce is the largest and most representative business association in Canada. Through its network of 500 local chambers and offices, it speaks for 170,000 members drawn from all sectors of the economy and all areas of the country.
[English]
With that, Mr. Chairman, I'd like to suggest that Mr. Mayo give a presentation on the substance of our brief.
The Chairman: Mr. Mayo, please.
Mr. Bill Mayo (Legal Department, Newbridge Networks Corporation): Mr. Chairman, members of the committee, the Canadian Chamber's commitment to the issues that are at hand was evident in the interest it showed at the introduction of bills C-22 and C-91. We supported the elements of those bills that strengthened the protection of intellectual property rights in Canada and we have clearly voiced our concern in the areas that may have had the opposite effect.
For example, in our submission to the Eastman Commission in 1985, the Canadian Chamber argued strongly against compulsory licensing, as it was a clear disincentive to companies that were pursuing innovative research and to investment in such companies.
These views were reinforced in our submission on Bill C-91 and we were pleased to see the compulsory licensing regime ended by that bill.
The changes brought about by bills C-22 and C-91 have gone a long way to improving patent protection in Canada. However, some levels of intellectual property protection still only meet the minimum standards set out in the World Trade Organization and the trade-related intellectual property rights agreements. They do not necessarily measure up to the levels of protection in other countries. Accordingly, there is still room for improvement.
The elimination of compulsory licensing meant that pharmaceutical patent owners were given the same 20-year term of patent protection as inventors in other technologies. However, innovative pharmaceutical products must go through a rigorous regulatory process during the 20-year period before they can be sold. Once a new drug has gone through testing and approval, it has only about 10 years, or less in some cases, of market exclusivity. Other industries do not have this kind of obstacle.
Many other countries recognize this and have taken steps to ensure a fairer period of market exclusivity through a system of patent term restoration. Through patent term restoration, the effective patent life in other countries such as the U.S. and Japan can be as much as 14 or 15 years compared with the 10-year period just noted in Canada. Some consideration must be made to putting Canada on a level playing field with its major competitors by enacting similar provisions.
In addition, the notice of compliance or linkage regulations are crucial to ensuring that patents held by pharmaceutical and biotechnology companies are not infringed. The Canadian Chamber is in favour of these regulations, which make patents more enforceable for companies both large and small. Because interlocutory injunctions are rarely granted in Canada, particularly in patent matters, the linkage regulations are a good alternative for enforcing patent rights.
The Canadian Chamber of Commerce believes the federal government should ensure Canada is a stable and predictable place to invest, a place where patent protection is both enforced and reliable. Bill C-22 required the government to review the Patent Act after 10 years and Bill C-91 after four years. The chamber believes the current review is a good opportunity to ensure a stable future by maintaining and strengthening the patent system in Canada.
It is notable that the development of the Canadian biotechnology industry in recent years has been encouraged, to a large measure, by the improved Canadian intellectual property protection standards since Bill C-91 has been passed. Biotechnology companies serve to transform scientific discoveries made in Canadian hospitals and universities into various types of applications. Canada is beginning to see the economic benefits and job creation as the industry establishes itself.
According to a recent Ernst and Young study, the biotechnology industry in Canada consists of more than 224 companies across the country. There were fewer than 12 such companies as recently as 1990.
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Employment in these organizations is growing at an annual rate of 17%. Total employment in the sector is about 8,000, and this number is expected to increase by 50% by the year 2000.
The majority of biotechnology companies in Canada consists of small or medium-sized firms, which can competently pursue innovative research with the knowledge that they have protection from patent infringement and a period of exclusivity on the market that will allow them to recoup their development costs. This industry would be drastically affected if it were compelled to fight every patent infringement action through the courts since, as I've noted before, interlocutory injunctions have historically been difficult to obtain in Canada.
