Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 4 - Evidence
OTTAWA, Wednesday, May 12, 2004
The Standing Senate Committee on Foreign Affairs, to which was referred Bill C-9, to amend the Patent Act and the Food and Drugs Act, met this day at 3:10 p.m. to give consideration to the bill.
Senator Peter A. Stollery (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, I call the meeting to order. I remind everyone that we are dealing with Bill C-9, an act to amend the Patent Act and the Food and Drugs Act. For the record, I will outline the procedure we will be following. The Honourable Bill Graham is with us to lead off. He will be followed, when he leaves, by the Honourable Lucienne Robillard.
We also have representatives from Industry Canada, Health Canada, the Department of Foreign Affairs and International Trade, and CIDA represented. I will not introduce everyone because that would probably take more time than we need to take. The officials are here to answer questions that senators may have.
After Minister Robillard is finished, we will hear from representatives of the research-based pharmaceutical companies to sum it all up. We also have the Canadian Generic Pharmaceutical Association, which I will introduce when we get there, if that is acceptable to everyone.
I know the minister has limited time, so I will not beat around the bush. With the consent of the committee, I will ask the minister to make his statement and proceed.
The Honourable Bill Graham, Minister of Foreign Affairs: Honourable senators, I apologize for being late, but Question Period seems to be becoming quite lively these days. I cannot explain the state of frivolity in the House, but it is electric.
We are certainly aware of the fact today that we, and honourable senators, are dealing with an issue that deals with a global health crisis, one that our renowned friend Stephen Lewis says will define our generation by the way in which we respond to it. HIV/AIDS is devastating much of the African continent, threatening the economic and social stability of millions. Each day, 8,000 African men, women and children die as a result of AIDS and another 14,000 become infected. Parts of Asia, the Caribbean and Eastern Europe are also potentially on the brink of an explosive HIV/AIDS epidemic.
Adding to this is the toll taken by other infectious diseases such as tuberculosis and malaria, which have long since been eliminated as major threats in the developed world. Together, these diseases, by devastating whole populations, are making development impossible and creating generations who will live in poverty. It is, therefore, our collective global imperative to combat these epidemics, both out of a basic human decency and out of a long-term vigilance for the security of Africans and others, including Canadians.
Amid the global focus on the threat that terrorism poses to the security of states, we must not neglect human security that concerns threats to the rights, safety and lives of individuals. Just as much as the terrible realities of conflict and human rights abuse, the toll of disease and ill health creates enormous threats to the security of Africans, both at the individual and national levels. Indeed, in parts of the developing world, as Kofi Annan has said, AIDS is equivalent to a weapon of mass destruction.
Rates of infection among adults in some African countries have risen above 30 per cent, and life expectancy is dropping below 40 years. AIDS will produce up to 20 million orphans on the continent by 2010. Who will support and raise them? Teachers and health care worker are sick and dying. Who will educate and heal the next generation? African police forces and militaries are being decimated. Who will be left to maintain peace and security; and what will it mean for the security of Canadians and the rest of the world when the instability created by these African crises reaches our own borders, as we know that they inevitably will?
[Translation]
Last September, I made a commitment, on behalf of Canada, to take the necessary steps to solve this issue when I addressed the special session of the UN General Assembly on VIH/AIDS. With that legislation, Canada is fulfilling its commitment in a very tangible way. As you know, at the G8 summit in Kananaskis, we placed HIV/AIDS at the core of an action program for the development of Africa. Since then, we have been cooperating with our G8 partners to implement NEPAD and the action plan for Africa. We are also committing a quite sizeable amount of resources, through SIDA, in bilateral or multilateral projects like the Global Fund to Fight AIDS, Tuberculosis and Malaria.
In June, my colleague, Minister Carroll, will preside the annual meeting of the main UN body engaged in the fight against HIV/AIDS. And at the end of the month I shall go in Mali to a ministerial conference of the Human security Network to discuss the HIV/AIDS crisis and other human security issues.
The most recent example of Canada's commitment to public health in developing countries is the $100 millions contribution announced yesterday by the Prime Minister at the World Health Organization to treat 3 million aids patients by the end of 2005. By this donation, Canada becomes the most generous contributor.
Furthermore, as was announced by the Prime Minister, the minister responsible for International Cooperation and Bono, we are also doubling Canada's commitment to the Global Fund to fight HIV/AIDS, Tuberculosis and Malaria by raising our contribution to some $70 million starting in 2006.
[English]
Beyond these financial contributions, of course, other forms of global leadership are needed. It is an act of truly far- reaching global leadership, I believe, that we are called upon as parliamentarians to enact this, the first statute of its kind in the world, a model for other nations.
Last August, the World Trade Organization came to a landmark decision permitting countries to export to developing countries generic drugs for treating diseases such as HIV/AIDS, TB and malaria. This was a critical step. However, because it was a waiver to an international decision, it was left to member states to decide whether or not to implement it. Within a few weeks, Canada announced its intention to change our patent law to reflect the WHO decision. Less than 10 months later, here we are on the brink of passing the Canada and Jean Chrétien pledge to Africa act, legislation that will make Canada the first country to implement the WTO decision.
I must say, Mr. Chairman, that the legislative process was more complex than we had expected, but we were determined to get it right. We consulted extensively with both brand and generic pharmaceutical companies, as well as with the NGOs that work with people and states of the developing world. Now we have arrived at a bill that we can hold up to the world and say, Canada has delivered. Once this bill is passed, Canadian generic drug manufacturers will be able to apply for licences to produce and export essential medicines to developing countries.
I will not go into the details of the bill today, since there are a number of officials, as you indicated, Mr. Chairman, who can speak to those. There is, however, one technical detail to which I would like to draw your attention, honourable senators.
You will recall that proposed section 21.18(2) of the bill provides for the establishment of an advisory committee to advise on eligible drugs for export under the act. The bill before you, in an oversight, failed to provide for senators' participation in assessing candidates for membership on this committee. However, you have before you a letter from the Honourable Lucienne Robillard, Minister of Industry, undertaking to rectify this error through an amendment to be introduced at the earliest possible opportunity. I apologize for this omission and hope that this undertaking will satisfy your legitimate concerns in this regard, and that you will enable us to adopt the bill in this session and deal with this issue by a subsequent amendment.
I would also like to emphasize the impact that this proposed legislation will have. The impact will go far beyond the lives that will be saved by Canadian-produced generic drugs. By being the first country in the world to pass such legislation, we are showing other drug-producing nations that they can and should move quickly to follow suit: to get their domestically produced medicines to people in need. The encouragement our actions will give for other countries will, I believe, ensure a truly global response to a global health crisis.
Canadians should be proud of what we are accomplishing here today, honourable senators. It is not the entire answer to advancing global health and protecting human security, of course. There is much else the global community must do together.
However, this is something truly important and far reaching that you are considering today. The swiftness of this bill's passage through our legislative system show's the depth of Canada's commitment to fulfilling the pledges we have made to Africa and the developing world.
I thank you for your role in advancing this historic achievement. I would be pleased to answer any questions.
Senator Keon: Thank you for your presentation, Mr. Minister. I am fully supportive of this proposed legislation. My questions in no way are meant to impede its adoption. However, I do wish to raise some serious issues that this proposed legislation will produce. I believe you are the right person to deal with them.
There is no question that diversion will be a huge problem associated with the implementation of this program. There is also very little doubt that counterfeiting will become a serious problem associated with the implementation of this program.
However, the most serious problem of all will result from the implementation of a program to treat tens of thousands or millions of people with AIDS. That will convert this population from a one of acute patients with a very short life expectancy from their disease to a population of chronic patients with a very long life expectancy who still have the capability of transmitting the disease. Consequently, this well-intended program could indeed turn out to be a catastrophe. I raise point this because this program must be associated with a program of prevention of transmission of AIDS. We will increase the population base of AIDS carriers capable of transmitting the disease.
My question to you is the following: Will your government undertake immediately to pursue, through the necessary channels, a program of AIDS prevention where the drugs are made available to the population?
Mr. Graham: Thank you very much, Senator Keon. Both of your comments are valid.
You have probably seen the safeguards in respect of diversion in Bill C-9. It certainly addresses that issue. That may have to be refined by further regulation. Certainly the drafters of the bill were conscious of this problem and it is everyone's hope that we have it right.
