Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 5 - Evidence
OTTAWA, Thursday, March 22, 2001
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill S-17, to amend the Patent Act, met this day at 11:00 a.m. to give consideration to the bill.
Senator E. Leo Kolber (Chairman) in the Chair.
[English]
The Chairman: Today we will receive further testimony on Bill S-17, to amend the Patent Act. Our first witnesses are, from the Canadian Drug Manufacturers Association, Mr. Jim Keon, President; Ms Julie Tam, Director of Professional and Scientific Affairs; and Mr. Ed Hore, Legal Counsel.
Please focus your remarks on the bill itself.
Mr. Jim Keon, President, Canadian Drug Manufacturers Association: Thank you for the opportunity of appearing here today and sharing with you the position of the Canadian Drug Manufacturers Association on Bill S-17.
I wish to pass on the regrets of Mr. Jack Kay, the chair of CDMA and the President of Apotex, who could not get here on time due to the weather that we are experiencing.
The CDMA represents substantially all generic and fine chemical producers of generic medicines in Canada. Generic drugs are low-cost, second-entry, equivalent versions ofbrand name prescription drugs. On average, generic drugsprovide 50 per cent savings compared to brand equivalents and play a vital role in keeping prescription drug costs affordable in Canada.
With regard to Bill S-17, the CDMA fully acknowledges that the Government of Canada must make legislative changes to the Patent Act to comply with our international trade obligations. However, we cannot support this legislation in its current form for two fundamental reasons. First, Bill S-17 contributes to the steadily worsening legal and regulatory environment for generic drugs in Canada. Second, and perhaps more important from your perspective as legislators, drug costs are far and away the fasting rising cost for Canadian health care.
The patent extensions under Bill S-17, combined with the prohibition on stockpiling, make the problem of skyrocketing drug costs paid by patients, employers who provide drug benefits, and provincial governments even worse.
To fully understand the impact of Bill S-17, it needs tobe viewed in contrast with the dramatic shift in Canadian pharmaceutical policy over the past 14 years.Since 1987, Canadian governments have continually increased patent protection for the brand name multinational drugcompanies in response to heavy lobbying by big pharmaceutical companies.
Many of you will recall that, in 1987, the government introduced Bill C-22, that, once passed, severely cut back compulsory licensing of patented medicines. In 1993, the government went further and introduced Bill C-91 which abolished compulsory licensing in Canada. In that same year, the government also rushed through the introduction of the patented medicine notice of compliance regulations which have been, by far, the most harmful to the generic industry of any of these measures.
These regulations made the pharmaceutical industry the only industry in Canada with its own set of rules for patent disputes.In 1998, and again in 1999, the regulations were amended, making them even more onerous to the generic industry. In brief, the regulations give brand name companies the automatic right to prevent Health Canada from approving a generic product for at least two years simply by alleging patent infringement. Obviously, it is well worth the money and effort for the multinationals to allege patent infringement and begin legal proceedings under the regulations, regardless of the merits of their case. Another two years in the market can mean millions in extra profits.
The fact drug that generic drug companies, since the most recent amendments in 1998, have won more than 80 per cent of cases initiated under the regulations, is evidence of their systematic abuse by multinational drug companies.
For the generic drug makers, even when they win in court, they have still been kept off the market for months or years. The Supreme Court of Canada has described the regulations as draconian in their effect on the generic industry. We estimate the cost to Canadians at over $300 million in extra drug costs from these regulations.
The proposed changes to the Patent Act in Bill S-17 continue this negative trend. If the proposed legislation is passed inits current form, Industry Canada estimates that patents on atleast 30 valuable pharmaceutical products will be increased.
Bill S-17 also repeals the stockpiling exception of the Patent Act. Stockpiling allowed generic manufacturers to start making drugs six months before a patent expired so that immediately on patent expiration the public would have access to cheaper generic equivalents. Without the exemption, the public must continue to pay monopoly prices for several weeks or month after patents expire.
The big winner under Bill S-17 is, yet again, the multinational brand name pharmaceutical industry. The losers underBill S-17 are Canada's generic drug industry and the Canadian public.
[Translation]
It is with respect to Canadians, incidentally, that I have come to speak to you about the impact of this bill on us all. The greatest threat to the publicly funded health care system in Canada is out-of-control costs. Among all the health care costs, it is the cost of medications that is rising the most quickly.
Just last week, the Canadian Institute for Health Information published figures which demonstrate that spending on prescription drugs has virtually quadrupled over the last 15 years. The report shows that Canadians spent some $11.4 billion in prescription drugs last year compared to 1985, when these expenses counted for $2.6 billion. According to estimates, total spending on drugs will represent some 15.5 per cent of all health care expenses in Canada in the year 2000.
The costs of drugs is second only to those for hospitals with respect to general health care spending. In fact, Canadians now spend more on drugs than on physician's services.
A great number of Canadians, particularly seniors and people living on a fixed income, are required to pay co-payments and deductibles that are steadily increasing and that undermine their ability to purchase prescription drugs. Members of the committee know that the Patent Medicine Prices Review Board is a government organization responsible for monitoring the prices of patented drugs in Canada.
In its most recent report, the Review Board reported that sales of patented drugs increased by 27 per cent in 1999 comparedto 1998. They increased by 27 per cent last year.
The steady growth in the market share of brand name drug companies, according to the Review Board, is partly due to the long-term effect of the extension of patent protection as a result of bills C-22 in 1987, and C-91 in 1993.
During this time, the market share of generic drugs has leveled or dropped.
[English]
Our view is that Canada's patent regime must be rebalanced. In the past, the federal government has repeatedly said that Canada's drug patent regime achieves a balance between the interests of the brand name industry on the one hand and affordable drug costs on the other. Given the implementation of the WTO rulings, and the brand name industry's abuse of the automatic 24-month injunction of the patent medicine NOC regulations, it is clear that the balance has been dramatically tipped in favour of the multination al brand name industry.
What should be done? The CDMA believes strongly thatBill S-17 should be amended as follows, in two ways: First, amend the proposed section 45 to provide a 20-year-from-filing term for all patents. If Canada must increase the term of some patents to comply with the recent WTO ruling, it should also roll back the term of patents that exceed that requirement. We have examples in our brief of patents that exceed the 20-year term by several years.
Second, we recommend to the committee that the existing section 55.2(4), which is amended in this bill, should berepealed to get rid of the regulations that provide for theautomatic 24-month injunction. Patent disputes in thepharmaceutical industry should be resolved through the normal litigation process used by every other industry in Canada. The world's richest companies do not need their own special set of rules for patent disputes, particularly when these rules are being systematically abused to extend monopolies and force Canadians to pay higher drug prices for longer periods.
