Proceedings of the Standing Senate Committee on
National Finance
Issue 19 - Evidence - October 21, 2014
OTTAWA, Tuesday, October 21, 2014
The Standing Senate Committee on National Finance met this day at 9:34 a.m. to study the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2015.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: Honourable senators, this morning, we will continue our study of the Main Estimates for the fiscal year ending March 31, 2015.
[English]
This morning we are pleased to welcome officials from the Canadian Institutes of Health Research. Thérèse Roy is Chief Financial Officer and Vice President, Resource Planning and Management Portfolio; and Kelly VanKoughnet is Associate Vice President, Research and Knowledge Translation.
We thank each of you for being here. It's been some time since we've had your agency before us, and we're looking forward to hearing all about the good work that you're doing.
Thérèse Roy, Chief Financial Officer and Vice President, Resource Planning and Management Portfolio, Canadian Institutes of Health Research: Thank you, Mr. Chair. I would like to thank the committee for inviting us today to discuss the Main Estimates of the Canadian Institutes of Health Research, or CIHR, for the 2014-15 fiscal year. I am pleased to be accompanied by Dr. Kelly VanKoughnet.
I would like to take this opportunity to first explain CIHR's role in the Canadian federal landscape and to highlight the mechanisms used by our organization to ensure that we support research that meets the highest national and international scientific standards of excellence.
As you know, CIHR was established in 2000 by an act of Parliament to position Canada as a world leader in the creation and use of knowledge through health research to improve the health of all Canadians and of the wider global community. More specifically, CIHR's objectives are first to excel, according to internationally accepted standards of scientific excellence, in the creation of new knowledge, and to translate new knowledge into improved health for Canadians and more effective health services and products.
An arm's-length organization within the health portfolio, CIHR also has the legislated responsibility to advise the Minister of Health on all matters relating to health research or health policy.
CIHR is also a member of the three federal granting agencies comprising CIHR: the Natural Sciences and Engineering Research Council and the Social Sciences and Humanities Research Council. Together the three agencies support and promote high-quality research in a wide variety of disciplines and areas. We also support prestigious federal research programs such as the Canada Research Chairs and the Network of Centres of Excellence, aiming to attract and retain the best researchers and trainees to Canada.
[Translation]
CIHR is led by its president, Dr. Alain Beaudet. Overall strategic directions for CIHR are set by its governing council, which also has a mandate to manage the property, business and affairs of CIHR. Dr. Beaudet and the Honourable Michael Wilson, former federal Minister of Finance, are currently co-chairs of CIHR's governing council.
CIHR integrates research through a unique interdisciplinary structure made up of 13 virtual institutes. Each institute shares responsibilities for achieving the fundamental objectives of CIHR and to work with domestic and international stakeholders to forge a coherent health research agenda across disciplines, sectors and regions that embraces scientific opportunity and reflects the emerging health needs of Canadians and the global community.
CIHR's science council, comprised of the scientific directors of our 13 virtual institutes as well as CIHR senior management, has the responsibility to develop, implement and report on CIHR's research and knowledge translation strategy, in accordance with the CIHR Act and strategic directions set out by the governing council.
Day-to-day management of CIHR is led by the executive management committee, which is chaired by the CIHR president and comprised of the three vice-presidents and the associate vice-president.
Through CIHR, the Government of Canada is supporting health research that addresses society's highest-priority health issues and that contributes to Canada's economic growth and prosperity.
Each year, the federal government invests approximately $1 billion to support the work of more than 13,700 researchers and trainees across the country.
Approximately 94 per cent of CIHR's $1 billion budget is invested in a range of programs and activities that are designed to support outstanding research and that promote knowledge translation in accordance with CIHR's mandate and strategic directions. As an operationally lean organization, the remaining 6 per cent of CIHR's budget is directed towards the operations and management of CIHR's activities.
[English]
Research supported by CIHR is divided into two main categories of programs. The first, the investigator-initiated research programs, represents approximately 70 per cent of CIHR's research investments. These programs are designed to ensure the continuous growth of a solid base of evidence and research knowledge from which innovative new health products and services can be built.
The second, the priority-driven programs, supports emergent and targeted research that responds to the changing health needs and priorities of Canadians. To support these initiatives, CIHR actively mobilizes the health research community, including federal, provincial and territorial partners, as well as those from the private and not-for-profit sectors.
Key to these priority-driven programs are CIHR's ''signature initiatives,'' which are typically large-scale initiatives designed to be transformative and have measurable health and health system impacts in the near term. CIHR currently has nine signature initiatives addressing a broad range of health issues, such as chronic disease, personalized medicine, Alzheimer's disease and Aboriginal people's health.
To ensure quality and excellence of research supported by CIHR in all of our funded research programs, applications submitted by researchers and trainees are assessed through an internationally recognized peer review process. Each year more than 3,000 researchers volunteer their time to participate in this peer review committee.
These committees evaluate the applications, rate them on their merit using a defined set of evaluation criteria, and provide funding recommendations to CIHR's Science Council for endorsement and presidential final approval.
[Translation]
I should also mention that in addition to supporting Canadian research excellence, CIHR is active in participating and leading important international activities that address global health issues. For example, CIHR is a member of the Global Alliance for Chronic Diseases, which aims to develop and facilitate innovative research collaborations between low-, middle- and high-income countries in the fight against chronic diseases, a growing burden for all, as you know.
CIHR is also a founding member of the International Rare Diseases Research Consortium. The goal of this consortium is to accelerate medical breakthroughs for people affected by rare diseases, with the specific objective to develop 200 new therapies for rare diseases by 2020.
Another example of CIHR's international engagement and involvement is the Canada-France global dementia legacy event. The goal of this event, which was held in Ottawa last month, was to discuss new models of collaboration between industry and academia in the treatment and care of people with dementia and their caregivers.
[English]
As reflected in the 2014-15 Main Estimates, CIHR is presenting an approved budget of $985 million. This represents a $17.3 million increase over the 2013-14 Main Estimates. This increase is mainly due to the ongoing investment of $15 million to support Canada's Strategy for Patient-Oriented Research, or SPOR, which was announced in the Economic Action Plan in 2013.
The SPOR strategy was announced in 2011 and represents a coalition of federal, provincial and territorial partners that foster innovation in the Canadian health care system. It involves ensuring that the right patient receives the right clinical intervention at the right time, ultimately leading to better health outcomes.
In Economic Action Plan 2014, the Government of Canada announced a new ongoing investment of $15 million per year to CIHR for the expansion of SPOR, as well as for the creation of the Canadian Consortium on Neurodegeneration in Aging and to support other health research priorities. However, as members of the committee know well, this budget announcement is not reflected in CIHR's 2014-15 Main Estimates.
[Translation]
I will conclude my opening remarks there. Thank you for your attention. I hope that I have been able to provide you with a solid overview of CIHR, and that this information will be useful for your committee's study.
Dr. VanKoughnet and I would be pleased to answer any questions you may have.
Thank you.
The Chair: Thank you very much, Ms. Roy. I will start with Senator Eaton, from Toronto.
[English]
Senator Eaton: There are so many questions we could sit here and discuss. I'm always interested in Aboriginal issues because that seems so interesting.
First, can you tell me if it is simply money that keeps and attracts top-rated scientists to Canada? How do you attract new scientists and keep the ones we have?
Kelly VanKoughnet, Associate Vice President, Research and Knowledge Translation, Canadian Institutes of Health Research: I would be lying if I said money didn't matter to the scientific community. But beyond money, I think the key competitive advantage that Canada has is the collaborative nature of research. Many of our most competitive partners in the global research game, such as the United States, have an incredibly competitive institution-to-institution nature of research.