Your second comment is also of concern. In my downtown riding of Toronto Centre—Rosedale, we learned a long time ago — as did other urban areas — that the way to deal with HIV/AIDS is through educating people on safe sex practices and by indicating to people how they can transmit the disease. There has been a great deal of publicity in Canada. As you know, we have provided medication for our people. People in the western world are not dying of HIV/ AIDS today. They are being, if not entirely cured, given an opportunity to live productive lives.
In respect of the risk of transmission, I do not think that we could, for that reason, deny other people in Africa or other countries that same opportunity. As I said, there are other tremendous problems associated with allowing the problem to go on as it is: There are no policemen; there are no teachers; there are no doctors. There are millions of orphans in Africa. Soon there will be not even be any agricultural workers. Entire populations are being decimated. That is the other side.
Yes, we have to have programs whereby people are taught about safe sex. This is an important part of what CIDA does. CIDA has many programs with women and vulnerable populations to teach them about these practices. We do work with governments in countries to deal with this. There is a serious problem of social taboos in certain countries.
Honourable senators, I have spent a great deal of time with leadership in Africa and countries affected by HIV/ AIDS today. Even a country like Russia — which would not even admit that AIDS existed 10 years ago — is taking strong measures to educate their population. There has been a sea change in the attitude of people as can be witnessed in a country like Uganda. We will have to do that as part of the process. I agree with you.
Senator Graham: I, too, congratulate the government on this initiative. Canadians can be proud of what would be accomplished through this. Can you tell us why the eligibility conditions are different between WTO and non-WTO countries?
Mr. Graham: We have extended the application of the bill to all least-developed countries, LDCs. As you recall, this arose out of a decision of the WTO, therefore WTO members originally dealt with it. We have extended it to all LDCs.
The Chairman: Regardless of whether they are members of the WTO?
Mr. Graham: That is right.
Senator Kinsella: I agree with Senator Keon. The opposition in the Senate supports the bill. It is an excellent initiative.
You made reference to a letter from your colleague, Minister Robillard. Can the chair advise whether this letter has been tabled yet?
The Chairman: It has not because we are expecting Minister Robillard in a few minutes. I thought we would give her the courtesy of tabling the letter to me.
Senator Kinsella: Minister, Monday evening we suggested in the Senate chamber that our side would adopt the bill immediately if the government side would agree to put in this amendment to which you drew our attention and which the government supports. Unfortunately, your colleague, the Leader of the Government in the Senate, was not able to go along with that.
Do you think if we made that amendment tomorrow we could get it through the House of Commons before you leave?
Mr. Graham: I could not speak for the House leader, Senator Kinsella. I hear what you are saying. I understand why the leadership of the Senate did not agree to proceed that way. It is due to the exigencies of the House of Commons and its procedures.
I am not sure. I could not make you the guarantee sitting here today that we could get it through by this Friday. I believe that all of you would agree that it is most important to get this bill adopted at this time.
I would respectfully ask you to hear what the Honourable Minister of Industry has to explain to you on this matter. I hope that will satisfy you. We could then proceed with an amendment as soon as it is feasible.
Senator Kinsella: In the bill and in your statement, you spoke to the pledge of Canada to Africa. Is that pledge elaborated and articulated in writing? Is there a document that contains all elements of Canada's pledge to Africa of which this is but an element?
On page 1 of the bill it reads that the purpose is to ``give effect to Canada's and Jean Chrétien's pledge to Africa...'' Was the disjunction intended there? Is there a distinction between the pledge by the people of Canada, made by the Prime Minister of Canada and a pledge made by Jean Chrétien? That is the way the bill is written. I have not seen a bill that, in its title, included the name of an individual in brackets. I do not want it go down that avenue — whether Stephen Lewis's name would have been better than the former Prime Minister's, or Bono's — because I think that our pledge to Africa is critically important, as you have articulated. However, it would be interesting to know whether there is a document that we could see the fullness of that pledge of which this is a part.
Mr. Graham: I would have to undertake to provide such a document if it exists. I will ask the officials to look for one. However, I must say that, as you know, the original wording of the section to which you refer was changed to add the word ``Canada'' in addition to the reference to the former Prime Minister.
The former Prime Minister's pledge to Africa was certainly made at the Kananaskis G8 Summit. It was also made at the Monterrey Conference when we undertook to increase our aid by approximately 8 per cent per annum over a period of time and that 50 per cent of that amount of money would be consecrated to Africa. Therefore, you will find that pledge to Africa is more a concept of a political engagement to Africa than a specific single document. It is found in initiatives such as the New Partnership for Africa's Development, NEPAD, to which I referred, the increase in aid to Africa, the guarantees, the various undertakings in respect of HIV/AIDS and others. It is not a single document; it is a way of expressing a series of a policy of initiatives to bring Africa back to a point where it can become a truly functioning entity where in fact the people there can live up to the potential that they have.
The Chairman: Senators, with your permission, I note that Minister Robillard has arrived and Minister Graham, I know, has to leave. I want to thank him for appearing.
I will also distribute the letter for members that Madame Robillard wrote to the chair and I think this is the appropriate time to distribute the letter. I want to extend the same welcome to Minister Robillard on behalf of the committee that we extended to Minister Graham.
[Translation]
The Honourable Lucienne Robillard, Minister of Industry: I am very pleased to appear before you this afternoon.
[English]
I am happy to be with you to discuss this important bill. This proposed legislation, when passed, will be something of which all Canadians will be proud. I intend to keep my remarks brief to allow time for questions.
My colleague, the Minister of Foreign Affairs, was here, so I do not have to speak about the international implications.
[Translation]
This legislation follows a decision by the World Trade Organization to grant a waiver from some provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights. That decision aims to allow, under certain conditions, the exportation of approved versions of patented drugs to member countries of WTO lacking their own manufacturing capacity.
I should underline that WTO does not oblige its members to do anything. Nobody ever forced Canada to participate. However, our collective conscience — I should say our Canadian values — are pressing us to do so. We have the moral obligation to act, and to act urgently. We certainly hope that Canada's leadership will encourage other countries to follow suit.
Bill C-9 is based on a balance between different interests. They are, on the one hand, the great humanitarian goal of facilitating the exportation of essential drugs to developing countries. On the other hand, we must still protect the integrity of our intellectual property regime and make sure that our international obligations will be respected.
It would have been impossible to develop this legislation without the goodwill, the expertise and the commitment of many stakeholders. I shall mention that, since the very beginning, patent and generic drug companies have been the champions of that initiative. Non governmental organizations have also participated in this project to make sure that what was proposed in theory could work well in practice.
[English]
I realize that the members of the committee are all familiar with the basic picture of the legislation, however, I should like to focus briefly on some of the specific amendments that were adopted as a result of a thorough review in the other place.
We have managed to improve the legislation considerably while continuing to respect the necessary balance. The most notable among these amendments was our decision to abandon the so-called right of first refusal. In essence, this provision would have allowed brand name patent-holding companies to pre-empt the grant of a licence where they are prepared to supply the needed medicines on terms no less favourable. Stakeholders — particularly the generic industry — told us that this was not appropriate. Therefore, we have acted.
Under our new proposal, generic companies will not be required to notify the patentee prior to signing a supply contract with an eligible importing country. In accordance with our international obligation, however, these companies will still be required to seek a voluntary licence from the relevant patentee prior to making an application for a compulsory licence.
To promote balance, we have also decided to include a good faith clause to ensure that companies using the regime respect the humanitarian nature of the initiative. This clause limits the maximum price of a generic drug to 25 per cent of the average brand cost in Canada or to within a cost plus 15 per cent profit threshold. Some have complained that these profit controls will discourage generic manufacturers from participating. I do not believe that is true. First, the terms are very fair. More importantly, this initiative should not be about profit margins. It is about saving lives.
Other elements of the legislation remain largely unchanged. We have for example, maintained a series of controls to ensure that drugs are not diverted for commercial purposes. The bill also still contains a schedule outlining a pre- approved list of products that can treat HIV/AIDS, tuberculosis, malaria, and other epidemics. This list will be inspired by the World Health Organization's list of essential medicines. The list will provide a sound guide to the most effective safe and cost-effective medicines for priority conditions in the basic health care system. There was considerable discussion in the other place about what drugs should be on the list. I assure the members of the committee that a great deal of thought has gone into the current list. I should note that a variety of amendments were adopted to include drugs that were not initially on the list.
