EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 8, 1997

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[English]

The Chairman (Mr. David Walker (Winnipeg North Centre), Lib.): Welcome.

Pursuant to Standing Order 108(2), a review of section 14 of the Patent Act Amendment 1992, Chapter 2, Statutes of Canada, 1993, the committee resumes its work through the hearing of witnesses.

I'd like to welcome everybody back, particularly my colleagues, after our two-week break and a chance to be in the constituencies and to read over some of the work that was done by the committee beforehand. I welcome some new members of the committee and a former member of the committee to participate in today's session. It's an indication of the interest that parliamentarians have in this topic.

I will begin arbitrarily with the witness list as I have it. It begins with the Board of Trade of Metropolitan Toronto, Mr. David McFadden, vice-president. Correct?

Mr. David McFadden (Vice-President, Board of Trade of Metropolitan Toronto): Correct.

The Chairman: Mr. McFadden, welcome. I'll begin with you and then I'll go to the board of trade from Montreal. Is this a parallel presentation such as the work you've done before, or is it separate?

Mr. McFadden: Mr. Chairman, I will give the presentation. Mr. Lacharité, who has joined me, has a case of laryngitis so he thought he would deal with all the difficult questions as they come up.

The Chairman: Committee members welcome that.

Mr. McFadden, please begin.

Mr. McFadden: Thank you, Mr. Chairman and members of the committee.

We're very pleased to have the opportunity to be here to present a joint brief on behalf of both the Montreal and the Toronto boards of trade. We have circulated to members, and I believe members have already received, copies of the briefs. The Toronto board is the one with the white cover. The one from the Montreal board has the cerlox cover. They are virtually identical, with the exception that on page 5-6 of the Board of Trade of Metropolitan Toronto brief we have a map of the Toronto area showing the location of all the various drug companies that are manufacturing in the greater Toronto area. There are also some figures more specifically related to Ontario in our brief, while of course the Montreal brief deals specifically with the pharmaceutical industry within the greater Montreal area.

Mr. Chairman, we're here to put the case that we think it's important in an economy that is very much dependent on knowledge-based industries that the pharmaceutical industry be offered the same patent protection as other industries in the advanced technology area.

Our report contains four specific recommendations that we would ask the committee to consider. Perhaps I'll briefly go through those now since they'll put it in context.

Our boards of trade both recommend, first, that governments take the necessary legislative and regulatory measures to maintain and reinforce intellectual property protection for all knowledge-based industries, including the pharmaceutical industry; second, that government ensure that research is a primary focus for business support initiatives; third, that all partners involved in manpower training work together to ensure that top quality training of researchers and other pharmaceutical workers is maintained and that the needs of the most highly specialized sectors are met; and fourth, that provincial governments avoid a narrow view with regard to drug programs that allow or deny patients access to new technology. The need for system-wide evaluation of trade-offs between medications and other therapies, as well as between isolated savings, health budgets, and the increased economic activity generated by knowledge-based industries, has to be recognized.

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Mr. Chairman, the Board of Trade of Metropolitan Toronto has been actively involved in pushing for enhanced intellectual property protection for many years. With regard to the pharmaceutical industry, we first approached the government back in 1987 with a brief urging enhanced protection for this industry. We again communicated with the government of the day in 1991 on this issue. I will quote from a letter we sent to the Minister of Consumer and Commercial Affairs in December 1991, in which we said:

It was the position of The Board then and is the position of The Board now that the degree of patent protection in Canada for pharmaceuticals should be no less than for any other product or process.

That remains our position, and that is the thrust of our brief today.

We believe it's important that our pharmaceutical industry has market exclusivity comparable to that of other high-tech industries and comparable to what they would receive in other countries. We think this is essential if we're to improve the competitiveness and growth of our innovative pharmaceutical and biotech companies.

We appreciate an issue that has been raised about the cost of patent medicines. We note from figures that have been provided by government agencies and elsewhere, though, that over the past several years patent drug costs have increased actually at a rate lower than the consumer price index. But we think the use of cost alone and price, in terms of approaching patent law, is not the way to go. After all, when we evaluate patent law, we don't attack the patents for cost reasons for CD manufacturers, book publishers, computer software companies, hardware companies, or whatever. We don't use patent law as a way to drive down prices in those areas, and it doesn't seem to me it's valid to use patent law as a way to drive down prices in this particular area.

We therefore feel it's important that equity be a key consideration of legislation in Canada between drug manufacturers and any other manufacturer or creator in other areas of advanced technology.

Job retention and job creation are obviously important as well. As you can see from our brief, the pharmaceutical industry is very important to the province of Ontario, and particularly to the Metropolitan Toronto area. With regard, for example, to the innovative pharmaceutical industry, our figures indicate that 8,400 jobs are created directly in the Toronto area from the innovative pharmaceutical industry. That's a significant job sector.

We want to encourage in the greater Toronto area, as I think government wants to do across Canada, high value-added jobs. That can't be done if we undermine patent protection. This is why we're really pleased to be working with the Board of Trade of Montreal. This, we think, is a national issue. While the greater Toronto area has an interest in this and we are very concerned about encouraging patent protection, we believe this is an issue of great importance to Montreal, as it is to communities across Canada that are seeking to develop advanced technology industries.

It is a particular pleasure for me to have a chance to be here with the Montreal Board of Trade, because I think this is an example of cooperation between our two cities on a very important national issue.

Thank you, Mr. Chairman.

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

The next person on my list is from Map International of Canada, Mr. John Kelsall.

I believe Dr. Stephens is with you.

Mr. John P. Kelsall (President, Map International of Canada): Dr. Robert Stephens.

The Chairman: Mr. Kelsall, you're going to give the presentation, are you, on behalf of the group?

Mr. Kelsall: On behalf of Map International, assisted by Dr. Stephens.

The Chairman: All right, then.

Mr. Kelsall: On behalf of Map International, I want to thank the committee for allowing us to appear this afternoon. As I mentioned, with me is Dr. Stephens. I thought I should mention that he is a member of our board of directors. He's also the executive director of the Christian Medical and Dental Society of Canada, which represents 2,500 doctors across Canada. He has spent his life in world humanitarian medical work, having been to over 63 countries in the world carrying out medical missions.

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I am sure the committee will be interested to know that last June 12 he was honoured by the Speaker of the House of Commons, the Honourable Gilbert Parent, in the House. I think some of you stood and clapped, because he was representative of the Canadian doctors who give of their personal time and effort to go overseas to help the poor and the sick. This is Dr. Stephens.

Map, just so that you all understand, stands for medical assistance programs. We're a Canadian registered, not-for-profit charitable organization, federally incorporated. We cooperate with but operate independently of Map International of the United States.

We want to briefly share with you today, Mr. Chairman, what has been going on in the world out of the glare of the news camera lights. It's done very quietly with no fanfare, but it's very, very real.

We provide the medicine, vaccines, and hospital supplies that health care professionals and agencies across Canada need to treat the world's sick and suffering. Member companies such as the Pharmaceutical Manufacturers Association of Canada support Map's mission. In fact, since 1990 they have donated over $30 million worth of medicines - wholesale value - and financial assistance to Map to aid us in our work. That represents some 95% of the product that we ship overseas.

The PMAC, their member companies, such as Connaught Laboratories and Baxter Corporation, will send to us the requests they get for medicines. They ship their medicines to us, and we in effect are a one-stop shopping centre for doctors and for agencies going overseas to help treat the sick and the suffering. We handle bulk container loads - 20-foot containers, 40-foot containers - as well as small shipments such as our physician travel pack. We have one here to show you in just a couple of minutes.

We organize specialized medicines. For instance, doctors down in the jungles of the Amazon may come across a cholera epidemic. They will get hold of us and ask for medicines that will treat cholera. We will go to the Canadian PMAC industry, get the medicines, and send them to them.

We also deliver the medicine required for humanitarian programs that are often organized by the Canadian government overseas. We also create development initiatives.

So we work through a network of trusted Canadian agencies, partners, and health care professionals. They include, as I mentioned, many of the doctors and dentists of the CMDS, Canadian Physicians for Aid and Relief, and so forth. You'll be interested to know that World Vision Canada, which is one of Canada's large agencies, gets all its medicines from us, which we get from the PMAC companies and distribute to their works around the world.

This approach ensures there's no duplication of effort, the medicines are where they are needed, and they are provided quickly and efficiently. As a result, more than 95% of our resources go into delivering medical relief and development.

Our Canadian physician travel pack - and this is show-and-tell time. This is one of our packs, and I'll ask Dr. Stephens to briefly describe how it came about. We have Valium here for the committee in case they need it.

Dr. Robert Stephens (Member, Map International of Canada): Thank you.

Many physicians like to take a couple of weeks from their practice to go overseas on missions, and when doing so they like to take some medications with them. Often they scramble at the last minute to find these medications in drug stores, through pharmaceutical agents, or in their own bathroom drug cabinets. This is a very unsatisfactory method, and they end up without a list.

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We decided we could do better than this and developed the physician's travel pack. The contents are listed in appendix II, pages 20-21 of your package. These medications come from18 different pharmaceutical companies, and we have brought this list together so that the physicians or nurses who are working with these packs will be able to treat most of the conditions they will see in the three-week period they will be overseas.

There's a strong emphasis on antibiotics and analgesics, but other medications, including anti-parasitic agents, are included. There's enough in these packs to treat about 1,500 people, with a list on the top so they can get through customs easily. The packages are designed so that they are maximum weight and size for air transport for personal luggage.

There's a little package on the top where our anti-malarial kit is, and that's for the physician. Coming from Canada, where there's no malaria, he or she can take that on the way and avoid malaria so that they'll be in good shape to use the contents of this physician's travel pack on arrival.

Thank you, sir.

Mr. Kelsall: Just briefly describing some of our future work, as I sit here, a 20-foot container is on its way to Romania. You'll also be interested, Mr. Chairman, that we have a major airlift -

The Chairman: Mr. Kelsall, I interrupt witnesses very infrequently, but in your last three minutes I'd like you to really address the impact of Bill C-91 on this work.

Mr. Kelsall: In terms of the bill, Mr. Chairman, we are not professional in that particular area to deal with that concept. We felt there was a wonderful story here to be told on behalf of Map International and our partners who give us millions of dollars worth of medicines for humanitarian aid overseas.

The Chairman: Thank you.

The next witness is from Novopharm Limited, Dr. Jacques Messier. Are you the coordinator of your group? Perhaps you'd like to introduce your colleagues with you. Even though you have colleagues with you, we try to keep the chief person making the presentation and then they can answer subsidiary questions, just so we can keep within our timeframe. Perhaps you could introduce your colleagues and then begin your presentation.

Dr. Jacques Messier (President and Chief Operating Officer, Novopharm Limited): Thank you very much, Mr. Chairman.

With me are David Windross from our head office in Toronto, director of our regulatory affairs and government relations, and David Howard, our president of Stanley Pharmaceuticals, one of Novopharm's many subsidiaries in Canada, situated in Vancouver. I will give a fairly brief presentation, I hope, followed by David.

As I mentioned, I am the president and chief operating officer of Novopharm Limited, headquartered in Toronto, Ontario. This year marks Novopharm's 32nd year in the business of being a generic pharmaceutical manufacturer in Canada, a supplier of high-quality products at a lower cost.

By the way, it may be interesting to note that our founder, our chairman and chief executive officer, Leslie Dan, who is still very active in the business, was given an award last Thursday by the Chamber of Commerce in Scarborough - the excellent businessman award of the year.

I have provided for you some background information, which I will not repeat, which covers all of the activities of Novopharm in Canada in all of its subsidiaries in Canada, in the United States, and around the world.

[Translation]

I would first like to talk about the export restrictions provided for in the Act. We have to start preparing for our future now; that is critical for Novopharm.

Bill C-91 prevents Canadian manufacturers of generic drugs and fine chemical products from being competitive on the export market. Under the bill, we are not allowed to manufacture, for export purposes, products that are protected by a patent here in Canada, even if the same products are not protected in the country for which they are intended.

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For that reason, the Canadian generic drug industry is forced to export high quality jobs instead of high quality pharmaceutical products. That is a key point that should be noted by committee members. The export restrictions are extremely anti-Canadian and hinder our growth and job creation.

Just to give you one example, two and a half years ago, Novopharm had to make some major decisions regarding the expansion of its manufacturing plants. A number of pharmaceutical patents expire in the United States before they do in Canada. Canadian manufacturers of generic drug products such as Novopharm therefore have to set up manufacturing plants in the United States if they want to sell those drugs on the American market.

The United States is a huge market, both in terms of volume and dollars, that cannot be ignored by companies like Novopharm. We therefore made the decision to build a manufacturing plant worth several million dollars in Wilson, North Carolina, to manufacture a product whose pharmaceutical patent has expired in the United States but has not yet expired in Canada.

In the United States, there are nine products that are currently at the research and development stage whose American patent will expire between two and seven years earlier than the Canadian patent. It is clear that sooner or later, our plant will have to be enlarged to meet the growing need for these products. The question we must ask ourselves is the following: Will Canadian legislation allow Novopharm to expand here, in Canada, to meet the United States market demand, or will Novopharm be forced to expand its facilities in Wilson, North Carolina?

The export restrictions proposed in this bill will mean companies such as Novopharm will lose millions of dollars in revenues and millions of dollars in export revenues in Canada. Novopharm is forced to invest in new plants outside Canada, thereby shifting funds that could have been used to finance the expansion here, in Canada, and to create new jobs for Canadians. These restrictions will also worsen Canada's trade deficit, which is now in excess of $1.6 billion for the pharmaceutical industry.

As a Canadian-owned firm with its head office in Canada, we deserve the right to export pharmaceutical products to countries where a product is not protected by a patent. We firmly believe that the laws of a country where a product is used should determine whether a Canadian firm has the right or not to sell its products there.

The other point I would like to raise refers to the Bolar provisions. Bill C-91 contains provisions known as the Bolar provisions, which authorize the research and development of a product prior to the expiry of its patent, as well as submissions for regulatory approval. They also allow manufacturing for the purpose of building up stocks so that generic drug companies can be ready to ship their products as soon as the patent expires.

These provisions must be kept. Without them, generic drug companies could not start the regulatory approval process before a patent has expired, which would mean the monopoly on a patented product would last an additional five to seven years. It is important to note that during the research and development phase of a generic product and the regulatory approval process for marketing it, the product will not be sold on the market throughout the entire duration of the commercial monopoly, which is 20 years. In other words, you maintain the 20-year product mandate.

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The abolition of the Bolar provisions would prevent Canadians from gaining access to a product in its generic form for an additional period of five years after expiry of the patent, which essentially, would extend the trade monopoly even further.