If the Senate does not feel it necessary to repeal theregulations, we would ask that the regulations and governing section 55.2(4) be amended so that there be a limit of one or at most two patents that can be listed on the patent list and take advantage of this extraordinary benefit of an automatic injunction against all competitors.
When the regulations were brought in, the notion of a drug coming off patent was thought by parliamentarians to be quite simple. If you read the transcripts from 1992 in the Senate and the House, people considered that, once the patent for a basic compound expired, other companies were free to enter the market. However, brand companies continually restart the injunction by listing multiple patents with new formulations, codings,manufacturing methods or minor variances on a drug. The automatic injunction can be restarted each time a new patent is listed, thus extending their monopolies for years beyond the original 20-year patent term. Again, in our brief, we have several pages of examples where that has occurred.
Drugs do not come off patent the way Parliament envisagedin 1993. They come off as a series of strategically staggered patents. The regulations have turned into a play-book for complicated, time-consuming, and, frankly, frivolous patent litigation. This must stop.
In conclusion, our suggested amendments would leave Canada in full compliance with our international trade obligations and the brand name industry would still have full legal recourse to protect their 20-year patents. Along with meeting our trade obligations, the amendments suggested by the CDMA would help to restore balance to Canada's pharmaceutical policy and control exploding drug costs in Canada.
Senator Tkachuk: I am sure you heard the testimony yesterday of the research drug manufacturers and the government. This issue gets complicated. You refer to terms such as application, certification, 20 years, and evergreen. Most of us are not medical practitioners, although there are some lawyers on this committee. Could you clarify for us the injunction elements? It seems that this is a special provision that exists in this legislation and is not the norm that lawyers or the legal system would expect.
Let us say a drug has been on the market for 20 years. At the end of the 20 years, one would think that generic companies would have access to that drug. It seems that it would be in the interest of the other drug companies to hold this up as long as possible. Could you explain that feature to us as you see it? How do they use extend the patent further?
Mr. Keon: I can provide an example where a generic drug was delayed for about eight months after the original patent expired.
The drug, Pravacol, which is produced by Bristol-Myers Squibb, was at play in the World Trade Organization dispute. The original patent on Pravacol expired in July 2000. The indepen dent generic company had applied to Health Canada for approval. When that application was made, it was faced with the fact there was not just the original patent on the list, but there were other patents on the list. Therefore, there was an automatic two-year stay against the generic approval. That had to go to court. The action began prior to July 2000, but did not finish untilFebruary 2001 when the court determined the generic should get its notice of compliance from Health Canada and could go on the market.
In that case, the original patent expired, but the generic was held up eight months by a subsidiary patent, and ultimately they were found not to be infringing. The play with the regulations is that they create the automatic stay against the generic approval. Thus, even though you may or may not infringe upon a patent, they do not have to develop a prima facie case. They simply go to court as the patent owner, under this system, and the court is automatically obliged to give them the two-year stay against a generic approval.
That is the way it operates in case after case. As I said, we have several pages of those examples in our brief.
Senator Tkachuk: It would be in their interest to do it at all times on a good selling drug, to simply cause that automatic injunction to take place. What do you have to do then? The onus then seems to be on you. What do you have to do to lift that injunction, as you did in that eight-month period, or however long it takes?
Mr. Keon: I will let Mr. Hore answer that question. He is involved in several of these cases.
Mr. Ed Hore, Legal Counsel, Canadian DrugManufacturers Association: Briefly, the generic must make the allegation that they are not infringing that patent or that the patent is invalid. That is what triggers the right of the brand to start the litigation. Eventually a hearing is held on the issue of whether the generic allegation is justified. That is the wording in the regulation. The court will consider the issue of whether the patent is infringed, valid or whatever the issue is, and make a preliminary assessment the question.
If you can get the matter to a hearing, then ultimately you can get the injunction lifted. However, as you say, there is what amounts to an onus because while waiting for a hearing date, which can often take a long time, the generic is stayed from the market. It cannot go on the market.
Senator Tkachuk: In the normal course of law, it would be the reverse. Normally a company would have to file to get an injunction and to prove that another company was infringing on a patent while that company is manufacturing the drug; is that right?
Mr. Hore: That would be right. In any other industry, if you have a patent and you believe your competitor is infringing, you sue your competitor and the court would grant whatever relief it thought was just. It might award damages if it found there was infringement. It might grant you a permanent injunction, and it likely would if it found infringement. It might actually grant an injunction at the outset of the litigation, but that would be rare because at the outset of litigation, you do not know who is right or wrong. Courts are reluctant to do that.
The Chairman: If the brand name company claims that the drug does something else or different and wants another patent, and the court says that is a frivolous claim, are damages ever awarded?
Mr. Hore: Damages were put into the regulations inthe 1998 amendments. So far, no generic has succeeded in getting damages because you must start a separate action. It is enormously expensive and difficult to use that section. An action was started in the last few weeks under that section, but the trouble is that you get your damages but you are selling a low-cost product and have many competitors, so the brand's benefit from triggering the stay is, by definition, going to be much larger because it has a monopoly and a high price.
Senator Furey: Mr. Keon, you indicated in your opening remarks that the rising costs of drugs is one of your main objections to the bill. In one of your briefs, you indicated that, as a result of Bill C-22, drug costs are rising steeply. Yesterday we got the impression from the department that this was not the case. I would like you to comment on that. As well, you indicated that Canada's trade deficit in pharmaceuticals is also rapidly rising. Would you care to comment on that as well?
Mr. Keon: On the issue of rising drug costs, we noted in our comments this morning that the report last week released by the Canadian Institute of Health Information indicated that drugs are the fastest rising component of health care spending. We are now spending more on medicine in Canada than we do for doctor services.
Medicine spending went up 15 per cent last year and has been doing that year over year. The department indicated that, according to the Patent Medicine Prices Review Board, drug prices went up by no more than the rate of inflation, as per the consumer price index. That is correct. However, drug costs are going up 15 per cent. Two things cause that increase. First, increased utilization of medicines, and second, the replacement of existing low-cost medicines by expensive new medicines that may or may not bring a therapeutic advantage. Thus, you have the replacement of an old medicine by a new medicine that might be four times the price. The PMPRB then measures that and says, "We will allow you to come on the market at the median of the international prices of seven countries." That is how they measure it. Then they say, "From that point on, we will let you raise your price by no more than the rate of inflation."
When they measure price increases, it is against this initial very high price. They do not have a measure for determining that you were buying a capsule for 20 cents and are now purchasing a new capsule for $1. They have no measure for that price inflation. However, if you are a drug program manufacturer in a province like Newfoundland, you have seen your costs go up 15 per cent year over a year. That is what really matters to you.
Both sides of this issue have their value. The value of the generic industry is that we provide cost saving or headroom. If you cannot save on the old medicines, how will you be able to afford the new medicines?