However, the list is not set in stone. There is a need for flexibility in order to meet future demands of importing countries. For this reason, there are provisions in the bill to allow for the adding of products as necessary. An advisory committee, comprising a variety of experts and medical health practitioners, will be created to make recommendations to the government in this regard.
As my colleague, the Minister of Foreign Affairs has pointed out, due to an oversight, the legislation failed to provide for senators participation in assessing candidates for membership on this committee. You have my apologies for this oversight. As I indicated in my letter to Senator Stollery, I intend to rectify this.
I would hope, however, that you would consider passing the legislation first and then we could correct the oversight through the necessary amendments to the Patent Act at the next available opportunity.
[Translation]
I should also mention that there is a two-year review clause. This will allow us to correct any weaknesses that might appear after implementation of the bill.
[English]
As honourable senators are aware, the bill received rare unanimous support in the other place. This says a great deal about the nobility of its objectives and the potential to alleviate suffering around the world. We have a historic opportunity. I ask for your support in moving forward quickly.
I would be pleased to answer questions. I have my officials and officials from the five departments that are involved in this legislation with me.
Senator Di Nino: Welcome, Madam Minister. I have two questions, and I will put them both to you to save time. I would then appreciate an answer to both.
First, I have a concern that this patent infringement may not be limited to this one particular time. I would ask that you inform us as to what mechanism has been put in place to limit the extent of the infringement so that it is not used for any other purpose other than this one time.
My second question deals with including countries such as Liechtenstein and the United Arab Emirates that are exempted. These are probably two of the richest countries in the world. If I understand this correctly, why would they be included in this exemption when they should be able to buy brand name products at least as easily as we do in this country?
Ms. Robillard: I will address your first question in respect of your concern relating to the patent infringement.
[Translation]
In this bill you will find very specific provisions, particularly section 21.04, which are trying to ensure full compliance on that respect. My officials might add to my answer as it was one of the industry's main concerns.
One of our difficulties to implement the WTO decision was its lack of clarity. We must interpret it while continuing to fulfill our international obligations concerning patent rights. This was the issue and I think that we have what is needed in the legislation to avoid abuses.
Mr. Éric Dagenais, Director, Patent Policy Directorate, Industry Canada: In section 21.04 of the bill, it is clear that the authorization to manufacture a drug can only be given to someone intending to sell and export that drug to the countries listed in schedule 2, 3 or 4. If the country is not on the list you cannot get that permission. The drug must be exported and there is a series of other requirements. The importing country must notify the WTO, demonstrate that it does not have its own manufacturing capacity, and so on.
This bill contains restrictions to prevent any other use of a patent, for instance to sell the drug in Canada or in other developed countries.
Ms. Robillard: We have the list of countries.
Mr. Dagenais: Yes, our list of countries was inspired by the WTO decision. WTO had put in place some provisions for less developed countries. They are in schedule 2. Other WTO members decided to use this waiver only in situations of emergency or extreme urgency. They are listed in schedule 4. All other WTO members, who did not say that they would use it only in limited circumstances, are included in schedule 3.
Liechtenstein is on the list because it is a WTO member. That country did not chose to tell the Chair of the Council that it would make a limited use of it. We shall implement the decision.
[English]
Senator Di Nino: I guess I am not convinced by the answer that you gave to the second question. We are talking about two extremely wealthy countries, and I do not think they need Canada's help. I do not think we need to include them. Obviously, we could have seen that and made some provision in the act to exclude the countries that are not under the LDC definition.
It is a joke for Canadians to have to change its laws of protection under the Patent Act so that we can send certain medicines to the UAE. The wealth of that country is staggering. I do not think that is a good enough answer, Mr. Chairman.
[Translation]
Senator Lynch-Staunton: As Senator Kinsella said earlier to your colleague, the Minister of Foreign Affairs, the Conservative Party in the Senate supports fully this bill, as did our colleagues in the House of Commons.
[English]
You are entering uncharted waters here. I am sure there will be many difficulties on the way, but I would hope that with the full support of both generic and pharmaceutical companies that this goal will be achieved and a good start will be made in Canada. Once again, we will be the lead in the field of international help.
[Translation]
I would like to come back on a seemingly minor point concerning the amendment you are ready to propose in order to place the Senate on the same level than the House of Commons to assess candidacies for appointment to the advisory committee.
[English]
The Leader of the Government in the Senate told us this week that it would be impossible for the House of Commons to pass this bill this week. However, the last time I looked at your calendar you are here until June 24. Would it be possible for an amendment to be considered after you return following the Victoria Day break.
Ms. Robillard: First, thank you for your support for the bill. Second, I am not creating a precedent asking the Senate for support if you want to help the government to pass the bill quickly that bill and to show leadership internationally.
I am told that certain mistakes have been made with other bills in the past. Other ministers had committed to changing their bill. I am thinking about the tobacco bill in particular.
[Translation]
The situation was the same with the electoral boundaries bill. Both times, the government House leader and ministers made a formal commitment to make an amendment at the first opportunity. It was done in the two cases I have mentioned. We made the necessary changes.
Unfortunately, this oversight happened at the amendment stage in the committee of the House of Commons. It was unintended and it is in that context that I am asking you for your cooperation.
Senator Lynch-Staunton: I can accept the fact that it is an oversight that can be corrected, but I would like to know if it could be done before the summer adjournment of the House of Commons, on June 24?
Ms. Robillard: We wish to pass this legislation as soon as possible, and this is why I asked for your collaboration.
Senator Lynch-Staunton: Yes, but when would you be ready to table the amendment?
Ms. Robillard: At the first opportunity.
Senator Lynch-Staunton: Which would be when you return after recess, next week?
Ms. Robillard: As soon as possible.
[English]
Senator Morin: Dr. Peterson, I know you are responsible for the approval of drugs at Health Canada. My question has to do with the approval of these generic drugs under the legislation. Will this legislation affect approval times of domestic products, which now, I think, has passed from 670 to 638 days? If we introduce a number of these drugs — 60, I believe — how will that affect our approval times in this instance?
Dr. Robert Peterson, Director General, Therapeutic Products Directorate, Health Products and Food Branch, Health Canada: Thank you. The generic drug-approval process is based upon an abbreviated new drug submission that references the approved Canadian brand product. That longer approval consideration for the brand product, which can go as long as 600 days, has already taken place, so that we use a different mechanism to consider the generic application.
In this instance, we have made provisions, in discussion with Treasury Board and the department, to be certain that special funds would be made available for products that would be brought to us for consideration for this humanitarian program. It is our intention, upon completion of the work on this bill, to sit down with the generic companies and attempt to get a reasonable estimate of what the workload would be, moving forward in the first year and the second year, et cetera, and to use those new funds in order to have the appropriate resources in place.
Senator Morin: Would these products be fast tracked as compared to other generic products?
Dr. Peterson: The approval time for generic products works on an 180-day performance target at present. The delays in that approval are based upon the queue — a very large number of generic products are presented to us for domestic approval. By having additional funding and a different stream, we would not anticipate that the consideration of these applications would be any different than the consideration we would give as though they were to come to the Canadian market. However, we would have a different queue for them to go through. At least that is what is visualized at present.
Senator Morin: Would the user fees be less important in this category than they would for others?
Dr. Peterson: We would, at the present time, not consider user fees for applications for this humanitarian program.
Senator Morin: Would the approval of a generic product under this legislation count in some way when this generic drug eventually comes for sale on the domestic market?
Dr. Peterson: Yes. We have looked toward the same consideration, the same approval process, and the same application for drugs going into this program as would be utilized for a generic drug attempting to reach the Canadian domestic market. With the exception of the distinctive markings that would be required in order to address such issues as potential diversion, the approval process would be virtually the same as if the drug were coming to the Canadian market. When the domestic patent issues could be fully addressed by the generic company, then the application — at least a large portion of that application — would already have taken place by virtue of having them participate in this program.
Senator Morin: Then a generic drug would save on user fees when it comes back for the domestic market, because most of it has occurred outside the domestic market and the drug has already mostly been approved. There is some advantage to introducing a drug now for export if eventually it will be sold in the domestic market later.