Senator Eaton: Siloed.
Ms. VanKoughnet: Very siloed, and because of our regional spread of expertise within Canada, there is both a tradition and a necessity to work more in networks and collaborate rather than compete on a national basis. That's one of the things we hear most often in terms of being a centre of excellence for research and what's attractive. We're also very connected internationally.
Senator Eaton: That's very interesting.
In June 2012, CIHR launched the Pathways to Health Equity for Aboriginal Peoples. When you talk about highest health priorities, are there specific ones to First Nations that don't exist in the other communities? If so, what are they and do you have a specific budget to meet those priorities?
Ms. VanKoughnet: I'll start by saying that CIHR is unique in the world in terms of having an institute dedicated to Aboriginal people's health. The Institute of Aboriginal People's Health is a unique construct in the world of research, to have an element of our organization focused specifically on that.
In terms of Pathways as part of our strategic plan, reducing health inequities for Aboriginal peoples is one of the top five priorities of the organization. Pathways was launched with a budget in the range of $25 million between now and I think it's 2022. It is specifically looking at intervention research. We try a lot of different public programs and new public policies without always aligning them with a research component to find out whether they're working, whether they have an impact.
Senator Eaton: Would you go into the communities themselves? Do you have input from First Nations?
Ms. VanKoughnet: One of the first elements of the Pathways initiative was to directly fund, through PEKEs everything in CIHR has an acronym, but it's partnerships for health research — some Aboriginal community organizations so that they have the capacity to participate in the design, in the selection of priorities, in actually mobilizing their own communities to participate in the research. It's not a bunch of researchers coming into the Aboriginal community; it's an Aboriginal community inviting research into its community in order to meet its priorities.
Senator Eaton: Can you give me an example of one of those initiatives?
Ms. VanKoughnet: We have already provided about $3 million to Aboriginal organizations through the PEKEs program. We're also building toward an intervention research program in four priority areas: tuberculosis, diabetes/ obesity, oral health and the last one that is slipping my mind. There are basically four areas, four exemplars within the Aboriginal community. Either the incidence or impact of those four health issues is much more severe in those communities. For example, we have, in partnership with the dental health research community in the country, interventions around oral health, which is a big public-based program to reduce cavities in young kids because the severity of the impact of that later on really does start to impact the health of the children and, eventually, health into adulthood.
[Translation]
Senator Bellemare: Your group of virtual research centres is fascinating. Do you have the list of the 13 research centres? I looked for them but could not find them. There must be one.
[English]
The Chair: Why don't you provide it to us?
Ms. VanKoughnet: We can provide it to you. I can probably list them, but —
[Translation]
Senator Bellemare: Your total budget is almost $1 billion, and you have leverage with other groups, the provinces, the private sector, other research centres like SSHRC and NSERC, and so on. Do you know what the overall leverage is of the part of your budget that comes from the government?
Ms. Roy: That is a very good question. Basically, we are still trying to collect all that information, and the governing council asks us for it regularly. Certain initiatives are currently in place to ensure that if we invest one dollar in research, the partners must contribute one dollar to launch the initiative. Collection of this information is constantly being improved.
Last year, we managed to collect about $80 million for the targeted initiatives. I am giving you a figure, but I can provide you with the information because our 2013-14 report indicates the leverage of our initiatives, and it is quite significant. Our organization's basic goal is to create partnerships with the industry or with non-traditional partners to increase research capacity in health, which is increasingly costly, as you know.
Senator Bellemare: How much do research centres like SSHRC and NSERC contribute? Is it included in your billion dollars?
Ms. Roy: Yes. There are always annual competitions in the case of Trois-Conseils programs, but, generally, the amounts transferred vary from $25 million to $30 million a year, depending on the results of the competitions we manage to create between these three agencies.
Senator Bellemare: The fact that all the institutes can react promptly in an urgent situation like Ebola — because we have clearly seen that you deal with major problems but, sometimes, urgent problems like Ebola arise. Do the virtual institutes have the opportunity to work in this field? Could you tell us a little bit about that problem?
[English]
Ms. VanKoughnet: Sure. I can comment on the past more easily than what's going on at present. For example, the Canadian Institutes of Health Research was very involved in the response to SARS. We had an emergency funding opportunity which funded a number of researchers on the ground, looking at some of the public health implications, and also focused on sequencing the genome of the SARS virus to understand how we can attack that. In the current context, we've learned from that as well, and, as another example, we have a partnership with the Public Health Agency of Canada in funding the Canadian Immunization Research Network. It's an established network of more than 140 experts across the country that really does have the capacity to turn around rapid research in the area of vaccination. They have a long-term goal. They study everything from uptake rates and hesitation around taking vaccines, to efficacy, to new methods of delivering vaccines to see if they are more or less effective over time, but they also stand ready in a moment of need for the country. Again, that is part of this connectedness of the Canadian research scene.
We believe, at CIHR, that the structure of the 13 institutes has gone a long way to assisting the research community in making them more connected to the health research or health problems of Canadians and being prepared to actually serve the moment it's required.
[Translation]
Senator Bellemare: We know that a research centre is working on the Ebola matter in Manitoba. Do all the institutes or that institute in particular receive money from the group? Are there ties, particular efforts being made to create a vaccine more quickly?
Ms. Roy: There is an issue of financial structure. The CIHR science council has given priority to the Ebola crisis. It remains that the vaccine and all the implementation mechanisms for these tests need to be tested. The current issue is not financial, because we can organize internally to put together the funds needed to support the Government of Canada, find the best vaccine and implement it. For the moment, though, we do not have any more details about that.
Senator Bellemare: I would like to ask one last question.
The Chair: Please keep it for the second round.
[English]
Senator L. Smith: Thanks for coming out today. In reading through the initial pages of how you were set up and the arm's-length position that the CIHR has, what type of relationship do you have with Health Canada and the Public Health Agency? How does that work?
Ms. VanKoughnet: CIHR plays a role sitting around the health portfolio table, so our president meets with the deputy minister on a regular basis. Our president sits as a deputy minister alongside the Deputy Minister of Health Canada, and now, over the last few weeks, the Public Health Agency's chief, Gregory Taylor. It really is a portfolio family. We have partnerships both with PHAC and with Health Canada to advance part of their priorities. As an example, we're all part of the federal initiative on HIV/AIDS. CIHR's mission in that regard is to support the research component, but there's also a public health component. There is a drug regulatory component. We work alongside our compatriots in the portfolio.
Senator L. Smith: Who determines the priorities when you have an arm's-length group and then two other big agencies that are working? There are lots of priorities, but is there a national list of priorities? In your write-up, you say you have four or five priorities.
Ms. Roy, you did a great job writing this up in terms of how you're set up, but it leads to questions. If 70 per cent of your research is for your core of research investments on page 8, and the rest go into the other priorities, such as your segmented programs and signature initiatives and goes into one pot, then you have all the other pots. Who determines the national priorities? If you're arm's length, do you agree with those priorities? Could you tell me what the top three priorities are from a health perspective in terms of research and development?
Ms. VanKoughnet: About four years ago, CIHR published its strategic plan after wide consultation amongst our federal family, but also with the provinces, with research institutions across the country. At the end of the day, the research institutions hire the people that do the research, so we have to be in alignment on some level. They came out with five priorities which were shared, and we've since continued to test those in the public domain and social media, through those kinds of analyses.
