Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 14 - Evidence, November 19, 2009


OTTAWA, Thursday, November 19, 2009

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill S-232, An Act to amend the Patent Act (drugs for international humanitarian purposes) and to make a consequential amendment to another Act, met this day at 10:31 a.m. to give consideration to the bill.

Senator Michael A. Meighen (Chair) in the chair.

[English]

The Chair: Good morning, honourable senators, and good morning to you, Mr. Taubman.

I am Michael Meighen and I have the honour to chair the Standing Senate Committee on Banking, Trade and Commerce. This morning we continue to examine a private member's bill, Bill S-232. This bill was introduced by our former colleague and the former deputy chair of this committee, the Honourable Yoine Goldstein, on March 31, 2009.

According to the bill's summary, Bill S-232:

[Translation]

. . . amends the Patent Act and the Food and Drugs Act to make it easier to manufacture and export pharmaceutical products to address public health problems afflicting many developing and least developed countries, especially those resulting from HIV/aids, tuberculosis, malaria and other epidemics.

[English]

Today we will hear from Antony Taubman, the current Director of Intellectual Property Division at the World Trade Organization, and the former Acting Director and Head of the Global Intellectual Property Issues Division at the World Intellectual Property Organization.

I caution colleagues that Mr. Taubman cannot comment, for obvious reasons, on our proposed legislation, the bill before us, Bill S-232, but he will provide us with information on the World Trade Organization's agreement on trade- related aspects of intellectual property rights, TRIPS, which established the foundations in international law supporting Canada's access to medicine regime.

Perhaps I should begin, Mr. Taubman, if you can see us all, by introducing the senators who are present.

On this side of the table, I will begin on my immediate left with Senator Ringuette from New Brunswick. To her left, and your right, are Senator Peterson from Saskatchewan, Senator Fox from Quebec, Senator Mahovlich from Ontario. On my far right are Senator Oliver from Nova Scotia, Senator Greene from Nova Scotia and Senator Harb from Ontario.

We very much appreciate your taking the time today, Mr. Taubman, to talk to us. I understand you have an opening statement, which I invite you to give, and if you are willing to take questions afterwards we will be much in your debt.

Antony Taubman, Director of Intellectual Property Division, World Trade Organization: Thank you very much, Mr. Chair. Honourable senators, I thank you for the opportunity to appear before the committee for its deliberations on a matter of fundamental importance to the international community, assuring access to vital medicines to those in most desperate need of them.

As the chair has mentioned, I do not appear before you as an independent expert, with latitude to offer any personal opinions. Still less do I appear as a partisan or advocate of any policy position or legal interpretation, nor am I representing or entitled to represent the World Trade Organization as such. I work within the WTO secretariat and can offer input to your committee only at a somewhat technical level.

To employ a rough analogy with this Senate, my role and status are closer to that of the staffers who organize and convene your committee hearings. It is our 153 member governments that are the equivalent of you as senators and who call the shots.

With your permission, I will explain our role as a secretariat, provide background on the Doha Declaration on the TRIPS Agreement and Public Health, and on the so-called paragraph 6 mechanism established pursuant to that declaration, and share some of our current thinking on the state of play of that mechanism.

I currently serve as director of the WTO's Intellectual Property Division, where I work with a small but talented and dedicated group of colleagues responsible for the administration of TRIPS: for servicing the TRIPS Council; for managing notifications and formal procedures under the TRIPS agreement; and providing technical assistance and training in partnership with other international organizations such as the World Intellectual Property Organization, the World Health Organization, United Nations Conference on Trade and Development and others.

Intellectual property and public health, and access to medicine in particular, have formed a major focus for our work in the course of this decade, including the implementation of the Doha declaration itself and the paragraph 6 mechanism.

As a measure of the significance of this mechanism, it represents the only amendment that WTO members have agreed upon to the entire package of Uruguay Round trade agreements since ink dried on that hefty bundle of paper in 1994. It is a measure of the significance this issue has for our members and obviously for the secretariat that carries out the bidding of our members.

The Doha declaration, in paragraph 6, also constitutes a major step towards greater coherence between the policy realms of public health and of intellectual property. As our Director-General, Pascal Lamy, has phrased it in a speech on July 14, 2009, the international intellectual property system "cannot operate in isolation from broader public policy questions such as how to meet basic human needs for health, food and a clean environment."

The Doha declaration is fundamentally important for the WTO and for the application of the TRIPS agreement, but it has also helped to shape the framework for multilateral cooperation on intellectual property and public health through the course of this decade.

That cooperation is a major practical responsibility. Indeed, we have provided extensive training throughout the developing world on the Doha declaration and on the paragraph 6 mechanism you are looking at. We have given considerably more than 100 training seminars across the globe since 2004 when this mechanism came into shape.

I have to be clear, I am afraid, as to what we do not do and why that is the case, since it sets unavoidable limits on my input to your deliberations. In particular, I cannot offer any views on the interpretation of text, or on the compatibility with TRIPS of existing or proposed Canadian legislation.

I am sorry if this position appears to be evasive or unhelpful — it is emphatically not — and perhaps explaining why this is the case may in itself assist in your deliberations, as it will give you a flavour of how the TRIPS regime is managed in practice.

The secretariat is responsible for supporting the 153 WTO members, including Canada, in implementing TRIPS in line with their own national interests and priorities. We are anxious to provide as much assistance as we practically can in supporting the implementation of the paragraph 6 mechanism. However, our members collectively have not considered it helpful if we, as a secretariat, sought to pass judgment on their domestic legislative proposals, or to make assessments of TRIPS' compatibility of their legislative choices. That is a matter for our members to take up amongst themselves.