Dr. Peterson: Certainly, there will be savings in time because the necessary studies, research work, and development of the pharmaceutical product would have already taken place. We would be able to accommodate all of that as part of our consideration for the domestic market, and there would be considerable savings in that respect.
The issue of user fees, when the product is presented to the Canadian market, is not quite the same as if it were going to the humanitarian program. That is because we have issues associated with licensing fees, with regard to establishment licences and product licence fees, and even some further considerations of what the approval process would be to bring it to the domestic market. I cannot commit to you that there would be complete exemption of users fees under those circumstances, but there would be substantial efficiencies in having that product reach the domestic market, having gone through this process first.
Senator Corbin: I would like to follow and perhaps elucidate the question posed by Senator Di Nino with respect to a country like Liechtenstein. I make a distinction between the country listed on one of the annexes and an effective request from such a country.
Will there be a means test of some kind at some level with respect to the ability to pay so as to prevent abuse of this humanitarian program?
Ms. Robillard: Perhaps we were not sufficiently specific in our response. Senator Di Nino also mentioned the United Arab Emirates, which is on annex 4, as an example. To have access, the countries listed in annex 4 must first advise the WTO. Next, they must prove that they do not have manufacturing capability in their own country. Third, they have to prove that they are in an emergency situation. This applies to all the countries on annex 4, so that is why I think it is important to say that.
Perhaps Mr. Dagenais will explain the conditions for annex 3.
Mr. Dagenais: For annex 3, it is the same first two conditions. If you are a country listed on annex 3, you do not have to demonstrate that you have an emergency situation. You just simply have to notify the WTO of your intent to use the waiver, so you name the product and the quantity that you are expecting to import. You also have to certify that you have insufficient or little manufacturing capacity for that particular product.
If Canada issued a compulsory licence, we would advise the WTO Trade Related Intellectual Property Rights, TRIPS, council in Geneva of our issuance of a licence. This notice would be circulated to other WTO members and it could be put on the agenda of the next TRIPS council meeting. Members of the WTO could question, for example, Liechtenstein or the United Arab Emirates, of their use of this waiver if other members thought this went beyond the spirit of the decision.
Senator Di Nino: Surely this program was intended to provide drugs to nations who are not able to buy it in the market because of their inability to fund. They do not have the money. These two countries — and maybe others — have the financial resources to be able to buy these on the open market. Why would we include them in a program of this nature? That is really the question.
Ms. Robillard: I do not know if my officials will want to add something, but we cannot decide, ourselves, to pull out of the list one country or the other. We must respect what the WTO has decided.
The Chairman: Madam Minister, thank you very much for your time.
I believe we now have other witnesses. Senator Corbin, you wanted to say something?
Senator Corbin: Why not ascertain beforehand if our colleagues have further questions for the departmental officials at this time since they are already at the table.
The Chairman: That is a good question. Let me just go back a second. Does anyone have any further questions for the officials?
Senator Day: I am looking at the list of who is here. Is there someone representing the commissioner of patents who could speak to us or is that coming up later?
Mr. Dagenais: We can but there are also representatives.
Senator Day: Let me just ask my question.
As I understand the scheme of this proposed legislation, when a company seeks authorization to manufacture and to obtain the compulsory licence, that application and all of the procedure goes through the patent office and the commissioner of patents, is that correct?
The Chairman: We have a Mr. Clark here. Is that correct?
Mr. Doug Clark, Senior Project Leader, Patent Policy Directorate, Industry Canada: I am here but I work with Industry Canada.
Senator Day: The commissioner of patents can determine a fee for the application process.
Mr. Clark: Yes.
Senator Day: What control is there on that to ensure that that does not become an inhibition?
My second question is, how do we avoid the situation of the patent owner having a patent in a country where this product is to go to, enforcing his patent in that country to avoid the sale of the product? If it was an authorized licence here, we could talk about exhaustion of rights, but I am not sure a compulsory licence fits under that general theory. Could you comment on that?
Mr. Dagenais: On your second question, the bill in clause 21.04 says that when someone is making an application for a compulsory licence, they must certify that in the importing country either there is no patent or a compulsory licence has been or is about to be issued.
Senator Day: Is it in the receiving country?
Mr. Dagenais: That takes care of both ends in terms of IP protection.
Mr. Ramlall is here from the Canadian Intellectual Property office and maybe he can address the question of the fees. Just note CIPO is a fully cost recovery agency, so they do have a charge a fee for the administration of their licences.
Mr. Vishva Ramlall, Senior Policy Officer, Corporate Strategies Branch, Canadian Intellectual Property Office, Industry Canada: The Canadian Intellectual Property Office in conjunction with our colleagues at Industry Canada is studying this issue to determine what is the appropriate fee with respect to administering this regime. We are working on this process right now.
Senator Day: We have no guidance at this stage?
Mr. Dagenais: To give you an idea of the draft regulations prior to the amendment under the previous bill, when there was a right of renewal, there was a notice of intent, an application and a fee for removal. It was somewhere in the order of $400 for the notice of intent, $400 for the application and $200 for the renewal. The notice of intent has been removed. That may change the fee slightly. The fee took into consideration the humanitarian nature of the initiative.
Senator Milne: I will be brief and rather picayune, I suppose.
Dr. Peterson, how do you spell ``cyclosporine''?
The Chairman: Was that a question?
Senator Milne: That is a question. I suspect it is spelled wrongly in the schedule, sir.
Dr. Peterson: I assume that you are referring to two spellings of it, one with an ``e'' at the end and one without.
Senator Milne: No, I am talking about the fact that it is spelled in the schedule on page 20, as ``ciclosporin.'' The French is spelled ``ciclosporine.'' I always thought it was spelled with a ``y.''
Dr. Peterson: That is my understanding as well, senator.
Senator Graham: The reason for asking a question at this time, Mr. Chairman, is because it relates to witnesses who will appear subsequently and that is the Canadian Generic Pharmaceutical Association.
The Chairman: They are coming.
Senator Graham: It is not a question to them.
The Chairman: Let us have the question, then.
Senator Graham: I am just explaining, Mr. Chairman. Be patient, now.
What is the intent of the government in changing the wording of the subamendment 21.04(2)(f)? Will this have an adverse impact on NGOs' ability to purchase drugs for developing countries?
The Chairman: To whom is the question directed?
Senator Graham: Whomever. This is a point that is being made by the Canadian Generic Pharmaceutical Association and I would like the government's answer.
Mr. Dagenais: Initially, the bill as it was retabled on February 12 simply said ``agent'' when it was tabled in November. It said any government or agent of government. The non-governmental organizations approached us and said that they would prefer it if we changed the wording, because they did not consider themselves to be ``agents'' of the importing government.
Upon consultations with the stakeholders, we agreed to replace the word ``agent'' with ``person or entity'' to better reflect the role and the nature of the relationship between NGOs and the importing government.
At committee it was decided by the members to adopt or the person entering permitted by the government of the importing country. That was added because — and I can only suppose, because this was not a government amendment — the WTO decision speaks to a number of steps that an importing country must take before it could use the WTO decision. A non-governmental organization working in sub-Saharan Africa could not absent the importing member taking a number of steps import this drug. In effect, the NGO would have to work with the government. The importing country must notify the WTO. The importing country must certify that they have insufficient manufacturing capacity. Some importing countries must certify that they have an emergency situation. An NGO could not do these things. The importing country must, in some instances where there are patents, issue a compulsory licence. The importing country must be a full participant in this. If it is not, an NGO cannot be importing. In my view, this reflects the WTO decision that a member government that is using this waiver must participate.
There was another issue whereby a country could take the required steps and say, ``We want to import 1 million pills of cyclosporine,'' and someone could ask which NGO would be allowed to import? You could have Oxfam or World Vision showing up at the CIPO saying that they will import the million pills that the Government of Botswana said they would import. The commissioner of patents would have no way of knowing what to do. He would know that a certain country is only supposed to import 1 million pills, but there are three NGOs claiming to want to import 1 million pills to that country. To which one does he give the compulsory licence? Those reasons persuaded the members of the committee.
Senator Graham: Per this subamendment to proposed section 21.04(2)(f), the Canadian Generic Pharmaceutical Association contends in its written presentation that it undermines the government's original amendment. In your position, that is not true. Is that correct?