What is difficult with this system is that the regulations have created a complex legal system that has, in many cases, made it more profitable for a brand company to spend time and resources putting up legal and regulatory road blocks to a generic coming in. It is more profitable for them to do that than to put their money into research for new medicine. That is the problem with the regulations.
Senator Furey: Do you have any information to share with the committee with respect to how that would compare with price increases in the United States, for example?
Mr. Keon: We heard yesterday from a few people that drug prices in the U.S. are higher than those in Canada by 30 to 40 per cent. We are aware that people do come across the border. The U.S. has two problems. First, they do not have medicare for many of their seniors, and second, they have the highest drug costs in the world by far. In most of Europe and in Canada, we have some form of price regulation on medicines. Canadian prices are at the median of European prices. They are below the U.S. prices but by world standard they are still very high. We have world-class prices.
We mention in our brief that there is a rising trade deficit in Canada. These statistics come from Statistics Canada, but they are actually from the strategist Web site of Industry Canada, therefore, they are Industry Canada's numbers. The trade deficit in 2000 is now at $4 billion a year in Canada. In 1993, it was $1.5 billion. We are importing into Canada $5.8 billion worth of medicines each year, and the value of the Canadian prescription drug market is approximately $11 billion. The imports have just skyrocketed.
Again, we are here primarily to talk about drug costs, but we are not sure that any industrial benefits have come about because more and more the industry is shutting down manufacturing here and bringing the products in to market them in Canada.
I would be happy to table these numbers with the clerk.
Senator Angus: As you said in your opening, Mr. Keon, this is basically a technical bill, simply to enable Canada to comply with its WTO obligations. It seems to me that you are trying to reopen a debate that took place when Bill C-22 was introduced. The matter was resolved at that time. You are now attempting, because of the circumstances that caused the government to bring in these technical provisions, to raise many other issues that are not relevant to the substance of this bill. Would you care to comment on that statement?
Mr. Keon: Yes. The generic industry did not ask for this bill. We very much did not want this bill. It was the lobbying of the multinational brand pharmaceutical industry in Europe and the United States that was successful in convincing their governments to bring these cases against Canada. The Canadian government fought against those cases for two to three years at the World Trade Organization. We find it curious that the government fought so hard against these cases, lost one case, was partially unsuccessful on the other, and once it did it is now saying, "Well, it did not really matter anyway, these are just technical amendments."
We do not believe that. We believe that these are part of a long and continual trend to increase patent protection. The government thought it had, as you said, fixed the Patent Act in Canada. The act was reviewed in 1997 and, essentially, minimal or no changes were made. Then who brought pressure against Canada? It was not the generic drug industry, it was the multinational drug industry, the brand name industry, lobbying their governments for greater patent protection. That is why this bill is here.
Senator Angus: Sir, I hear what you are saying. On the other hand, this bill is not about the patent legislation in Canada. That is for another time. Reading the transcript of yesterday, I had the sense the proceedings got off the point. We are not here on this particular bill to revise or change the principles of our patent legislation. That is for another time. I was quite troubled.
I take it you can understand that we on this side would not normally be that favourable to Mr. Tobin and his cohorts, and yet he seemed to take the strong medicine that was given to him and said that this is for the international community and in order to fulfil our obligations with our trading partners. He took the high road. I thought it was quite uncommon for him to do so, but he did it well.
Mr. Keon: Senator, we have proposed two amendments to the bill. We do not consider that we are reopening the entire patent debate. Our proposals would leave Canada with 20-year patents, which was contained in Bill C-91. It would leave the Patent Medicine Prices Review Board in place to protect drug prices. It would leave the brand companies with full legal rights to enforce their patents.
We are proposing two things. First, if you increase the patent term on some products, why not decrease the patent term on the other products? If 20 years is the term, make 20 years the term for everything. We are increasing some patent terms and not decreasing others. Again, in our brief we mention that some drugs in Canada have very long patents. The heart drug now "genericized" in the United States, Vasotec, has six more years of patent protection in Canada. Why not do that?
Second, section 55(2)(4), the enabling section of theregulations, is already in place. Part of the rational for it is being removed. It says that, if you take advantage of early working and stockpiling, the government will put in place measures to give further protection to the brands against infringement. Part of that rationale is being removed because the stockpiling is being removed. We are building on that and saying there are things that are happening that were not intended. None of the Parliamentary debates talked about putting 8 or 10 patents on a list and keeping the generics out. The drug patent policy has only been opened so many times. We think our proposals are modest and within the spirit of the bill.
Senator Angus: In other words, your argument and your proposed amendments do in effect go to the patent policy, which is not open at the present time.
On another subject, I understand that, of all of the drugs that are produced and developed by the brand companies, only a small percentage of those drugs are generisized by you and your member companies. Is this true? If so, what is the percentage?
Mr. Keon: When determining which drugs to develop, the generic drug makers choose the largest selling drugs. There are several things that they would take into consideration, such as their technical capacity to produce a certain drug and the popularity of a drug. You must remember that if it is a small drug and you enter the market, you are reducing the price and you are sharing the market. It simply may not be profitable for you to do that.
The other point to remember is that if you generisize a $200-million-a-year drug and reduce the price by $40 million, you are saving the health care system $80 million. If you generisize a $5-million drug and reduce the price by 40 per cent, you are only saving $2 million.
Yes, it is in their self-interest to choose the larger medicines, and it is certainly in the interests of the health care system that they do.
Senator Angus: What percentage would it be? Would itbe 2 per cent?
Mr. Keon: We will get back to you on that.
Senator Angus: Is 5 per cent a fair number?
Mr. Keon: Certainly it is much greater than that. We will need to get back to you. I do not have the exact figure. Some companies have 600 different products, so they are fairly massive, unlike the brands that focus on a small number, the large generic companies have several hundred of products.
Senator Angus: You used the word "profitability" before. As compared with the members of the "Big Pharma," how would the profitability of a smaller pharmacy of these medications compare? There is a ratio.
Mr. Keon: Fortune magazine has listed the brand name industry as the most profitable in the world based on any measure, whether it is return on revenues, return on assets or shareholders' equity. I also have that article if honourable senators would care to have a copy.
The generic industry, since the changes in Bill C-91, has become much less profitable in Canada and has actually become much weaker. In 1991, we were here and talked about the Canadian-owned generic industry. Several of our companies have been weakened by the regulations in particular. They cannot bring new products to market, and have actually been sold at fairly discount prices. Apotex is a private company. I do not know their profitability. They are, in effect, the last major Canadian-owned generic company.
We should remember that, if it is a $100-million-a-year product, by the time the generic comes on, prices are, let us say, downby 40 per cent. The brand company usually licenses its own generic, the pseudo-generics. You are sharing a market that, instead of $100 million, is $60 million. If there arethree companies, you might have a third of it. Your sales are $20 million. The profits on any particular drug are much less than they were for the brand companies.