We've focused on improvements to the health care system, a more patient-centred care system that is sustainable. Obviously, that's one that hits across the board.
Next is reducing health inequities for Aboriginal peoples.
Senator L. Smith: Is that number two?
Ms. VanKoughnet: That's number two.
Preparation and response to health threats is the third.
The fourth covers a lot of territory, but it's reducing the burden of chronic disease and mental illness.
They're broad priorities. The health system one is broken into two. We've kind of moulded it over time.
As I said, it's patient-centred care and improved clinical research. The second is more the health systems side of things. Once you figure out what the treatments and the clinical intervention are, how do you deliver them more effectively and sustainably from a cost perspective?
Senator L. Smith: What are your results? Patient care is a topical discussion amongst Canadians. How do you measure your results and where are you with your five priorities?
Again, when we hear that dementia and Alzheimer's disease are national priorities, apparently, how do you measure your success? Maybe you could give us some examples of success and things that you need to improve on.
Ms. VanKoughnet: Without going into a ton of detail, CIHR is using an impact assessment framework developed by the Canadian Academy of Health Sciences. Because research is a long-term game, but we want to be able to measure progress, there are five categories of impact that we look at as an organization.
One is advancing knowledge, your traditional bibliometrics, with researchers contributing to the worldwide literature.
Building capacity: Who do we have on the ground who can understand the research emerging elsewhere and who can contribute on their own?
Informed decision making: An example of that is the emergence of clinical guidelines and mobilizing the evidence into a policy framework that a clinician can act on.
There's improving health and health systems — I'll get to that in a second — and then contributions to the economy; so launching new companies, the economic impact of research itself, the employment levels of the researchers and their teams across the country.
In terms of health impacts, we're working very closely with the provinces on the strategy for patient-oriented research, for the very purpose of integrating research more closely into the care system to start getting more of a pull effect as opposed to just the push effect. That's been a very interesting process because we're also engaging patients, caregivers and clinicians in defining what impact is important to them at the end of the day. Rather than stating some great researcher's perspective on what a great clinical outcome is, we're looking to patients to help us define those.
Each of the provinces has set up early win programs within the funding of what we call support units in each province to see what we can accomplish in five years. Some of those are very specific: decreased incidence rates of particular disease or shortened wait times for a particular intervention, to try and get more precise in the world of research on what impact we're actually looking for.
Ms. Roy: Measuring impact in health research is not an easy task, as you might imagine. Globally around the world, we're all facing the same thing. We connect internationally and try to find the best measures to determine the impact on the health system and health in general.
To come back to your first question about how we establish priorities with the health portfolio, obviously our minister is setting the priorities for her portfolio, and one of her priorities is innovation. Obviously, at CIHR we're building our priorities under the chapeau of innovation. We want to develop innovative and transformative initiatives, so we work as a portfolio together, setting up the initiatives and priorities.
Senator L. Smith: When I saw ''arm's length,'' I was interested in whether there were any jurisdictional issues between your group and the other groups.
Ms. Roy: We are effectively arm's length, and we are independent for determining the health research agenda, generally speaking.
The Chair: I'm trying to picture how you're organized. So far you've told us you have 13 virtual initiatives, two main categories of programs, a group of priorities and then a number of signature initiatives. Have I got that straight? Why do you insist on making it so complicated?
Ms. VanKoughnet: It's about mobilization. The institutes were built over a long period of time and really brought the infection and immunity community together, all of the researchers and stakeholder groups who are interested in issues around research. Cardiovascular and respiratory health, nutrition, metabolism and diabetes are others.
Now those communities see themselves as communities. They can self-mobilize. We're challenging them, through signature initiatives now, to start crossing the boundaries between silos X and Y.
An example of that is our signature initiative around inflammation in chronic disease. Whether you're talking about cardiovascular disease and the inflammation that happens within your arteries, or arthritis and the inflammation that happens within your muscles, there are commonalities in terms of how those immune responses play out. We're trying to see if there are things that we can learn from one community that may be applicable to another; hence, building a layer. So you've got a set of networks, a set of institutes and communities that we're now layering on top of that capacity, challenging them with more complex crosscutting ideas. We don't think it's that complicated, but we do have to explain ourselves.
The Chair: I'll go on to other senators. I may have an opportunity to follow up on that later on.
Senator Wells: I want to follow up on a topic raised by Senator Eaton and the follow-up by Senator Smith on the success measures, specifically with Senator Eaton's line of questioning on the Aboriginal issue with Aboriginal oral health, diabetes and obesity. They're very specific things that can be measured with respect to success. The other five you gave to Senator Smith, such as advancing knowledge and informing decision making, while they can be measures, they're very general. Can you tell me about some of the successes specifically in Aboriginal oral health, which has a measurable metric, as well as diabetes and obesity? Are there successes? Is there advancement?
Ms. VanKoughnet: That initiative is just getting off the ground in terms of the measurable results of the research that comes out at the end. I can say that the initiative has been set up to have specific measurables, so the community is declaring what they will experience as success. The bottom line is reduced cavities in children from age X to Y within the study itself.
In other areas, the fourth that I couldn't come up with at the moment was around suicide prevention. In that domain, we've been working through the Arctic Council with different circumpolar nations. Because different nations have implemented different public policy and programs, all attempting to reduce what is a higher suicide rate in the circumpolar region with lots of different factors and cultures in that space as well, obviously the outcomes are reduced need for intervention but also reduced suicide outcomes.
Senator Wells: I hope in five or six years or however long the program is, and if I'm still on the Finance Committee and you're still visiting, I'll ask the same question.
Ms. Roy: The initiative has just been launched, but what we do at CIHR is add a little more discipline when we establish a major initiative like that. We identify at the beginning what kind of measure we'll take into consideration when we declare success or if we have made some progress. We're just getting there, so we're gathering more information. Obviously five years from now, you will get more specificity on that.
Senator Wells: I have a question on the International Rare Diseases Research Consortium. That's an impressive goal of 200 new therapies by 2020 in rare diseases. When did this initiative begin, and can you give me an update on the progress?
Ms. VanKoughnet: It began in about 2012 with a co-investment with Genome Canada, but it is part of a global initiative trying to coordinate the global effort to understand the genetic profile and what's behind some of these rare genetic diseases. In each country you might have a handful of cases and it's hard to mobilize effort around that. There are a large number of them.
Most of the rare disease charities and coalitions came together behind an effort at the international level to divvy up the work so you didn't have seven different research teams working on the same rare disease. You actually spread out the work.
Under the initiative with Genome Canada, there have been two success stories. I don't have the details in front of me to tell you exactly what they are, but we have identified that the research teams involved have identified the genes and mutations in those genes responsible for two rare diseases, which has set up a clear target for potential drug intervention in those two cases.
The partnership had wanted a demonstration pilot for the bigger international initiative, that by doing a consolidated and very focused sequencing effort, and using new sequencing technology, it could be done. And in the first wave, two success stories came out.
Senator Wells: In the consortium, is the only other overall partner Genome Canada or is this not necessarily gene specific in the therapies?
Ms. VanKoughnet: The scientific effort itself is focused in the International Rare Diseases Research Consortium. The focus is on using a sequencing-based approach. But once you figure out a little tiny piece of what may be behind it, then a whole other set of physiology, protein function research is required. It is focused on a genome sequencing approach.
[Translation]
Senator Hervieux-Payette: Who holds the patents? The researchers? The institute? The universities? And how many are obtained each year?