It is indeed a most unusual step for staff of the secretariat to appear at all before a body such as this committee and to testify on the public record in a domestic legislative process. I am appearing today, frankly, because you have encouraged us to do so, and in the hope that despite these constraints we can still assist your deliberations.

Senators, the first substantive provision of TRIPS before it goes on to elaborate any standards on intellectual property protection, states that members shall be free to determine the appropriate method of implementing TRIPS provisions within their own legal system and practice. Our members continue to stress this flexibility at the political and at the practical level. For instance, during the annual review of the paragraph 6 mechanism, one of our members recalled this exact provision — article 1.1 — when stressing that implementing legislation for paragraph 6 should not prejudice the interpretation and application of the amendment to TRIPS at the national level by other members and this implementation should not set a precedent for how the decision is implemented elsewhere.

We still have a relatively small number of implementing laws giving effect to the paragraph 6 mechanism that have been notified to us, so there is, in fact, a limited range of experience for us to draw on in any case.

TRIPS establishes a legal benchmark of the mutual expectations that WTO members have of one another's intellectual property regimes. It defines, in a multilateral context, the standards that trading partners can require of one another, and establishes several avenues for resolving differences when they disagree bilaterally on whether those standards have been met at the national level.

TRIPS is therefore not a kind of a model law. No functional national intellectual property system would simply transpose TRIPS language directly into national law and simply leave it at that. The paragraph 6 mechanism we are discussing is not a stand-alone procurement system for medicines. It is not even a compulsory licensing system in itself. It is a means of creating a legal pathway for constructing freedom to operate in certain circumstances in which some countries could not use compulsory licensing effectively; in other words, when this pathway did not exist before.

The paragraph 6 mechanism was introduced as an amendment to the TRIPS agreement to create a legal pathway that did not exist before, but to work in practice, the mechanism requires implementation in a broader legal and practical context, also in line with the more general directions given by the Doha declaration.

Technically, the legal character of the mechanism is as a legal waiver. It sets aside certain requirements in TRIPS and when, as we hope soon, its matures into a full amendment of the treaty itself, it will continue to define circumstances in which members can have no legal complaint in the WTO about choices taken by national legislatures and administrations. However, it is not self-activating. It helps define a legal pathway, but it is still up to countries to choose to follow that pathway and when.

WTO members have marked out, and understandably insist upon, certain significant demands of policy flexibility; that is, domestic legislative choices, which it would be improper and incorrect for me to comment upon.

The soundness and legitimacy of the international legal system does not depend only on the content of specific standards that members have agreed upon among themselves. The international legal system also requires clarity about the proper scope and limitations of the international layer of law as such, and the legitimate policy choices that members are free to pursue as sovereign states within the policy space that is open to them.

Many issues under discussion in the context of this bill fall into the province of choices that WTO members may choose to take for themselves in seeking to advance the broad objectives of TRIPS in a manner that makes policy and legal sense within their own national systems.

The broad cross-section of WTO members shows great diversity in how members precisely balance the interests of the patent holder and other uses of patented technology, and the general public interest through both the substantive law and procedural safeguards. Even as all members seek to pursue the same broad policy objectives, this diversity reflects different policy interests, legal traditions and legal systems, broader policy settings and bilateral and regional agreements and other cooperative arrangements members enter into.

Looking at interpretation of text at the international level, interpretation of TRIPS, several formal mechanisms have been established to interpret the text of TRIPS and we, the secretariat, are structurally insulated from these mechanisms. WTO members themselves can collectively adopt an authoritative interpretation of TRIPS following a recommendation from the TRIPS Council. Also, there are several avenues for dispute settlement to exist and they can lead to formal legal findings that interpret TRIPS provisions inasmuch as this interpretation is required to settle a bilateral dispute, as of course Canada itself experienced on certain patent law issues.

The secretariat, and officials such as me, have no such authority and our members, whose organization it is after all, are clear in their directions to us not to confuse these lines of authority. It would foster uncertainty about the scope of legal obligations members expect of one another if we sought to push any particular pat interpretation that we might like.

Concerning the paragraph 6 mechanism itself, the chair of the WTO General Council has noted that "any member may bring any matter related to the interpretation or implementation of the paragraph 6 amendment to the TRIPS Council for expeditious review, with a view to taking appropriate action." This specific option for the paragraph 6 mechanism has not been used so far, although the TRIPS Council undertakes an annual review of the system, and it also receives national implementing laws that several WTO members, including Canada, have notified.

Let me conclude with a few remarks on the current state of play with the paragraph 6 mechanism.

To put this mechanism into context, it constitutes an additional flexibility to many mechanisms that already exist within the TRIPS agreement and were recognized and clarified in the Doha declaration.

The mechanism deals with a specific set of circumstances, and addresses the difficulties identified in the Doha declaration that certain countries with insufficient or no manufacturing capacities in the pharmaceutical sector could face when seeking to make effective use of compulsory licensing under TRIPS. The mechanism only comes into play when a country desires to use a compulsory licence to diversify supplies of medicines, but when the country cannot do so effectively because the alternative suppliers are constrained by the existence of patents in foreign jurisdictions. This scenario is a limited subset of the full range of pharmaceutical procurement scenarios that such countries face today.

Recalling that this mechanism fits into a broader context, WTO members have recognized the desirability of promoting the transfer of technology and capacity-building in the pharmaceutical sector to overcome this very problem. Members are indeed encouraged to use this system to promote that objective in the sense of transferring production capacity to the countries concerned. Indeed, at a practical level, we as a secretariat lend practical support to initiatives, in particular, a number of important ones undertaken by the World Health Organization, to support the development of indigenous production capacity, especially in the African continent.