As another point on the brand profitability in Canada, I know that they do meet their political commitments to 10 per cent research, according to the PMPRB. Approximately 98 per cent of the drugs on the market in Canada are developed elsewhere and come into Canada. The primary job is to get regulatory approval and to market them. The industry in Canada on the brand side is extremely profitable.
Senator Angus: Going to my question, I think I heard you say that the environment here is becoming increasingly negative or not as good for your members, for the generics; yet I understand from my own research that Canada perhaps has the best environment anywhere for the generic companies. Am Imisinformed?
Mr. Keon: We worked very hard with the government on the challenge from the European Union to protect what we call early working, which allows our companies to develop a product during the life of a patent. That is a favourable condition in Canada. Without that, our industry would have been strangled, and that is ultimately what the brand industry would like. We have that provision. They have it in the United States and variants of it in Australia, but not in Europe.
We would go so far as to say that patent law in Canada would be fair to generics if we did not have these automatic injunctions. Those are the things that allow the evergreening strategy to be so effective, and that keep generics off the market even after basic patents expire. If we could eliminate these injunctions, then I would say that the patent law is fair to generics.
Senator Angus: Since you are coming back to the patent issue, I will leave that. I understand, and I think you have confirmed it but I want to be sure for the record, that generics in Canada are able to charge more than generics in other countries.
Mr. Keon: I certainly did not say that. No, I do not think that is true. In some countries there are regulatory limits to what can be charged. In other countries, like the United States, the free market reigns, and it is a competitive pricing environment. In Canada, you have rules at the provincial level. A rule in Ontario, which tends to set the price across the country, says that no generic can come on the market unless it is at least 30 per cent less than the brand, and a second generic cannot get listed in the Ontario formulary unless it is at least 37 per cent off the brand. Therefore, you have those maximums. Typically, as more generics come on the market, they compete and prices go down further.
Senator Angus: One of your main points - I may be wrong, but I do not think so - in your opposition to the bill is the cost of drugs. I think it is a very attractive argument. We all want lower drug costs. We all understand that senior citizens today, given the ageing population, have more and more need for these things. I put it to you that if your members genericize more of the brand drugs than they do and not just the hot big ones, and if they perhaps were prepared to still be profitable but perhaps less profitable, we could have much lower drug costs in Canada. You do not have the big research costs.
Mr. Keon: The point I made is that if we did not have these regulations, several dozen generics would come on the market immediately. Each quarter, Health Canada publishes a list of what they call NOC holds. These are drugs they have approved, generic drugs that have passed the health and safety regulatory aspects, but are held up because of patent rules. If we could come on the market, we would bring the prices down.
The other point I would make is that the generic industry is not as competitive as it should be in Canada. Why? Largely because of the regulations. Let me give an example of a company in Montreal, Technilab, which is one of our member companies. It is in Mirabel. It has sales of perhaps $80 or $100 million a year. It is faced with the decision of whether or not to bring out a generic. It wants to be the first on the market. Everyone wants to be the first. It has to develop the product, source it, do the testing, do clinical testing, and submit it to Health Canada. Then it will go to its patent agent or patent lawyer and ask about the patent situation. It may be told that there are eight patents on that patent list, andthat a search of the patent office data base reveals that thereare 80 other patents pending. This is not unrealistic at all. Then the company will be told that, if they go forward, they can be sure to face a two-year injunction. They can be sure that they will be faced with going to court with the best law firm in Canada and several of the best lawyers they can hire. The company will be told that these lawyers will tear apart its submission, its patent claims, and that they will do everything possible to keep it off the market. The company will be told that it will have to invest a lot of money developing the product and on litigation. What do they do? They do not produce the product. Seventy-five per cent of the litigation is handled by our largest company. There is almost only one company remaining that has the resources to actually go at this.
If you want a competitive generic industry, one of the best things to do is to limit the damage these regulations do, because the small and medium-sized companies are never the first generic. It is not in their economic interest to go forward. That is the chilling effect of this system.
Senator Angus: We have been seeing on TV lately the former presidential candidate talk about his little blue friend. I wonder if any of your members are doing something so we could have that in Canada.
Mr. Keon: I think the drug you are referring to is still patented in Canada.
Senator Angus: There is no product here.
Mr. Keon: It is on the market but under patent, so we cannot produce it yet.
Senator Wiebe: For clarification on the question that Senator Tkachuk asked regarding the eight-month delay that the generic industry suffers as a result of not being able to get a licence at the expiry of the patent, is there a certain time frame in which you can apply for that licence? It is my understanding that there is not. If a generic company wanted to obtain a licence to produce a certain generic drug and was anticipating a battle with the pharmaceutical companies, it could begin that application considerably earlier to ensure that everything was fine and dandy once the patent actually expired. Is that a correct assessment?
Mr. Keon: With the early working provisions, there is no legal limit on when you can begin to develop the product. In practice, in their businesses, the companies go to their patent agents and patent lawyers, and find out when certain patents expire. If a patent is to expire in 2001, you do not want to begin the process in 1995 and then sit with technology that you cannot use for four or five years. There are some costs, and you cannot recoup those. Also, you do not know what will happen to the drug. It may not be a popular drug five years down the road. Typically, they try to time their development work so that they are ready to come on the market when the patents expire. We find with the "evergreen ing" and the regulatory system, there will be major applications in the system. A company may be in court under the two-year stay and in the process of litigating, when new patents go on the list. Then they would have to go back and start again. That is causing the delays beyond the expiry of the original patent.
Senator Wiebe: Are you saying that my understanding of it is correct, then?
Mr. Keon: There is no statutory limit on when you can start the process but, from a business perspective, you will not start several years early.
Senator Wiebe: I do not want to appear as being in defence of the pharmaceutical companies, but I am always concerned about the rhetoric one hears about a certain issue. Because you are on one side, you will use whatever tools you can to get your point across, and when you are on the other side, you will use whatever tools you have for that argument. The inference here is that, were it not for the drug companies that manufactured the drug, you could have had this drug on the market eight months earlier. You could have had the drug on the market had you made your application eight months earlier than you did.
Mr. Hore: The difficulty is that you do not know what patents will be on the list. You cannot start the litigation on a patent until it appears on the register. You cannot start the litigation on that patent earlier. You must start it when it appears, so that there is enough scope for strategic actions where new patents appear.
For example, with Omeprazole, which is Losec, which is an ulcer drug and one of the biggest selling drugs in Canada, you see a steady succession of patents. Litigation is going on now. The application, that is, the submission for health and safety approval, was commenced many years ago, but a new patent appeared on the register on Friday. Another one appeared last fall. It is like jumping over a hurdle which keeps moving further away.
Senator Lynch-Staunton: I cannot think of any other industry in this country whose members are so diametrically opposed in their interpretation of a fundamental principle that guides them, which is what patent protection is all about. I will limit my questions to patent protection.