Lastly, I would like to take a few minutes to discuss the patent and drug regulations adopted under section 55.2.

These regulations cost Canadians and Canadian generic drug manufacturers like Novopharm millions of dollars. The overall effect of the regulations adopted under section 55.2 will translate into a possible loss of sales on the order of 475 millions dollars for generic drug manufacturers between 1993 and 1999, according to studies conducted by Health Canada.

In practice, the patented drugs regulations can allow up to two and a half additional years of trade exclusivity to patent drug corporations. To date, there are over 100 cases before the courts. Canadians are thus loosing out on substantial savings, and generic drug manufacturers must spend millions of dollars in legal fees because they are forced to go before the courts to get permission to sell their products.

I must point out that the patents for these products have all expired and that these are simply allegations of patent infringement, without any supporting evidence. We have a legal system in this country to counter this kind of allegation. Perhaps we should use it.

The repeal of the regulations will bring about an immediate and long term reduction in costs of the health care system. Public and private drug insurance programs and consumers will also achieve savings. If the regulations were abolished, the regulatory framework would be more favourable to the generic industry, which would promote the growth of the sector and help create jobs for Canadians.

[English]

Mr. Chairman, thank you for this opportunity to address the committee and provide Novopharm's major concerns on Bill C-91.

[Translation]

The Chairman: Thank you very much for a good presentation, Mr. Messier.

We'll now hear from Pierre Morin of the Groupement provincial de...

[English]

Mr. David Windross (Director, Government and Professional Affairs, Novopharm Pharmaceuticals): Mr. David Howard, president of Stanley Pharmaceuticals, also has some brief remarks -

The Chairman: I'm sorry, you'll have to wait until you come back again. I suggested five or ten minutes, and I gave you over ten minutes. That's the sort of thing we like witnesses to discuss among themselves, and normally we have one presentation per group for that reason. If it's a one-minute intervention, that's fine. If it's a long presentation, the answer is we'll catch you later.

Mr. Windross: Mr. Howard is in here from Vancouver, British Columbia, on behalf of Stanley, which is a manufacturer on the west coast. I think hearing from a manufacturer on the west coast would be of benefit to the committee, Mr. Chairman.

The Chairman: How long is your presentation, sir?

Mr. David Howard (President, Stanley Pharmaceuticals Ltd.): It can be very short.

As stated, I'm David Howard, president and general manager of Stanley Pharmaceuticals. We're Canada's leading manufacturer of non-prescription medications, and as stated we are located in North Vancouver, British Columbia.

Since our acquisition by Novopharm some 30 years ago, we've grown from a local British Columbia supplier to one of Canada's largest manufacturers of non-prescription medications.

In 1989, Novopharm Ltd. mandated Stanley Pharmaceuticals to revitalize the product line, upgrade and modernize our facilities, and expand our business both here and abroad. I'm proud to announce that during the course of the last eight years, under the stewardship of Novopharm Ltd., Stanley Pharmaceutical sales have grown sixfold. We now export products to 14 nations around the globe, and the plant renovations to bring Stanley Pharmaceuticals up to the highest standards have been completed.

We've created almost 300 new full-time jobs. Also, Stanley has become a full-time partner with the University of British Columbia, both in pharmacy education for students in industrial pharmacy and in their R and D programs.

Today, Stanley Pharmaceuticals and our industry are at a crossroads awaiting the outcome of your deliberations and recommendations with respect to Bill C-91. As the largest manufacturer of pharmaceuticals west of Toronto, Stanley is vitally interested in three aspects of this legislation.

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First, we would recommend the committee support amending the export exemption to allow pharmaceuticals under patent in Canada to be manufactured in Canada for export in jurisdictions in which they are no longer under patent. This makes good sense to us as a Canadian-based exporting manufacturer because it keeps manufacturing jobs and plant assets here at home to generate moneys that will flow through our economy and stimulate other business sectors. It fosters free trade between nations, which is the objective of international agreements such as NAFTA and WTO. It encourages us to become more competitive with nations active in the growth of a global pharmaceutical marketplace, and it allows a Canadian company to provide well-accepted medications to countries that normally do not have access to these medications.

Second, we would recommend the committee support the introduction of regulations calling for generics to have the same size, shape, and colour as the originator product. Our reasons for this are as follows. Numerous surveys confirm that similar size, shape, and colour minimize confusion, enhance compliance, and create confidence among the elderly who must self-administer medications. Individual tablets and capsules are easily identified by the manufacturers' symbols, names, logos, etc., which are printed on each tablet and capsule. Consequently, the precise origin of the product being taken will never be in question. The similar size, shape, and colour recommendations also fall in line with the B.C. coroner's recommendation arising from the unfortunate case of an individual who died due to a medicine being mistakenly given him because of a failure to distinguish it by colour. Similar size, shape, and colour promote effective competition in the marketplace after patent expiry.

Last, Stanley Pharmaceuticals does not support the extension of the powers of the PMPRB to include the regulation of OTC and generic pricing because, first, the business environment of the OTC and generic industry is very different from that for patented prescription drugs where there is by definition only one supplier. Also, applying the PMPRB regulations may have the effect of forcing prices higher than necessary in order to satisfy legislative requirements. Since the definition of a drug covers any product making a health claim, the scope of the PMPRB is potentially enormous. Old products with process patents such as toothpaste, mouthwash, etc., could now come under PMPRB regulation.

We believe competition in the marketplace and the choices available in all therapeutic categories, including prescription drugs, lead to pricing resulting in market-driven cost reductions.

Thank you for allowing me to present the views of Stanley Pharmaceuticals on this piece of legislation. Stanley Pharmaceuticals is the product of a successful reinvestment of profits in Canada by our parent, Novopharm Limited, and we are poised to grow dramatically in the international arena. The changes I have discussed are not only important to our future in B.C., Stanley's future, but also affect the future and health of our parent corporation, Novopharm Limited.

Thank you.

The Chairman: I will remind witnesses that committee members read all the briefs and it's not necessary to read things into the record here.

[Translation]

We will now hear from Pierre Morin of the Groupement provincial de l'industrie du médicament. I believe you are accompanied by Mr. André Boivin, correct?

Mr. Pierre Morin (Groupement provincial de l'industrie du médicament): That's right, Mr. Chairman.

The Chairman: This is the first time we meet with your group. Perhaps you could introduce its members to the members of the committee?

Mr. Morin: Certainly. Le Groupement was founded in 1983 and is an umbrella organization of 20 companies or groups of companies with common management that manufacture drugs according to the definition contained in federal legislation. The members of the Groupement had cumulative sales of approximately 250 million dollars by the end of 1996. Approximately 15% of their products are sold outside of Canada. These companies provide about 1300 well- paying jobs, particularly in greater Montreal. Ms Boivin, who is accompanying me, is president of Laboratoire Prodoc of Laval.

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I hope that all the members of the committee will have an opportunity to read our brief, if they have not already done so. Essentially, we would like to draw your attention to two points and submit them to your consideration.

The first point is that right now, Canadian companies, of all types, have a considerable strategic advantage in the sense that up until now, very few drugs imported into Canada, valued at 1.6 billion dollars, are generic drugs.

This strategic advantage results from the legislation that existed previously. In the current context, with C-91 and the regulations as formulated now, we may stand to loose this strategic advantage, which consists in having the Canadian generic market mainly to ourselves.

Earlier, you heard an argument concerning one exception. If this can not be done, we would still like to draw your attention to an alternative solution which seems significant to us and which would consist in harmonizing the expiry dates of Canadian patents with those of American patents. That would be a more general solution that would not lead to the loss of our current strategic advantage. Moreover, it may be politically less complicated, but that is for you to judge.

The second point that we'd like to draw to your attention is that you should recognize that the regulations adopted under section 55.2 of the legislation create an absolutely extraordinary precedent here in Canada. This is the first time that the executive of this country has said that it is does not have confidence in the judiciary power of Canada. It says so explicitly . The notes accompanying the summary of the impact study on the regulations state that, among other things:

These regulations are necessary to avoid that this new patent infringement exemption be misused by generic drug manufacturers...

They therefore concede that at the outset that the courts can not do their job. I'm not sure that this is a precedent the House of Commons would like to live with for a long time as a legislator. It's rather heavy, and we think that the courts are perfectly capable of dealing with trade conflicts that may arise among responsible companies.

Here again, I think that there is a potential to invoke a fall-back position, and politics is the art of the possible. This fall-back position may be to rely on what the courts have authorized until now to be registered on the patents list.

There are three types of drugs that can appear on the patents list. The first are patents for new molecules, the second are patents for our usage and the third are products derived from a process, which is different from a process patent.

If the regulations required companies that insist on registering a product on a list do so under one of the three categories, the situation would be much clearer for everyone, and there would be far less litigation - that's the word that springs to mind - far less legal debate, and this would be less expensive for everyone.

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These are the two main arguments that we wanted to present to you today. We will answer your questions as they arise.

Thank you, Mr. Chairman.

The Chairman: Thank you very much, Mr. Morin. Your ideas are very

[English]

useful for our committee. So thank you very much, sir.

[Translation]

Mr. Brien, would you like to begin the questions?

Mr. Pierre Brien (Témiscamingue, B.Q.): I have many questions.

First of all, I would like to clarify one thing with Mr. Morin. You talked about a fall-back position regarding certain proposals. I would like you to explain what you mean when you refer to harmonizing patent expiry dates. Right now, there are patents that expire earlier in the United States. Are you trying to say that we should consider that the patent has expired here at the same time?

Mr. Morin: Yes, in the same way that certain patents are to expire in the United States after the Canadian expiry date. We don't have the means or the luxury of our colleagues who've already made large investments in the United States. Novopharm and Apotex have manufacturing facilities in the United States. We acknowledge that they are perfectly entitled to this. I don't know if I have any remedies to recommend to you, sir, but we can't all afford that. Therefore, we feel that it would be fair to harmonize patent expiry dates in Canada and the United States. As a matter of fact, that should have been done under the harmonization legislation that you adopted earlier this year. It should also have been done under the North American Free Trade Agreement. We mustn't forget that we now have a so-called domestic market with different patent expiry dates within that same domestic market. I would like someone serious to explain to me how we can live with such a situation.

Mr. Pierre Brien: That is usually the case in periods of transition, but there's very strong pressure to have international standardization of patents. Right now, do you accept the hypothesis that effective protection of patents here may be slightly inferior to that provided in the United States and Europe?

Mr. Morin: No.

Mr. Pierre Brien: If that's true, you're suggesting that we provide protection in accordance with international standards so that patents expire at the same time.

Mr. Morin: Indeed, that's what will happen. Right now, we have to look at the situation specific to Canada. You're talking about the effective duration of patents. If you're talking about 1994, you are more or less right. If you're talking about 1996, we already see that the timetable for approval of new substances have been considerably reduced. I might point out that it's shorter for generic drugs. In Canada, you require less time to have a new substance approved by the Drugs Directorate than to have a generic drug approved. That is indicated in the 1996 document on the performance results of the Drugs Directorate. I invite you to familiarize yourself with it. It's surprising. There are many myths about timeframes and all that. There is corrective action that has taken place here.

Mr. Pierre Brien: In your brief, you discussed the retroactive aspect of certain things that have happened. Your suggestion about the harmonization of expiry dates would also have somewhat of a retroactive effect. If we were to harmonize current patents, which will expire in 2005 here, for example, but in 2001 in the United States, we would be telling people who have planned investments within a certain framework that their patent will expire four years earlier than anticipated. To my mind, that means acting retroactively.

Mr. Morin: Anyone planning investment timetables does not do so in terms of the past but rather of the future. That being the case, three or four years less will not make a big difference.

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What we must remember is that with the 1969 or 1970 Patents Act, which introduced compulsory licenses, we created a situation in Canada where people had no interest in removing their patents because they knew that they were going to be copied.

Up until now, I have had nothing against that. It is true that it was in their interest to remove the patent as late as possible. Compulsory licences were later abolished. Once again, I agree. I have colleagues who do not agree, but I do. But there is a corollary. There are some who, because of the existence of compulsory licenses, took the maximum time possible under the old system to register their patent. We can't give them the cake and the icing and the envelope that comes with it. We gave them the cake and the icing. Let's remove the envelope.

Mr. Pierre Brien: I now have questions for Mr. Messier of Novopharm.

You mentioned several concrete demands in your brief. Specifically with regard to the linkage provision, I would like to know what you prefer. Do you prefer the current mechanism, which includes a linkage regulation that seems to cause you considerable difficulties, or a mechanism similar to the one in the United States where, when a product is copied and marketed, sanctions are very severe, and damages are three times higher than those caused? There is therefore a strong disincentive to engage in patent infringement. The law has teeth, and that's not unique in the pharmaceutical sector. Would you prefer that we copy more closely the American system which provides for very serious damages in the case of patent infringement and which for all intents and purposes can lead to the bankruptcy of any company that infringes a patent?

Mr. Messier: It's proper punishment for an illegal act, isn't it? I said in my presentation document that we should let the court impose sanctions against those who try to market products protected by a true and active patent. I believe that we should let the Department of Health examine a pharmaceutical product and decide whether or not it is sufficiently safe and effective in humans to be marketed, and to leave it up to the Department of Justice to sanction those who market a patent-protected product.

Mr. Pierre Brien: You would like to see the linkage regulations removed from the system, but you would like to retain early production which enables you to put a product on the market the day after the patent expires. You objective is to ensure that your products can be marketed as soon as the patent expires. However, in many other countries, this system doesn't exist. You complain about the linkage regulations, but you really like the early production opportunity. However, there may be a link between these two things: both early production and the linkage regulations could disappear. Would you prefer to keep the current situation or would you prefer to see the linkage regulations and early production disappear?

Mr. Messier: That is a good question.

[English]

That's a good answer too.

[Translation]

This is, in my opinion, too complicated an issue to be able to deal with it in two seconds. I could send the committee a formal reply in a day or two, if you would allow me enough time to analyze the difference that may exist between these two things.

Mr. Pierre Brien: All right. I have no problem with that.

The Chairman: This is an important issue for us.

[English]

We'd like to get a response from you in the next couple of days. Fax it to the chair and it will be distributed to the committee.

Dr. Messier: I would be more than pleased to provide an official answer within a couple of days.

The Chairman: Thank you very much, sir.

Now I turn to Mr. Schmidt for questions.

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Mr. Werner Schmidt (Okanagan Centre, Ref.): Thank you, Mr. Chairman. I have several questions, and I'd like to refer first of all to the brief we have with regard to Novopharm. It wasMr. Messier who presented this.