[English]
Ms. VanKoughnet: In the Canadian system, CIHR doesn't have any ownership of the intellectual property that comes out of the research that is funded. Who owns that property is determined by institutional policy, so the University of British Columbia or University of Manitoba; they have policies in place. They do differ from institution to institution in terms of the role of the institution versus the individual researcher. It's part of faculty contracts, et cetera.
In terms of the number of patents, I don't have that information in front of me, but it is one of our measures in the impact framework. I can certainly get the information for you.
The Chair: If you would, and send it to our clerk.
Ms. VanKoughnet: Absolutely.
[Translation]
Senator Hervieux-Payette: According to the OECD, it seems that Canada is lagging far behind in this area, so I think it is important to look into it. Fundraising billions of dollars is really interesting, but if that does not have a subsequent impact on the market, where is the interest?
Now, what criteria do you use to determine which sectors will be granted money?
[English]
Ms. VanKoughnet: In terms of outcomes of research and their impact and utility in the system, I'd say we have to look at a mix. A drug may come onto the market, but it still needs to be taken up by a system. A device has to go through a certain set of testing and for a drug, a different set of regulatory requirements. It's a question of a systems approach, looking at the wide variety of outcomes that we need.
I'll take dementia as an example. There's an incredible worldwide effort on multiple fronts. This is reflected in the Canadian Consortium on Neurodegeneration in Aging, which is bringing together a set of researchers. One bit is focused on looking at the biology and looking for ''druggable'' targets. Other groups are looking at what we can do from a prevention level from a drug perspective, but also from a lifestyle perspective. Another group is looking at how we manage the care of individuals who do have dementia.
Each one of those spaces will have outcomes across that spectrum, whether it is an assistive device, an app that reminds people when to take their medication that is specially adapted for a population that is experiencing dementia. That's a very specific outcome on one front. A drug would be another. They come out in terms of their impact, their patentability, their economic impact from a sales perspective and then economic impact from the perspective of cost savings in the system or caregiver time or the cost of medical errors.
[Translation]
Senator Hervieux-Payette: Do the institutes collaborate? For example, I recently read in the newspaper that MaRS in Toronto was having significant financial problems. The company seemed to be the ideal model for uniting the public and private sectors, and basic research to move toward the applied sector. There seem to be shortcomings preventing us from getting to the marketplace, in other words, the return on investment of the money that the government granted for research.
[English]
Ms. VanKoughnet: CIHR is one, together with the Natural Sciences and Engineering Research Council and the Social Sciences and Humanities Research Council, for a couple of programs that really focus in that space. One is the Centres for Excellence for Commercialization and Research, where business acumen is really brought to the fore, not just at end-state research but also in actually shaping the research that gets done so that, again, it's a bit of the pull, a bit more from the business side.
There's also the business-led Networks of Centres of Excellence, again, trying to break down the barriers that are perceived and sometimes real between the academic research environment and the business environment. Canada is actually very successful in the production of intellectual property and also competes generally well in the start-up phase of commercialization and business structures. The conversion into larger-scale entities is sort of where investments and focus go. There's report after report. I'm sure you're well aware of those reports around innovation in Canada.
Senator Gerstein: Before I ask my question, I'd like to disclose to the committee and to our witnesses that I am a past chair of Mount Sinai Hospital, during which time we established the Lunenfeld-Tanenbaum Research Institute, which was and is a major recipient of funds from CIHR.
The Chair: Thank you for that disclosure. I won't prevent you from asking.
Senator Gerstein: I will further indicate that the president of our great institute, for many years, was one Dr. Alan Bernstein, who subsequently became president of CIHR, I believe just before the current president, Dr. Beaudet.
With that, I will start by commending the work of CIHR and the role it plays in the outstanding research work that is done in Canada, which is recognized globally.
Although I'm not as close to it as I used to be, there is a question in the back of my mind, and it relates to the process that you go through with regard to awarding grants. My understanding is that there is a transition from what was done to what is being done. As is usually the case when there's a transition in something, there are a couple of questions. Having said that, I understand it's being very well-received in the research community.
I understand that in the transition from the old system to the new there may be a concern that there are some funding gaps with regard to our young scientists. Could you comment on that?
Ms. VanKoughnet: CIHR is going through a transformation of our investigator-initiated program. The outcomes we're looking for remain the same, but the process behind them in terms of the criteria, the application process and the peer review process are, from an operational perspective, going through a shift. That leads to the potential, at one moment in the transition, that some of our long-standing researchers may have a funding gap because of when their current grants come to a close and their new grants start up.
We've been in very cordial and supportive conversations with the institutions, and we've closed part of the gap and are working with institutions to make sure that those established researchers aren't lost in that process.
In terms of new investigators, a concern raised consistently through our consultations is making sure that during this transition new investigators are in no way disadvantaged. For the first program, we have set the foundation scheme that's rolling out, a minimal target for the number of new investigators that will be funded. I'm happy to say that the number of applications we received from the new investigator population was beyond our estimates. So there's a huge appetite of excellence out there.
We're confident that there will be certainly no fewer new investigators funded under the current scheme during this transition period than would have been otherwise. Everybody wants there to be more, of course. That would require an increased budget to fund more at the international levels that we want to provide.
So we have put in place some concrete steps to make sure that new investigators aren't disadvantaged, and we'll be looking very closely as the competition results come out.
Senator Gerstein: I thank you for your response. We certainly don't want to disadvantage our new, young researchers, and I appreciate very much the attention that you're paying to it because I understand it is an issue.
Ms. VanKoughnet: Yes.
[Translation]
Senator Chaput: In your presentation, you spoke about two main categories: investigator-initiated research and priority-driven research. You said that 70 per cent of the budget was dedicated to investigator-initiated research. Is the remaining 30 per cent of the budget set aside for priority-driven research, or is it less than 30 per cent?
Ms. Roy: Thank you for your question. In fact, the remaining 30 per cent is set aside solely for priority-driven research. It is, for example, used for horizontal research initiatives, including the HIV research initiative, the national anti-drug strategy and the pandemic preparedness strategic research initiative — PPSRI.
[English]
Pandemic Preparedness is closing down. I think we've done that. Plus, we have the tri-agency funding.
[Translation]
Senator Chaput: Are all of these initiatives part of the priority-driven research?
Ms. Roy: Yes, so to speak. However, the horizontal research initiatives with a $250 million budget for 2014-15 are also the priority. These specific programs are carried out in collaboration with the three agencies.
Senator Chaput: What is the approximate percentage that priority-driven research would receive?
Ms. Roy: About 20 per cent, or close to $200 million a year. The amount is determined with the institutions.
Senator Chaput: In your response to one of Senator Bellemare's questions, you mentioned targeted research or support. What do you mean by ''targeted''? Does it mean targeted support based on the five priorities mentioned by Senator Smith?
Ms. Roy: Yes. We have a science council comprised of 13 institute scientific directors, which has an envelope of $200 million for targeted research. Part of those funds is centred on the priorities of the various institutes or on national priorities, meaning strategic initiatives. Those priorities are determined based on the strategic plan that we developed a few years ago.
Senator Chaput: In terms of the competition aspect, namely, the funding requests, does a competition exist in the two main categories? Is there a competition for investigator-initiated research and one for priority-driven research?
Ms. Roy: It is the same process. I will let Dr. VanKoughnet answer.
[English]
Ms. VanKoughnet: In the investigator initiated component, we have ongoing competitions on a certain cycle that are predictable for our research community on an ongoing basis — a little less predictable right now because we are in the middle of a transition. Generally speaking, they're on a path.