Mr. Dagenais: It was always the intention — perhaps implicit — within the government's amendment that the ``person or entity'' would be acting in cooperation with the importing government because they simply would not be able to do it on their own. The importing government would have to take certain steps. If you do not have some type of cooperation, it is just two ships passing in the night.
The Chairman: Thank you very much. I think we have explored that subject. On behalf of members of the committee, I thank the officials. I would like to welcome the next set of witnesses who come from Canada's Research- Based Pharmaceutical Companies. I see there are three witnesses.
[Translation]
Mr. Jean-François Leprince, President, Aventis Pharmaceutical, Chair, Rx&D Intellectual Property Committee, Canada's Research-Based Pharmaceutical Companies: On behalf of the Research-Based Pharmaceutical Companies (Rx&D), thank you for having us here today. Rx&D has supported the humanitarian efforts of Bill C-9 since its inception. We have been doing our part. Rx&D has proactively offered its continuous support to officials and parliamentarians being tasked with developing this crucial peace of legislation. We brought to the table, not only our experience in delivering medicines, but also in delivering care to the developing world.
In Africa alone, help is delivered in every country by member companies, as you can see in the map we have included in Appendix B of our submission. Is it enough? Probably not, but they are many other issues in the developing world that prevent patients from accessing health care let alone medicines.
I have seen first hand the plight of patients in Africa. For over a decade, I had responsibility for Near and Middle- East Africa, and worked on programs to deliver medicines to the African patients. I can speak from personal experience as to the need for these medicines, but also to the dire need for the infrastructure and training that ensures they are distributed and properly administered. We believe that Bill C-9 is one step, but much more needs to be done.
[English]
Mr. Terry McCool, Vice-President, Corporate Affairs, Eli Lilly Canada Inc., Vice-Chair, Rx&D Intellectual Property Committee, Canada's Research-Based Pharmaceutical Companies: Our Rx&D member companies support Bill C-9 in its current format and believe that it reflects the intent of the WTO decision in both the amendment and mode of text. At the same time, we will monitor the progress over the next two years before the mandated review.
We are concerned about the absence of government oversight by a designated government body regarding decisions on the merits of compulsory licence applications. No actual decisions are being made by the Commissioner of Patents for granting licences. It is simply a checklist. Bill C-9 creates, in essence, an administrative process without consideration of the merits of the licences before they are granted. We are also hopeful that the regulations will reflect our concerns around diversion.
We have heard from some NGOs that they wish to be able to contract directly with the suppliers. Rx&D's position is, and has always been, that NGOs should be able to contract for supply of products for countries in need. However, it is important that they do so in the context of the WTO decision, with permission from the government of the importing country. The proposed legislation indicates that the purchaser must either be a government person or entity or a person with permission from the government. We support the language of the bill.
It is countries that will be held accountable at the TRIPS council, or to Canada through diplomatic channels, should aspects of this legislation not be followed. Therefore, government involvement is very important. Experience on the ground also tells us that the best success happens when the local governments are involved and help take responsibility for improved health care regulations. We also believe that strengthening Bill C-9's provisions for any diversion can be accomplished through the regulatory process and without legislative amendments.
In addition to prescribing the manner for determining the royalty rates, regulation should ensure the review of the product does not adversely affect our domestic approvals; that anti-diversion measures are put in place — such as requirements to mark and label products being exported in a way that clearly distinguishes them from the innovator's product; and that products exported cannot be imported back into Canada and sold here, negatively affecting Canada's intellectual property regime.
The unfortunate reality is that some medicines sent to developing countries are illegally diverted for resale in the developed world, and never reach the intend patients. Bill C-9 must ensure a system that is open, transparent and does everything possible to curb diversion. Pre-export inspections and effective anti-diversion measures must be put in place.
It is important that the parameters are put in place to ensure the legislation remains a humanitarian venture, and that contracts of patented medicines being copied for export are not exploited for commercial gain. The bottom line is that the situation in the developing world is too great for one group to do it alone. Our companies will remain active in the aid programs that we have pioneered, and we support Bill C-9 as it now reads.
[Translation]
Mr. Leprince: While we will continue implementing international aid programs, we also believe that our role in helping the developing world is finding cures to such terrible diseases as HIV/AIDS. We are proud of companies working on vaccines some of whom are at the clinical trial phase and are hopeful they will succeed. Our goal is to continue research for the next generation of drugs to treat diseases affecting patients around the world.
In closing, I want to emphasize that offering access to affordable medicines is but one element in providing relief to the developing world. We support the Prime Minister's announcement to contribute $100 million to the new World Health Organization's ``3 by 5'' initiative to treat three million people with AIDS by the end of 2005. This Canadian commitment directly reflects the need to address the issues of access to physicians, proper diagnosis and creating a sustainable infrastructure.
Thank you. We are ready to answer your questions.
[English]
Senator Kinsella: Is it not true that your company members have many different types of programs that have had the effect of donating drugs to Third World countries over the years? I believe that I read somewhere — I do not remember where it was — that GlaxoSmithKline not only was donating millions of dollars of drugs, but they had a pricing differential program for these drugs that are in question. Could you explicate that so that the record is clear as to what your member companies have been doing?
Mr. Leprince: I will not expand too much on the pricing programs. I am not totally familiar with them. What I would like to point out is that in the annex you have this map here. It is a nice map, but not so nice when you see the reality of it.
The colour codes are all the treatments that are currently in place by the research-based pharmaceutical companies, and that are intended to treat what I would call ``developing world disease.'' As you can see, all of Africa is covered by colour, with a notable exception that I just realized a few minutes before coming here, which is the central part of Mozambique. It a country that maybe you do not know, but I do know, and I tell you that we will find a remedy to that.
Having said that, today there are at least 25 programs going on in Africa by all of the major pharmaceutical companies. These programs are intended to donate drugs, or maybe to sell drugs at a very attractive price. More importantly, these programs are intended to train physicians to deal with early detection of the disease and, above all, the follow-through of the treatments.
I will give you one example. This is an example that I know well, which is an example from Aventis Pharmaceutical. We are heavily involved in the treatment of tuberculosis, TB. Everybody is referring to AIDS, but TB is at least as important as AIDS is in Africa. According to the World Health Organization, TB could infect an additional 1 billion people within the next 20 years. As usual, 80 per cent of the TB patients are in only 22 countries. Out of those 22 countries, there is South Africa. The WHO and the Mandela Foundation put together a program that called ``DOTS,'' which is directly observed therapy short-course. This program is intended to ensure that patients are detected, receiving the appropriate treatment, and that there is follow through. If we could do this with all the TB patients around the world, with a 90 per cent likelihood of reach, we would eradiate the disease. The data in South Africa today shows that less than 30 per cent of the patients have access to any kind of detection or treatment.
We supply the drugs, but the most important part is the $15 million commitment over a period of five years, which is essentially intended to educate volunteers and health care professionals, and to ensure the consistency of treatments as well as the follow through.
Senator Di Nino: I am looking at the map to which you directed our attention. It is a horrible situation. Therefore, it is understandable why we all support this piece of legislation. I do not think there is a member of the Senate — and certainly there did not appear to be a member in the House — that would not support the legislation.
However, there are issues and weaknesses in the bill. We are trying to bring those forth so that we can correct the weaknesses at some appropriate time and be aware of the pitfalls. My colleague, Senator Keon talked eloquently about those matters. We should be concerned particularly about the diversion issue and the consequences that could arise.
I have two questions. First, were you here when I asked the officials about the potential abuse of the system? I referred to it in another report as the ``thin edge of the wedge.'' Are you concerned that the extent of the infringement of the patent is only restricted to this one particular time for this one particular use? Does that not leave open the possibility for abuse? Officials said that the legislation is pretty clear and it covers that. Are you happy with that?
Ms. Adrienne Blanchard, Legal Counsel, Gowling, Lafleur and Henderson, Canada's Research-Based Pharmaceutical Companies: The officials indicated that there is a limited right being give under proposed section 21.04, which is true. There is not a particular section in the bill that deals with the issue of exhaustion of patent rights, but we believe that many of those issues could be dealt with through regulations and ensuring that there is not a diversion of products back into Canada to be sold.