I'm particularly interested and intrigued, actually, with the note you made on page 8. I believe you suggest that section 55.2 of Bill C-91 is costing Canadians and Canadian-based manufacturers such as Novopharm millions of dollars. The total impact is a potential sales loss to generic producers of $475.5 million. Does that mean that the equivalent, the drugs that would be bought by that amount of money, is now being provided by the patent medicine drugs, or is that an absolute number?

Dr. Messier: I will make an interpretation. It's not my document. The numbers come from a document from Health Canada. My understanding would be that the numbers being supplied on the market would be more than that since we are saying here that those dollars are dollars of a generic equivalent for what is now being presented on the marketplace. Since generics are traditionally sold at lower cost than brand name products, those products being supplied on the Canadian market at the moment are substantially higher than that amount.

Mr. Werner Schmidt: So you're actually suggesting that this is a revenue number for the generic companies and that in fact the medicines would still have been supplied to Canadians but at a higher price.

Dr. Messier: That's correct.

Mr. Werner Schmidt: I just wanted to make sure of the correct interpretation.

The next question is to the representatives of the Metropolitan Toronto board, in particular the reference to the PMPRB and the maintaining of patented drug prices below the level of inflation. To my understanding, that's precisely what the PMPRB is designed to do. The history of the last couple of years has proven that this is precisely the case, that it has been below the consumer price index. If that is in fact true, what is your concern about the PMPRB? Is it not doing its job or do you want it to expand its mandate? Just what is the issue here?

Mr. McFadden: We don't have a problem with that board. In fact, based on the figures we've seen that the board has provided, the current legislation appears to be working.

Mr. Werner Schmidt: Thank you, Mr. Chairman.

The other question then becomes one of the foundation price of where the PMPRB begins to evaluate its position with regard to the CPI, the consumer price index. Are you concerned that the base price from which the PMPRB starts with a particular new drug is defensible, or is it perhaps higher than it ought to be? Is there any way the PMPRB can justify its original price level?

Mr. McFadden: Mr. Chairman, Luc and I are the only people here who aren't involved in the drug industry. Quite honestly, I don't know how the board operates. I'm assuming they are looking at this in a fairly knowledgeable and fair way. I can't tell you the basis on which those prices are developed. I'm assuming they're meeting the legislative mandate.

I'm sorry, I can't answer that question. I don't have the detailed knowledge to answer that.

Mr. Werner Schmidt: The question was directed at you deliberately because I think that's precisely where the issue lies with most Canadians. They simply assume, just as you did, sir, that in fact the PMPRB is starting at a place that is defensible. I'm not at all convinced that this in fact may be true, because we do not know exactly what the cost is of producing a particular drug. To my understanding, the way the board operates is that they take a median price, which is sort of the middle price in this thing, and that may or may not be an accurate reflection of the cost of producing that drug.

The Chairman: I don't want to steal from your time, but on that point, when we've had the business communities before us, we've asked them this question. As part of your deliberations, was the cost factor that was incurred by each individual business under one regime or the other discussed by your members?

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Mr. McFadden: We didn't spend a tremendous amount of time going through the operation of this board. Our main orientation, as you know from reading the brief, was in the area of patent protection. We have a concern that whatever we do maintains this industry in a healthy condition, both for Toronto and Montreal. As for the operations of this board, as a taxpayer and as a member of the board, I can tell you we would be concerned to know that the board is not setting standards that aren't appropriate. I'm not in a position as a witness here to validate one way or another how the board does it.

I don't know whether Luc would like to comment on that.

[Translation]

Mr. Luc Lacharité (Executive Vice-President, Chamber of Commerce of Montreal): If I may, the suggestion could be made that the Patented Medicine Prices Review Board be mandated to study this issue.

[English]

Mr. Werner Schmidt: That's precisely where I was headed, so that's great. Thank you for the contribution. I think that's excellent, because it is indeed a significant part.

I'd like to refer to Mr. Howard's recommendations.

It has to do with two of your recommendations, the second one being that the regulations regarding size, shape, colour, and so on not become an issue with regard to the drugs, the generics in particular. There's some reason for this. Could you tell us what the reason is for that, outside of what you said in your brief? I remember what you said in your brief.

Mr. Howard: Yes. Many surveys in Canada among pharmacists, among physicians, and particularly among the elderly point out that confusion does arise when medications are switched from one brand to another, with a corresponding switch in colour, size, or shape. This can lead to confusion. It leads to people not taking their products correctly, and it can have, in some cases of elderly patients, disastrous consequences.

Mr. Werner Schmidt: So this is actually a health hazard?

Mr. Howard: It can be.

Mr. Windross: Can I also add to that, Mr. Chairman? In terms of our handling of medications in Canada, as you are well aware, the provinces are responsible for health care. Many of the drug programs in each of the provinces have formularies that list products that are provided to their citizens, generally people who are over the age of 65 or on social welfare. Generics play a major role in those formularies, and numerous provinces have something called ``automatic substitution'', where products are provided to patients by the pharmacists. Those products, of course, are generics.

When we now get down to the compliance level of patients, this is where this particular issue becomes paramount. We are now dealing with some of our products, as an example, at Novopharm...same size, shape, and colour for a medication a patient would be receiving. Therefore, often you'll talk to many patients who may refer to their water pill as being a yellow pill or their heart pill as being a blue pill. You're talking about a person who might be 80 years old, etc. So you get into the size, shape, and colour issue. Who is the person using the end product?

In our country we are dealing with a Canada Health Act. We're dealing with a situation where medications are provided by provincial health ministries, and therefore it becomes important that our end consumer Canadians are safe in terms of receiving these products.

[Translation]

The Chairman: Mr. Morin, would like to start?

[English]

Mr. Morin: Perhaps you'll allow me to put in my two cents' worth. We have made representations to Health Canada on a public health issue, supporting the same shape, size, and form concern.

Mr. Werner Schmidt: Okay.

Mr. Morin: It is a public health issue to all concerned.

Mr. Werner Schmidt: Thank you, Mr. Chairman.

Mr. Morin, I think you had three types of patents: the molecular patent, and then the second one...I didn't get the third.

Mr. Morin: We don't have three, but the courts in Canada since Bill C-91 have recognized the legitimacy of having three patents for products derived from three patents put on the patent list, and that is, the product per se, or molecular utilization patent, and a product by process. I've had the product by process explained to me as, for instance, having to heat a product in order to make it effective. In other words, there's a transformation.

These are the three that the courts in Canada have determined that should be listed or should be part of the list.

Mr. Werner Schmidt: Mr. Chairman, it's rather a technical question, but we raised the three classes and so I can't help but ask the question. Of those three classes, is a classification into those kinds of categories in itself a problem of litigation?

Mr. Morin: It is currently, yes.

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Mr. Werner Schmidt: If that is the case, perhaps this classification into these kinds of areas is in itself a problem rather than copying a particular patent. I can see all kinds of difficulties, especially with that last one when it comes to process. Where do you really find that a process has been infringed upon? How do you ever prove something like that?

Mr. Morin: It is relatively easy to prove patent infringement, and that is not the issue we're raising.

Mr. Werner Schmidt: What is the issue you're raising?

Mr. Morin: The issue we're raising is that after the regulations came into force, our friends who had patents and who had a given period to list those patents listed everything including the kitchen sink. Where regulations were restrictive in their mention... If you look at them, they were saying that the product per se only... Everything was there, including process patents that were not intended to be there.

Health Canada took the issue to court. The courts have decided that process patents should not be there. That's where the courts have in fact decided that the three categories of patents were the ones intended for listing products under the regulations.

What we're saying is that right now you do not know when you look at a patent why it is on the list, what you would be infringing.

We have a case currently, which we've been discussing with Health Canada, that has no managerial power over the list. It is a product where the patent on the molecule was given to the public years ago by a generous company named Pfizer. Then in December 1996 the same product all of a sudden became listed on the patent list but for a slow-release tablet. It is specifically mentioned as a ``slow-release tablet''. That is the reason for its inscription on the list. We have a member who had a product in the pipeline ready for NOC that is not a slow-release tablet but uses the same molecule. All of a sudden he has to go through a notice of allegation, potentially three months of difficulties, of litigation. That is the issue we want to avoid. We want that list to become specific as opposed to general.

The Chairman: One very quick question, Mr. Schmidt.

Mr. Werner Schmidt: If the generic would not have to prove a non-infringement, in other words, the initiative would lie on the patent holder to allege that you had infringed and they would have to issue it that way, rather than the other way around, the way it is now, would that help?

Mr. Morin: Very much so. As a matter of fact, that's why the regulation should simply be scrapped.

Mr. Werner Schmidt: Okay. Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Morin and Mr. Schmidt.

I will now turn to Mr. Murray, who I believe will be splitting his time with Mr. Fontana.

Mr. Ian Murray (Lanark - Carleton, Lib.): Right. Thanks, Mr. Chairman.

I'd like to return to this question of export restrictions that Dr. Messier was talking about earlier. I see in a Globe and Mail article from earlier this month that Novopharm, as the headline says, won the right to sell a generic ulcer drug in the U.S. This is the generic version of Zantac. Apparently Novopharm has been selling that in Canada for about four years, and the patent expires in the U.S. on July 25. You've made a considerable investment in a plant in North Carolina to serve the U.S. market. Is there any reason why you couldn't have sold that drug from Canada, once the patent had expired in the U.S., if it had already expired in Canada?

Dr. Messier: We manufacture and sell the product in Canada under the old regime of a compulsory licence so that we can do it for the Canadian market. The advantage of doing what we are doing now with ranitidine for the U.S. market is that we have done all of the research and development in Canada that is permitted under the present legislation.

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It goes back to the question Monsieur Brien asked before. Would we prefer to lose the linkage regulation or would we prefer to lose the stockpiling provisions under the so-called Bolar exemption? If we were to lose the opportunity of the Bolar in Canada, then there is definitely no doubt in our mind that not only for ranitidine but for most of the other products we would have to definitely manufacture them all in the United States.

Mr. Ian Murray: Do you see any advantages to manufacturing in the U.S. other than the obvious one of being seen as American companies down there? Would you prefer to be able to do all your manufacturing and your R and D in Canada and export?

Dr. Messier: Prior to 1993, prior to Bill C-91, we had bought a 25-acre parcel of land in Stouffville. Stouffville is just north of Scarborough, where we bought a prior pharmaceutical manufacturer from McNeil, who had closed it down. Our intention was to continue to develop that site into our R and D industrial park and to continue to do most of our expansions out of Stouffville since most of our other sites had been maxed out as far as production capacity. That was the intention up until that time. We changed that because of some of the legislation that was passed, because of the uncertainty of what would be in the long-term future. Therefore, we built the plant in North Carolina.

Mr. Ian Murray: I'd just like to ask Mr. McFadden if the Board of Trade looked at this whole question of export restrictions. Is that something that came up in your discussions at the Board of Trade?

Mr. McFadden: No. This is an issue that we didn't specifically address as far as I know. I think it's an interesting issue. It's an issue we might be prepared to have a look at. It certainly isn't in our brief, and I'm assuming as a result it was not one of the topics discussed. If it was, we didn't make any recommendations on that subject.

Mr. Ian Murray: Thanks.

Mr. Kelsall, I was interested in your presentation, even though it doesn't necessarily link directly to Bill C-91. Was I correct in understanding that you only have contributions of pharmaceuticals from PMAC members? Is that because you have a special relationship with them?

Mr. McFadden: Yes. Our relationship here in Canada is primarily with the PMAC. It's been a long-standing relationship, developed since 1989-90, and they have been very, very generous. We also do receive some products from a company known as Pharmascience, which is a generic company. We are aware that the generic industry does have a humanitarian agency that also distributes medicines, but we are primarily working very well with the PMAC and Connaught.

Mr. Ian Murray: Thank you, Mr. Chairman. I think I'll pass on to Mr. Fontana.

Mr. Windross: Mr. Chairman, perhaps I can just clarify a question that was brought up with the committee in terms of being made aware of what the generic industry does in terms of these similar initiatives that Map is involved in.

CAN-MAP, the Canadian Medical Aid Programme, was started by Novopharm in the mid-1980s. Novopharm as a company has donated over $10 million worth of pharmaceuticals from Novopharm to that initiative, which does similar things in going to Third World countries. As an industry as a whole, generic companies contribute to that as well. You should be aware that we are also involved with that initiative, both as a company and -

The Chairman: It is equally germane to our deliberations.

Mr. Windross: Thank you.

The Chairman: Before I turn to Mr. Fontana, for those witnesses who were scheduled originally for 5 p.m., there was a vote at 3:45 p.m. that has held us up. We're running about 45 minutes behind schedule. If the committee is in agreement, we will continue this until 5:45 p.m. and then the next witnesses will begin. It will give us another round or so for people to ask questions. Okay? Then the committee members will continue and go from 5:45 p.m. to 7 p.m. with the next group and continue right through so that they catch up. We'll have sandwiches brought in, but we won't break. We'll just keep on going.

Mr. Fontana, please.

Mr. Joe Fontana (London East, Lib.): Thank you for this opportunity, Mr. Chairman.

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I want to ask the question that I asked back in 1992 as we were reviewing Bill C-91 at that time. It all has to do with the research in the R and D portion of this equation. I want to address my question to Mr. David McFadden and perhaps all the other participants.

It would seem to me that Mr. McFadden and the others talked about the growth in this industry. The key to growing in this particular industry is patent protection obviously, but it's also doing the research and development at the front end.

I know that certain commitments were made back in 1992. In fact, when C-91 was passed with regard to research and development, most companies were expected to make that in this country. It would seem to me that it's a voluntary system, essentially, that we have in place. Some companies do, some companies don't, and some companies do much better than others. In fact, it's an MRC, PMAC sort of proposal in terms of contributing a certain amount of your sales toward research.

I know that the biggest concern is the quality of research. What are we really talking about when we're talking research. Are we talking about marketing? Are we talking about clinical trials? Are we talking about really basic research? It would seem to me that if Canada wants to be at the forefront of biotechnology and biopharmaceutical research, then in fact the basic research is necessary in order to ensure that we have a continuing, growing industry.

You addressed the question of research. I'm just wondering whether or not we should, instead of the voluntary system - I believe there is consensus in the industry, and in fact the industry, MRC, might have proposed it - put in place a compulsory system of research. All of the contributing companies, generic and patent, would contribute 1% or 1.5% of their sales to a reinvestment research fund that would in fact be administered by MRC under a peer review, which is similar to what happens now. The drug companies themselves and even smaller biotechnical companies could access some of those funds to do some continuing research and development.