You tell us that the drug companies have an ability to extend patents by tinkering with the original product and by a minor modification - that is my term - create a new product that is really like the old product. In effect, the old product is being extended, disguised as a new product. This can be done over and over again.
The drug companies tell us that once the patent claiming the original active compound is expired, a generic company is free to market a drug product containing this compound.
These are two diametrically opposed interpretations of the significance of a 20-year protection. Someone must be wrong. Once the 20 years is over and another patent is awarded to the old product, which has been somewhat modified but in effect remains the same, why do you not copy the original product and forget about the new one, which you claim is the same as the old one?
Mr. Keon: Mr. Hore will answer that question. We will use the drug Losec, which is the top selling drug in Canada. It is a $350-million-a-year drug for the treatment of ulcers on which the primary patent expired in July, 1999. Perhaps Mr. Hore will explain to you why there are no generics on the market yet when one might expect there would be.
Mr. Hore: The reason is that a number of things are happening. One is that further patents are being added to the register for the older version. We have had a succession of patents over the years. It has varied from time to time, but it has usually been in the vicinity of about five or six patents. As those patents expire, or are removed by the minister, new patents are put on. For the original version of the Omeprazole I believe there might be six patents today on the register, with the latest one having been added last fall. One company has already won one case on that drug, but other patents have been added, so they must deal with those, and on it goes.
There is also another version of the same drug, that being Omeprazole magnesium, which is essentially the same thing, but this is now the version that is being marketed because the company hopes to complicate the genericization as much as possible, so it has moved to a slightly different version of the drug. It has now added patents for that product, so I think we are at eight now for that one.
As I say, it is in continual motion. When a patent expires, if it is a patent that expired after 20 years, in the absence of any other patents on the register, a generic is free to go on the market. The reality is that, if it is a valuable drug, there will most likely be other patents.
Mr. Keon: That drug alone is a $350-million-a-year drug. We would love to be in the market selling Losec. We have four companies in litigation.
Senator Lynch-Staunton: I do not understand what you mean by additional patents on the original patent. What does the second patent do to affect the first patent? I would think the two would be separate.
Mr. Hore: They are separate.
Senator Lynch-Staunton: You have two separate products, each having its individual patent.
Mr. Hore: There can be a patent, for example, on the molecule, which is the active ingredient. That is a patent that is claimed, so no one else can make it. Then there might be a patent on the coating, that is, the molecule in a tablet with a certain coating on the outside. That might be the second patent. There might also be a patent on the method of making that tablet. That is called a "product by process" patent. There might be a patent on the sustained release version. There might be all kinds of patents.
Senator Lynch-Staunton: What is to stop you from copying the original product, which was covered by the first patent, and using a different coating than is covered by the second patent?
Mr. Hore: Even if you claim that your version does not infringe that patent on the coating, a stay will be imposed, because the stay is automatic. You only get into litigation if you allege that you are not infringing the patent. You are saying that patent is invalid or you are not infringing that patent. The single fundamental point we wish want to make is that it does not matter, you still are stayed even if you are developing a non-infringing product. That does not seem to make sense.
Senator Lynch-Staunton: Then the pharmaceutical companies are wrong, by your interpretation, in stating, in an undated backgrounder entitled "Evergreening Does Not Exist," that once the patent claiming the original active compound is expired, a generic company is free to market a drug product containing this compound. Is that inaccurate?
Mr. Hore: It is inaccurate if there are other patents on the register, which there often will be.
Senator Oliver: It is accurate as far as it goes.
Mr. Hore: As far as it goes.
Mr. Keon: That is the whole point of our brief today. When Bill C-91 was passed, all the debate was about protectingthe 20-year patent, but that is not the reality. The reality is that there are multiple patents on the same product.
Senator Lynch-Staunton: Neither of you, generics nor drug companies, are helping yourselves by this constant feuding. How will a legislator reconcile, and particularly those that must write the regulations, when this rivalry goes on forever? They also say that, unlike many countries around the world, the term of a Canadian patent cannot be extended under any circumstances.
When I read that I say the generics have it all wrong. Now you are telling me they have it all wrong.
Mr. Keon: That statement is accurate. In Canada, you geta 20-year patent. That cannot be extended. We are saying they get other patents on the same product, so that patent will expire but they have other patents and, with the automatic injunctions, you must litigate against those other patents on the same product. Therefore, you are not on the market.
Senator Lynch-Staunton: Is it the automatic injunction that has been introduced in the regulations that you claim is infringing on the protection the legislator thinks he is giving, which is a maximum of 20 years?
Mr. Keon: That is correct. We believe strongly that the regulations that are envisaged under section 55(2)(4) are not operating the way that Parliament intended or understood they would.
Senator Lynch-Staunton: We cannot resolve that here, because the chairman rightly pointed out that that is not within the mandate of the bill itself. However, the minister yesterday did let on that he would re-examine the regulations. Are you aware of any discussions going on between his department and the industry? I think he suggested that perhaps next fall he would revisit this whole area of regulations.
Mr. Keon: We believe that the minister is sincere and does want to look at the regulations, but the fact of the matter is that the enabling section, 55.24, is being amended in this bill. It is being restricted in this bill. We are saying that now is the time to address the issue. Drug patent policy has not been before Parliament in eight years. I believe 1993 was the last time a bill was introduced. If we wait another eight years, drug costs will skyrocket. You will get no relief on the older medicines from generics. Senator, I guess we would say that now is the time to address this issue.
Senator Lynch-Staunton: Yesterday we asked the minister if Health Canada was involved in the preparation and drafting of regulations. I do not have the exact words, but he indicated that they were quite supportive. I find it difficult to appreciate that Health Canada, which is so conscious of the rising cost of drugs, would not lean more towards you for the simple economic reason that you produce a cheaper product. Are you aware of any Health Canada input? Perhaps we could ask them here to the committee to discuss this. It is a patent issue, but it has repercussions on health costs in this country, unlike other products that are protected.
Mr. Keon: Health Canada was not here yesterday, but we are very much aware that Health Canada administers theseregulations. They are very much aware of this problem of evergreening - of adding patents that probably should not be on the list even under their current very extensive rules.
Health Canada is actually taking a much more activist role and is purging some patents from the list. We are aware that, in the last four months, approximately nine actions have been brought against Health Canada by the brand name pharmaceutical industry, suing them for orders. They are telling them that they had no authority to take a certain patent off the list. Health Canada is the meat in the sandwich here. It is caught trying to perform a function that it has no business performing, which is patent litigation or patent interpretation. Health Canada's role should be simply to determine the health and safety of these medicines.