We think many of those issues can be dealt with through regulation because it is a limited patent right that is being given as a limited licence to generics to be able to manufacture for the purposes of export to the particular countries that are covered.
Senator Di Nino: Keep in mind as well that this has a two-year review period. During that period of time, you will form some opinions. We would appreciate you forwarding them to us, because eventually it will come to us again.
Assuming that we get the power that the two ministers assured us we will receive, the Senate will have a role to play in naming the advisers to the panels. We wonder if you have any comments? What kind of people do you think would be appropriate for these panels?
Mr. McCool: In terms of trying to pull together an expert committee, it should be people who have expertise in the disease that the drug is intended to treat. If it is AIDS, there are a number of people who operate with AIDS patients in Canada that know current and pending state-of-the-art treatments. They could make decisions around that therapeutic category. If it were malaria area or tuberculosis, you could use infectious disease specialists. I do believe that Health Canada should be involved because they know what is coming through the approval process and the indications for which the drug is being approved. A combination of external and government people would be appropriate.
Senator Di Nino: I agree with you. I think that is what one would expect.
What about those who would be experts on the delivery system to ensure that this act of generosity by Canada — and we hope, other nations — was reaching the right people in the right places? Did you think that they should play a role in this advisory panel as well?
Mr. McCool: We did not think they should play a role. If you are to have an expert committee, the expertise should be focused on the drug. You are referring to a problem that has raised our concern: How do we actually get the drug to the patient without it running into a number of different government interventions in the country of destination or diversion before the drug gets to a treatment centre? We are very concerned.
Those are some of the things that would be addressed under the government announcement this week regarding $100 million for creating the infrastructure, distribution network and clinics. There must be a process in place to get these drugs to the patients or this will never work.
Senator Morin: This morning there was another announcement of $75 million for the global AIDS program.
[Translation]
My first question has already been raised by senator Kinsella. I think you are right to draw our attention on this map showing the extent of the problem in Africa and the list of programs put in place by research-based pharmaceutical companies. I shall not raise it again. You have been very eloquent earlier.
[English]
I have a few questions for Mr. McCool, if I may. We just received a document on the subject of Bill C-9. The bill points out that brand companies, such as yours, are highly litigious. Proposed section 21.17 opens a hornet's nest of potential court battles that will defeat the purpose of this legislation. There are a number of proposed amendments in the document. One amendment recommended is that we remove this new section. Could you respond to this, please?
Mr. McCool: We have said from the beginning that there must be some government oversight to ensure that this was being used for humanitarian and non-commercial use. No, we would not recommend removing the clause.
If it truly is intended for the least developed countries of the world, the price of generics that you would need to compete today versus the generics already competing in those countries will be extremely low. I do not think that that threshold will be exceeded in all the likelihood. We continue to support the government's intention of ensuring this is non-commercial.
Senator Morin: Mr. Dagenais, from Industry Canada, dealt with receiving government's permission. He convinced us it was a necessary amendment.
In the bill, the compulsory licence is extended to two years plus one automatic renewal. That is a total of four years. Why can we not remove the limit and permit long-term contracts that would be advantageous to the aid organizations?
Mr. McCool: Canada is the first country to put this legislation in place. There must be some checks and balances. If it was open-ended and you had a problem, you would do more harm than good. In our opinion, four years is appropriate. It means you need to come back with another application for a compulsory licence. It should not be that big a deal.
Senator Morin: Previously there was a fixed royalty of 2 per cent. This has been changed in the new version of the bill and the royalty is more flexible. There is an amendment here that recommends that we reinstate the fixed maximum royalty rate at 2 per cent. What is your opinion of that recommendation?
Mr. McCool: A fixed royalty rate is contrary to the TRIPS agreement. The royalty rate should be approved licence by licence and should be based on the value of the contract in the importing country. Therefore, it could be from a very low amount in the least-developed countries, but in countries like Liechtenstein and the United Arabs Emirates, it might be a little higher. It should not be fixed. Therefore, we support that moving it out of the legislation into the regulations. The officials are working on a formula for trying to determine that, which will be quite fair and quite low.
Senator Morin: You are saying that you do not expect lawsuits on that issue. There will be a formula. Finally, the schedule 1, as you know, deals with a number of drugs. Most of them are essential ones that have been defined by the World Health Organization.
There is a recommendation to eliminate schedule 1 — in other words, to allow all drugs, and to authorize new fixed dose combinations for the treatment of AIDS. I know there are a number on sale, which I think are included in the list. However, if I understand correctly, there would be new fixed-dose combinations for AIDS. Would you come on this final statement?
Mr. McCool: To the first point, a list of drugs helps ensure that drugs get to the diseases that the legislation is intended to treat in the least-developed countries is AIDS, malaria and tuberculosis. If it is expanded to all drugs and diseases, no one knows where this will go. However, if the issue really is in sub-Saharan Africa, then let us deal with that and get that right first.
For the second question on fixed doses, some are approved through Health Canada and are for sale. Those will be appropriate for compulsory licensing and would be on the list. There are some fixed doses that are not approved. Testing has not been done and we are a little out on the risk curve if we start approving drugs for export that we may not be prepared to approve in our own country.
Senator Morin: Are you saying we should approve essential drugs and not lifestyle drugs and things like that for export to Africa?
Mr. McCool: There are no such things as lifestyle drugs.
Senator Morin: Some people would disagree with that.
Senator Keon: Both Mr. Leprince and Mr. McCool alluded to the fact that when you export your drugs, there is a program tied to them. I suspect that is to protect your own reputation but that is commendable.
The problem with this bill is — and I raised it with the minister earlier today — that this is an isolated effort to deal with a truly horrendous problem. There is no question about it but it is an isolated effort to throw many drugs at a disease with no associated health care programs. Particularly, as it relates to AIDS, the global situation could become much worse because unless there is a health care program associated with it, the necessary prevention programs and so forth that we enjoy here in Canada are not going to be there. A person gets a dose of HIV drugs, gets to live another 25 years, and gets to spread the disease all that time.
You people now have the structural framework to do this thing right. You are only doing it for a very tiny segment of the population, but you are doing it correctly. Would you volunteer your sort of structural program to the World Health Organization — I know you work with them already — in a more forceful way and join hands with this whole initiative to see that each time, where it applies to AIDS, that the drugs are distributed, they are associated with the health care program? This does not apply to malaria or TB but to AIDS, it is a tremendous program. What are you doing with the World Health Organization to make the effort better?
Mr. McCool: We do a fair amount with the World Health Organization but more importantly we work with partnerships on the ground. The partnerships are helping ensure that appropriate treatments are reaching the patients and that there is a certain amount of compliance associated with that. A big part of it is getting patients enrolled in the programs. There is a tremendous shortage of public health people in sub-Saharan Africa that creates limitations on what can be done.
I know that there is a noble goal of getting 3 million people into treatment by 2005. However, that will be horribly difficult unless Canada's multi-billions of dollars and other global funds address the infrastructure problem in order to make sure that the drugs are taken appropriately. My biggest fear is that we will over treat people without the necessary follow-up and requirements that a resistance develops and that we create a bigger problem and something more difficult to treat if we do not do this properly.
I do not fully believe that there is a shortage of drugs right now in sub-Saharan Africa. There is a shortage of infrastructure and public health workers and a host of other things that we need to get right so that we can increase the supply of drugs this these areas. Currently, the partnerships that are working there, the generic companies that are on the ground now, that are coming in from other countries has increased a supply that is more than appropriate. I am concerned about how we fix those other things and not how to fix the supply of drugs.
Senator Keon: However, you people are tying your supply to appropriate infrastructure so that you are not damaging your own reputations. How can you assist this program in tying the supply of drugs to appropriate infrastructure? That is what I am asking you.
Mr. Leprince: Senator Keon, I was listening to your comments earlier and they were appropriate in respect of the fact that the moment you start treating a disease like AIDS, there is a certain risk associated with the fact that you move from an acute care situation to a chronic care situation. The associated risk is effectively the fact that there is a lack of consistent follow-through in the treatment. In disease such as AIDS or TB, this is the source of resistance.