I want to really talk about whether or not you're satisfied, or whether or not research is something that you mentioned we in fact should put in place as part of this Bill C-91 review.

Mr. McFadden: Thank you for the question. I think you've raised a really important issue that not only relates to this industry, but also goes right across the board. I think it's vital for the future of Canada at the forefront of any kind of world economy for us to really invest heavily in R and D. Some industries are better than others.

As for this industry, from the figures I've seen... I have here a report that was put out by the Government of Canada in February 1997 that provides two sets of figures that were of interest. One indicates that certain commitments were given as far as the ratio of revenue to R and D.

According to the figures here, various members, at least, of the Pharmaceutical Manufacturers Association of Canada, undertook to commit up to 10% of their sales to R and D activities. According to the figure we've received, the federal government figure, it's something in the order of 12.5% in 1995.

There's another figure that's probably more germane to your question, though. I don't know if you have a copy of this, but there is a thing called current R and D expenditures by research type, which I think goes to what you're talking about.

According to this, what appears to be happening here is that you have a steady increase since 1988 in the area of basic research, which goes back to the development of brand-new ideas. You've got a probably more noticeable expansion area of applied research. You've got ``other qualifying'', which is a small chunk at the top.

In any industry it's often difficult to find the fine lines between research and development. Here's one of the points that is complicated. I'm on the board of a couple of companies that are not in this industry but in the computer area. The fact is that often the toughest thing is not coming up with the concept, but getting it into a marketable condition and then ultimately getting it into a condition that can get right outside your door on the market.

I think it's complicated in terms of deciding which areas of research you really want in this country. Again, it goes back to the question you raised. I'm assuming that the government board supervising this is supervising, monitoring, and reporting it. If they're not, then maybe that's something this committee ought to deal with.

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As for this other concept of some kind of an industry fund being created, presumably that's something that should be discussed with the industry. I've seen some of these funds work. Some of them don't work well, so I'm not exactly sure that's the way to go, but I think members of this committee might want to discuss that further with the industry representatives of all the various groupings.

The Chairman: Thank you, Mr. McFadden, and thank you, Mr. Fontana.

Monsieur Ménard.

[Translation]

Mr. Réal Ménard (Hochelaga - Maisonneuve, B.Q.): Mr. Chairman, it is a pleasure to see you again.

I have two questions for the witnesses and I will begin with a question to the representatives of the Metropolitan Montreal Chamber of Commerce, seeing as I am a member of Parliament from the eastern part of Montreal, near Olympic Stadium. I would ask the witnesses to explain the importance of research for the vitality of a city such as Montreal so that this is clearly understood by all of the members of the committee. I would therefore ask you to give your opinion on this.

On page 5 of your brief, you make a recommendation that I would like you to clarify. You say that the governments are passing legislation and regulations to maintain and even increase the protection of intellectual property in all knowledge-based industries, including the pharmaceutical industry.

I would like you to provide further information on this topic for the benefit of this committee. You also referred to the possibility of a restoration clause and perhaps you could explain this.

Mr. Lacharité: I believe that my colleague Mr. McFadden, in the forward to his presentation, clearly explained the importance of protecting intellectual property in Canada. Since there is an increasing desire to base the Canadian economy on the knowledge-based industry, the high technology industry, we must be able to harmonize and operate in accordance with international standards. These are the rules of the game.

Mr. McFadden also highlighted the importance of the industry. Everything being equal, the pharmaceutical industry is just as important in Montreal as it is in Toronto. We are talking about 7,000 highly paid direct jobs in the brand name industry, particularly in the research and development sector, owing to certain benefits that Quebec gives to the industry through taxation laws, etc.

The recommendation that governments adopt legislation and regulations to maintain and even increase the protection of intellectual property goes hand in hand with the principles mentioned in Mr. McFadden's introduction. This is crucial. We have to harmonize with international standards and the pharmaceutical industry as well as other knowledge-based industries will have no other choice but to comply.

Mr. Réal Ménard: As a member of a chamber of commerce that is as important as the Metropolitan Montreal Chamber of Commerce, and one that doesn't just cover the island, have you ever heard managers from international or multinational organizations say, during the course of discussion panels or in other settings where they talk about issues that go beyond their own firm, that a city such as Montreal could be penalized either because of intellectual property or because of the fact that the city is not as competitive as others?

Mr. Lacharité: I think that this can be seen in just about every sector. If neither the industry nor our governments provide us with a climate that is favourable to our industry and enables it to attain the international standards of the competition, we won't make it, particularly since we are focussing increasingly on exports. The Montreal region and Quebec is banking a great deal on exports, and therefore these measures must be taken for the good of our economy.

Mr. Réal Ménard: I have one final question. I apologize, Mr. Chairman, for missing the opening statement, but with elections on the horizon, we have all sorts of other obligations.

I would like to ask Novopharm if this type of argument is what this whole issue of the patented drug industry versus the non-patented drug industry is all about.

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As imperfect as the patented drug industry may be, it is claimed that it has one great virtue, and that is that it opens its books and makes an annual report to a quasi-judicial tribunal. In addition, this sector has made some commitments to do research and, it is said that these commitments have more or less been met.

Consequently, should we not be questioning Novopharm or other countries about the research that they do? I am not saying that Novopharm does not do any research, because I have seen the figures and I know that it does do research. But should we not be asking questions about the fact that Novopharm and other generic industries are accountable to no one and provide very little explanation about their research? Furthermore, would these industries accept an amendment whereby the Patented Medicine Prices Review Board would have to pass judgement on their research efforts?

Mr. Messier: In answering your question, several different things must be taken into account. First of all, we have never really clearly defined what is meant by "research". Recently, when we asked the industry to invest 10% of its sales revenue into research, the word "research" was based on the Department of Finance perception of what constituted research.

There is, therefore, a lot to be said about whether or not we should be spending 10%, 12% or 8% on research, and about the definition of what is considered to be research or basic research.

As you said, Novopharm invests a great deal in research as well. This is not always basic research, but we also have a biotechnology plant and we have four sites where we conduct basic research. Moreover, we will be investing about $500 million over the next 10 years, which demonstrates clearly that we are investing more than 10% in basic research.

The Chairman: Thank you very much.

[English]

We have three people left and just under 15 minutes. I wonder if you could all just be very generous to each other.

I'd like to extend the courtesy to Monsieur LeBlanc. He is the former vice-chair of this committee and was a very helpful member in its early stages. Perhaps we could do that and still try to be on schedule.

Now Mr. Lastewka will take over the chairmanship.

Mr. Werner Schmidt: Thank you, Mr. Chairman.

I would like to refer to page 10 in ``A Prescription for Success''. On this page there are some very interesting statements, and I want to read them for our attention here. It says we need to have ``the best quality/price ratio for funds invested in the health care system''.

Then you go on to an example:

As noted in a Quebec Advisory Council on Pharmacology publication, a task force mandated to assess recombinant erythropoïetine concluded that the use of ``Eprex in hemodialysis will practically revolutionize quality of life for these patients''.

Here comes the critical point:

``It makes it possible to eliminate transfusions and their complications such as infection, reactions, cytotoxic sensitization and iron overload. Furthermore, the elimination of anemia in these patients improves their exercise capacity, well-being and sexual functioning''.

Wow! This is absolutely fantastic. I wish we had the university people here, because it seems to me that what you've done here is revolutionize the medical training industry.

Mr. McFadden: I could claim credit for that.

Mr. Werner Schmidt: Are you perhaps suggesting that there ought to be a major shift in the way medicine is practised in Canada?

Mr. McFadden: No, we're not intending to do that. I think what we're suggesting through the brief here is that we should be looking at the health care system as a total system, right from surgery and what happens in the hospitals through to drug care. It may well be that developments in one part of the industry will have a tremendous cost benefit in another.

I guess what this is really referring to here is that the development of a drug that effectively treats a certain condition normally treatable by surgery, let's say, is a real innovation. It may be worth spending money on that drug because it will save money perhaps in health care and other areas, with people having to be in hospitals and have surgery.

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Mr. Werner Schmidt: Could it also be possible that we aren't using the drug because it's more fun to do surgery and doctors get paid more?

Mr. McFadden: Theoretically that's possible. It is often difficult to introduce new procedures into the system for various reasons.

We have one physician here. He might be able to comment on that. There could be needless surgeries. Of course, there could also be needless drug use in our society.

Mr. Werner Schmidt: Thank you, Mr. Chairman.

The Vice-Chairman (Mr. Walt Lastewka (St. Catharines, Lib.)): Thank you very much, Mr. Schmidt. I will now go to Ms Brown.

Ms Bonnie Brown (Oakville - Milton, Lib): Mr. McFadden, you say the board supported Bill C-91 in 1992, and I can understand why, considering the recession Toronto was experiencing. You decided to have more investment and new businesses coming there, but I also assume you must have been in favour of the five-year review. My questions hinge on how much work was done by the Board of Trade in preparing this document for the five-year review, because to be frank with you, I find it a promotional piece that could have been put out by PMAC.

For example, did you simply get out your 1992 brief and update it with some other documents such as the ones listed on the back, most of which were published by the PMAC? Did you, for example, hold hearings among your members who are in this industry? You keep talking about this industry, but there are two sides to this story and I don't see any indication of input from the Canadian drug manufacturers into this document, even though they are serious players and job creators in the Toronto area.

Could you describe to us the process? Did the board simply say to the staff we need a document because somebody has to go and make a presentation at the parliamentary hearings, or was there in fact a full set of meetings, like a subcommittee of the board struck, in order to prepare for this to make sure all points of view were accommodated?

Another set of players who might have been included in that were large manufacturers who have very expensive drug plans, for example. They also have opinions and they also are members of your association. Was everybody included or was it just an update of an earlier brief and mainly based on PMAC input?

Mr. McFadden: That's a combination of questions. First of all, this brief was developed in concert with the Montreal Board of Trade. Second, in part what we were doing was tracking issues that were raised in 1991, in our previous brief, to see if in fact the industry in general had acted upon the types of initiatives that were expected of them with the 1991 legislation. That's what this is intended to do, so we went to a variety of sources.

I was not personally involved in developing all these figures in the brief. I'm the vice-president of the board. It was developed by staff and within a committee of the board. This followed the usual process. Maybe Luc can deal with how it was done in Montreal, but it came before our executive and was reviewed, approved, and forwarded on.

We followed a pretty standard procedure on this. We didn't have any specific hearings on this matter. What we really did was update and try to monitor what had happened in light of our earlier brief.

I think what you're alluding to probably is the real contention that obviously exists between the innovative drug companies and the generics. We're not here to denigrate anybody in the industry or to denigrate any contribution they make. We believe quite strongly that... That's why we've included in our map an outline of all of the companies, regardless of where they come from, whether they're members of one organization or another.

Ms Bonnie Brown: I understand what you're trying to do. You're trying to be fair and you're trying to be the Board of Trade, but do you realize that your presentation is just about a replication of the position of one part of the industry as opposed to the other? Maybe you have brought this forward unwittingly. I'm trying to find out. Does the whole Board of Trade agree that the Toronto Board of Trade should take the side of one industrial group versus another group when both groups are members of your association?

Mr. McFadden: Actually, you're misconstruing our point. Our point in this, as it has been since the original brief on this in 1987, is to deal with an overall policy matter.

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We're not trying to get into a criticism or a support of specific industry sectors. We're not here representing any part of the industry. We're here because on this issue as well as on other issues, whether it's computer software, book publishing, etc., our membership believes the patent legislation is important for the future of our country and for the future of creative industries, wherever they're from. We believe this industry is as entitled to a 20-year protection as any other group. That's our underlying and key point.

Ms Bonnie Brown: I understand that.

I want to ask you something from your position as a board member on two computer software companies. What we actually have in Bill C-91 is stronger patent protection than all other industries in Canada have. They have to operate under the Patent Act and these people operate under Bill C-91.

You're saying you will support Bill C-91 even though that gives pharmaceutical companies a stronger patent protection in some ways and better ways to protect their products than your computer software company. In other words, I find your position contradictory, in the sense that on one side you're saying all high-tech, knowledge-based industries should have the same patent protection, and on the other side you're saying pharmaceuticals should have a special bill all their own. Would you be satisfied if all industries were under the Patent Act? Which is it?

Mr. McFadden: I wouldn't be personally opposed to having all regulations come under the Patent Act. I think the reason we're into this, an issue with the drug industry obviously, is because of the amount of government involvement and public support for pharmaceuticals. I think that's why we've managed to get government so intimately involved here.

I mean, you put out a good argument why maybe government should be getting out of a lot of areas, and the Board of Trade is very strongly supportive of this. In fact, we've made the point here, in one of our recommendations, that as concerns any government support for this industry, as with others, its primary focus should be on research and not on handouts.

As far as this industry is concerned, if the government wanted to look at reregulation that's fine, but our point on this is quite consistent. We think this industry is entitled to the same protection as other industries, no more and no less.

Ms Bonnie Brown: Then you would in fact be against Bill C-91 if you want no more.

Mr. McFadden: If in fact government regulation is giving some groups special attention, then it's up to this committee and the House to decide whether they want to continue to offer something special.

Ms Bonnie Brown: So you'd be happy to have everybody under the Patent Act?

Mr. McFadden: Luc may want to say something about that.

The Vice-Chairman (Mr. Walt Lastewka): Thank you, Ms Brown.

We have to go the next questioner. This is what happens when we extend our presentations: the dialogue gets cut short. We have two minutes to go, so I'll go to my colleague, Nic Leblanc.

[Translation]

Mr. Nic Leblanc (Longueuil, Independent Sovereignist): On several occasions, both here and elsewhere, I have heard representatives of the generic drug industry complain about the difficulties they have in exporting their products before they are approved here, in Canada. Is this primarily because the federal Department of Health takes too much time, in comparison with other countries, to issue licences for selling drugs?

This question is intended for Mr. Morin and I will add something else: Would you give the same benefit to the brand name products?

Mr. Morin: What benefit?

Mr. Nic Leblanc: The benefit of being able to export products before they are approved here, in Canada.

Mr. Morin: I think that the issue is whether or not we can export products still under patent in Canada because this is something that is not necessarily accepted. It is not accepted in the sense that Health Canada must provide its opinion as to the safety and effectiveness of this product. There are two things here: there's the patent, on the one hand, and safety and effectiveness on the other hand.

So there are people who want to export to countries where the patents have expired although they haven't, here in Canada. We want to be able to manufacture here and export to those countries. That is the first thing.

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On that, we will say that this might cause a problem and the solution would probably be to harmonize the expiry dates. If the expiry dates are harmonized, whether for the original products or the generics, then it won't be favourable or unfavourable for anyone.