The coming of age of the Canadian biotechnology industry is to a large measure attributable to the security of its greatest resources, brain power and patents. Without strong patent protection Canadian innovators will be forced to move to countries where intellectual property protections are more predictable. Simply put, any weakening of Canada's current Patent Act would greatly erode the long-term viability of the made-in-Canada biotechnology industry.
For all the reasons outlined above, the Canadian Chamber of Commerce urges that in its review of the Patent Act the government keenly focus on the benefits that strong patent protection has had for job creation and levels of investment in Canada. The federal government should ensure that Canada's intellectual property legislation remains competitive, thus giving Canada a fair chance of attracting international investment
We must ensure that smaller Canadian biotechnology companies are as attractive an investment as those in other countries, and living up to the commitments we have made as signatories to various international agreements is the best method to ensure this. Canada must be true to its commitments if we are to grow as a competitive player in the international marketplace. Canada must keep its commitments to the international community.
The Canadian Chamber of Commerce is pleased to have had this opportunity to present its views to the industry committee. We would be pleased to discuss any of the recommendations in the submissions in greater detail.
The Chairman: Thank you very much, Mr. Mayo, for your very succinct presentation, which covered the major points. Thank you also for bringing your own expertise from your professional life to the committee. We appreciate that.
[Translation]
Mr. Brien.
Mr. Pierre Brien: We have, for pharmaceuticals, a deficit in our balance of trade. I don't know whether you have focused on this issue, but are you in a position to explain why this is so? Also, what do you think could be done to improve Canada's balance of trade in pharmaceuticals?
[English]
Mr. Mayo: I'm not sure if I can answer your question in its fullest sense, but I would like to note, and I think it's important to note, that some of these changes to the Patent Act are fairly recent. Simply obtaining a patent can take months or years in most cases. This is something that's going to take time to work through the system, and I think that's evident in the growing biotechnology field.
I'm not sure about getting into all the historical reasons, but I think it's important to keep the current trend going. I think that the situation will improve or at least change in that respect as time goes on and we see the R and D in the biotechnology industries expanding.
[Translation]
Mr. Pierre Brien: One of our concerns is to have a legislative framework that promotes research and development, on top of the tax incentives granted by the federal government and by certain provincial governments, and to assist particularly interesting areas of research and development. On the other hand, when a discovery is made, production will be carried out in other country, which is also consonant with the international trade agreements we have signed. In that case, we will not fully reap the benefits of the investments we make as a society.
Have you considered the issue closely? Are you concerned about it too?
[English]
Mr. Mayo: My view is that, again, there needs to be a window of opportunity for the industries to develop. Looking at the area I practise in, the communications field, there is a very robust manufacturing sector in Canada, which I think is expanding.
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From my perspective, that seems to parallel the research and development efforts, particularly in high-technology areas where the benefits of having a skilled labour force and a skilled research and development presence go hand in hand, and over time the manufacturing seems to follow with that.
[Translation]
Mr. Pierre Brien: You spoke, in your presentation, of the need for stability as far as patent protection is concerned. Would you nonetheless agree to the government's periodically reviewing the situation? We have to find a balance between the concept of intellectual property and the repercussions on the costs of our health-care system.
Bill C-22 provided for a 10 year review. Should we not, here again, provide for a statutory review and, if so, what time-frame would meet the requirement for stability?
[English]
Mr. Mayo: I'm not sure if a mandated legislative review is necessarily required. As you pointed out, there have been a number of changes in the last few years, not only with respect to the patent side of intellectual property rights but also copyright, trademarks - all aspects. As the various international organizations review these processes and the international regimes are developing, that, in my view, is cause for these questions to be revisited as they are needed in the overall global context. I'm not sure if we need to then add another layer of required review onto that. I think these are issues that will grow in their own course.
Periodically, there will need to be changes made. Previously we haven't necessarily had mandatory reviews, nor are they necessarily present with respect to other legislation. That doesn't necessarily mean that changes won't follow when required and as overall situations change in the global marketplace.