Our view is that Health Canada should be out of it. Yes, we do go back and forth with the brand industry, if it makes people feel any better, not just in Canada, but around the world. Health Canada should be out of it. They should leave regular patent litigation between the generics and the brands to the courts. If someone feels we are infringing a patent, they have every right to sue. That is what we would like to see.
I have sympathy for Health Canada being the unwitting meat in the sandwich, and also because the regulations are made by Industry Canada. They may consult, but they are still made by the Minister of Industry, and Health Canada has to administer them.
Senator Lynch-Staunton: When a patent is taken off the registry and challenged, does it remain on the registry until the challenge has been resolved?
Mr. Hore: That depends on the individual case. In some cases it has been left on because the minister has agreed to that, or the order has been to do it on an interim basis. In other cases, it is off the register, and there is litigation about whether it should be put on. Both situations have arisen.
Senator Lynch-Staunton: What would determine when to keep it on and when it goes off? If this is too technical, we will keep it for another day.
Mr. Hore: It seems to be something that the minister decides he will do or not do, based on factors known to the minister.
Senator Lynch-Staunton: Have there been cases where the department has lost and, if so, are damages paid?
Mr. Hore: The cases are still in the courts. I think only one of them has actually gone to hearing so far. The minister won that one. It seems more are being brought all the time.
Mr. Keon: The minister taking an activist role in purging the patent list is a fairly new development, although it is something we called for many years ago because these patents were, in our view, clearly irrelevant. However, now that he is doing that, I guess he is being sued by the brand companies.
Senator Lynch-Staunton: Thank you. You have been very helpful.
The Chairman: I would make a request of you for our edification in due course. This whole question of patents will come back to us, I am told, within the year. Senator Angus has mentioned that, and we saw it in the papers this morning. We will have a renewed in-depth discussion, when we are allowed to do so. There is presently, I am told, a bill before the United States Congress which will limit patents to two, which goes some length towards answering your complaint. It would be helpful to us if you could look at the proposed American legislation and send us a brief on it so we can prepare ourselves for the next hearings.
Thank you very much for being here.
Mr. Keon: We will be happy to do that, senator.
Senator Tkachuk: Before we go on, could we ask that Department of Health officials appear before the committee? I understand we will be meeting next Thursday. We could ask the Department of Health officials to come then.
The Chairman: Absolutely. That is a good suggestion.
Senator Tkachuk: I am sure we will have further references from our other witnesses.
The Chairman: The next witness is from the Canadian Health Coalition, Mr. Daniel Benedict.
Mr. Daniel Benedict, Canadian Health Coalition: First, let me express my appreciation and our appreciation of this opportunity to raise with you our concerns with respect to the context and contents of Bill S-17, the proposed legislation on prescription patents.
The Canadian Health Coalition, which I represent here this morning, is an expression of the feelings on health care of the many hundreds of thousands of members of local and provincial health coalitions around the country, of community organizations, of ethnic, linguistic and cultural groups, of seniors, of health care providers, of trade unions and of other public interest groups.
Caring, universally available, and effective health care is a major part of what it means to be Canadian. Every poll and study shows that most Canadians believe in it, aspire to it for themselves, their family and community, and even perhaps too often take it for granted. Yet, it costs money.
Though it is still far less costly than the system for our neighbours across the border, some elements of health care have been costing us more and more at a rate often higher than general inflation. Is it true that there is no alternative? Yes, there are alternatives. Providing we do not give in to the hopeless TINA mentality. I apologize if any of the women present are named "Tina," but I am referring to the TINA syndrome, an acronym for "There Is No Alternative," not to any individual. I ran into that problem at one conference, so I am now careful. There are alternatives and they are germane. We ask you to join us in considering some of them.
It is no secret that health care costs for some time rose faster than inflation in general, in Canada and abroad. In 1992, that situation was modified as widespread cuts and increasing use of user fees lowered the real dollar amount in constant 1986 dollars of public expenditure, as confirmed in the 1998 study of the Canadian Institute for Health Information. In total dollars spent on health care, as a percentage of the gross domestic product of Canada, the turn around came a year later. After reaching 10 per cent of the gross domestic product in 1992, it dropped back to about 9 per cent by the end of the decade.
More to the point of today's consultation, over a nine-year period, from 1987 to 1996, prescription drug prices rose 93 per cent, as compared to the consumer price increase of about 23 per cent. In other words, four times as much. However, whether total health expenditures - public, private or individ ual - went up or down, pharmaceutical costs skyrocketed.
Prescription drug costs, powered by the private sectormultinational brand name companies, continue their merry profit rise. From 1985, costs reached roughly $2.5 billion onprescription drugs, and a little over $1 billion on non-prescrip tion, over-the-counter drugs. In the year 2000, those costsreached $11.34 billion and $3.34 billion, respectively.
Most recently, in the years 1998 to 2000, drug costs have continued the trend of the last 15 years to rise some fourtimes faster than the consumer price index, by increasing afurther 16 per cent compared to about 4 per cent for the CPI. No wonder that drug costs have now surpassed spending on physicians of all kinds, and at 15.5 per cent of all health costsin 2000, they are second only to overall hospital expenditures.
Furthermore, while those costs increased, the public nature of coverage was undercut more and more by a series of moves, particularly by provincial governments, that hit low-income people the hardest.
From 1984 to 1990, those with annual incomes below $14,400 in 1986 dollars actually spent seven times as much of their income on out-of-pocket health care expenditures as did higher income people, with "higher" being a relative term, those earning over $49,400 per year. Not only is the proportionhigher, but so are the dollar figures: $61.20 for poorer people,and $43.08 for the richer.
Since then, cuts in public spending, particularly on hospitals, nurses and other health providers, have been joined by the imposition of heavier user fees, particularly on formerly protected low-income segments of the population, such as seniors and people receiving social assistance. Indeed, the 1990s have been a decade of sad reversal of much of the social progress underway in Canada.
The passage of Bill C-91, in 1993, eliminated the compulsory licensing factor that had acted as somewhat of a break on the unrestrained pricing practices of the brand name companies. It extended patent protection for new drugs from 17 to 20 years. Of course, the companies took great advantage of that. After all, these are the same folk who fought like mad to prevent any restrictions on their ultra-high price fixing of AIDS and HIV drugs in Africa and Brazil, even if millions more were dying. Only under tremendous pressure from international public opinion have some companies - two that I have seen in the press - shifted tactics. They agreed a few days ago to lower their prices in the hope of stopping those exasperated countries from producing low-cost generics. Perhaps that is a lesson for the world.
For those who rely on our health system, and many of us must, the increased inequity of prescription drug pricing represents a warning shot across the boughs of health care. The major brand name drug manufacturers are out to get even higher amounts and proportions of our health care dollars in the 21st century.