Does that answer your question?

Mr. Nic Leblanc: Yes, but I've heard other witnesses say that to get a licence in Canada, it took a lot longer than in most other countries either in the U.S. or in Europe.

Mr. Morin: That was true until 1994. The data for 1996 show improvement. Presently, to deliver a licence for a new active substance in Canada, there is an average wait of about 18.4 months which is, give or take a few days, as fast as it gets in the most efficacious country, Great Britain.

On the other hand, for a generic, the average is 21.2 months. So it takes longer in Canada to get a generic drug approved than a new active substance.

Mr. Nic Leblanc: And do you know what the reason is?

Mr. Morin: There are several answers to that. First, we have a very heavy past. Let's start with the Act that guarantees products in Canada. The government of Canada guarantees the quality of products. Mps and ministers don't want to run any risk which means that our officials are very prudent; so it takes time. But it's improved considerably.

I'd like to point out here that using the argument of administrative slowness to justify extending a patent doesn't wash. Let's correct the governmental apparatus rather than accepting wasting all that time! There are situations we must take in hand. You're asking us to manage a business and we are asking the government to manage the governmental apparatus. If there are delays, then let's shorten them. That can easily be done and the proof of the pudding is that it's been done during these last two years and it's still being done.

[English]

The Vice-Chairman (Mr. Walt Lastewka): I want to thank the witnesses for being patient with our late start because of the bells. I want to thank you for your presentations and your discussion during the Q and A period.

I would ask now that the next set of witnesses take their place. As mentioned earlier to the members of Parliament, lunch will be brought in. We'll be working right through lunch, and we must stay on time, because we'll be here until at least 10:45.

We'll suspend the meeting for five minutes and we'll resume hearings when the new witnesses get into place.

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The Vice-Chairman (Mr. Walt Lastewka): Folks, we will resume the hearings. We have a number of witnesses here with us tonight.

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As mentioned earlier, again I'm going to ask the witnesses to give at least a five-minute pointed presentation and then leave the balance for questions and answers. I will remind you as you get close to your five minutes. I'm going to apologize in advance if I have to cut anybody off. We want you to make your points right to the point such that we could have more dialogue.

We have many witnesses we have heard and many more to come. Our objective is to be able to have as much dialogue as possible with the members of Parliament so they can answer their questions.

I'll go right to the first witness. I'll start right at the top. I'll ask Ms McDonough from the New Democrats.

Ms Alexa McDonough (Leader of the New Democratic Party): Thank you very much, Mr. Chairman, to you and to the industry committee members for the opportunity to appear before the committee this evening.

In our view, the current federal minister hit the nail on the head in the early 1990s when he condemned Bill C-91, when it was first introduced by the Tory government, as, and I quote, ``no more than a gift of hard-earned dollars out of the pockets of ordinary Canadians into the pockets of multinational corporations.'' At the time he stated further:

Tories' drug patent laws create an enormous welfare program for some of the world's largest corporations that will cost Canadian consumers, seniors, taxpayers, employers, and drug benefit plans billions of dollars by the turn of the century.

There are few public policy issues that so clearly define the choice between the interests of large multinational corporations on the one hand and those of everyday Canadians on the other, as does the drug patent protection issue. Drug patent laws passed by the Conservative government and left unchallenged by the Liberals represent an unconscionable betrayal of the public trust that Canadians have invested in this government.

You must restore the public interest to Canadian drug patent legislation so that Canada's health is better protected. Mulroney's discredited drug patent law must be replaced with a law that makes affordable and effective generic drugs available earlier whenever that will improve the health of Canadians.

This goal is best achieved, in our view, by restoring competition to the drug industry by allowing compulsory licensing of patented medicines after four years of exclusive patent protection. Fees paid by generic drug companies for such licences should reflect the extent to which research and development is conducted in Canada and actually serves public health policy goals.

The Liberal government's support for excessive drug patent protection is driving health care costs through the roof at the very time they're pulling the rug out from under health care funding. This result is a double-whammy recipe for bankrupting public health care.

Bill C-91 has had a disastrous impact on public health care budgets. In fact, while hospital costs have declined, drug costs keep going up and up. Drug costs represent approximately 15% of health care expenditures, roughly equal to what we spend on doctors' services.

Between 1991 and 1993, when per capita hospital costs were declining by $17, drug costs were actually increasing by almost $21. Brian Mulroney sold Bill C-91 as a boon to job growth in Canada. Instead of creating jobs, Bill C-91 has actually cost Canadians thousands of jobs in the drug industry sector. Instead of creating jobs in Canada, the big drug companies have actually cut their workforce by more than 2,000. In contrast, generic drug companies have actually increased employment by over 2,000 jobs since 1990.

The real job impact of unconscionable drug industry profits are to be found in the health sector, where more than 60,000 Canadian workers have lost their jobs since 1991. Even more workers will be joining the jobless ranks as future federal spending cuts are implemented: 93,000 to 408,000 more jobs could be saved or created by the year 2010 if the savings from reducing drug patent protection were reinvested in the health care system.

Let me quickly go through the math. Protecting the monopolies of giant U.S.-based pharmaceutical companies is estimated to cost Canadians between $3.6 billion and $7.3 billion over the next 13 years. For every $1 billion invested in direct hiring, 56,000 jobs are created.

If this government is to show some leadership, it will first have to stop pretending that it has no legislative authority to regulate drug patents or license generic drugs. Liberals claim they are powerless to do anything about the mess that Mulroney has created with Bill C-91 because the WTO won't let them license generic drugs. But compulsory licensing is specifically allowed under the WTO.

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I've circulated to members of your committee, Mr. Chairman, an expert opinion on international trade law and drug licensing that makes it perfectly clear that several other countries have compulsory licensing systems and even more are considering establishing them, and that even the United States maintains a compulsory licensing system for environmentally beneficial technology under its Clean Air Act. In fact, according to the U.S. Information Office, the only noteworthy limits on the use of compulsory licensing are that licensing be restricted to the purpose for which it's authorized and that the patent owner receive adaquate remuneration.

It's become the favourite game of this government to claim it is powerless to deal with the public policy issues that are of great consequence for Canada. In fact, in light of its repeated protest of powerlessness to create jobs, license generic drugs, or respond to other pressing challenges, one must wonder why the government would want to seek re-election at all. It's time to stop the buck-passing and stand up for Canadians, for public health and the public interest. Fair drug prices will mean billions of dollars in the pockets of consumers and in the budgets for health care. It will also mean tens of thousands of jobs for Canadians.

The Vice-Chairman (Mr. Walt Lastewka): Thank you very much.

I'll next go to the Canadian Pharmaceutical Association, Garry Cruickshank. Garry.

Mr. Garry Cruickshank (Vice-President, Canadian Pharmaceutical Association): Thank you very much, Mr. Chairman. Our presentation will be in English, but we can respond in French as well.

In the interest of time and in order to allow for more discussion afterwards, we will focus on some recommendations only and hope that the committee will take the other recommendations of our brief under advisement for its deliberations.

The Canadian Pharmaceutical Association, or CPHA, as it is commonly known, has been a voluntary association representing pharmacists from all areas of practice for the past 90 years. It is an honour for us to appear today before this committee.

The Canadian Pharmaceutical Association, which provides leadership for Canadian pharmacists, would like to state the following as a preamble to its position on Bill C-91.

We know drug prices are but one component of drug cost increases to governments, insurers and the public. Changes in utilization, coverage, compliance problems, mix of drugs used and the higher priced new drugs are other contributors to these increases. But the entry price of new products is a major factor that must be constrained.

In 1997, as health care professionals we again recognize that a number of factors affect the fast-rising costs of medications in Canada and that singling out any one of them will not help us address the problem in a coherent fashion. We also recognize that as governments are shifting costs to employers and individual payers, it is important to take into consideration the impact all cost increases in medication have had on consumers and particularly on our senior population through cost-sharing measures.

As an introduction to our comments today we would like to say that in the pharmaceutical field in Canada the dual goal of encouraging foreign investment and sustaining a strong national industry has been undertaken and to a great extent achieved over the past ten years by ensuring that both have had a fair chance of growing and thriving.

We would, however, like to caution that the long-term impact of increasing patent protection to 20 years has not yet been fully felt, and we should keep that in mind while proceeding with the current review. Legislation exists within a broader context, and in the case of Bill C-91 the protection afforded patented medicines also needs to be evaluated as to its impact on our publicly administered heath care system.

This is particularly crucial in the current context of deficit reduciton, which has entailed drastic cutbacks to health transfers to the provinces. The equity the federal government should be seeking lies in taking into account the facts that the provinces currently bear a major share in the costs of public drug programs without assistance from federal transfers, since medications outside of hospital settings are not covered under the Canada Health Act.

The provinces do so without having any control over the setting of patented medicine drug prices. Though they can give input, they have no decisional power. Weigh this in light of Canada's interest in fostering investments, job creation, and sustainability of industrial concerns, homegrown as well as those resulting from foreign investments.

We will briefly touch upon the following: the term of patent protection, the linkage regulation, the Patented Medicine Price Review Board's mandate.

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Under term of current patent protection, as in 1992, CPHA believes in the need for adequate protection of intellectual property. The 20 years currently afforded by Bill C-91 are in accordance with our international commitments under NAFTA and GATT. The positive environment created by Bill C-91 has led to the strengthening in Canada of the biotech industry, which in turn has contributed to more research and development being done in Canada as well as to the creation of many jobs for Canadians. This sector has grown from 12 companies in 1990 to 224 in 1997.

At this time, we feel that the 20-year protection is appropriate. Because the full impact of Bill C-91 has not yet been felt, it would be premature to consider going beyond 20 years. This in our mind would also apply to attempts to prolong patent protection under the model of patent restoration currently being practised in the United States.

We would now like to turn our attention to the linkage provisions, which are the most sensitive for stakeholders, particularly because it is the one provision that has given rise to the most challenges, disputes and court cases. When Bill C-91 was first drafted, this provision was put in place to actually prevent disputes by linking the notice of compliance to the initial patent on a medicine. Unfortunately, the original intent seems to have been forgotten or circumvented. We are concerned that the ensuing litigations can only result in cost increases down the road as manufacturers attempt to recover their legal costs.

We would like to recommend going back to the original intent of the linkage regulation - namely, by relying on the date of patent expirations of the first patent for a product. The initial document would clearly identify and refer to each product, molecule and process used by the innovator for its first patent filed on the product. These types of affidavits would be used by a joint committee of the patent office and the Health Protection Branch to determine at the time of application for a notice of compliance if the issuing of a notice of allegation is warranted.

We also believe the notice of allegation should include more pertinent information than it currently does in order to elicit a quicker, fuller and more precise response from the innovator company.

We would like to talk briefly about the Patented Medicine Prices Review Board's work and mandate. CPHA feels that the board has been efficient. While private and public drug plans are experiencing cost increases between 8% and 11% annually, prices of patented medicines have kept in line with inflation.

This clearly indicates that other factors need to be taken into consideration to work at controlling the escalation in drug plan costs. More attention could be placed on the setting of entry prices for new drugs, which many still feel to be fairly high due to the basket of countries used for comparison in setting of prices. The PMPRB should seriously consider moving to a purchasing power parities system to determine medicine entry prices in Canada.

We would at this point in time recommend once again that the PMPRB mandate be broadened to include all prescription drugs, patented and non-patented. Though some would think that the market can take care of itself, comparable generic drugs in other countries have come on the market at lower prices than in Canada. This has also had an impact on the cost of medications to consumers and to private and public plan payers. The generic companies themselves set the entry price limit at no more than 80% of the innovator's price.

Taking the experience of other countries into consideration, it seems that the Canadian market does not self-regulate as well as other comparable markets. Therefore, some monitoring measures, and if need be regulatory measures, should be considered to ensure that costs of generics in Canada are comparable to those in the basket of countries used by the PMPRB for patented medicines.

This could be done through a similar process to that used for patented medicines in setting the entry price of the first generic version of a drug onto the Canadian market. This initial drug would then be used by other manufacturers as a basis to set a competitive price.

We would also like to comment on other Bill C-91 provisions. The provisions in the original amendments to the Patent Act required a review after four years of implementation. In light of the fact that the full impact of the amendments has yet to be fully felt, CPHA would like to recommend that another review of the impact of Bill C-91, and the potential amendments that will be brought about as part of this review, be once again assessed in four years, and that this process become an integral part of the legislation.

Though the research and development funds commitment of the industry were not included in the act, the Canadian Pharmaceutical Association would like to recommend that they form the basis of an official appended document to Bill C-91. We recommend that the commitments by industry be renewed and assessed once again in four years and that the obligation of ensuring fair, cross-Canada repartition of the research funds be reiterated.

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On the related provisions on early working for generic companies, the Canadian Pharmaceutical Association agrees with the advantage granted generic companies through the early working provisions, which enable them to manufacture and stockpile a product six months before the expiration of a patent. These provisions, along with the ability to apply for notice of compliances two to three years before patent expiration, have ensured that generic equivalents of patented medicines can come on the market as soon as patents expire.

This in turn has guaranteed that some lower-cost alternatives could be available upon patent expiration. Unfortunately, this advantage has not been used to its fullest by generic companies on a broader array of drugs. One can hope a greater number of generic companies coming in the marketplace will result in more drugs being ``genericized'', thus decreasing costs for more patients and consumers.

CPhA also feel the limits placed on exportation of generic medication before patent expiration in Canada are discriminatory for Canadian companies and may in fact cost Canadian jobs in the long run. We would therefore like to recommend the government undertake to revise the export rules linked with patent protection to allow generic companies to manufacture for export purposes only before the six months early working period and that this be allowed for any drug that comes off-patent in another country more than six months prior to patent expiration in Canada.

In closing, we feel the costs to the system of the additional protection afforded patented medicine companies has been partly offset by the mandate and powers of the PMPRB. We continue to believe we all have a vested interest in seeing that patent medicines are developed, manufactured and well protected in Canada. Without the medicines innovator companies discover, there could not be a strong generic industry in Canada, and consumers would not benefit from the arrival on the market of medically necessary drugs.

The Bill C-91 amendments that treat patents for medicines separately from other types of patents confirms what the National Forum on Health also recognizes:

That drugs are as much a part of `medically necessary' care as are the services of physicians and hospitals, seems now too obvious to deserve discussion...In a fundamental sense, it implies that we do not wish to treat drugs as a `commodity', on a par with shoes and ships and sealing wax, and that it is irrational and inconsistent with our broader objectives to do so.