The paragraph 6 solution, for all its importance, is not a stand-alone solution to access problems but, as Director- General Lamy has pointed out, "the paragraph 6 system should be periodically reviewed and lessons drawn from these evaluations so that the WTO can continue in its effort to make it work as a contribution, among others, to enhancing access to medicines."

The required annual reviews have been conducted since 2004. These annual reviews are formal reviews in the TRIPS Council. The details of these reviews are on the record, and I will not give a full account of them, but it is fair to say that these reviews have concentrated on the progress with the implementation legislation, that is, steps taken by our members to implement the decision, and the movement towards acceptance of the TRIPS amendment. The amendment to TRIPS that this mechanism represents is still not in force yet and needs to be accepted by two thirds of our members to come into effect, so the annual review considers such matters as the broader implementation of the decision.

Also, Canada's own pioneering efforts in implementing and shipping under the mechanism have been welcomed in the course of these reviews. The more recent reviews have seen concerns expressed that implementation of the mechanism should not be too cumbersome, but no proposals have been advanced that would reform the system.

At the secretariat level, we are conscious of the continuing debate about the adequacy of the paragraph 6 mechanism. We are not complacent, and Mr. Lamy has cautioned against "blind faith in its success." We are as concerned as anyone to see this mechanism bear fruit and to see answers to the questions that currently circulate in the policy debate. Has the system worked? What are the best options for members to implement it in their national law? Is there an in-built problem within the system as negotiated by our members? Is it inherently too cumbersome and complicated? If not, why has it been used so infrequently? To set these questions in context, several factors may explain the limited use of the system so far.

First, we need to consider the limited patent coverage of key medicines in low-cost exporting countries. In some cases, it is possible that generics could be available already, which would compete with the medicines produced under the paragraph 6 scheme. In such circumstance, compulsory licencing for exports has limited utility. Where eligible importing countries are not notifying needs under the mechanism, it follows there can be little use of the mechanism itself.

The question then turns to why countries are not notifying needs. This pattern may change in the future as procurement efforts turn towards new generations of medicines for which the same freedom to operate may not be available, depending on the evolving patent situation in established generic-exporting countries such as India. This question is an empirical one for which much in-depth study is needed before we can draw any firm conclusion.

Secondly, as our director general said, "the very availability of this mechanism, together with the changing climate among the health community and drug companies, may help drug procurement programs to bargain down prices, just as the prospect of compulsory licensing can be used in general to exert leverage in negotiations on voluntary access to technology." One way or the other, prices have fallen dramatically in this decade. Competition between generic producers can make the issuance of compulsory licences in higher cost, developed countries unattractive to procurement programs in any case. Again, this question is an empirical matter and something I am not asserting any finding on before you.

Third, the pre-existing TRIPS rules already permitted a substantial proportion of production under a domestic compulsory licence to be exported anyway. The limit was only that the compulsory licence not be predominantly for exports — in other words, that the bulk of the production be destined for the domestic market. This amendment opens up a parallel procurement pathway, which the TRIPS amendment explicitly provides for. It clarifies that this rule does indeed still operate.

Fourth, the mechanism is still going through an extended implementation phase, and few countries have notified that they have legislation in place. Even the comparatively straightforward step of formally accepting this amendment, accepting it as an amendment to the TRIPS agreement, which does not create specific obligations on a member, has taken longer than expected. Two extensions of time for this acceptance have already been agreed upon, and still the numbers are well short of the required total to trigger the formal entry into force. That extension is not a practical constraint, but it illustrates more broadly that implementation overall is taking longer than some may have expected.

More generally, the Doha declaration points to TRIPS flexibilities on a wider spectrum to promote public health outcomes. We have seen our members pursue various choices as to patentable subject matter, as to available remedies for patent infringement, and as to exceptions and limitations, such as the regulatory approval exception that Canada successfully defended in TRIPS dispute settlement. A number of avenues have been chosen to work towards greater generic competition and the consequent reduction in prices.

Let me conclude absolutely by offering you some of our current general reflections on how the system may be made more effective. This topic is of considerable policy discussion here in Geneva and may be of background interest or direct practical interest to you.

Once again, our director general has touched on this topic in a recent speech, wherein he said:

The objective was never to issue lots of compulsory licenses as an end in itself. The objective was and remains cheaper medicines for the poor. The system, therefore, has to be judged in terms of prices and access. A simple headcount of notifications under the paragraph 6 system is a poor indicator of public health outcomes. . . .

. . . it may be important, also, to consider how procurement programs can make more effective use of the system as it stands. It creates a legal avenue for access, but that does not in itself generate a commercially viable level of command.

Indeed, the system explicitly recognizes the need to create economies of scale for procurement initiatives in regions with a significant proportion of least-developed countries (LDCs). The system is open more generally to the cooperation of import needs and source countries so as to ensure the necessary economies of scale. . . .

The effective use of the IP system and of TRIPS flexibilities is important, but does not stand alone: IP law and policy must be harnessed with drug procurement policies, pro-competition safeguards, and regulation of drugs for safety and quality.

Thus, there is a practical question of how to make the suppliers under the system commercially viable and cost- effective. To what extent can orders be coordinated and grouped together to achieve economies of scale? To what extent can orders be spaced out over time for consistency of supply, to make it worthwhile for manufacturers to tool up and meet regulatory requirements? How can these economies of scale and efficiencies be achieved within the existing framework?

This system is very much a work-in-progress on the international plane. Countries are working with a range of TRIPS flexibilities to promote access to medicines, and because there have been relatively few national legislative experiences reported, that is in relation to the paragraph 6 system, and fewer actual needs reported and notified under this system, that is, needs for pharmaceutical procurement, we have a limited factual basis to work from in trying to assess the best way of moving forward.