For the targeted initiatives we have a process of calls for proposals that is ongoing, so we have a database of the funding competitions that are active at a given time with specific timelines for applications and for getting the results of peer review.
[Translation]
Senator Chaput: Are the funding requests you receive for the competitions from institutions or the private sector?
[English]
Ms. VanKoughnet: To receive funding from CIHR, the principal investigator has to fall into a number of categories and they must have an appointment at a CIHR-eligible institution. Traditionally, the CIHR-eligible institutions have been universities, research institutions such as Lunenfeld, but increasingly we are having community-based organizations and in the case of Pathways program, Aboriginal organizations, because the scope of who's involved in the research process has been expanding. Each of those eligible institutions have to meet a very strict set of requirements to be seen as eligible to manage the funds that come through the granting process.
[Translation]
Senator Chaput: So I presume that everyone who would receive funding through these competitions should also report on the work that is done, based on the criteria you have established. Do you have a say once you have the research outcomes and you have the result?
[English]
Ms. VanKoughnet: I would say two things on that front. One is that once we've funded a team in a particular area, increasingly our institutes are following that research. Say we funded five teams in a certain area. They will bring those teams together repeatedly during the course of the research to see if there can be value-added learning across what's happening in each of those teams. They are grants; we don't guide or dictate outcomes in any way, but we are attempting to mobilize the research in a much more active way.
When a grant is complete, researchers and grant recipients have an obligation to complete the research reporting system, record the outcomes across a number of categories such as capacity built, number of students trained, papers published, but also in the other categories of what impact this has this had on decision making, health care or the economic impact. We now have a systematic process for collecting that information, which has only been in place for about two years, but over the years it will provide a very rich source of information for defining impacts over time and being able to mine what actually happened.
Senator Chaput: I understand that you don't dictate the outcomes, but is there a link between the work that has been done and the priorities that you've given and discussed with Senator Smith? Is there a link between those five priorities and the outcomes of whatever research is being done?
Ms. VanKoughnet: Yes is the simple answer.
[Translation]
Senator Bellemare: Your institute is at the leading edge of technology. Perhaps because it is virtual, we have difficulty understanding how it operates.
I took a quick look at the Internet site, and I understand that each research institute is tackling a great challenge. If I take cancer, for example, we have a cancer research institute and a university in Calgary where the demand for grant analysis is centralized. Keeping with the example of cancer, health research institutes in Canada invest about $166 million in research projects. These research projects go so far as to rethink oncology and look into the cyclotron solution, and macro and microtechnology. If we look at the researchers, this involves the universities and hospitals. But to contextualize the current experience — and this is what I find interesting — the research institutes do not cover the entire amount of cancer research done in Canada. You are allocating $166 million in funds through virtual agencies.
Do you think this virtual, decentralized model with its main objectives is more effective than before? In terms of the amount in your $1 billion budget that is set aside for managing all these research projects, is the administrative percentage lower, stable or higher, as a result of this virtual vision and the research network?
Ms. Roy: That is a very good question. I will try to answer it concisely. We are very effective by setting aside 6 per cent of the budget of the $1 billion, which obviously includes management of the budget of the 13 institutes, as well.
It is important to keep in mind that $1 million is allocated each year for the operational expenses of the 13 institutes. That amount pays the researchers' salaries, for the labs, the research and the salary of the scientific director. Added to that 6 per cent for operational expenses is $13 million for the 13 institutes.
It is still very effective. We have just completed the study required by law, in order to review the model with the 13 institutes. We went through a series of reports. An external committee expressed its opinion on how effective the reports are when the committee reviewed the model of the 13 institutes, and we prepared an internal report. In addition, we held a retreat on the issue specifically with the board of directors, and we made a few changes to the way the institutes operate.
I would say that it is still effective. We are getting a lot of added value because, as Ms. VanKoughnet said earlier, research is now multidisciplinary. We have monthly meetings with all the scientific directors, based on the specific needs of each institute, to discuss health research linked to the initiatives. It is a beautiful and enriching experience for Canada, and to answer your question, the model is still very valid today, but we have made small changes internally to make it more effective and efficient.
The Chair: Thank you, Ms. Roy.
[English]
In total, how many full-time employees do you have to do all that good work?
Ms. Roy: About 420.
The Chair: And you said about 13,000 researchers.
Ms. Roy: Supporting.
The Chair: There are also some part-time employees, those on your scientific council presumably, and the management committee and governing council. These are all different organizational parts of the institutes. Can you tell us how many? For example, Michael Wilson, who is on your governing council with Dr. Beaudet, it's not full time for him; that's a part-time position.
Ms. Roy: It's a governing council nomination, so we have about 15 members of the governing council of CIHR. Mr. Wilson is co-chair.
The Chair: And on the Science Council, about how many?
Ms. Roy: The Science Council is made up of 13 scientific directors, plus all of the VPs and directors with CIHR.
The Chair: You have a president, who is Dr. Beaudet, and three vice-presidents.
Ms. Roy: Yes, three vice-presidents, and one is my position. We have the vice-president of research, knowledge, translation and ethics. Kelly VanKoughnet is the associate vice-president, and we have a vice-president of external affairs and business development.
The Chair: That's the 6 per cent that you've been talking about.
Ms. Roy: Yes, it's all funded by that.
The Chair: It's all part of that administrative side of things. The rest goes to grants and contributions.
Which auditor does an audit to provide fiscal oversight of your organization?
Ms. Roy: We used to have the Office of the Auditor General. As of last year, because of the economic reduction action plan, they decided not to audit any small agencies. Our governing council decided that it would be best if we continue doing the audit, and now we have an external auditor, Ernst & Young, that started last year.
The Chair: There are many senators interested in posing questions. We are now well over our time, but I'm going to get their questions on record. If you can't answer quickly, then you can provide us with a written answer.
Senator L. Smith: What are your three major challenges?
The Chair: You can provide that in writing to us. It gives you a chance to bring it down to three.
Senator L. Smith: I like to hone it down.
Senator Eaton: Regarding knowledge translation, for example, during the dental Aboriginal program, when you collect the data, how do you translate it? Do you kick it over to the private sector?
The Chair: Provide us with a written explanation of that, please.
[Translation]
Senator Chaput: I would just like to thank our witnesses. Your answers have helped me better understand this rather complex system, and I thank you for that.
[English]
The Chair: That brings me to my concluding remarks. Thank you all for being here. We will undoubtedly be hearing from you again about the $15 million that you will be looking forward to receiving in one of the supplementary estimates that you told us about. We may or may not ask you to come and tell us a little bit more about that initiative at that time, but we will be watching for you. Thank you.
[Translation]
Honourable senators, we are continuing our study on the Main Estimates for the fiscal year ending March 31, 2015.
[English]
For the second and final session, honourable senators, we welcome officials from the Patented Medicine Prices Review Board. Mr. Douglas Clark is the Executive Director, and Pauline Lahey is Chief of Corporate Planning and Reporting.
We thank each of you for being here. I understand, Mr. Clark, you will have some introductory remarks, and then we will get into a question and answer dialogue.
Douglas Clark, Executive Director, Patented Medicine Prices Review Board: I do have some introductory remarks. I realize we're running behind. I was going to put the organization in context for people; I don't know whether that would be helpful.
The Chair: I think it would be helpful. If we run over a tiny bit, it's more important for us to understand your organization, so take the time. If I feel you're going over, I'll let you know.