The Canadian Pharmaceutical Association hopes the above recommendations will be useful to the committee in trying to address the problems that have arisen with Bill C-91. We will continue to monitor its impact and work with all governments to find solutions that will ensure the cost-effectiveness of optimal pharmacotherapy for all Canadians.

Thank you for your attention.

The Vice-Chairman (Mr. Walt Lastewka): Thank you very much.

We'll now hear from the Quebec Research Group on Medication Use on the Elderly, Dr. Robyn Tamblyn presenting.

Please proceed, Dr. Tamblyn, and welcome.

Dr. Robyn Tamblyn (Quebec Research Group on Medication Use on the Elderly): Thank you very much.

I first want to say that I am an epidemiologist from McGill University. I have no opinion on Bill C-91 but I do have an opinion on the utilization of drugs. My work is in the area of drug utilization in seniors.

What is pressing in this area is not how much we are spending but the fact what we're spending is not translating into what you would expect it to be - that is, better health outcomes for seniors in the population. Approximately $1 billion is spent every year to cover the cost of drugs in Ontario for welfare recipients and seniors. It's about three-quarters of a billion in Quebec. Seniors fill about 4 out of every 10 prescriptions, and on average some will fill 33 prescriptions per year.

It would be wonderful, in fact, if the drugs they were taking would translate into longer life, better life, better quality of life. But the reality is that we have a huge problem between what's known about a drug and what gets put into practice. The problem isn't over-medication only; it's also under-medication, and misuse of medication.

All that amounts to approximately 12% of hospital admissions per year being created by problems created by the drugs themselves. Half of that's avoidable.

If we look at two major problems, one is that medication that should be used in fact isn't being used. A good example of that is a medication that was known to be effective in preventing secondary heart attacks. That medication was identified in 1951. By 1970 it was known that it worked. It took another ten clinical trials to actually convince everybody it worked. By 1980, guidelines were present that it should be used for all people who had myocardial infarction, or heart attack. In 1990, only 21% of people were getting that medication.

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In Quebec there are 14,000 heart attacks a year. Of that group of people, 2,100 will go on to have another one within the first year. Only 333 of those are being prevented. There's 1,000 that could be prevented that aren't.

We can look at another situation where in fact medication that's used to treat insomnia, a common problem in older people, a medication that was known to be potentially dangerous for older people, was identified, research was done, essentially through the 1970s and 1980s, and it was considered to be relatively contraindicated by the late 1980s. In 1990, 12% of seniors were getting it. Six thousand hip fractures occur in Quebec every year. A thousand of those are due to that medication.

The problem is that we may spend $2 billion to $3 billion actually getting a drug to market, evaluating its effectiveness, and that information just doesn't get into practice.

We are challenged here to say why this is happening. It's a paradox. Patients don't want to get ill, and physicians want to make their patients well, so why is it that in fact this information that would be so beneficial in improving people's health experience is not getting out into the front lines of practice?

Part of the problem is that there are least 24,000 drugs, if not more than that, approved for marketing. Any person at the front line in this day and age has to know that there are 33,000 different drug interactions, that there are 6,500 drug-disease contraindications, and another 3,000 or so drug allergy combinations that should be avoided. No one's equipped to know that.

The rate of increase in terms of drugs has been exponential. In 1918 there were 1,000 drugs on the market. In 1941 Canada approved two new drugs for the market. For the last two years we've been approving about 1,500 new drugs per year for the market. It's just impossible for people to keep up to date. If we do not solve the gap between what is known and what we get to put into practice, then it doesn't matter how much you spend on drugs; you're not realizing the benefit in the population.

What I'd like to say to this committee is I think Canadians have a unique opportunity to take advantage of our universal health care system to provide part of the solution to that. We know it's very difficult for physicians to keep on track - and the same with pharmacists - of what medications their patients are taking. We know as you get older you see many different physicians and receive prescriptions from many different physicians. It is possible in every single province in Canada to have that information accessed by physicians who are in practice, given to that physician so they can make the best decision for their patient, to know what drugs they're on.

In fact, one out of every five potentially inappropriate combinations of drugs is created because one physician is prescribing one and the other one is prescribing the other one. So you may be getting two blood thinners and then actually go ahead and have your gastrointestinal bleed.

So we have the ability to do that, and the second thing we have the ability to do is actually to take advantage of providing that information, which we can through electronic means, to provide guidance to people in practice to say here's the latest and the greatest; this is what you need to know about this problem, this drug, and what to prescribe next.

If we could only do that, and I think we can - and I provide you with a brief about how we've attempted to do that in Montreal, not to blow my own horn; there may be other solutions - to take advantage of new information technology and access to population-level databases, that will provide us with the means of getting information out into practice and potentially realizing, I think, the benefits that drug therapy can provide for the population, particularly for seniors.

Thank you.

The Vice-Chairman (Mr. Walt Lastewka): Thank you very much.

We'll now go to a witness from the University of British Columbia, Dr. James Wright.

Dr. James Wright (Department of Pharmacology and Therapeutics, University of British Columbia): Thank you very much. It's my pleasure to be here.

I'd like to speak on behalf of the therapeutics initiative that was set up in 1994 in the province of British Columbia.

Before 1994 I was a real doctor, and as a specialist in clinical pharmacology I was an early adopter of new medications. I have to admit that I would prescribe them with relatively little knowledge of their benefits and risks, no knowledge of their costs, and a general attitude of confidence and belief in the company's claims for that medication. At that time it was primarily because of the lack of time, and that's the same for all doctors. I didn't have the time really to learn that information.

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Since 1994, that has changed. I now have the privilege of being able to take part in the review process of the evidence of effectiveness and safety for all new drugs. This experience has completely changed my attitude.

I now realize that the evidence available when a drug is marketed is often weak and sometimes suspect, and the claims made in advertising are substantiated by very weak evidence. All of the evidence, including the design and analysis of the clinical trial, is done entirely in-house by the pharmaceutical company. The company is clearly in a conflict of interest position. So I think we need to work towards improving that situation.

I'd like to list briefly some of the objectives of the therapeutics initiative. Our objectives are: to assess new and existing drug therapies by the standards of the best evidence of clinical effectiveness in the scientific literature; to collaborate with other groups nationally and internationally involved in assessing drugs; to use these assessments to establish cost-effective first-choice drugs and recommendations for their optimal clinical use; and to design and implement a number of educational strategies to deliver the evidence and recommendations to physicians and pharmacists.

We have three main working groups in our therapeutics initiative: One is the drug assessment group; another is the equation delivery; and the third is the evaluation of the impact.

Part of our education delivery is the therapeutics letter, which we send out to all of the doctors, and I have some copies of that to leave with the committee. We've sent 17 letters so far on evidence-based drug therapy.

The drug assessment process, which I have been part of, involves a comprehensive literature search on all of the published databases and use of that data from the most scientifically rigorous study, the double-blind randomized controlled trial, whenever possible.

Using rigorous principles, evidence for the clinical effectiveness of each drug is reviewed and compiled. From this evidence, recommendations for the practical use of the drug in relation to other available therapies is developed and new drugs are specifically evaluated as to whether they represent a proven therapeutic advantage over available similar therapies.

In our review of the drugs between 1994 and 1997, only 7% of the drugs we reviewed represented significant therapeutic advantage, by our criteria.

We in the therapeutics initiative have concerns about Bill C-91. We're concerned that too much money is going to lawyers and courts involved in disputes about patent infringement. We're concerned that too much money is going to advertising and promotion of drugs in Canada and not nearly enough to research and development.

We are definitely concerned about the people who are losing from Bill C-91. They are the patients who are not only sick but are paying too much for needed drugs, frequently don't get the drug that is based on the best available evidence - which Dr. Tamblyn has spoken about - and are not benefiting from a lot of new drugs coming onto the market, as is evidenced by the fact that we aren't getting that many new drugs. Bill C-91 is certainly not changing that situation.

The other groups that are losing as a result of Bill C-91 are the provincial drug benefit programs and other drug benefit programs, which are unable to maintain the cost and which are downloading the cost onto the patients. So the patients are paying more for drugs, significantly more in the last four or five years than they were previously.

The others who are definitely not benefiting from Bill C-91 are the researchers in pharmacology and in medicine, particularly in provinces other than Ontario and Quebec. There is not an equitable distribution of research moneys across Canada, and that should be improved.

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I'd like to make a few recommendations. We think the twenty-year patent protection should be maintained to encourage and protect real innovation, but it should be both a minimum and a maximum patent protection. Instead of being a minimum patent protection of twenty years, we think it should be both a minimum and a maximum of twenty years.

We think we should prevent the extension of the patent by putting a limit on the years of protection for the chemical entity, and there should be only one patent on a drug.

We would like to see the law designed to prevent legal disputes as much as possible. If there was a clear distinction, I think that would prevent a lot of the loss of money in the courts.

We would like to see research and development expenditures become compulsory. One of the previous speakers mentioned making the placing of one to two per cent of sales into a research pot compulsory, and that an equitable distribution of that money be made across Canada, based on the population in each of the provinces.

We also believe the generic companies should be allowed to market a drug based on the patent law in the country of origin, and not on the patent law in Canada. We're not helping our balance of trade at all by having a situation in which that's not possible.

We also think all drugs should be included in the Patented Medicine Prices Review Board mandate, because we do feel that some of the generic drugs are overpriced.

We have some other things, but I'll stop at that.

The Vice-Chairman (Mr. Walt Lastewka): Thank you very much. I'm sure you'll have the opportunity to make your extra points during the questioning.

We will now turn to Grey Clark Shih and Associates. Mr. Peter Clark, welcome.

Mr. Peter Clark (President, Grey Clark Shih and Associates): Thank you, Mr. Chairman.

Today I would hope to provide the committee with a little bit of help in understanding Canada's obligations in its international economic relations, as those obligations relate to the GATT intellectual property agreement and the NAFTA.

Mr. Appleton appeared before the committee some weeks ago and suggested to you that you could reverse the provisions with relation to patent protection on the basis of public order.

I was leafing through Mr. Appleton's book on the NAFTA, which is probably more relevant for us than the WTO agreement. On page 127 he indicates article 1709(6), which relates to compulsory licensing: ``It should be noted that finding these conditions'' - that is, for exclusion - ``would be very difficult indeed. The NAFTA essentially prevents compulsory licensing regimes from returning in Canada and Mexico.''

The agreement is very tight. Mr. Appleton also suggests that the obligations go further than those contained in the Uruguay Round TRIPS agreement. The only difference I can find in the two texts is the preposition, and that's the difference between North American drafting and European drafting.

The fact is that we should look at the NAFTA because if the United States were to object to a change in Canadian practice, they would have the choice of using the NAFTA or the WTO. I would suspect they would use the NAFTA.

I understand the concern is to ensure increased competition in the field. There should be some mechanism to ensure competition when such long periods of exploitation of the patent are granted.

There has been a reference to the good government and public order provision in article 1709 of the NAFTA. There has also been a reference to the exclusion provision in the NAFTA. Interpreting these trade agreements is not always easy. I've been trying to do it for over thirty years now. I'm not a lawyer. Mr. Wright, I hope that sits okay with you, but it hasn't held me back so far, sir.

One of the things I do from time to time is sit on these international panels. The government has seen fit to nominate me for chapter 19 and chapter 20 panels under the NAFTA, and it has also seen fit to nominate me as a member of the roster of dispute settlement panellists under the WTO. So I have a bit of experience in this area.

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There is a provision in article 1704 of the NAFTA that refers to control of abusive or anti-competitive practices or conditions. It indicates that any party has the right to amend the protection they provide to intellectual property rights if that protection has an adverse effect on competition in the relevant market. There are two ways to address that. Of course any six Canadians can ask Mr. von Finckenstein over at the Competition Bureau to take a look at it. All they have to do is put their names in writing. Indeed, the minister or a parliamentary committee can ask him to do that. But as I understand it, we already have a monitoring committee that looks at pharmaceutical prices.

If we look at the specific provisions of the NAFTA that have been alluded to as creating the possibility to return to the system we had prior to 1992, and if we were looking at the public order provision, I would wonder why we would have to do that if there is a specific provision related to ensuring competition. It would seem to me that you look to the specific rather than the general.

With respect to the provision relating to limited exceptions or compulsory licensing, I would also ask why one would not look first to the provisions relating to competition. Those provisions are clearly available to a party without breaching the contract, because what this is is a contract. There is a balance of rights and obligations. There is a balance of concessions on both sides.

If people were interested, they could go back to the United States trade representative's reports going back to the mid-eighties. The USTR talked about our compulsory licensing system as being a trade barrier. In 1989 the Americans put us on their super-301 watch list because of our compulsory licensing, even after going part way in granting ten years' protection.

It's not as though this was a new matter. It's not as though it was something we couldn't foresee. The United States would have rights under the NAFTA to pursue dispute settlement. In dispute settlement, when you make an exclusion from an agreement you have to ensure that the exclusion is as narrow as possible. You also have to demonstrate that you have explored other options, and that none of those options that would be less disruptive to the working of the agreement would be suitable for your purposes.

Without the grounds that you might find in article 1704, the impact of an exclusion would be that somebody would have a right to renegotiate the agreement or to compensation, or, failing that, retaliation. There would also be questions raised about Canada's reliability as a negotiation partner in international agreements. That's a matter we should all consider.

I'm not going to tell you that you could not use the public order provision. The Parliament of Canada is constrained by the Constitution. It's not constrained by our international trade obligations. That's another matter. That's a commercial matter. It's a political matter. It's a diplomatic matter. It's something you have to decide.

Thank you, sir.

The Vice-Chairman (Mr. Walt Lastewka): Thank you very much for your presentation. We'll now begin with questions, starting with Monsieur Ménard.

[Translation]

Mr. Réal Ménard: I'd like to welcome our witnesses. Fist of all, I have a general question.

It seems to me one of the questions we must ask ourselves as members of this committee is whether there is a certain rationale that guides research. One doesn't interfere haphazardly in a research and certainly no business is going to intervene or approve investments on the order of 200, 300 or 400 millions dollars. The figures that have been advanced concerning the marketing of drugs vary between 300 and 500 millions dollars. I don't know who's right, but I do know that we agree that these are substantial amounts to invest.

And the question, then, is at what specific point do we consider that those who have invested in research within a very specific regulatory context will be able to get a return on their investments?

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As soon as this question is answered, then we can say what kind of protection we want to grant. So I'd like you to tell us if you agree on the fact that in 1997, to market and discover a drug, it costs between 300 and 500 million dollars, and do you have the impression that with a proposal like four years' protection, there would be a return on the investment so that Canada and Quebec wouldn't be penalized in the area of biomedical research? That's my first question.

I'd be quite honoured to get an answer from the head of the NDP.