I know, honourable senators, that these general observations will not resolve the important issues before the committee, but I hope they set your important work in its international context. I am in your hands as to how I can help you further, including on follow-up questions on detail that our time today or limitations in my own knowledge may prevent me from answering in your hearings today. I thank you very much for your attention.

The Chair: Thank you, Mr. Taubman. We appreciate the information that you have given us. It is helpful.

We have been joined since you began your statement by Senator Gerstein and Senator Frum from Ontario. We have a full complement of senators here, which underscores the interest we have in this subject matter.

With your permission, I will go to a list of those who have indicated a desire to ask you a question.

Senator Harb: In Doha, when the WTO met, they called it the development round. Part of the conclusion at the time was to set a large sum of money to assist least-developed countries, in particular African nations and developing countries, to have access to information at the WTO, because many of those countries do not even have representatives in Geneva. Therefore, from time to time, when something takes place at your office, they have no clue what is going on. If they were informed, they would not be able to understand, because some of those issues are complex in nature. This provision is one of those complex issues, as you properly alluded to, that a limited number of countries have taken advantage of. The issue is complex.

However, one thing is clear from all the witnesses who appeared before us: There is a tragedy in Africa; there is a problem. Pretty well every one of the witnesses said to us that not one single action will solve the problem. We need a holistic approach with many actions, et cetera.

You are appearing before us to talk specifically about paragraph 6. I have several questions.

First, how many countries have taken advantage of that provision, as far as you know? Second, do you keep a registry in terms of either the companies or the organizations that raise concerns about paragraph 6?

Mr. Taubman: Thank you very much, Senator Harb. Let me briefly respond to your first point, because it is an important one for us. This organization is made up of members of equal standing. Each has the same rights of representation and the same vote. Yet, as you pointed out, there are concerns, both in terms of physical representation and in terms of capacity to work with these complex issues.

This subject would be another lecture from me, and I will spare you the details, but I can say there have been concerted efforts to ensure that least-developed countries are brought into the centre of things and are given special attention when it comes to their capacity-building needs. I would say that the group of least-developed countries in Geneva are active and concerned to profess their interests.

Since the Doha conference, as you mentioned, considerable resources have been mobilized exactly to meet this need. I note that only today another significant donation has been made to ensure that least-developed country representatives can come to our forthcoming ministerial conference at the end of this month. It is an ongoing concern, but efforts are being made.

On the specific question of public health, as I have mentioned, we have had an active program of technical cooperation with a strong focus on the needs of least-developed countries. One specific initiative is for those least- developed countries that do not have Geneva representatives, who are not physically represented by our mission here in Geneva. An initiative called Geneva Week brings those countries to this building, and we brief them in detail. We work with them to take them across these issues.

This work is a long story in itself, but I wanted to reassure you. At the secretariat level, this issue is a high priority for us, because we see the need, we respond to the need, and a lot of energy goes into doing what we can to meet that need.

Concerning the actual notifications under paragraph 6, I alluded in my comments to what I think I euphemistically called the extended implementation period. It is taking a while for the mechanism to come into operation. We have a small number of laws notified under the system, in other words, specific legislative measures, such as the original Canadian act that you have before you. That act was one of the pioneering forms of legislation. Otherwise, we have only had notifications from the European Union, Switzerland, Norway, India, Philippines and Singapore.

When you ask how many members have taken steps to take advantage of the decision of this mechanism, these members are the ones who have notified actual laws.

When it comes to importing countries, countries seeking to import pharmaceuticals, so far we only have Rwanda, the member that had indeed notified its need for imported pharmaceuticals, and which, of course, the Canadian company Apotex exported under your existing law. That is the only one so far.

This situation brought up a question: Are there no needs out there and what is going on out there? Broadly speaking, this question is one of coming to a better empirical understanding of the precise procurement needs of these countries. We know that there is a desperate need for low-cost pharmaceuticals in developing countries, in sub-Saharan Africa especially, and in least-developed countries. The needs are acute. The needs are being partly met by a whole range of initiatives, but clearly those initiatives cannot be enough.

Therefore, we continue to work with the technical assistance, in partnership with the World Health Organization, with the World Intellectual Property Organization, to advance understanding of this system, to encourage countries to look at it in a practical light, and to, above all, link it with practical procurement activities. As I have said, this system does not operate in isolation. It is not a sort of stand-alone, online pharmacy. It is a way for existing procurement programs to provide better access to cheaper supplies.

There is an issue of coordination, or linking supply and demand in a more systematic manner. That coordination is something that goes well beyond our mandate as a specific organization. It is a matter for overarching coordination and cooperation. I can say that coordination is taking place. It is focused on those countries that have most demand. I hope that, one way or the other, this coordination leads to a more systematic fulfilling of those needs, whether under this specific paragraph 6 system or otherwise.

Senator Oliver: Thank you for your presentation. You gave us a good overview of the way that the WTO wants to apply and have member countries such as Canada understand the amendments and the paragraph 6 mechanism that you have outlined.

At the beginning, you gave us a disclaimer, indicating why you could not give clause-by-clause interpretation of the bill we are studying. I understand that position, because your other 152 member countries would not appreciate your providing that interpretation. You have stated that you have read the first act that Canada passed, but are you familiar with, and have you read, Bill S-232, which is before us now?

Mr. Taubman: I have not read it in detail. I have skimmed through it, but I would not want to speak about it in detail.