Mr. Clark: Thank you for the invitation to appear this morning on the topic of our Main Estimates for 2014-15. As Senator Day mentioned, with me is Pauline Lahey. Pauline is Chief of Strategy Planning and I'm Executive Director, as Senator Day mentioned.
[Translation]
Before addressing the Main Estimates, I would like to quickly provide you with some basic information about the PMPRB and its role in the Canadian health care system.
[English]
As many of you know may already know, the PMPRB is an independent, quasi-judicial body established by Parliament in 1987 through amendments to the Patent Act. Although the Minister of Health is responsible for the provisions of the act that pertain to the PMPRB, we are a member of that and we are a member of the health portfolio. We carry out our mandate at arm's length from the minister, a necessity borne of our quasi-judicial function.
At present, the PMPRB is divided into about 60 full-time staff and five Governor-in-Council appointed board members. The chairperson of the board is designated under the Patent Act as the CEO of the PMPRB with the responsibility to supervise and direct its work. That work is carried out by staff under my day-to-day direction. Our current chairperson is Mary Catherine Lindberg.
[Translation]
The PMPRB is a consumer protection body with a dual mandate. First, it ensures that prices charged by pharmaceutical companies for patented medicines sold in Canada are not excessive. Second, it reports on pharmaceutical trends in general and on R & D spending by pharmaceutical patentees in Canada.
[English]
The PMPRB's dual mandate is reflected in the Main Estimates through its two programs, the Price Regulation Program and the Pharmaceutical Trends Program.
[Translation]
Under the first program, the PMPRB sets the price ceilings for the 100 or so new patented medicines that enter the Canadian market every year. It also reviews the prices of more than 1,300 patented medicines already on the market to ensure that they continue to comply with the price ceilings as long as they are patented.
[English]
The PMPRB encourages patentees to comply voluntarily with our price ceilings — upwards of 94 per cent do — and investigates any complaints we receive regarding allegations of excessive pricing. When the results of an investigation are that a patented medicine appears to be priced excessively, the patentee may lower its price and/or refund excess revenues through what we call a voluntary compliance undertaking, or VCU. If the patentee disagrees with the results of an investigation and chooses not to submit to a VCU, the chairperson of the board may issue a notice of hearing. Board members exercise their judicial function at the hearing as part of a panel before which board staff and the patentee appear as parties. If a panel finds that the price of a medicine is in fact excessive, it can order the patentee to reduce the price and/or refund excess revenues.
[Translation]
Since 2008, the PMPRB has received 52 voluntary compliance undertakings by patentees, for a total of over $93 million in excess revenue refunded to the Government of Canada.
Right now, about 50 investigations are in progress, but no hearings are being held. Three of the board's decisions are currently under appeal before the Federal Court of Appeal. These decisions deal with the board's jurisdiction for some types of generic drugs.
[English]
In terms of our reporting program, the PMPRB reports annually to Parliament, through the Minister of Health, on its price review activities, the prices of patented medicines, price trends of all prescription drugs and the R&D expenditures reported by pharmaceutical patentees in Canada. Our 2013 annual report was tabled in Parliament last month.
In addition to our annual report, we publish a multitude of studies every year under what we call our National Prescription Drug Utilization Information System initiative. NPDUIS is a collaborative initiative between the PMPRB and CIHI, the Canadian Institute for Health Information, that was established by federal, provincial and territorial health ministers in 2001 to provide analytical support to the decision-making processes of public drug plan managers. The PMPRB has produced and published over 22 analytical studies over the last decade under the NPDUIS initiative.
In the last few years in particular, the PMPRB has worked closely with provincial governments through NPDUIS and directly with lead jurisdictions through the Council of the Federation to provide relevant pricing and market analysis aimed at reducing the cost of generic drugs in Canada. The work of the PMPRB was referenced in recently achieving the price reductions in the 10 top-selling generic drugs reached by the Council of the Federation and continues to be utilized in discussions on a national framework on generic pricing currently being contemplated by premiers.
With that as background, you'll see that our total budget for 2014-15 is $10.9 million, of which $9.9 million requires approval by Parliament. This includes a $2.5 million Special Purpose Allotment, what we call the SPA, which can only be used to cover the costs of public hearings, such as external legal counsel, expert witnesses and the like. Because these expenditures are dependent on the number of hearings in any given year and the length of complexity of the hearings, it's difficult to predict how much the PMPRB will spend under the SPA in any given year.
[Translation]
The PMPRB's Main Estimates include about $6.8 million for the regulation program and $1.26 million for the policy and economic analysis program. An amount of $2.8 million is earmarked for internal services.
[English]
The PMPRB's planned expenditures have decreased by approximately $17,000 from the previous year, in keeping with our efforts to advance the government-wide Deficit Reduction Action Plan. You'll note from the Main Estimates that our priorities for 2014-15 include assessing the impact of changes to the pharmaceutical regulatory environment, both nationally and internationally, on the work of the PMPRB.
[Translation]
Right now, the industry and those responsible for reimbursement are going through troubling times. Canada's recent commitment, under the comprehensive economic and trade agreement, CETA, that seeks to amend the Patent Act by extending the patent term for pharmaceuticals to two years, could reopen the debate on striking a balance between intellectual property and consumer protection. While the sales of patented medicines in Canada have stabilized over the past few years, Canadians still spend more per capita and as a percentage of GDP on patented and generic drugs than many of our OECD partners. As a result, public and private payers in Canada are particularly interested in new cost containment measures, just like their counterparts in many other countries.
It is important for us at the PMPRB to keep a close watch on these developments and their impact here and abroad, in order to make sure that our regulations, guidelines and operational procedures are still relevant and effective.
[English]
With that, I would be pleased to answer any questions you may have.
The Chair: Thank you very much, Mr. Clark.
[Translation]
Senator Hervieux-Payette: I have not done studies, but you must have. Apparently, Canadians pay more for generic drugs than most other developed countries.
What is the real explanation for that? Why would we pay more than someone who lives in France, Belgium, Italy or Germany?
Mr. Clark: That is an excellent question. First of all, the PMPRB has no authority over the prices of generic drugs, unless a patent applies to a generic drug. However, for a number of years, we have been publishing reports on prices, on the way generic prices in Canada compare to international prices. This was prompted by a Department of Health directive asking us to do that type of work.
Now, the studies released in newspapers recently mention a significant gap between prices in Canada and prices abroad. Our studies are somewhat more modest in terms of the gaps since we select a wider range of medicines and compare them with many countries. We compare our prices with the average prices rather than the lowest prices. I know the provinces have done a lot of work in this area recently and they have just announced eight other generic drugs reduced to 18 per cent of the price of comparable brand name drugs; but we are lagging behind our OECD partners. I do not have a good answer to the question, because it is not what we do. The provinces handle the prices of generic drugs, not us.
Senator Hervieux-Payette: Were you involved in developing the free trade agreement with Europe, which requires longer patent protection? There is always a way to account for the period of time.
For those following our proceedings, could you explain how the current policy will change in terms of when drugs can become generic and how the patent protection will be extended?
Mr. Clark: First of all, that does not fall under our regulatory responsibilities. As a result, we were not involved in negotiating the agreement. I can simply tell you that, as far as I know from talking to our counterparts from Industry Canada, if the agreement is implemented and the Patent Act is amended, pharmaceutical patents will benefit from a two-year extension. Not all patents will be eligible for the extension; criteria will apply, but the period of market exclusivity for patented pharmaceuticals might be extended.
Senator Hervieux-Payette: Who has done the math to determine how much more this would cost the federal government and the provincial governments?