[English]

Ms McDonough: Well, let me say two things.

First, it's perfectly obvious that under the current arrangements, companies have the right to a return on their investments. I think the facts would show that the return on investment is very, very healthy indeed at the moment.

Second, there is not a suggestion for them to cease to have any return on their investments by opening up opportunities for generic drugs at an earlier date. The provision would clearly be made, as required under NAFTA and WTO, for there to be a reasonable return in the form of royalties.

So I think it's a false argument to say that the current system is the only system for one to make a case for maintaining, and that the argument for doing so ought to be based entirely on investment considerations.

Surely the starting and ending points for how we put in place legislation and regulations with respect to drug patent protections and any other aspect of the health care system should be whether it serves the public health.

I'm not a legal expert in the matter of trade law, but I must say that I think we have to look awfully closely at the narrow interpretation that the Government of Canada is taking now that suggests we have locked in for all time to arrangements under the WTO and NAFTA that do not permit us to make any changes that would better serve the public health of this country, as well as the health of the treasury of this country.

I wonder if I might just refer for a moment to Steve Shrybman, who is with me. He has done extensive research. He has come to a somewhat different conclusion, I think, from that of some others who have appeared before the committee, with respect to the leeway, the provisions under WTO and NAFTA that would indeed give us a solid basis for varying from the current arrangements.

[Translation]

Mr. Réal Ménard: Sorry to interrupt. I would have liked a clear answer to my question. You may be right in saying four years, but I'd like to hear the reasoning.

Why four instead of 10 or 20 years for effective protection? At the end of the day, that's the question we'll have to use as a lead-off to present the report and that we'll have to decide upon. Protecting the health of Canadians is something I hold dear, the same as you.

As you know, I come from a rather disadvantaged community so I have no particularly favourable bias towards multinationals. But I'm not so naive and rosy-eyed as to think that investments go anywhere at all at the whim of those managers who make the decisions.

When witnesses come before to us to ask for a reexamination of the provision concerning 17 or 20 years, I'd like someone to explain the reasoning behind those figures to me. Do you get the impression that with four years' protection you'll get a return on the investment or do you have other criteria you could share with this committee?

[English]

Ms McDonough: Let me say again that I don't think there's a suggestion that a multinational company that has invested would cease to get any return after four years. It would get royalties for a continuing number of years beyond the four years. The suggestion is based on a better balance between the responsibilities of this government to advance and protect the public health and its responsibility to respect international trading agreements into which it has entered.

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The first thing that makes us very impatient and suspect about the pleadings for greater consideration on return is that the figures that have been available to us suggest that the returns are currently not just healthy but excessive.

Secondly, when we see figures that suggest the multinational pharmaceutical companies are spending ten times as much money on marketing their drugs as they are on actual research in Canada, we think the situation is badly out of balance and the government has a responsibility to correct it.

Steve, do you want to comment on the WTO aspect?

Mr. Stephen Shrybman (Policy Analyst, New Democratic Party): Under the WTO now, a company is entitled to a global mandate for any patent right it has acquired. That should substantially increase the revenues available to drug companies for their patented drugs, because that minimum period of 20 years of protection will now apply in the more than 120 countries that belong to the World Trade Organization. The revenue prospects of patented drugs have increased dramatically as a result of the inclusion in the World Trade Organization of an agreement on intellectual property rights.

[Translation]

Mr. Réal Ménard: I think this committee will have to consider something very important that many witnesses have mentioned here. As far as the evaluation of the research undertaken by the pharmaceutical companies, I quite agree to say that one of the recommendations this committee will have to make is that part of the investment should go into an independent fund where the orientation in the area of research and development would be directed not by the pharmaceutical companies but by an independent committee made up of experts who know what the needs are in the biomedical field.

It's important to have equity requirements for the drug companies. Personally, I think it's quite normal for drug companies to make profits, but it's not normal for them to be driving research and development. As a Quebecker, I find that a concern.

I'm also equally very concerned about the fact that the Patented Medicine Prices Review Board has no more power than it does presently to ensure that there is fair and equitable access to non-approved drugs. There are thousands of Canadians this year who need drugs who don't have a clearance. Because Parliament didn't go far enough in the obligations it imposed on drug companies, access to those drugs is extremely restricted. So I think we have the duty to be concerned with this and I hope we'll be able to count on your support, as witnesses, to support this committee making such recommendations.

[English]

The Vice-Chairman (Mr. Walt Lastewka): Please put the mike toward you because it might not pick it up. Thank you.

[Translation]

Ms Noëlle-Dominique Willems (Director of Government and Public Affairs, Canadian Pharmaceutical Association): I'd simply like to comment on what you've just said. Actually, what you've just said does dovetail with what was recommended by the National Health Forum. However, it went a lot further than you did because they said that all research funds should be oriented in that way.

I think we should also realize that this isn't done with many other industries. We don't force others to go into research and development. Moreover, the government does seem to be forgetting a principle: "When you want to play, you got to pay". So the government should show leadership, and also that it believes in research and development by investing adequate funds.

Mr. Réal Ménard: You have been heard loud and clear.

[English]

The Vice-Chairman (Mr. Walt Lastewka): Mr. Schmidt.

Mr. Werner Schmidt: Thank you all for coming. It's good to hear from you.

I have several questions and would particularly like to address questions to Dr. Tamblyn from the university in Montreal, and Mr. Wright from the University of British Columbia.

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It's rather interesting that from two different parts of the country we find such obviously different things, but things that could work together with a therapeutic initiative and the lack of knowledge that's apparently in the practitioner's bag of what to do. Is there communication between your two initiatives?

Dr. Tamblyn: This is the first time I've met Jim Wright, although I've heard a fair bit about him. You may not be aware of it, but our group is funded by Health Canada, the Seniors Independence Research Program. There is a group that is also funded in British Columbia to essentially study the therapeutics initiative and develop mechanisms for putting research into practice and consulting the consumers about their wishes.

It was recognized that we were working on very similar things. I am in communication with the person who is the investigator of that group and with others in British Columbia. This is the first time I've had a chance to meet Jim Wright, and that's because I think he's so busy and has so many other things on his plate.

Mr. Werner Schmidt: The thing that particularly intrigued me was Mr. Wright's comment that only about 7% of the new drugs actually qualify as providing a new therapy, if you will. That's a very low percentage.

Dr. Wright: That is the same percentage that other groups have come up with. Joel Lexchin looked at it over a longer period of time, and he came up with 8%. That's one of the real problems here. Most of the new drugs that come onto the market are not really new drugs, they're actually drugs that act by the same mechanism as other drugs and they've been called ``me too'' drugs. It doesn't cost as much to develop a ``me too'' drug as it does to develop a new entity.

We really need to have a system that will encourage the pharmaceutical industry globally, not just in Canada, to put most of its research into developing new entities and not into developing drugs we already have.

Mr. Werner Schmidt: If 7% of new drugs is actually different, does the 93% that is really different also have patents?

Dr. Wright: Yes, it does.

Mr. Werner Schmidt: What's going on with our patent procedure then if only 7% is new and 93% is not new? I thought the granting of a patent depended upon it being somehow new or different.

Dr. Wright: You patent the chemical entity. Because there are different chemical entities, they have different chemical entity patents that allow them to say they are different, but if they could only be patented based on pharmacological action, they wouldn't be different.

Mr. Werner Schmidt: So is the problem that we have, as we heard just a moment ago, three categories of patents - molecular or chemical, process, and indication? If we had only one of those, would that clarify and rectify the situation?

Dr. Wright: The clearest patent is the chemical entity patent, so that wouldn't change things. It can change a molecule. When a company actually makes a discovery, it will try to patent all of the chemicals that are similar and that it thinks will have the same action. It will sometimes patent over 100 compounds. But even when it does that, the system is so complex that another company can still come along and come up with a slight alteration of the molecule that will allow it to patent another drug that will have the same pharmacological action as the original drug.

Mr. Werner Schmidt: This problem is getting more complex, not simpler. I'm beginning to wonder whether the patent approach is the right approach in this whole business. Is it a practical consideration to use a patent law, which applies to new ideas, to the world of chemistry?

Somebody must have an answer to that, because I think that's a pretty fundamental question.

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If there is no answer, Mr. Chairman, I'll go on to a different question. It has to do with the role, actually, since the university is here... I just can't resist the teaching of medicine at the universities. I know the University of British Columbia is particularly strong in regard to that, as is the university in Montreal. There are several of them, including McGill.

You're at McGill, right?

Dr. Tamblyn: Yes.

Mr. Werner Schmidt: McGill has a particularly strong faculty of medicine. Is the preparation of practitioners in medicine such that it in fact helps to increase the cost of medicine? Or does it reduce of cost of medicine?

Dr. Tamblyn: I'm not sure there is a definitive answer to your question. It is apparent that drug prescribing or drug management is learned in the more clinical years in training. It's learned more by the apprenticeship mode. The cost of medication is not foremost in the training process, as are the cost issues related to many other forms of health services. The drug industry is very much involved in supporting training endeavours and various activities, and that's been shown to influence what does get prescribed by individuals.

With respect to using the best drug for the right indication in the right amount for the right period of time, there are some who certainly believe that it is almost impossible to adequately train someone to have the needed knowledge for all the drugs currently on the market. And if it's dynamically changing at the rate it has been over the last little while, that's virtually impossible. Maybe we need better methods of supporting people in practice by giving them more up-to-date information as they need it.

Mr. Werner Schmidt: That's your philosophy.

Dr. Tamblyn: That's my philosophy. There is a link between the score people receive on licensing examinations and their prescribing habits. The Medical Council of Canada and the College of Physicians and Surgeons in Quebec are also looking at that closely to see whether or not they need to change the standards on examinations, which will influence what training programs do.

Mr. Werner Schmidt: What's the score at UBC?

Dr. Wright: I agree with everything that Robin has said, but we have a more optimistic view in that we feel that the graduates in training now in our medical school are learning much more about the principles of evidence-based drug therapy and consideration of cost than graduates did in the past.

We're hoping they will be more likely to prescribe in an evidence-based way. We will actually be doing an experiment to test that, because we can follow these graduates and actually look at their prescribing practices and thus be able to give you some information about that in the future.

Mr. Werner Schmidt: I think you are in an absolutely unique position yourself, sir, if I may say so, because you have been a practising physician and now are in the therapeutics initiative. It seems to me that you would be able to bridge this gap very nicely. I think there's a revolution about to take place here, if I read you correctly. Would you interpret it that way as well?

Dr. Wright: I think so. Yes.

Mr. Werner Schmidt: What would you recommend, then, in regard to this committee changing the legislation so that we can accommodate or anticipate this revolution that's about to take place? I think it's not far away.

Dr. Wright: I think we need to encourage true innovation and we need to have some financial incentive to encourage true innovation. I think we do need to distinguish between true innovation and copying. The PMPRB, I understand, does try to do this to some degree, but it has only a very minor effect on the cost. In Canada I think we have nine or ten ACE inhibitors now. They all do the same thing and their costs are all very similar. There's not a huge difference in cost among them. That doesn't seem to me to be really rewarding the innovation that led to the development of the initial one, therefore decreasing the reward for the ones that come afterwards.

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If we did that, actually, that could lead to savings for the patients as well, if prices came down. That would be one way of looking at it.

Mr. Werner Schmidt: How could we do that? That's a great concept, but how do you make that practical? That's what we have to do, finally.

Dr. Wright: The problem is that it's a global issue. The prices tend to be chosen based on what is the world price, not on what the Canadian price is. Clearly, I think there should be more competition between companies who are marketing drugs that are doing the same thing. I'm not sure exactly how legislation can be fashioned to encourage that, but I think there needs to be that competition. That would then drive the prices down.

Perhaps you need a mechanism whereby the copy medication doesn't get onto the market as quickly as the initial one. Maybe there needs to be some protection, maybe they need to have four years of protection before the copy comes on. The copy would then have to come on at a competitive price, not at the same price.

Mr. Werner Schmidt: Mr. Chairman, interesting as it is, I think we'll have to stop here - I think it's only fair - but I'd like to go into this a little further in another area as well.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Bodnar.

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

Ms McDonough, you referred today to the matter of drug costs representing approximately 15% of health care expenditures. But only 3.3% of that is patent drugs. The rest is generics. As you probably well know, patent drugs are under the jurisdiction of the federal government. All generic drugs and prescribing the wholesale cost of those drugs, as well as the dispensing fees, is all within the jurisdiction of the provinces. I don't know why you've lumped the two together when only such a small proportion is within the jurisdiction of the federal government.

Would you not agree that the provincial governments, by not having boards such as the prices review board to control the prices of generic drugs, are in fact shirking their responsibility in trying to foist this responsibility elsewhere?

Ms McDonough: I must say I hadn't thought of the problem in those terms at all. It seems to me that we have so much downloading going on in the provinces these days that this in turn leads to downloading health care costs onto patients.

What's really happening in the country is that sick people are now being forced to pay their own costs of drugs because of hospital closures and all the rest of it. I guess what I would be doing is pushing in the opposite direction. The last thing in the world we need is to go further and further in the direction of fragmentation of this aspect of our health care system along with all others.

That's why I take some heart - and I know others have referred to this as well - from the National Forum on Health recommendations with respect to the need to establish a national pharmacare program so that our health care system is truly universal. It's becoming less so all the time. Secondly, I support their recommendation on how we have to get the cost of drugs under control by addressing some of the problems created by Bill C-91.

Mr. Morris Bodnar: Ms McDonough, with respect to hospital costs going down, since I come from a province where hospital closures are a regular occurrence - and that's Saskatchewan - perhaps hospital closures and fewer patients in Saskatchewan are the result of physicians treating patients with drugs rather than necessitating them being in hospitals.

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Maybe Dr. Tamblyn can comment on whether the use of drugs by physicians is resulting in patients not having to be admitted as often to hospitals, and perhaps for shorter periods, by being treated through this alternative means rather than by use of surgery. Is that the case, Dr. Tamblyn?

Dr. Tamblyn: There are various examples of that. Historically, when you think about it, when you think about all the TB sanatoria that were around - people would be housed in there and half of them would die - now we have very effective anti-tuberculous drugs that have reduced case fatality down to about 5%, and people recover. The same is true for antibiotics. A case in point is also the beta blockers. The tragedy is that many more could benefit than currently do, because somehow that information is not getting out there.

Mr. Morris Bodnar: Thank you.

In fact, Ms McDonough, this is a concern I have. You may call it political or not, but if you and your party are so concerned about drug costs and Bill C-91, I'm wondering why there is never, except on one occasion, a member of the New Democratic Party before this committee on Bill C-91. Why?