Senator Oliver: The waiver that you have spent a lot of time describing to us today facilitates the export of generic medicines to developing and least-developed countries that face public health challenges. Yet, you have said that only one country has taken up the use of this mechanism, and that is Rwanda, through Canada.

The mechanism works by removing the restrictions on TRIPS article 31(f). However, one thing that was preserved is that it included in the waiver to ensure that providing for exports of medicines to least-developed countries would not undermine legitimate patent protections under the TRIPS agreement. That waiver was one of the safeguards.

In the Canadian legislation, one concern is that perhaps these safeguards might be overlooked. You told us today that you have a mechanism in your legislation such that a country like Canada can bring an issue before the TRIPS Council for review.

If Canada had a concern that one of the safeguards was not being protected, is this concern the type of thing that could be brought before your council for review and, if so, what are the steps?

Mr. Taubman: Yes, indeed; when this amendment to the TRIPS agreement was agreed upon, and the mechanism given its current legal character, the chair of the General Council, that is, the main body that takes these decisions, issued a statement that set on the record some of the concerns and interests of our members in negotiating and concluding this arrangement. I will quickly quote from that. It raises exactly those questions that you have mentioned. The chair's statement, for example, mentions that the system will be established "in good faith to protect public health and not be an instrument to pursue industrial or commercial policy objectives."

One issue that was much debated was the question of diversion, the concerns that the purpose of this system would be defeated if products supplied were diverted from the markets for which they were intended — in other words, if a shipment was made to a country in need but the supplies were diverted, because of their low cost, perhaps, back to a rich country where profits could be made. There was concern about anti-diversion, and ensuring there were effective measures to prevent diversion.

When it comes to your question about specific issues concerning implementation, yes, the statement of the chair of the General Council points out that "members should seek to resolve any issues arising from the use and implementation of the amendment expeditiously and amicably," and then sets out several avenues that can be followed. One of the avenues includes putting the issue to the TRIPS Council. In particular, any member may bring any matter related to the interpretation or implementation of the amendment, including issues related to diversion, to the TRIPS Council for expeditious review, with a view to taking appropriate action.

That is an understanding between our members. It has not been put into effect, but Canada, as a member of the WTO, has that option. For us, as a secretariat, frankly, it would be only a matter of receiving the request for the issue to be raised at a session of the TRIPS Council, and we would have to process it accordingly. Our role as a secretariat is simply to organize the agenda and the documentation in that way. It would be a choice for the Canadian government to take up the issue in terms of any specific question of interpretation or implementation of the TRIPS amendment. I would not speculate as to why no one has done that yet. A great deal of domestic debate and consideration is going on in a number of countries. This issue may be the kind of issue that people prefer to work out at home, if you like, before taking it to an international forum.

As a simple matter of fact, senator, this issue has not been taken to the TRIPS Council, apart from what I have mentioned before, which was the regular annual review of the system. That review has looked only at reporting on steps taken by our members in implementing the system and encouraging one another to move in implementing and accepting this amendment.

The Chair: Can I ask a supplementary question? Mr. Taubman, I may not have grasped what you said, but in this country in the tax area, for example, we can go to the tax department and say, "I am thinking of doing this, that or the other. Would that violate any tax legislation? Can you give us an advance ruling?"

Is that what you are alluding to? If Canada chose to do so, can it say, "Here is what we are proposing to do in terms of domestic legislation. Please tell us in an advance ruling if it would violate any of our obligations under the WTO in general, and TRIPS in particular?"

Mr. Taubman: I do not think that exact kind of mechanism is available. There is the possibility of an authoritative interpretation of TRIPS text, of the treaty language, but that has never been done so far for any WTO agreement. The political threshold to getting there is high. It is not a matter of going to your tax office for a specific ruling, as a best analogy. It is more like almost passing another law or concluding a codicil to the treaty. That is not a viable option for your current situation.

The only other source of reliable interpretation is in the dispute settlement process. That occurs when a trading partner is sufficiently concerned about the choices a country has made to take them to the WTO dispute settlement mechanism. There are more informal mechanisms of consulting among and between members, off-line in a sense, not on the public record; not in the formal proceedings of the TRIPS Council. Those consultations take place off-line. However, there is no specific mechanism that you can obtain a pre-qualification of any particular option you are considering. It would take a tedious lecture in WTO law and policy to explain why that seemingly logical option is not available, but as a matter of fact it is not. There are sound policy reasons for that, but I will not belabour the point.

The Chair: To finish off, with Senator Oliver's permission, can only a member country raise and refer a concern to the dispute mechanism, or can the WTO itself initiate that process?

Mr. Taubman: No, it can only be another member. As a secretariat or as an organization we have no, if you like, policing authority whatsoever. I am sure if I had parked illegally on Parliament Hill outside, automatically someone would come and give me a fine or tow my car away. That authority does not apply here. There must be a specific complaint lodged by another member, referring to the law or the mechanism in question. There is no automaticity. A finding of non-compliance can only flow directly from a complaint lodged by another member.

The dispute mechanism is a way of resolving bilateral disagreements between our members, rather than us centrally policing compliance and taking action ex officio regarding non-compliance. We cannot do that, and there are broader reasons for that.

Senator Oliver: In the section 6 mechanism that you have devoted a lot of time to explaining, and which is an amendment to the TRIPS, it was clear that certain safeguard provisions were included in the waiver. Evidence has come before this committee saying that Bill S-232 will eliminate these safeguards. Witnesses before the committee say that the bill will allow the unlimited production of generic copies of any of the patented medicines for export to any developing country under open-ended compulsory licences granted without notification to the patent owner.

On that issue, my question is: Can that type of issue be brought to the TRIPS Council for review to determine compliance?