Mr. Clark: Everyone is doing the math; the generic drugs industry is submitting calculations, the research and development industry is also submitting calculations. I have not seen the most recent calculations from Industry Canada, but it is up to that department to do the math since it is responsible for implementing the agreement in terms of the amendments to the Patent Act. I am not aware of the impact.
Senator Hervieux-Payette: We are talking about billions of dollars, not millions; two additional years of protection for all patented medicines, when we know that, in the overall health care budget, drugs represent quite a high percentage — I do not remember if it is 35 per cent —
Mr. Clark: It is around 16 per cent.
Senator Hervieux-Payette: It is still an amount —
Mr. Clark: It is $30 billion.
Senator Hervieux-Payette: In that sense, I would have liked you to be consulted on that, because your colleagues at Industry Canada may not have thought about who will pay the $30 billion.
Mr. Clark: Whether we like it or not, I think the PMPRB will be at the centre of the debate once the Patent Act is open to amendments, because the internal environment has recently changed in terms of research and development, and the prices have gone back up to where they were before the 1987 changes, with the infamous Bill C-22. I therefore think people will wonder why patents are being extended when our prices keep rising and research and development in Canada keeps going down.
Senator Bellemare: My first question has to do with the role of the provinces. Are drug prices automatically the same across the provinces? If not, how does that work?
Mr. Clark: Like everything related to this issue, it is complicated. Until very recently, the provinces were independently negotiating with pharmaceutical companies the price of each drug that had to be reimbursed by the province.
Now, just recently, the provinces have come together under the Council of the Federation and they have launched an initiative called the Pan-Canadian Pharmaceutical Alliance, PCPA. Increasingly, they have been negotiating collectively for three years now. On the Council of the Federation website, they list all the products negotiated collectively. So far, if I am not mistaken, there have been 46 drugs in total. That is happening more and more, and the prices are dropping accordingly.
In the public sector, governments in Canada are now a minority on the pharmaceutical market. The private sector and individuals are paying out of their own pockets for prescription drugs in Canada. For the governments of Canada, the public portion is at about 42 per cent. We have to bear that in mind.
Senator Bellemare: My second question has to do with a table from your 2013 annual report, where we see that the ratio of research and development spending to the patentees' sales revenue has been dropping since about 1997, when it apparently reached a maximum of about 12 or 13 per cent. Can you tell me why? It is a strong trend. We can see that it is dropping now; it is barely over 4 per cent.
Mr. Clark: That applies to all the patentees; Rx&D members promised in the 1980s to increase the level of research and development to 10 per cent. The level is now around 5.4 per cent. It is slightly higher now.
The Chair: Can you tell us who the members are?
Mr. Clark: The members are the companies we know, the brand companies, Pfizer, Astra, and so on. There are about 80 or 90 Rx&D members. There are also other small companies, especially in the biotechnology sector, which may not be members, but the largest pharmaceutical companies are Rx&D members.
Our work consists of releasing information about the level of research and development in Canada, but it is not really our job to worry about the policies and the reasons. I know the market is very competitive in terms of pharmaceutical research and development investment. There are many political tools that might attract investment. I think experts are starting to increasingly wonder about the extent to which intellectual property and prices attract research and development. What we have been seeing recently is access to scientific infrastructure, to good researchers and to a very modern network of clinical studies. That is what we have been seeing. In addition, Canada does not have a home-grown industry, so to speak, whereas companies tend to centralize their research and development in their multinational centres and in their head offices.
Senator Bellemare: Is the drop in the ratio also partly explained by the rise in revenue?
Mr. Clark: No.
Senator Bellemare: So it is really a drop in nominal value?
Mr. Clark: Yes.
Senator Verner: I am not a regular member on this committee, but your organization and this issue interest me a great deal nonetheless.
Some of my questions have already been asked by my colleague, Senator Hervieux-Payette, regarding Canadian consumers' ongoing and serious concern about the spike in drug prices. I believe articles about this issue were also published in various Quebec dailies last week. I think your answer was that, in the case of generic drugs, your organization deals specifically with patented products, brand name drugs, not generics.
Mr. Clark: Our area of responsibility has to do only with the regulations and setting the price ceilings for drugs. It pertains only to patented brand name products. However, we publish many studies and we are constantly analyzing the prices of generic drugs and how they compare to prices internationally.
Senator Verner: That brings me to the following question, because, on a number of occasions, you have clearly explained to the members here that your mandate does not allow you to participate in this or that debate. Your mandate dates back to 1987. That is quite a while.
Do you not feel that, in an ever-changing context, where concerns are being raised about the free trade agreement with the European Union and the increase of patents, in short, where a whole host of factors contribute to our ever- changing environment, your organization might be ripe for a renewed mandate to better reflect the current and future situation?
Mr. Clark: I certainly acknowledge that a number of players are asking for that kind of change, that kind of reform. However, let me give you a bureaucrat's careful answer: we control only our own guidelines and we implement only our own current regulatory authority. As I said just now, like it or not, we are expecting those questions to come up as part of the amendments to the Patents Act that will be needed in order to implement the accord with the European Union. We are doing our part so that, when the time comes, we will be able to answer decision-makers' questions about the analysis of the recommendations.
Senator Verner: I should really have been more specific and asked you if it would not be appropriate for the government to review your mandate. Thank you for your answer.
Senator Chaput: When you say that 16 per cent of the budget is tied to medication, is that just for patented medicines or unpatented ones too?
Mr. Clark: That includes all medicines.
Senator Chaput: Can you tell us the proportions?
Mr. Clark: I do not have the figures in front of me, but I could send the answer to you. I think it is about 60 per cent. No, I remember now, it is 60 per cent. In the 1990s and the beginning of the 2000s, it was more like 70 or 75 per cent. But for a number of years, it has been around 58, 59 or 60 per cent.
Senator Chaput: For patented medicines?
Mr. Clark: Yes.
Senator Chaput: One more quick question for clarification. You mentioned that the provinces and territories are now negotiating collectively. Is every province and territory in Canada involved in that collective negotiation?
Mr. Clark: That depends on the medication. Three provinces have taken the lead in this initiative. They are Ontario, Nova Scotia and Saskatchewan, I believe. For each medication, one province is chosen to conduct the face-to-face negotiation with the company. It is up to the provinces to decide whether they are going to go along with the negotiation and whether they are going to get behind the results. So, basically, they all participate, except Quebec.
Senator Chaput: In total, 46 drugs have been identified.
Mr. Clark: Exactly.
Senator Chaput: And the provinces and territories can decide which of those drugs they want to negotiate collectively on.
Mr. Clark: Yes.
[English]
Senator Eaton: To switch focus, I sat on another committee where we did a study on the oncoming shortages of antibiotics throughout the world, and drug companies' hesitations in spending research money on drugs that aren't consumed every day. Do you have any kind of mandate to encourage drug companies and where they put their research money?
Mr. Clark: No, we don't really. That doesn't fall within the parameters of our regulatory or reporting responsibilities. I know a lot of people are expressing concern that the current paradigms don't sufficiently incentivize that kind of research, but I think that's more of a policy issue, be it for Industry Canada or some entity within Health Canada. But we have no involvement in that, no.
The Chair: Could you explain the process for a medicine to become a patented medicine so that we understand what we're dealing with here?