Ms McDonough: Mr. Chairman, perhaps I could respond to two things this member has raised. First of all, I hadn't understood it was the mandate of this committee for it to have a full discussion about health reform. I'd be happy to have that discussion, but the aspect of health reform that I understood you were dealing with is specifically Bill C-91 and what is happening with respect to access to drugs and the cost of drugs.

I think part of the difficulty with the whole review that is going on is that it's not related enough to the question of health and too much related to what is in the interest of the companies. Part of the problem is that the organization of how people get the drugs they need in the first place is based more on an industrial model than it is on a health model.

The point that I don't want to see lost here is not at all some argument coming from me that we should keep hospital beds open and people in them if alternate therapies of whatever kind can be provided more healthily and more cost-effectively out of province. And I think Dr. Tambyln has confirmed that there are many such examples of where that can be. But the question before this committee is how can people get drugs at an affordable price. The difficulty with what's happening now is that as a result of the downloading of health costs, instead of those being paid for as part of our universal health care system, they're being bumped outside of the health care system and put right on the backs of the sick, because prescription drugs are not being included in universal coverage of health care.

Mr. Morris Bodnar: Ms McDonough, we had before our committee the Canadian Association of Retired Persons, also known as CARP. I have their report they presented to us. They conclude in their report that Bill C-91 was effective in achieving the objectives of ensuring that prices and costs are reasonable and fair. This organization represents 250,000 people in Canada and it came before the committee to say that it supports the bill. Are we to listen to this organization of seniors and soon-to-be seniors, or are we to listen to you?

Ms McDonough: Mr. Chairman, I don't wish to go into combat with a particular group, but let me say that of all the groups from whom I hear, the most strenuous objections about the increasing costs of drugs and the increasing burden of those costs directly onto the backs of the sick are from seniors. I say that without fear of contradiction from coast to coast to coast. It also is the most numerous group from whom I hear in terms of advocacy organizations on behalf of seniors, so I'm not speaking only about individual seniors. Seniors' organizations everywhere I go across the country have expressed this concern, and I think the concern is real.

I have a second point, if I may, Mr. Chairman. A a very direct suggestion has been made that New Democratic Party members of Parliament would be here on this committee if they were interested in this issue. I think members of the committee know that no member of the New Democratic Party caucus has full status as a member of this committee, or any other parliamentary committee, in the current Parliament.

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I very much resent the suggestion that there has been no leadership on this issue, when my colleague, John Solomon, has again and again -

The Vice-Chairman (Mr. Walt Lastewka): Time out. Please be advised that any member of Parliament can come to this committee meeting.

Ms McDonough: I'm talking about membership, to fully participate on the committee,Mr. Chairman. I think it's important for the record that this be accurately recorded.

The Vice-Chairman (Mr. Walt Lastewka): I think it's important for the record to show that everybody is allowed to come.

I go to Mr. Schmidt.

Mr. Morris Bodnar: I'm not finished my ten minutes, Mr. Chair.

The Vice-Chairman (Mr. Walt Lastewka): I'm sorry. Yes, you have another minute.

Mr. Morris Bodnar: Thank you.

The Vice-Chairman (Mr. Walt Lastewka): I misread the clock.

Mr. Morris Bodnar: I had one point that I wanted to raise with Ms McDonough. It deals with the community of Saskatoon, which has a very healthy biotech industry.

The suggestions you're making for alterations in the law would result in certain members of the biotech community literally having to pack up, drive south across the border into Montana or North Dakota, and leave Canada, because you would literally shut down that industry. I am wondering whether it is your intention to shut down the biotech industry in Saskatchewan and in other parts of Canada.

Ms McDonough: Mr. Chairman, I think the member realizes it is a totally ridiculous suggestion to say that -

Mr. Morris Bodnar: This is not ridiculous, Ms McDonough, because they said that this is the effect of doing this to Bill C-91.

Ms McDonough: No. The question to me was is it my objective to shut down the biotech industry in Canada. I think that's a perfectly ridiculous suggestion. Let me make it clear that I have no such intention. In fact, the very point of the recommendations we are making is that we need a healthy biotech industry in this country, and instead of that having proliferated to the extent that was predicted and promised by Bill C-91, there have been disappointing results.

It is absolutely true that there are some important initiatives and developments in biotech industries, and that certainly has been true in Saskatchewan, precisely because there has been leadership taken and creative partnerships formed.

I think there is no basis whatsoever for suggesting that the kinds of recommendations we are making would be either inspired by or result in the shutdown of a healthy biotech industry in Canada.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Schmidt.

Mr. Werner Schmidt: Thank you, Mr. Chairman.

I have three questions that have to do, first of all, with a conflict of interest in the clinical trials. I believe it was you, Mr. Wright, who mentioned that.

The clinical trials that are done by the pharmaceutical companies are in fact done in-house and therefore certain procedures that perhaps aren't as stringent and as constrained as they ought to be. Could you elaborate on that a little more fully? Would you suggest that perhaps there ought to be an independent group that does this?

Mr. Wright: If I were running a trial in a pharmaceutical industry I would want to have all of the data analysed and presented by an independent group. I would specifically do that, and when it was published I would make it clear in the publication that the data and analysis had been done by an independent group.

It only makes sense that if you want to make it absolutely clear that everything is above board and there is no conflict of interest, that's the way it should be done. That would be a very useful thing. That would actually put money into Canadian research, because there are groups, including our own, who would be more than happy to get involved in doing the analytical work that would be involved in writing up these trials and making sure they're published independently.

This is something I would like to see encouraged. When a company has something that is a really major step forward, it shouldn't have any reason to not want that to happen and to not want to do it in that way.

Mr. Werner Schmidt: Thank you.

I have another question that I would like to address to anybody and everybody. It has to do with the function of the PMPRB.

There is a suggestion in one of these that the price of a generic ought to be roughly 80% of the price of the drug charged by the pharmaceutical company when it was new. My question is, how do we establish the base price - in other words, the foundation - set by the PMPRB? They set the price, but what are the components of that price, and how objective is the establishment of that price?

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Ms McDonough: Mr. Chairman, I don't know the answer to that, but I do know -

The Vice-Chairman (Mr. Walt Lastewka): I'm going to try to get you to stick right to the question.

Ms McDonough: - there's been a considerable shaking of confidence around the work of the board. As a result, I've written to the Auditor General to say that I think we need to have a thorough, independent review of the whole question of how the Patent Medicine Prices Review Board does actually determine price, because some of the information that has come out before the committee has really caused a lot of concern, with some real contradictions and I think some questions around the impartiality and the public interest mandate of the board.

When it appears that they've used as the basis for their pricing the data, unquestioned and uncontested, from the multinational pharmaceutical industry itself, then I think there is a need for an independent audit to determine what the current practices are and to come up with some recommendations for how the public interest can truly be represented here.

I mean, it has to be questionable for this supposed review body to be depending on information -

Mr. Werner Schmidt: You really haven't answered my question, with all due respect.

Ms McDonough: Well, I think this is the difficulty.

The Vice-Chairman (Mr. Walt Lastewka): Rather than carrying on here, you have one minute, Mr. Schmidt, for a short question and short answer.

Dr. Wright: I'm willing to answer that.

Mr. Werner Schmidt: I'll give my minute to Mr. Wright.

Dr. Wright: I think any amount is arbitrary. I would recommend it arbitrarily be set at 50% of the cost, unless the generic company can come up with justification in their research and development that would justify a higher cost. But the generic company, when they come in at a price that is relatively close to the marketed price, is actually seriously benefiting from the research and development and marketing done by the company to establish that market. So anything close to the cost is not really justifiable.

The Vice-Chairman (Mr. Walt Lastewka): Thank you, Mr. Schmidt.

I'm going to go to Mrs. Parrish.

Mrs. Carolyn Parrish (Mississauga West, Lib.): Thank you, Mr. Chairman.

I find it quite fascinating listening to the language that has been coming forth. I'm going to be very specific in mine. I'm going to ask my questions all at the same time and then sit back and let the answers come forward. I find that each of the speakers tends to be expanding, and I'm afraid I'll lose my questions.

I've been exposed to old math, new math and now NDP math. I find it interesting thatMs McDonough talks about driving health care costs through the roof, about unconscionable profits and bankrupting the national health care system, when the average price increase over the last three years of name brand drugs has been 1.6%, the cost of living has been 3.1%, and patent drugs are only 3.3% of health care costs. So I'm going to give her another shot at teaching me NDP math, because those numbers don't work for me.

Second, she talks about competition, going back to compulsory licensing after four years. I'd like to know when the four-year date sets in, because my understanding is that most pharmaceutical companies, when they come upon an idea, register it so that their competitors, who are also trying to get to the market with that drug, don't grab the idea.

So if you go back to compulsory licensing after four years, at what point are you going to say that the four-year date sets in, and what do you think a reasonable royalty is? How are you going to decide how much a patent company should get as a royalty?

The third point is one Mr. Bodnar touched on and one I'm particularly enamoured of. The doctors here talked about true innovation, and coming up with new drugs.

By the way, I thoroughly enjoyed your presentations, Dr. Tamblyn and Mr. Wright. We're on the same wavelength.

When you talk about disappointing results in bio-pharmaceutical expansion, from 1991-92, when Bill C-91 came in, it grew from seven companies to 228. I don't find that disappointing; I find that amazing. This is pure research, as has been referred to. It's jobs for university graduates.

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I can remember when I was in university I actually voted NDP. That's where a lot of your supporters are, and they need good, solid, scientific, well-paid, exciting jobs when they graduate. So how do you expect to preserve this massive growth from seven to 228 companies if you're going to send all the research and all the development down south and you're going to get rid of these patents?

Did I do it?

The Vice-Chairman (Mr. Walt Lastewka): Thank you for your short questions. Now I'd like to get to the short answers and to the point. There were four questions.

Ms McDonough: Mr. Chairman, I think I had three. If I missed one, you can come back.

I think the difficulty we have is that there are a huge number of contradictions. You've heard a lot of contradictions around this table in terms of what the actual cost increases have been, compared to other countries, what kinds of base figures are being used. I think that's one of the reasons we need greater independence around the regulatory regime that deals with the cost of drugs as well as with the whole drug patent system.

The second thing is, it's my understanding that the system of royalties that was in fact in place before Bill C-91 destroyed it provided for royalties in the 4% range, 4% of investment, based on a formula that seemed fairly workable. As Mr. Shrybman has suggested, because of this WTO protection now for an automatic 20 years with the provision for there to be the opportunity to introduce compulsory licensing, there could be a case for a slightly more modest royalty than 4%, because in effect what the WTO provision has now put in place is the guaranteed return on literally a worldwide basis. I wouldn't presume to have the expertise to know what that figure might be, but I think a case could be made for recognizing that the return to the patent-protected companies will be even greater because essentially they have a worldwide mandate under the WTO.

Mrs. Carolyn Parrish: If I might, at what point would you recognize a patent as being in effect, and where would your four-year point start?

Ms McDonough: I will be quite honest with you in saying that I don't have the expertise to say exactly at what point that would be triggered. But once again, I think the real difficulty - and it has come out in a good deal of the testimony before the committee - is that too many of these decisions are being made entirely on the basis of profit considerations and not on the basis of what we need to do to organize the pharmaceutical industry in this country in such a way that we're maximizing the health benefits to Canadians.

Mrs. Carolyn Parrish: In regard to the number of bio-pharmaceutical companies going from seven to 228, what would you do to keep those expanding if they don't have any patent protection?

Ms McDonough: You haven't heard me argue against patent protection. What I'm saying is the patent protection is excessive. Since we now have locked in for ill or for good - and we're not disputing the fact that we now have locked in through NAFTA and the WTO to 20-year patent protection - what we're arguing for is a system that allows compulsory licensing at a much earlier stage and that provides for reasonable royalties. It would be against the law, so we would not be advocating nor would it be sensible to advocate that you put in place a system where there can be no return that would adequately encourage research. We're not advocating that.

Mrs. Carolyn Parrish: Thank you.

The Vice-Chairman (Mr. Walt Lastewka): I'm going to ask Nick Discepola for one short question, and he will conclude this session.

Mr. Nick Discepola (Vaudreuil, Lib.): Mr. Chairman, with your indulgence, I'll ask three very short questions, but they only require yes or no answers.

Ms McDonough, does your party or your position personally agree with most of the people who have made presentations that generics pricing should also come under the PMPRB review? If so, the second question is, would you work with all NDP governments in the provinces to ensure that will be able to come about?

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The third question is, in a press conference earlier today you alluded to compulsory licensing being allowed under WTO and you released an expert opinion on international trade law. Could we have for our records also, please, a copy of that opinion you gave at that press conference?

Ms McDonough: You should have received that in the distribution of the material that I filed with the clerk. If for some reason it's not -

Mr. Nick Discepola: Are you referring to this document? This is the only document we got.

Ms McDonough: The legal opinion was also with it. If for some reason members didn't -

Mr. Nick Discepola: Okay. I didn't get it. As long as we got it, that's all right.

Ms McDonough: Secondly, I'm not going to speak for any other government, New Democrat provincial government or otherwise. I do understand the New Democrat governments are appearing before the committee, or at least had requested the opportunity to do so, and hope that opportunity will be -

Mr. Nick Discepola: But would you answer the question? Specifically, should generic prices come under PMPRB review? Yes or no, please.

Ms McDonough: You see, I think that depends on what the comprehensive changes are as to -

Mr. Nick Discepola: All right. Welcome to Parliament. You've done an excellent job of not answering questions.

Ms McDonough: - whether we come up with a more coherent system.

Mr. Nick Discepola: You make a great politician.

Ms McDonough: If we're going to put a national prescription drug program, national pharmacare program in place, then I think -

Mr. Nick Discepola: Is that a yes or a no?

Ms McDonough: Well, I'd say yes or no is too simplistic an answer to what is a comprehensive challenge that has to be seized by this committee to get a better balance between what is happening with respect to advancing the drug companies -

The Vice-Chairman (Mr. Walt Lastewka): Thank you very much.

Ms McDonough: - and advancing the public health.

The Vice-Chairman (Mr. Walt Lastewka): You see, when you ask for 20 seconds and you give them a minute, he tries to take four. This is what happens in this group.

I want to thank the witnesses for appearing, and I apologize for some of the delay. It was very helpful, and I'm sure some new information was provided with the group. I'd like to thank you again for being with us this afternoon and this evening.

I will terminate this portion of today's session with a ten-minute break for the members who will be here for the night shift. Since I'm the vice-chairman, I always get the night shift, for the benefit of our witnesses.

The meeting is adjourned. We'll be back in ten minutes.

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