Mr. Taubman: There are two aspects to the question. First is a question of compliance. Whether Canada or any other country is complying with TRIPS or not only comes up if another country takes a complaint. It is, in effect, like an interparty court proceeding between two parties to a lawsuit. It is more in that character. Compliance would not come up in the TRIPS Council, which is the collectivity of our members working together as a council, as a committee, if you like.

However, what has happened in the broad area of intellectual property law is for members to pose questions to one another about their laws to obtain further information about them. This option has worked in the past to cover a whole host of areas of intellectual property law. Again, in principle, that option is not excluded where our members, our governments, can ask questions of one another about the approach they have taken in implementing this particular part of TRIPS, this paragraph 6.

In the past, that process has thrown up a lot of useful background information, but it is not a contentious matter. It is not being on trial. It is under the cap heading of transparency, because in these areas of domestic law it can be difficult to fathom in detail what is going on in the national systems of 153 diverse countries.

There are those two broad possibilities. One is literally someone initiating a case, a complaint. This situation happens rarely.

Senator Oliver: We are not in a position where we can have a complaint because all we have is draft legislation. We do not have a bill, a statute or an act. This legislation is only draft. Therefore, at most, it could be a form of stated case to the general council. Is that a possibility?

Mr. Taubman: It is a possibility. It would be unusual. In some cases, countries have reported to the TRIPS Council as part of their overall review of their laws. They have reported that legislation is in progress, but they have not opened up the domestic legislative process to the TRIPS Council to discuss and explore. That review has been kept at the national level. The TRIPS Council has been more about information, about transparency, rather than, if you like, a specific review as to compliance or not; as to consistency with TRIPS or not. It has been more about transparency.

The Chair: We are almost out of time, but I have two further questioners who assure me they have short, sharp questions. If you can continue your pattern of short, sharp answers, we will be finished, Mr. Taubman, and we will not keep you too long.

Senator Peterson: Thank you for your presentation.

I have a couple of short questions. If they fall in the category that you cannot comment, I am sure you will indicate such.

Witnesses before us have said Bill S-232 could attract a WTO challenge.

Witnesses have appeared before us who have said there are a number of countries available from which to purchase generic drugs for Africa to reduce costs, to fight HIV/AIDS, so why is Canada going to all the trouble of trying to put through a bill?

Can you comment on those issues?

Mr. Taubman: You are right, senator. Your first question I cannot answer. All I can say is that there is no automaticity about a challenge of TRIPS consistency of any law or any measure you take. There is a certain political threshold. Another country has to be sufficiently concerned to launch a complaint. Before a complaint goes through to a quasi-judicial process, there have to be consultations as well. That situation is not something that happens often, given the range of issues we are looking at, but it is an entitlement of other members of the WTO, if they have a concern, to initiate a complaint. However, I cannot advise you on who would do that, when or on what grounds.

Concerning the question of the point that is often made that there are already low-cost providers of cheap generic drugs, so why bother, this matter is more for a public health expert than me. However, we are looking at a changing landscape of the front-line drugs that are needed in the field. We are looking at a second generation of antiretroviral drugs and so on. We are looking potentially at new vaccines, new treatments. It is not only a matter of looking at the existing pharmacopoeia, the existing collection of drugs. People are concerned about access to the new generation of drugs.

In those cases, it may be the case that the existing producers of generics, exporters of generic drugs, may be more constrained by patents because in the lifetime of the TRIPS agreement, since 1995, only over time has patent protection of pharmaceuticals come into effect for many developing countries — India is a good example. It has had full protection of pharmaceutical products only since 2005. It is a changing situation.

Why bother to provide this protection? There are two reasons. First, there may well be scenarios that arise where this is the viable way of meeting needs. It is hard to predict in advance who, when, where and how much. However, it is entirely possible logically.

Second, Canada already has taken an important step as a pioneer in breaking the drought, if I might say, and putting the system into operation. We found that people learn from experience in the implementation of such mechanisms generally in intellectual property. It is important in this particular area. I would not understate the importance of what Canada has done so far.

It is up to you how to take it further, but Canada's contribution has been an important one so far.

The Chair: I am afraid we are out of time, honourable senators and Mr. Taubman. I thank you again for taking the time to chat with us today. Given the constraints under which you operated, you did an excellent job. We are grateful to you for the context in which you have placed our considerations.

I spent a happy year once in Geneva. I am sure you are enjoying the city as much as I did. Thank you for agreeing to meet with us under challenging circumstances, which you have met extremely well.

[Translation]

We are now ready to hear the views of Professor Frederick Abbott on Bill S-232.

[English]

Good morning, Mr. Abbott. Thank you for being with us.

For the information of honourable senators, Mr. Abbott is the Edward Ball Eminent Scholar and Professor of International Law at Florida State University College of Law. He is a distinguished scholar who has worked for several international organizations. He has written a number of books and articles on international economic issues and international intellectual property rights. In particular, he will be sharing his knowledge of the TRIPS agreement, the August 30, 2003 decision of the World Trade Organization, Canada's Access to Medicines Regime and changes proposed to it by Bill S-232.

I understand, Mr. Abbott, that you had the advantage of hearing our exchange with Mr. Taubman in Geneva.

Frederick M. Abbott, Edward Ball Eminent Scholar, Professor of International Law, Florida State University College of Law: No, I did not.

The Chair: I was misinformed. As you may have surmised, he discussed, in general terms without venturing any opinions, the proposed Bill S-232 and how it might impact on our obligations under WTO and the TRIPS agreement.

Will you please proceed with your opening statement? I hope you will be amenable to questions from honourable senators.

Mr. Abbott: I have an opening statement that is about 12 minutes long. Is that acceptable?