In response to your question, we — that is, the research-based pharmaceutical companies — usually have a close cooperation with the WHO because that body exists to validate the kind of treatment regiment we want to apply to a specific disease. On the ground, there is close collaboration with NGOs. I can give you many of examples of such ``three-party agreements.'' These agreements involve WHO, which is responsible for approval of the type of treatment; the pharmaceutical company, which provides the drugs as well as the necessary education and training programs; and the NGO, which is responsible for the implementation phase. That kind of triangle usually works because the pharmaceutical companies cannot do all of this by themselves.
Senator Mahovlich: According to the map that you have presented, about one-third of the area is not orange, which represents HIV/AIDS. Why is there no AIDS in those areas? Are the people educated?
Mr. Leprince: That is not what the colour indicates. The map colours correspond to programs that are currently in place. If there is no colour, it means there is no program in that area. In some instances, it may very well be that there is an AIDS program in an area that is not orange. However, we wanted to emphasize programs for other serious diseases in Africa that may not have the same level of visibility or exposure as does AIDS. For example, sleeping sickness is very serious in Africa; TB is a very serious disease in Africa. AIDS is a catastrophe, but it represents the proverbial trees that mask the forest. Our intention with this map was to show that there is indeed AIDS, but, unfortunately, there are also other serious diseases that need the same kind of attention.
Senator Graham: How many companies are you representing today?
Mr. Leprince: We represent 62 pharmaceutical and biopharmaceutical companies in Canada that are current members of Rx&D.
Senator Graham: Mr. Chairman, could the witness provide us with a complete list of companies?
The Chairman: I am sure the witness would be happy to provide us with the list of the companies that they represent.
Mr. Leprince: We will.
The Chairman: With the agreement of the committee, I would thank you very much for appearing before us. I am sure that you are fed up with appearing before committees, but it was very much appreciated. We thank you for the information.
We now have one more witness. After that, if it is appropriate, we might actually turn our attention to the bill.
Mr. Keon, I am sure you appeared on this subject quite a few times at the House of Commons committee. If you would like to make a short presentation and then we might have a few questions.
Mr. Jim Keon, President, Canadian Generic Pharmaceutical Association: I am pleased to have the opportunity to present our industry's views on Bill C-9. I will start with the purpose of this bill, which is to implement an agreement that Canada signed at the World Trade Organization last August that was intended to increase the supply and decrease the price of medicines to needy, poor countries that did not have the domestic capacity to make these medicines.
It is true the brand name companies have programs in Africa and elsewhere, but it is also true that the world community, including Canada, agreed that there were not enough medicines at prices countries could afford. The purpose of this bill is to try to increase the number of companies making these medicines through increased competition to lower prices, to make them more affordable.
Canada came forward today with money for the World Fund. We have impressive amounts of money available to buy medicines, particularly for HIV/AIDS. However, the world community does not want to pay western-based patent prices for those medicines. They want products available through generic companies at lower prices. That is what this bill is intended to do, and it is important to remember that objective.
As well, this bill builds on and comes from an agreement that was negotiated over two to three years. It came from the original Doha Accord in 2001. Most of the issues that have been addressed here in terms of diversion and lists of products, et cetera, were negotiated at the World Trade Organization. Decisions were made and again, Canada signed on.
Our overall approach to this has been that Canada should have implemented the WTO agreement as it is, without further restrictions. Coming back again to the overall objective, which is to try to increase the quantity and supply of these necessary medicines. Our industry supports the bill. Clearly, if this bill is to be effective in Canada, it relies on generic drug companies to make medicines and to offer them to the international community.
We support the bill. However, we have flagged about six areas where we think the bill contains flaws. I will not got into detail as they are explained in full in our brief, however, I will highlight the areas for which we see potential problems and explain why we think the bill will not be as effective as it could have been.
One point is the invitation to the brand name companies to go to Federal Court to challenge whether a contract is humanitarian or commercial. We have been in court more than 325 times in the last decade with the brand name companies over patent regulations in Canada. They have been in court with illustrious people such as Nelson Mandela. I am not sure I was too comforted by the comment today that there is unlikely to be much litigation. We expect that there might well be.
Second, a number of the non-government organizations have demanded the right to purchase these medicines and then distribute. That was the amendment that the government had proposed. It was then changed at the House committee to a requirement that government approval be linked to the licence and export of the drugs to the developing country.
Third, licences are issued for two years and can be renewed one time only. Our companies are seeking long-term security. We are talking about drugs that are under patent in Canada. Many of the HIV/AIDS drugs are under patent for another 10 years in Canada. You are asking companies to develop products for a limited export market. They will not be able to sell these products in Canada, the United States or Europe for many years to come.
We have argued all along that our companies would like a clear, simple, secure process. The more you complicate it, the more you make it subject to review by a court and create uncertainties in terms of what the royalty rate or the length of the contract will be, the less likely you are to have companies investing the resources to make these products.
A fourth point is the royalty rate itself. As I said, there had been a cap at 2 per cent. The royalty is now to be fixed in regulations. Officials have assured us that the regulations will be appropriate, but as we have not yet seen those regulations, we continue to have a concern in this respect.
In respect of the list of drugs, the WTO agreement did not restrict the types of medicines that should be available to countries. If a country had an emergency and needed medicines, the WTO agreement gives them the right to request them. Canada has decided on its own to limit that with a list of drugs. We think that is unnecessarily limiting.
Finally, like others, we would encourage the Government of Canada to become involved. Unlike some of the large, multinational brand companies, most of the Canadian generic companies do not have people on the ground in Africa. We do not have resources to provide support services, et cetera. We very much hope that the Government of Canada will be an active participant in this whole process and work with our companies, direct them to where the needs are, work with the international organizations, and try to get the more competitively priced medicines on the market. We would encourage the government to move in that way.
Having said that, we support the legislation. We have not tried to slow it down at all. We feel we do need to point out that there are several flaws that will decrease the likelihood of significant amounts of medicines being made under this new system.
Senator Morin: Thank you for your presentation, Mr. Keon. As you point out, the contribution and cooperation of the generic-based industry is essential for this program. As you know, the generic companies from India and Pakistan have been active in this field for some time. Recently, the Clinton Foundation and the World Bank have signed a contract with India and are now exporting generic drugs from India to Africa.
How much competition is that for our Canadian products? You know more of the situation than I; will that interfere with our program here?
Mr. Keon: I do not know if it will interfere, but clearly the Canadian generic companies are looking at those contracts in respect of the prices being negotiated compared with their own cost structures. They want to determine if they can be competitive. I believe that it will come down to a drug-by-drug basis. They will have to look at what the supply now is. If the prices are too low, it will discourage the development of that.
Senator Morin: Is the approval process the same in those countries as it is in Canada? I am referring to the approval process by Health Canada. What is the approval process in India, Brazil and these countries?
Mr. Keon: In many ways, their approval processes are much less stringent than in Canada. As you know, in this bill requires that a generic drug be approved by Health Canada according to Canadian standards before it can be licensed for export. That will be another factor.
The Canadian Generic Pharmaceutical Association is part of an international generic pharmaceutical alliance. We met with the World Health Organization last week. They are very interested in and concerned about those fixed therapies. The WHO has approved products from Indian companies like Cipla and Ranbaxy Pharmaceuticals. These fixed-dose products are approved by the WHO and are now being sold into several countries in Africa. Many of those medicines would not be available under this bill.
There are many issues in relation to competing with Indian companies in particular, but also with Brazilian companies.
Senator Morin: Have there been good clinical studies done on these new multiple-dose medications? We should point out that we do not have them in Canada. They are not for sale in Canada but they are sold by India and Pakistan. Have they been studied and evaluated carefully in those countries, before they are exported to Africa? If not, I am surprised the World Health Organization would have agreed to that.
Mr. Keon: The World Health Organization has developed a protocol for reviewing those drugs. Generic drugs are approved as being equivalent to a brand name product. Typically, the clinical studies are done to demonstrate that the product is absorbed into the system at the same rate, time and strength. They have developed protocols to allow companies to submit information that compares their products to the various individual products, and reassure the World Health Organization that they are equivalent and effective. The World Health Organization has given its blessing to these products.
Senator Di Nino: Obviously, the reason we are dealing with this issue at all is that there is an understanding, belief or reality that enough drugs to deal with these problems, particularly HIV/AIDS, are not being made available to these nations; am I correct?