Studies by a wide range of authors and organizations, including the Conference Board of Canada and the Paris-based Organization for Economic Cooperation and Development, show that public plans can reduce costs as compared to private plans or individual expenditures by measures that do not harm those who need protection. Public plans more often use less costly generic drugs than private plans. Public plans give governments more effective bargaining power to negotiate price reductions withmanufacturers, whether brand name or generic. Public plans are better at holding down dispensing fees. The proof is that dispensing fees in public plans are about one-fifth less the cost. Public plans, helped in part by their larger scope, spend far less on administrative costs, about 2 per cent in Ontario and Quebec, as compared to 8 per cent of the private totals.
Furthermore, Health Canada's national health survey, con ducted in 1996 and 1997, highlights the fact that seniors are among the hardest hit by recent trends. The found that 40 per cent of seniors lack insurance coverage for drug costs and 88 per cent of those of us who are over 80 - and that includes me at 83 - use prescription drugs. There is more inequity there.
What is to be done about this situation? In some parts of Canada, public awareness of the overuse and overcost of prescription drugs has been met by an increased effort to educate people, particularly retirees, of the dangers involved. This has even been written into numerous collective bargainingagreements. However, beyond the educational response, health care supporters have called for immediate action on several points. First, enforce the ban on direct-to-consumer advertising that adds to the price of drugs and creates demand for products that are more costly and, in many cases, not appropriate. Second, encourage the use of guidelines for physicians, pharmacists, government and private insurers on the appropriate and safe use of prescription drugs to prevent over-prescribing and abuse. Third, withdraw the patented medicines regulations of the federal Patent Act to stop the pharmaceutical industry from using litigation to delay the introduction of lower cost generics. Under the present circumstances, something must be done to counter the systematic abuse of the notice of compliance regulations that are used to extend monopoly control far beyond the already overlong patent protection.
The 20-year limit on protection is being converted to a 20-year minimum. It should be changed to a 20-year maximum, with national sovereignty recognized as capable of reducing that period for humanitarian, social or other reasons that any government judges valid. Instead, currently, a brand name manufacturer has only to accuse someone of patent infringement to get an automatic stay of two extra years of monopoly. That should be stopped. By eliminating that regulation, the Government of Canada can take a step to balance some of the inequity increased by the attempt to comply blindly with the World Trade Organization's latest move to strengthen the international corpor ate invasion of health care.
Furthermore, legislation and regulations must be modified so that lower cost generic drugs may really be available to the health seeking public once the already too long waiting period imposed by the unelected World Trade Organization is over. There should be no injunctions in the way of manufacturing and stockpiling generics in preparation for the end of the monopoly period.Bill S-17 can play a healthier role if it is modified in that direction.
Your committee has a responsibility to the Canadian people. We stand ready to be of any possible assistance in that task. Once again, thank you for the opportunity to share our concerns with you.
Senator Angus: Sir, I thought I might point out for you that we have another committee in the Senate on social matters, which is chaired by Senator Kirby. They are doing a study of what is wrong with our health care system. I just put it to you that it might be better to direct your comments to that committee because, as you heard earlier, Bill S-17 does not deal with changing our patent rules, it deals with complying with our international obligations.
Mr. Benedict: If I may respond further, I have a good friend who has a glass eye. He tells the story of the banker who had a glass eye. Some of you may have heard that story. People could tell which was the glass eye quite easily. It was the eye that was more compatible, more friendly.
Senator Angus: Generically speaking.
Mr. Benedict: Furthermore, I thank you for yourrecommendation to appear before Senator Kirby's committee. I shall.
Senator Angus: I take it you are against this bill, right?
Mr. Benedict: I am also concerned about the fact that this is a bill that once again adds to the attempt to turn health care into a commodity. Health care is a part of our lives, not just something we are selling or buying. We are not just clients. We are people. I would appreciate it if you would try to remember that.
The Chairman: Thank you for your time. We appreciate all you are doing.
The next witnesses are from the Canadian PensionersConcerned Inc., represented by Ms Gerda Kaegi, and from the Ontario Society (Coalition) of Senior Citizens' Organizations, represented by Mr. Don Wackley.
Are you making a joint presentation?
Ms Gerda Kaegi, President, Canadian PensionersConcerned Inc.: I am giving a presentation on behalf of both organizations. I sent a copy of my presentation by courier on Monday night and I have just discovered that it did not arrive.
The Chairman: I believe we have it here.
Ms Kaegi: You have just received it. That is why I am not answering you directly. I apologize. I was going to talk to it, not read it.
The Chairman: That is a good idea. I have scanned the document and, really, most of the points have already been presented to us by other witnesses. Please proceed with a summary and your comments.
Ms Kaegi: I would like to give you some background as to who we are. That is outlined in the brief. I am president of the Ontario Division of Canadian Pensioners Concerned. Our national president's husband is in the hospital having undergone heart surgery, so she could not attend. I am speaking on behalf of the national, the Ontario, and the Ontario society, the coalition.
In our brief, we have tried to point out our understanding of the issue in the overview section. We are addressing the role the patent legislation has played in the manufacture and cost of prescription drugs in Canada. We make the link between the cost of drugs and what we call a national medicare plan established under the Canada Health Act. We suggest that our trade agreements do not require us to have the regulations associated with Patent Act regulations that, in our view, severely restrict our access to safe, high quality, lower priced generic drugs.
We also point out that we have a long history of compulsory licensing in Canada going back, as far as I could find, to 1923 - a history that served us well in the past. Our focus is the real needs of Canadians for prescription medications, and the escalating costs associated with that need under the current and proposed patent regime. Bill S-17 is in fact extending the patents to drugs that were not formerly covered under the 20-year limit.
Then we deal with the escalating cost of drugs. We use a variety of sources to point out the incredible increase in drug costs in Canada. A large amount evidence coming into the public domain attests to this fact. One of the most recent is the study done by the Canadian Institute for Health Information released last week, entitled "Drug Expenditure in Canada." I hope that honourable senators will have an opportunity to look at that because I feel it brings the argument into a clearer focus, which is the argument that we certainly are making.
In our view the figures are extremely disturbing, as a significant part of the cost burden is carried by individuals, especially those who have no drug insurance or who have inadequate coverage.
Yesterday, I received a study by Dr. Joel Lexchin, published this month, which also demonstrates the crisis Canadians are facing now over the price of prescription drugs. I do not believe anyone would argue against the fact of the rapid escalation of drug costs in Canada. We see that cost of drugs as a threat to our public health plan, to our private insured plans and, most significantly, to low- and moderate-income people who are either not protected by insurance or public programs or who are only marginally protected. We argue that changes can be made to the regulations to help tackle this problem.