The Chair: Absolutely.

Mr. Abbott: I am more than happy also to answer any questions.

I appreciate the opportunity to appear before the committee regarding the bill proposed to enact changes to Canada's Access to Medicines Regime, CAMR. I appeared before the House of Commons Standing Committee on Industry, Science and Technology on March 10, 2004 during consideration of Bill C-9, which as amended, was enacted as CAMR.

In the course of dialogue with House of Commons committee members, I raised several concerns regarding the terms of the draft legislation. I was of the view that a number of the restrictions and limitations under consideration would hamper effective use of the legislative mechanism as then proposed. Though certain important improvements were made in the legislation prior to its adoption, it was clear that Canada had decided not to take full or effective advantage of the flexibilities in the WTO TRIPS agreement, the 2001 Doha Declaration on the TRIPS Agreement and Public Health, and the August 30, 2003 WTO waiver decision.

It was foreseeable that the limitations adopted in CAMR would significantly restrict its utility in addressing the serious public health problems confronting developing countries with limited or no capacity to give effect to compulsory licences. It is not surprising, therefore, that committee members are revisiting CAMR with the objective of making it a more effective and useful mechanism.

I will spend a few moments explaining why I might reasonably be considered to have expertise on the subject of legislation to implement the WTO August 30 waiver decision. I have written and published extensively on the subjects of the WTO TRIPS agreement, trade and intellectual property rights and on the relationship between that subject matter and public health, including access to medicines. I have served as an expert consultant to the World Health Organization and I am presently a consultant to the WHO, but I am not appearing today in that capacity. I have also served as a consultant to the World Bank, the WTO, the United Nations Conference on Trade and Development and other multilateral organizations regarding trade, intellectual property and public health matters.

I served as legal consultant to the group of developing countries that developed and proposed the 2001 Doha declaration. I worked with those countries throughout the process in which the Doha declaration was negotiated and adopted. I subsequently advised, on a day-to-day basis, the core group of developing countries that was primarily responsible for negotiating the August 30, 2003 waiver decision at the WTO from the inception to the completion of that process. I have written and published about those negotiations in the Journal of International Economic Law, the American Journal of International Law and elsewhere.

For the World Bank, I co-authored a detailed guide to implementation of the August 30 decision, including model notifications and implementing legislation. At the invitation of the international trade committee of the European Parliament, I co-authored a detailed report assessing whether the European Parliament should approve the ratification of the article 31(b) amendment to the TRIPS agreement. I participated in the international experts committee convened in Ottawa in 2007 to review the CAMR. I prepared a report on the issuance by Canada of its first compulsory licence for export on September 19, 2007 that was published in International Legal Materials of the American Society of International Law.

The August 30, 2003 decision has been criticized by non-governmental organizations promoting access to medicines, by some academics, by some groups representing generic producers and by some developing countries. They say it establishes an overly cumbersome set of rules that makes it difficult to give effect to the basic objective of permitting exports of low-priced generic pharmaceutical products to developing the countries that do not have the capacity to manufacture those products under compulsory licensing.

I have consistently observed that the August 30 decision was the result of a long and intensive negotiation, involving stakeholders with decidedly different perspectives concerning the appropriate implementing mechanism. The August 30 decision reflects a compromise between stakeholders seeking the most straightforward and efficient method for addressing public health needs on one hand, and stakeholders seeking to protect their perceived industrial interests on the other.

Neither NGOs seeking to provide the easiest mechanism for facilitating access to medicines, nor the originator pharmaceutical industry, found, or find, the August 30 decision to reflect an ideal world of either access to medicines or industrial protection. However, the critical question, and the one on which the jury seems to be out, is whether this negotiated solution can be made to work, given an appropriate implementing framework, or whether the solution itself is fatally flawed.

My own view is that the system can be made to work and that the obstacles presented by the regulatory or bureaucratic requirements of the WTO mechanism can be dealt with adequately by pharmaceutical industry managers, skilled lawyers and public medicines procurement specialists. However, dealing with this mechanism requires a serious effort to design national implementing mechanisms that seek to take advantage of the opportunities inherent in the WTO legal framework.

The CAMR took a different approach, introducing regulatory and bureaucratic requirements beyond those incorporated in the August 30 decision. The CAMR was designed to add obstacles to the effective use of the decision. The question before the committee is whether it should recommend that the CAMR be designed with the objective of seriously promoting exports of low-priced generic medicines to where they are very much needed.

Bill S-232 seeks to streamline CAMR and take advantage of the flexibilities inherent in the August 30 decision by providing a pharmaceutical producer with the opportunity to obtain a single licence from the Commissioner of Patents that will authorize it to make and use a patented pharmaceutical invention or inventions for purposes of export to eligible countries that identify public health needs. A principal reason for proposal of this single licence mechanism is to solve a significant problem reflecting the way the international pharmaceutical market works in practice. Many or most pharmaceutical procurement authorities acquire medicines by publishing a request for bids or proposals for the supply of medicines, soliciting responses from industry. Competitive bidding is not always practiced when, for example, a medicine is known to be single source on the international market.

It is extremely difficult in practice for a producer, for example, a prospective Canadian supplier, to respond to a bid request conditionally, indicating that supply is predicated upon obtaining a compulsory licence and that obtaining a compulsory licence may be a lengthy process involving modifying a government list to add the medicine to that list, opening negotiations with a patent holder or holders for a voluntary licence, and awaiting an ultimate determination by the Commissioner of Patents as to whether a licence should be issued.