[Translation]
Mr. Pierre Brien: As far as section 55 regulations are concerned, you are in agreement, considering how difficult it is to obtain a court injunction. If we find that these regulations should be maintained, would you rather see them put under the act or should we continue providing, as is currently the case, that they can be modified by the governor-in-council?
[English]
Mr. Mayo: I think it wouldn't be a bad idea to see some recognition of this process in the act itself. It wouldn't necessarily have to be the full text of the regulations, of course, but I think the principle with regulations corresponding to put them into play would be a good thing to get the heart of it into the Patent Act itself, or perhaps into another piece of legislation.
But to elevate them beyond the current level might not be a bad idea. There would obviously be regulations regarding the implementation, but I think the basic premise would fit well within the act.
[Translation]
Mr. Pierre Brien: If we increase the period of patent protection in order to bring it in line with the standards of our international competitors, can we legitimately ask the industry to make a commitment in this area? The last time we increased patent protection, we asked the industry for a commitment to increase its research and development efforts and to transfer funds to the Medical Research Council of Canada.
If, as you suggest, we increase patent protection, could we not expect in return some further commitments with respect to research and development? Do we have a right to expect that, and even to require it?
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[English]
Mr. Mayo: My view is that a patent system is adequate in and of itself and should stand alone, largely. It's a system that has historically been intended to recognize and reward innovation and to encourage further developments as patented information allows that material to be open to the public domain future advances. Through those mechanisms, I think they will attract additional research in their own right, so I'm not sure if it's necessary to demand or require further commitments.
On the other hand, if there are additional gains to be had, that's not necessarily a bad thing, but I would like to see the patent system operate on its own and I believe it will bring benefits without having to take additional steps or force anybody into particular courses of action. I think that will come on its own in time.
The Chairman: Mr. Mayfield, please.
Mr. Philip Mayfield: Thank you very much.
I'd like to clarify a couple of things with you. In your statement, you mention that employment is growing at the rate of 17%, and you estimate the 8,000 number to increase by 50%. Can you tell me where that information comes from, please?
Mr. Mayo: That information is from an Ernst and Young study. I'm afraid I don't have the further particulars of the study with me, but I can certainly follow up with that if you would like.
Mr. Philip Mayfield: I would very much appreciate that, because we've heard other witnesses say that in fact the levels of employment have decreased. I think that's an important piece of information, and I would appreciate it very much.
Mr. Mayo: Perhaps to clarify, I believe that particular study was referring to the biotech industry and not the pharmaceutical industry at large.
Mr. Philip Mayfield: That's fair enough. What you have, I would appreciate.
Mr. Mayo: Certainly.
Mr. Philip Mayfield: We've come five years down the road since this patent extension was put in place. I wonder if you have any projections about, say, what the next five years will be. You mentioned employment numbers by the year 2000, but do you have any information on investment, on the number of projects? These are all expanding, I would think, if employment is expanding. Do you have anything to say about that?
Mr. Mayo: I'm afraid I don't have any particular details or projections on that particular point. We may be able to provide some additional material on that, though. I would have to check and see what is available, but I'm afraid I don't have anything in hand that would project past those.
But I think you're quite right that with the trend we've seen to date there's reason to expect that type of growth or, at any rate, significant growth to continue, particularly since this industry is such a new industry. Again, if I might draw a parallel to the high-tech and communications fields, which are perhaps ten years or a certain period in advance of the biotech, certainly growth here in Kanata and in other Canadian cities seems to be at a fairly steady and rapid rate some several years down the pipes since the industry started to emerge.
Mr. Philip Mayfield: I have a question on a little different tack, if I could. It has been said to this committee that there is a means for interfering with the agreements and having international agreements, NAFTA and so on, changed. I wonder whether you have any information about the consequences of this kind of seeking to amend the agreements. What kind of repercussions would there be on areas besides the pharmaceutical industry? What would be the repercussions for Canada as a nation if we began to do that? Do you have any thoughts about that?