Mr. Clark: It's a complicated one, but typically once a company has proof of concept — they have a reasonable amount of evidence to suspect that a molecule that's been identified among thousands, if not tens of thousands of molecules, has some promise for a treatment, for their clinical study, to go from in vitro to in vivo in animals and eventually in humans — they will file a patent application, typically in the country where the research is primarily taking place. Under various international treaties they can file an international patent application and benefit from filing dates. All the participating jurisdictions and CIPO, Canada's patent office, is included within those jurisdictions. They will process that application at the same time as they continue with their clinical research.
If ultimately the drug is proven to be safe and effective and is approved by Health Canada, they will receive a notice of compliance from Health Canada, and at that point the company can enter the market. That's when they go through various review processes by CADTH to determine the cost-effectiveness, the pharmacoeconomics of the drug. CADTH then makes a recommendation to the provinces as to whether to list the drug, reimburse the drug, or not.
In the meantime, the patent term is being burned up, you could say, because patent terms are 20 years from filing. So all this research and then the regulatory approval process typically takes place within the patent term. They've done studies around the world about the average amount of time left on a patent when a drug finally enters the market and the actual market exclusivity it enjoys under a patent, and it varies between eight and twelve years. That's why many countries have opted to introduce patent term restoration, which is one of the features of the CETA agreement that Canada has agreed to implement to extend patent terms for up to two years, depending on a methodology that takes into account how much time the drug spent in clinical trials and how much time it spent before the regulator in order to prove safety and efficiency.
The Chair: We understand there are two tracks and they're independent of one another. One is through the Canadian Intellectual Property Office, and the Commissioner of Patents determines whether a patent should be issued.
Mr. Clark: That's right.
The Chair: The second track is ultimately the Minister of Health, determining whether it can be sold.
Mr. Clark: That's right. Then there are additional layers. We will review the drug and set a price ceiling, and CADTH will review the drug and make a recommendation to the provinces as to whether it should be reimbursed. If it is reimbursed, you have meaningful market penetration at that point.
The Chair: You describe yourself as an independent quasi-judicial body. Can you explain that so we understand the quasi-judicial aspect?
Mr. Clark: We review every new patented drug that comes onto the market. It goes to a scientific committee and they determine what level of therapeutic improvement the drug provides over existing therapies. We then set a price ceiling based on international prices and domestic comparator drug prices. It's a function of how much therapeutic benefit the drug provides.
If it's a breakthrough, it will get a higher price ceiling, at least in theory, than a drug that offers slight or no improvement. We set that price ceiling based on the scientific review. It enters the market and then we continue to monitor the price to make sure it doesn't contravene other rules we have that it can never be the highest price in Canada.
In the event of a dispute between the board staff that determines the initial ceiling price as the drug remains in the market and goes through its life cycle under patent, where the drug company refuses to lower its price — the company doesn't think it's excessive — the chairperson of the board, who is a Governor-in-Council appointee, can issue a notice of hearing if he or she is of the view that it's in the public interest. In that case, the PMPRB bifurcates and staff plays the role of prosecutor, and board members form a panel and sit as a quasi-judicial administrative board. The patentee appears as the defendant, more or less. An adversarial process ensues and the board panel decides if the price is excessive. If it is, they can order the company to pay back excess revenue, lower its price or both.
The Chair: And you don't have the mandate to deal with the issue of whether the patent should exist for this or not?
Mr. Clark: No.
The Chair: That's not part of your mandate. It's just price?
Mr. Clark: That's right.
The Chair: Licensing is not part of your mandate?
Mr. Clark: Well, that's an interesting question. We're currently before the Federal Court of Appeal on the question as to whether the board has jurisdiction over generic drugs that are licensed by the patentee, what we sometimes refer to as authorized generics or pseudo generics. That's a live issue.
The Chair: We'll look forward to learning more about that.
Senator Mockler: When we look at your mandate and the questions you've just answered, are you achieving your outcomes?
Mr. Clark: That's a very good question. Going back to Senator Verner's question, our regime has been in place for almost 30 years now. There have been some changes to the guidelines over the years. What we're seeing of late, and I'll give you an example, is other countries are introducing very aggressive cost containment measures. The way our prices compare is starting to be less favourable.
How it works when we compare ourselves internationally is that we look at seven countries, what we call the PMPRB 7, which is Italy, Sweden, Switzerland, the U.K., France, the U.S. and Germany. In 2005, our average ratio of prices of patented drugs was roughly the second lowest of those seven countries. More recently, this particular year, if you look at our 2013 annual report, we're close to second highest. That's been steadily creeping up, although we're still slightly below the median international price of those seven countries. That's predominantly due to the fact that the U.S. is on that list, and the U.S. is quite an outlier when it comes to prices. Their prices are considerably higher than those other countries. We have been creeping up, and I think the main reason is the cost containment models that other countries have been experimenting with of late, and I'll give you an example.
Germany recently passed legislation called AMNOG — I'll spare you the translation. One of its features is when a new drug comes onto the market, in terms of the price-setting body, it's compared to the standard of care in whatever class of drugs, whatever indication it's approved for: the gold standard, if you will. If there's probative, compelling clinical evidence that the drug in question offers improvements over the gold standard, then a price premium will be accorded to that drug and a negotiation will ensue. However, if there's no evidence that the drug offers a therapeutic benefit over and above the standard of care, that drug will be given a price that's the lowest of the drugs within the therapeutic class, including generic versions of brand drugs, which can be quite a low price.
If you look at how drugs are broken down, a lot of pricing authorities internationally do the same kind of categorization that the PMPRB does. Is the drug a breakthrough? No. Is it substantial improvement? No. Is it moderate? No. Is it a slight or no? The bulk of drugs across jurisdictions falls into the ''slight or no'' category. Over 80 per cent of drugs fall into that ''slight or no'' category.
In Canada, under our existing rules, a drug that falls into that category will benefit from the top of the therapeutic class price instead of the lowest price. That kind of disparity is I think leading to an increasing price gap between us and some of our comparator countries in the PMPRB 7, the countries that we compare ourselves to, particularly Germany in this case. I think it's reasonable to assume that in the coming years, although we're still slightly below Germany in prices, if current trends continue we'll eventually find ourselves second only to the U.S.
Senator Mockler: I don't question the quality of work that you do, but I come back to another question, especially when you just said that we're creeping up. If that's the case, do you have appropriate resources to effectively deliver your mandate?
Mr. Clark: Yes. I don't take issue with the resources that we have. I think if we became more aggressive, more activist, then resources could be an issue. I think right now it's mainly a question of a regime that is almost 30 years old and increasingly becoming somewhat out of pace or out of step with some of the practices we're seeing in these other countries.
[Translation]
Senator Bellemare: Just now, you said that Quebec does not participate. Have you any idea of the reasons?
Mr. Clark: No, actually, I do not have those details.
Senator Bellemare: Does your organization participate in the activities of the Council of the Federation?
Mr. Clark: Yes, a lot. We are more and more involved and we look forward to participating in that kind of initiative.
Senator Bellemare: How many employees do you have?
Mr. Clark: At the moment, we have about 60 employees, and five Board members who are appointed by cabinet.
[English]
The Chair: We really appreciate your being here, Mr. Clark and Ms. Lahey.
Ms. Lahey, we didn't get to call on you as much as we sometimes do.
Pauline Lahey, Chief, Corporate Planning and Reporting, Patented Medicine Prices Review Board: That's fine.
The Chair: She also serves who is here, right? We appreciate the work you're doing with the Patented Medicine Prices Review Board. I don't expect that we'll be appearing before your board, but we may well have you back to tell us how things are going in due course.
(The committee adjourned.)