Then we look at the issue of low income and drug costs, because that is primarily at the heart of our argument. The reality of low income in Canada is something that many of us forget. The recent media headlines highlighting the small piece of Stats Canada study, the assets and debts of Canadians, was a one-day wonder, dropped in favour of the stock exchange issues. We draw your attention to the harsh reality facing thousands of Canadians. Do I eat, or do I have my medication? Do I pay for shelter or try to have my medication? We have reports from family physicians whose patients have, in fact, made those statements. The National Council of Welfare, poverty profiles, Dr. Lexchin's study and the CIHI study raise the issue of income and the capacity to pay. Again, we draw that back to the discussion around Bill S-7, and the regulations in particular.
Provincial drug benefit programs vary incredibly across the country. I understand the problem they face, given theever-increasing costs of health care and the fastest rising component, drugs. In our brief, we touch on strategies used by provincial governments to deal with this serious issue, and we deplore the results. Inequity reigns supreme. In fact, even if you are covered by a provincial plan, your out-of-pocket expenses would vary from one province to the other, one of the highest being found in some of the poorest provinces. I note that, according to Dr. Lexchin's study, 12 per cent of Canadians,or 3.5 million people, have no drug insurance at all. Again, we are tying this back to Bill S-17.
We have also considered the World Trade Organization and the Agreement on Trade-Related Aspects of Intellectual Property Rights, TRIPS, and the international pharmaceutical industry. You have heard the arguments before, so I will not repeat them. We are not lawyers, nor medical researchers, but we do study reports. We read divergent opinions and come to our conclusions.
Bill S-17 continues the pattern of Bill C-91, and there we have some problems. The legislation puts the interest of patent holders, the big, international pharmaceutical companies, over the rights of all citizens. We argue that this bill continues to put the rights of corporate wealth over the rights of public health.
Reference was made by the person who spoke to you before me to Africa. That is not a frivolous issue. It is the same issue in Africa and Asia. It is the battle of countries needing low-price drugs prepared to go with generic drugs, and the large pharmaceutical companies trying to block it every step of the way. That also happens in Canada. We cannot afford the cost of patent drugs, specially at the rate of price increases we are seeing today. Individual citizens cannot afford the price of drugs.
We agree that you must protect the rights of patent holders. That we accept. The question is, do you go beyond what is the norm for a particular industry? That is the other issue. We join with many others in calling for changes to the treatment of patent and generic drugs in Canada.
Our first recommendation, which I know you will not consider, but we believed that it should be put in, is to return to compulsory licensing after 17 years and call on the government to move to a national drug plan where the distribution of medicines isoverseen by federal or provincial government bodies. That links recommendation numbers one and six. In the hearings that were held in 1997, legal opinions were given that, if Canada in fact had done that, it would be covered under the TRIPS rules. Again, I am reading the arguments. I am not a lawyer, but I am reminding you of that fact.
Our second recommendation is that we move to a 20-year patent applicable to drugs, but again, as you have heard others say, an absolute 20-year limit. We have investigated this. We have talked to doctors and manufacturers, and we are appalled to realize how much variation occurs. We argue that the 20-year limit should start the moment the application goes in. In other words, start the clock ticking the moment you apply.
As you have heard from the first presenters, and I think there was a reference to this from the second, we urge you to repeal the special regulations targeted to the pharmaceutical industry. At the very least, we plead with you to recommend rescinding the regulations that permit automatic injunctions and the stockpiling of generic drugs. It has been documented that these are strategies that the international pharmaceuticals want. They battled Canada when we had the shorter licensing period, and they are continuing to battle. It is an issue that we believe need to be addressed, and we say we should balance the public interest against the recognized private interest of the corporations.
We also argue to limit the number of patents per drug.
The Chairman: That was a terrific presentation. Thank you.
Senator Tkachuk: I have some sympathy with you on the 20-year patent provision. A number of the presenters were correct in that when the two bills were passed in the 1980s and early 1990s, the intent was to provide a 20-year protection and not find ways to exacerbate the problem and continue with the high increase in drug costs.
Perhaps you can help me. We extended patent protectionfrom 17 to 20 years. Of course this is a double-edged sword. We have been told that the price of existing drugs has not gone up that much, but that the increase relates to the new drugs coming on the market. I believe that, by extending the 17 years to 20 years, we provided an impetus for new drugs to come onto the market, so therefore we have an increased supply to fill a demand that was there but unavailable. We now have a new drug on the market, say for cancer, that perhaps would not have been there if we did not have the patent protection we have. Prices have not gone up, but we have so many more new drugs on the market that the cost has gone up because we are now treating more people and treating more diseases and treating more symptoms. That is a difficult problem to solve because you want this to happen, but you pay for it in the end. It would be difficult to go back to the old system. That may decrease the number of new drugs on the market, and that would not be good for our society.
Ms Kaegi: Thank you. I do understand the argument, but I would beg to differ. Under the old regime, drugs were being produced and new treatments were being developed. The point we are making is that much of the research is already funded from the public sector through universities, through grants fromgovernments, and also through the patent protection.
I believe that we would have the new drugs in place even if we did not have a 20-year term. We were getting themunder 17 years. I realize that, under the agreements with the World Trade Organization, the government has clearly said that they will stick with the 20 years. However, I do not believe that any extra protection should be granted. I believe the intent of Parliament should be carried out. I do not see why the international pharmaceutical industry should be given better protection than other industries.
We are dealing with real human needs. We are not dealing with another version of an engine or, as I flippantly said in my brief, "can openers."
One of the documents that I wish I had read more carefully before I came here included a statement made in the study done by Dr. Lexchin that said, at one point, I believe it wasin 1993, the cost of Australian drugs were 30 per cent below those in Canada. They had a national drug policy that allowed them to bring down the cost of drugs because there was a purchasing negotiation strategy that worked with the pharmaceuticalcompanies. When I read that, I phoned someone in the Ontario drug benefits branch and I asked, "What happens when you agree to a drug?" The answer was, "Well, we talk price."
My sense is that the drugs would be there. We are getting the benefit. The drug companies want the provincial plans to take their drugs. It is a confirmed market for them. I do not believe the new drugs would not be developed. I hope I have answered your question.
Senator Tkachuk: Yes, you have expanded on my question and answered it. Thank you very much.
Senator Oliver: Could the witness provide us with a copy of Dr. Lexchin's paper?
Ms Kaegi: I can provide that to the clerk.
The Chairman: Thank you. He will distribute it for us.
Mr. Don Wackley, Co-Chair, Ontario Society (Coalition) of Senior Citizens' Organizations: Honourable senators, if I may add one small comment. There is a myth that all seniors are rich. That is not true.
The Chairman: We do not think that.
Mr. Wackley: That sentiment is out there. That perception is especially false in regard to senior women who, because of the period in which they grew up, they stayed home, looked after the family, did not have a job and were not putting money into pension plans. Those people are now phoning us in dire need and may even lose their houses because of the cost of drugs.
I urge honourable senators to pay special attention to seniors who are in jeopardy of losing the roof over their heads.
The Chairman: Thank you for that comment.
The committee adjourned.