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Mr. Mayo: My thoughts are that if you start to do that, to take those sorts of measures, you certainly leave open the door for reciprocal treatment. That could be in other sectors where we may be more vulnerable, or other industries not involved in this debate may find themselves being adversely affected when some sort of protection that they've come to expect and enjoy in other countries starts to be eroded, and a finger is pointed to derogation in Canada in this particular area. I think that's certainly a danger we could face if we start to take that type of approach.
My view is that a patent system should be uniform across industries, by and large. There may be some room for exception, but as a starting premise, let the patent system do its job and treat industry fairly across different technologies and have this competitive, equal playing field internationally as well so that we enjoy the benefits of R and D investment into Canada coming from outside. Canadian exporters could also go abroad and enjoy patent protection in those other countries in which they operate.
A company like the one I work with has a vast majority of its sales through export to other countries, other jurisdictions, and it's very important that we see predictable and enforceable patent protection in those countries in which we do business. Conversely, we expect that they will be treated the same way when they come to Canada.
Mr. Philip Mayfield: I have two other short questions, if I may. These relate to the consequences of certain actions. We've been told by some of the companies that if the patent protection at the extended period, if not even further, is not maintained, their recourse would be to leave and go where there is a better business climate. We have had witnesses say that this in fact is not the case. They were here before, and they would stay.
What is your opinion on that? What would be the effects if the patent period were reduced?
Mr. Mayo: I think there would be an effect. It may be that companies don't necessarily up and leave Canada, but they operate in a business climate, and these are all factors that go into the various decisions made as to where certain operations will be. So I think there'd be an impact there.
I think you may also see an impact on investment and further growth within Canada if those sorts of things happen. Perhaps companies wouldn't up and leave the next day, but I think you would see a progressive change. There may not be a decline, but the rate of growth and progress that's been seen in the past few years is going to level off, and I think that would be an unfortunate turn of events.
Mr. Philip Mayfield: Would that be for both the newer biotechs and the majors?
Mr. Mayo: I believe so.
Mr. Philip Mayfield: I have one last question. One has difficulty finding fault with people who come to protect and maintain the interests of those people whom they represent. Many of the people who have come here have done so to represent the interests of consumers, and they are concerned about the high cost of drugs. I'm wondering what the effects on drugs would be if there were a reduction in the patent period.
I'll leave it at that.
Mr. Mayo: I think it's a very complex equation figuring out what the downstream impacts of that would be. On the one hand, I think it's pretty clear that the average price of a generic equivalent, once it comes on the market, is going to be less. At its face there's a cost saving, perhaps. However, I think you have to factor in all of the other issues that come to bear. By creating a climate that encourages research and development and that encourages investment in Canada, I think in the long term you end up being worse off. You don't have the same type of job creation or the same type of investment, not only in numbers but also in terms of the quality of jobs in which you have highly skilled research and development-type positions.
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So I think just to look at the cost of a particular pill on a generic basis versus a brand name basis falls far short of the type of analysis you need to look to. My view is that certainly in the end we benefit by having the type of patent term we do and the type of consistency across industry as well as in comparison with our international partners.
Mr. Philip Mayfield: Thank you very much, sir.
The Chairman: Ms Brown.
Ms Bonnie Brown: Thank you, Mr. Chairman.
You're going to have to help me with some of the logic in your brief. You're strongly in favour of Bill C-91, and always have been. You're also in favour of the 20 years and of the linkage regulations. You've even suggested patent restoration. I assume that's based on the idea you express in your brief when you say that the courts are not always effective in enforcing patent protection. But then I think of the chamber having 170,000 members in all sectors of the economy, and you also said that patent protection should be uniform across all industries.
So on the one hand, you're saying that it should be uniform, and on the other hand, you're saying that this particular industry should have this special protection. Has any other industry that you represent come to the chamber and expressed the idea that their patent rights are not sufficiently protected in the Canadian judicial system?