Mr. Keon: That is the intent of the bill, yes, to increase the supply of medicines, absolutely.
Senator Di Nino: Notwithstanding that there are companies — we just heard about Pakistan and India — that are providing these things, there is still a shortage of these drugs; is that correct?
Mr. Keon: The World Health Organization believes that there is a shortage of these drugs. As was mentioned, they have their so-called Three by Five Program, where they want to treat 3 million people by 2005. They are encouraging generic drug companies around the world to become involved in making these medicines.
Senator Di Nino: After the passage of this bill, obviously, the companies you represent will be able to provide, under that list of drugs, a quantity for this purpose. Will that be a major part of the needs in Africa? What percentage of the needs do you think that our country would be able to produce, assuming a period of time to go into reasonably full production?
Mr. Keon: This proposed legislation is no a short-term fix. We will not be shipping drugs in three months. First, the legislation will not come into effect until the regulations are passed. I understand that will be this fall; that is the intent.
It can take 18 months to two years to develop a generic drug product. You have to source the fine chemicals, develop the formulation, and complete your clinical tests, and submit it to Health Canada. If there are issues with Health Canada, you have to clear them up. You have to do all of that and have an approval from Health Canada before you could even offer your product on the international market.
From our industry perspective, we are looking at setting in place the framework so that over time, our companies can participate — and we have some of the best generic drug companies in the world in Canada.
In the short run over the next few months, you should not expect that there will be generic drug contracts. These are products under patent in Canada; these are products that our companies are not now making. It will take time to resource and develop these products and get approval. It will be some time before Canada is playing a significant role.
Senator Di Nino: Do I understand, as well, that even after that happens, you now have to compete with the rest of the world?
Mr. Keon: That is very much the case. That is as it should be. The WTO agreement applies to 110 countries or more. The intent, as I said, is to get the good quality medicines at the best prices. If our companies can compete and supply these, terrific; if not, then I guess it should be the other companies.
Senator Di Nino: In theory we could be going through all of this and not be able to provide a great deal of the needed drugs because of the cost differential between Canada and India or Canada and other countries around the world.
Mr. Keon: The proposed legislation is important for two reasons. One of the reasons Canada went first is because we have a significant generic drug industry. That is something that there is at least a potential for these products to come from Canada. Second, it is important for countries around the world to implement this type of legislation. Canada is doing it. I understand the European Union will introduce regulations this fall to do it. I would hope that countries all around the world implement this legislation. The Canadian proposed legislation is a model and impetus for other countries to do the same. That is also important.
Senator Morin: The quality of our drug approval system — and Dr. Peterson is in the room — is an added factor that would improve the chances for Canada.
Mr. Keon: Canadian drugs are known as high quality around the world. Our generic drugs are sold in more than 100 countries now. That is one of our strengths; the product comes from Canada. We see on the Internet that people are trying to pass their products off as coming from Canada, often.
Senator Di Nino: The previous witnesses representing the other pharmaceutical companies told us that a large number of programs in these countries provide a certain amount of services and drugs at a reduced rate. Do members of your organization also participate in some programs in these or other countries on the basis of reduced costs? The principle of this bill, in effect, is to make available certain drugs and services that the Rx&D companies seem to be providing now. Do you folks provide any of that at all?
Mr. Keon: Most of our companies would not have resources on the ground in the African countries. That why we have been very insistent and encouraging the government to allow, to the maximum extent, the participation of the international organizations such as the World Health Organization, UN aid groups, as well as the significant NGOs such as Oxfam and Doctors Without Borders. Our companies specialize in making and supplying good quality, competitively priced medicines. That is where we would see our main role. We do not see — at least initially — that generic drug companies will be at the frontlines of actually delivering the health care to the people on the ground. No.
Senator Di Nino: If you wanted to, there are no roadblocks in the way. You could actually go to some of these countries and provide programs.
Mr. Keon: Yes. The difference between the generic and brand name companies is that, by and large, our companies are leaner and do not have the same kind of worldwide resources that some of those companies have. That is one of the reasons why Indian generic companies can sell the products at one-tenth or one-twentieth of the brand prices. There are limits on that.
Remember that this bill is a humanitarian bill but you are actually asking commercial companies to make these products. They are looking at it from that perspective as well. They must ensure that they are not getting into a situation of great uncertainty. I return to my comments earlier about concerns about litigation and so forth. You are talking about very low margin products here. We do not want to get into battles with brand name companies over.
Senator Di Nino: Are the major generic companies publicly or privately held? In conjunction with that, would the financial information on these companies be available, as they are, for the Rx&D companies?
Mr. Keon: I have an executive committee comprising seven companies. Five of them are now foreign-owned companies. Some are publicly traded companies. Teva, which now owns Novopharm, is publicly traded. You can get their annual reports and see all of their information. Two of the large generic drug companies in Canada Apotex and Pharmascience are still privately held.
However, whether they are public or private, they do not want to go to a court to show all of their cost structure to justify that their contract is humanitarian and not commercial. Over the years brand name companies have resisted very well and never have having to open their books to justify pricing. Equally, generic companies would not look forward to doing that in court.
The Chairman: With the agreement of the committee, I would like to move to clause-by-clause consideration following this witness. However, I will go to Senator Graham.
Senator Graham: Mr. Keon, were you in the room when I raised the question with government officials related to subamendment 21.04(2)(f). I went over your written presentation. In that presentation you suggested that this subamendment undermines the government's amendment. You obviously believe that the new subamendment has an adverse effect on the NGOs' ability to purchase drugs for developing countries. Were you satisfied with the response from the government officials?
Mr. Keon: When the government presented their amendments at the House of Commons, they removed the requirement that there be a link to an importing government. It does seem that they felt that that was sufficient at the time.
My response is that our intent all along has been to partner with the major NGOs, particularly Doctors Without Borders and Oxfam. We know that they would have liked the right and ability to purchase these medicines without restrictions. We support that. I would stand by that. It would be better, and more likely in some circumstances, to have significant long-term contracts made with these organizations than it would be with some poorer governments.
Senator Graham: Then, in your opinion, the subamendment still has an adverse effect on the efforts that you would like to put forward?
Mr. Keon: That is correct. That is the one message we would like to leave. We believe there are flaws in the bill that will make it less likely to produce significant amounts of medicine from Canada. Yes.
Senator Graham: Mr. Chairman, I would like to ask this witness to provide us with a list of companies that he represents.
The Chairman: Thank you very much. I am sure the witness would be happy to provide that list.
Senator Corbin, the sponsor of the bill, has a question and then we will thank the witness and go to clause-by-clause.
Senator Corbin: I only ask questions if necessary.
Mr. Keon, in respect of revealing your cost structures, if you must go into court, your cost structures are not made public. They are given to the judge in all confidentiality. Therefore, your rights would be protected and your concerns would be alleviated by this disposition of the bill, is that not right?
Mr. Keon: This is a new feature of the bill. We are not entirely sure. The bill seems to say that if your cost is any more than 25 per cent of the price in Canada, you will have to justify it. We find it offensive that we have to explain and open our books as to what our cost structures are. How is the court going to determine a decision? Who will be looking at our books?
Senator Corbin: That is given personally to the judge. No one else sees it.
Mr. Keon: That may be.
Senator Corbin: If need be.
Mr. Keon: If need be, but who is going to take us to federal court for that? It will only be the brand name company that will go to Federal Court.
The Chairman: On behalf of the committee, I would like to thank the witness.
I would like to proceed to clause-by-clause consideration of Bill C-9. Is it agreed?
Hon. Senators: Agreed.
The Chairman: I shall go down the list of things.
Shall the title stand postponed?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall clause 1 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall clause 2 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall clause 3 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall clause 4 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall schedule 1 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall schedule 2 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall schedule 3 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall schedule 4 carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Shall the title carry?
Hon. Senators: Agreed.
The Chairman: Carried.
Is it agreed that this bill be adopted without amendment?
Hon. Senators: Agreed.
The Chairman: Carried.
Is it agreed that I report this bill at the next sitting of the Senate?
Hon. Senators: Agreed.
The Chairman: Carried.
Senator Corbin: Can we agree that in your absence, if you were to be absent, the deputy chairman will table the report on your behalf?
Hon. Senators: Agreed.
The Chairman: I thank everyone.
The committee adjourned.