Mr. Mayo: From the experiences I've had, there is certainly an appreciation across the board, not simply in the pharmaceutical industry, that interlocutory injunctions for patent matters generally are extremely difficult to obtain with the way the Canadian courts are currently viewing the law.
Ms Bonnie Brown: Is that anecdotal evidence or do you have some empirical evidence to show people? Do you have a list of complaints from various industries, and have those industries actually asked to have special privileges such as the pharmaceutical industry's in order to get around that?
If interlocutory injunctions are so hard to get, I'm surprised that the issue is only being brought to our attention at this particular review on this particular industry. If in fact we need to do some judicial review and reform, then I'm surprised the chamber hasn't previously come before us and suggested that.
Mr. Mayo: I don't have any information before me right now, but with respect, I'm fairly confident in saying that is the case as far as the ability to get an interlocutory injunction for a patent matter.
With regard to other industries, I'm not sure if we have any specific requests - and again, I apologize - but I can certainly check on that.
Ms Bonnie Brown: But the board of directors of the Canadian Chamber of Commerce believes the pharmaceutical industry is so special that it should have a special set of rules that no other industry that's involved with patents is able to have. Is that correct?
Mr. Mayo: I wouldn't say that is characterized quite properly in that the pharmaceutical industry does face some different circumstances.
Ms Bonnie Brown: I'm not asking about the pharmaceutical industry. I'm asking about the position of the 170,000-member Chamber of Commerce. I'm just wondering if some of the other people in business who have to go through the patent regime and who have only the use of the courts are in favour of one industry having this special protection. I'm wondering if that has been fully debated or only debated in the context of the review of this particular bill.
Mr. Reid: I think the question is a very fundamental one, and I don't have the answer to it. I think it would be very interesting to find out whether this issue of how the courts handle these kinds of matters is being dealt with in other industries or other sectors.
The reason we're discussing this one here is because we have this particular bill in front of us. The positions we've taken in the 1980s and the early 1990s have evolved, and we're taking the same kind of position on this one now.
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Ms Bonnie Brown: I understand that. My point is, I'm a member of the Chamber of Commerce. I was not a member at the time of the earlier review of the bill. No one in my local Chamber of Commerce has asked me whether I think the pharmaceutical industry should have special privileges, or whether there needs to be a review of patent legislation in the country and whether the courts need some revision. It would seem to me that to come forward five years later with the same position, unless it's been fully debated by all the new members, is not really reflective.
I have another question about the chamber. If you polled the chamber, I believe they would probably say they want EI premiums reduced. Do you think that's probably a pretty good guess?
Mr. Reid: You know, the chamber has an annual meeting. We have the resolutions that come from the local chambers. The only people who have a vote at the annual meetings are the delegates from the local Chambers of Commerce. When you discuss the -
Ms Bonnie Brown: Did you get a resolution on EI premiums?
Mr. Reid: Very much so, yes.
Ms Bonnie Brown: Okay. I figured that was your position.
What I'm seeing, as a lack of logic here from the point of view of the chamber, is that a much larger cost to most employers is the drug health insurance costs that they share with their employees. We have had evidence here that shows us that Bill C-91 has seriously increased if not the prices of individual old drugs then the costs of the health insurance part of an employer's costs in running his or her business.
I see you coming out in favour of Bill C-91 for pharmaceutical companies, but I don't know that the analysis has been done by the chamber as to the effect on all 170,000 members and their businesses around the health care costs and the rise in those costs since the passage of Bill C-91. I would think all 170,000 members, unless they're very small businesses, would have an opinion about the health care costs, which they might feel a little more strongly about than patent protection under Bill C-91.
I'm wondering if you have ever juxtaposed those two ideas, because both have an effect on your members.
Mr. Reid: I think it's a very astute observation. The question of the costs of drugs and what causes those costs is the issue Mr. Mayo has addressed in the sense that if we want to have investment in innovative drugs, if you like, pharmaceuticals, we must have this patent protection. We must have an enforceable patent protection, one that is enforceable and can be enforced.
If the objective is to have that, then we're saying this is the way to do it. For goodness' sake, don't get involved in a fight with a lot of other countries by having your legislation and the way you go about things uncompetitive internationally, because that investment will go to those countries under the World Trade Organization's standards, if you like, and not to Canada. That's the consequence. You have to ask yourself, what is the purpose of patent legislation?
Ms Bonnie Brown: But I'm asking the questions now. I'm asking you, has the chamber synthesized the position of its members on their costs around health premiums and the position you are taking as their representative on Bill C-91? Because I foresee a serious lack of logic there. I would think that before you come here and surely speak in favour of something that in fact the whole picture, as it affects all your members and the businesses in Canada, has been discussed with those members.
Mr. Reid: I would say that if you know how we operate in terms of our annual meetings and who has the votes and the process by which policy proposals come forward, it's very much like your own political party. Local chambers of commerce, together with their policy committees, make proposals, which go through a screening process. The national issues are put out well ahead of the annual meeting, and then they're debated and voted upon.
At our last annual meeting in Saint John, New Brunswick, we debated a resolution that relates to this. We passed it. It's a reaffirmation, if you like, of the position we've taken on our international policies. We've been very articulate in terms of the advice we've given to the government on the FTA, on NAFTA, on the Uruguay Round, and we're still doing that.
In our opinion, the presentation we've made and the views we're expressing to you today are not only consistent with the views of the past, where we have a track record on this, and consistency - which in this case, I think, is a virtue - but also, more importantly, with what's happening in terms of international agreements, whether it's the trip, whether it's the work that took place in Singapore on these kinds of intellectual property issues. If Canada does not keep up with that and put itself on a level playing field, then your concerns about the drug component of health care costs can just go out the window. Those are the fundamental issues and that's what we present.
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Ms Bonnie Brown: I understand those issues about being internationally competitive, but you're still staying with the idea that only one industry, of all the industries you represent and of all the industries that are involved with patents, requires these special regulations because the courts are failing us on the patent protection field. You have no suggestions as to how those other companies...or you have no complaints from them about patent protection.
I just don't understand why you can say you represent 170,000 members, most of whom are businesses, and you want one fairly small sector of the economy to have special protection.
Mr. Reid: This is a rather critical sector of the economy. This is not a small sector. This is a leading-edge sector. If we don't play in this sector over the next decade just like we're playing in other high-tech sectors, then all our kids will have to go and get jobs elsewhere.
That's the answer to your question.
Ms Bonnie Brown: Are you saying the other high-tech sectors don't deserve the same exception?
Mr. Reid: It's the same issue. You have to create a level playing field in Canada vis-à-vis international competition, vis-à-vis the obligations we have under international treaties. If we don't do that, other countries will come and whack us very hard.
The Chairman: Thank you. Mr. Murray.
Mr. Ian Murray: Thank you, Mr. Chairman. I have just one question, to Mr. Mayo.
Right now, generic manufacturers are not allowed to export their version of a drug to a country where the patent has expired if the patent has not expired in Canada. Several witnesses have suggested to us that they should be allowed to do that. I'd be interested in your views on the whole subject of allowing the export of the generics before their patent expired in Canada but after they expired in other countries.
Mr. Mayo: The view I would take is that one of the underpinnings of the patent that is obtained is your ability to be exclusive in the manufacture, sale, marketing, use, etc., of the product. This proposal would be removing one of those pillars, the right to exclusively manufacture during the term of the patent. That's the starting point, that this is a fundamental aspect of the patent.
Second, I think it gets back to the issue of what happens in other countries, other important trading partners of Canada. That is something that is not exempted from patent protection in those jurisdictions.
As well, it is my understanding that if that type of exemption were applied to pharmaceuticals, one sector of Canadian industry, in order to be consistent with our international treaty obligations we would likewise have to provide exemptions in other fields and to other industries. I'm not sure there is much of a will in other industries to see that happen.
Again, I think it falls largely on two points. One, to my mind that is a fundamental aspect of a patent. Second, we need to be consistent with the international community on this type of issue.
Mr. Ian Murray: Thanks, Mr. Mayo. That's all for me.
The Chairman: With the indulgence of the committee I have one or two questions. It follows up on what Bonnie Brown was asking, but I want to go at it in a slightly different way.
We had interesting testimony last night from British Columbia, from the CAW. One of the surprises they found was how little attention businesses were paying to the rising cost of their drug plans. They gave an example. A company president would write a big check and never even think twice as to what those costs were and where they were going. It was sneaking up to being a union/management issue again because it affects the cost of the benefits package and therefore the hourly cost of labour and so forth.
In your answer to Bonnie Brown's question you seemed to confirm their impression that the business community hasn't focused in on that as an issue.
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Mr. Reid: I think you've certainly given a lead to us to put that front and centre of our next survey, along with some of the other costs of doing business that are unrelated to profits, which is a real issue for business, whether it's EI premiums or other costs that are related to the number of employees you have as opposed to the profits you make. I think it's a worthwhile thing to follow up on.
Mr. Mayo: Perhaps I could add one additional thought to that.
I've mentioned the point that the patent system was brought about for certain purposes, focused on the encouragement of research and innovation and all the things that flow from that. I think it's important to maintain that distinction from issues relating to other fields, such as health care. It would be nice to get added bonus or cross-impact, but the patent system is fundamentally there for one reason.
The Chairman: You brought the Patent Act back into the question, not me. There are two different issues here, and we're trying to find out the causality.
Now, you can take a blanket statement and say there's no causality, but everybody else is telling us not necessarily that there's causality but that there is an issue of the cost of their drug plans, and giving us testimony.
As I said, I would encourage you to think about this. When unions and management don't think about things ahead of time, they end up at loggerheads and that increases the pressures that rebounds eventually on how people perceive the treatment of the pharmaceutical industry in the country.
I'll leave that as a comment.
[Translation]
Do you have a final question?
Mr. Pierre Brien: No.
[English]
The Chairman: A very quick one, Mr. Shepherd. Go ahead.
Mr. Alex Shepherd (Durham, Lib.): I'm sorry, I got in at the tail-end of this.
You talked about the importance to employment in evolving industries and biotechnology. The issue is knowledge-based workers who are employed by the pharmaceutical sector. Presumably, a definition of that, a component part, is people who work in the research field.
Why is it that professors who are graduating these students in some of our universities are saying they're not going to these companies, they're not going to multinational drug firms? The actual people who are doing genuine research are being hired in the United States and Britain.
Is that something you've studied? Have you actually looked at the correlation between research labs and research workers and our universities and where they're being graduated to?
Mr. Mayo: I'm not sure we have that type of information.
Mr. Alex Shepherd: But that was kind of the premise of your argument, that we had to support these opportunities for our youth.
Mr. Mayo: Certainly, though that's one area within a larger pool of this type of work. I don't have a specific breakdown.
But if that problem does exist, and it may well be a significant issue, I don't think that necessarily means that the numbers are not significant in the R and D community at large, at private companies, in other institutions, in hospitals, etc.
Again, there is a very strong research presence in the high-tech industry here in Ottawa. They can't find enough people to fill the R and D requirements in places like the one where I work.
The Chairman: I'd like to thank both of our witnesses. Again, I apologize for our delay in starting. We appreciate your coming in.
Mr. Reid, I know your organization, like a political party...it's a topsy-turvy process to put together your position. I appreciate the effort you've put into your contribution to the committee. As with other witnesses, it will be part of our deliberations at the end, and you'll be seeing the result of our work sooner or later. Thank you so much.
Mr. Reid: Thank you.
The Chairman: The committee is adjourned until 7 p.m. in the same room.