A public health procurement authority in a developing country would be and should be understandably reluctant to award a supply contract based upon the fulfillment of an uncertain set of contingencies on the part of the producer's supply. Requiring a Canadian producer to seek a compulsory licence for export on a case-by-case and country-to- country basis presents obvious difficulties.

The present CAMR system presumes that a producer can and should develop a pharmaceutical product production line to facilitate or to fulfill a single contract to be negotiated and put into effect over a protracted period of time. Then, the individual licence is set to terminate after two years. You have undoubtedly heard this from Canadian generic producers; simply put, this is a non-economic proposition. The process is almost certain to drain business and personnel resources without justification. It is counterproductive, if the intention is to make Canadian producers a source of low-priced generic pharmaceutical products needed by developing countries to address public health needs.

The single licence mechanism will allow Canadian producers to submit proposals or bids in response to requests from developing countries requiring medicines to meet public health needs. Canadian producers will be in a position to commit to supplying the medicines in the event they are the successful bidder. Similarly, the single licence mechanism will permit Canadian producers to respond to direct purchase requests from developing countries, or to seek contracts from developing countries, so as to allow the producers to realize production efficiencies without fear that, ultimately, they will not be able to meet their contract commitments.

The proposal for a single licence is consistent with the August 30 decision and with article 31 of the TRIPS agreement. Paragraph 2 of the decision sets out the obligations of the importing and exporting members with respect to the grant of a compulsory licence. The express terms of the obligations refer to eligible importing members, pharmaceutical products, and the names and expected quantities of the products.

It is clear from the express terms of the decision that a licence may be granted for more than one product and for export to more than one destination. There is nothing in the decision that indicates that the destination-eligible importing members must notify their intention to purchase and import at the same time, or as a single group. The obligation on the importing members is to provide certain notifications to the WTO TRIPS Council before products are exported or imported.

The exporting member — Canada — is required to notify the TRIPS Council of the grant of the licence, including the conditions of the licence. Those conditions include the products, quantities, destination and duration of the licence. However, that notification requirement does not limit the exporting member in terms of the stated conditions. It is a reporting requirement. Footnote 8 to the August 30 decision clarifies that the notification requirement does not require approval by any WTO body.

There is nothing in the text of the reporting requirement that precludes the exporting member from stating that destination countries may include all eligible importing members that notify their requirements to the TRIPS Council, prior to importations, or that the quantities to be supplied will depend upon the requirements of the notifying importing members. Likewise, there is nothing in the reporting requirement to preclude that it be updated by the exporting member as the licence is executed.

Article 31 of the TRIPS agreement remains generally applicable to exports under compulsory licence, except as specifically waived or changed by the August 30 decision. Regarding compulsory licences, article 31(a) provides that authorization shall be considered on its individual merit. That condition does not, in any way, express or imply that the recipient of a compulsory licence should be limited to supplying a single or designated recipient of products produced under the licence.

Since manufacturers of products would rarely supply a single buyer, a compulsory licence ordinarily should be expected to supply multiple buyers. There is nothing unusual about a compulsory licensing system in which the licensee supplies multiple buyers over a period of time.

Bill S-232 will establish a framework under which any number of Canadian pharmaceutical producers may submit applications to the Commissioner of Patents for the grant of a compulsory licence for export. Under the terms of the legislation, the commissioner is instructed to grant a licence when the applicant has complied with the relevant conditions, and to reject applications that do not comply with the conditions or when the commissioner, under a broad grant of authority, determines that the licence will not fulfill the objectives of the legislation.

The Canadian Parliament will have established the basis upon which the individual merits of the application are assessed by the commissioner, consistent with article 31(a) and with the letter and spirit of the August 30 decision and the Doha declaration.

Bill S-232 provides the compulsory licence will be authorized to meet the needs of eligible importing members that enter into a contract with the Canadian supplier. There is nothing in the August 30 decision that requires that quantities to be supplied under the compulsory licence for export be fixed in advance. Indeed, the decision limits exports to those necessary to meet the needs of the eligible importing members, but it is not expected that the importing members should be able to predict the quantities of products needed over time with specificity.

In the August 30 decision, the WTO members expressly referred to expected quantities of products. The World Bank model notifications, for example, suggest a formula such as a quantity of pharmaceutical product X sufficient to treat Y patients over Z period of time might be employed to provide adequate flexibility for eligible importing members.

Bill S-232 does not expressly limit the duration of each licence. This is sensible because eligible importing members may be notifying their public health needs over time. Article 31(c) provides that the duration shall be limited to the purpose for which it was authorized and article 31(g) provides that "such use shall be liable . . . to be terminated if and when circumstances which led to it cease to exist and are unlikely to recur. The competent authority shall have the authority to review. . . ."

Bill S-232 authorizes the patent holder to apply to the Federal Court for termination of the licence if the licensee does not perform properly, including if diversion takes place with the consent of the licensee. Otherwise, it is foreseeable that licences would terminate upon expiration of the relevant patents to which the licences have been granted.

A patent holder might presumably apply to the Federal Court to terminate a licence if the circumstances giving rise to the adoption of the amended CAMR change such that the reasons for its adoption are so substantially different that the legislation no longer serves its public health purpose. That is an eventuality that does not appear to require immediate attention.

During legislative consideration of CAMR in 2004, I expressed strong reservations regarding the decision not the take advantage of the fast track opportunity provided by article 31(b) of the TRIPS agreement for situations of national emergency, extreme urgency or public non-commercial use. Article 31(b) expressly contemplates that governments may waive the requirement of prior negotiation with the patent holder when circumstances dictate. Paragraph five of the Doha declaration affirms that WTO members have the freedom to determine the grounds upon which compulsory licences are granted. It also expressly acknowledges that public health crises such as HIV/AIDS, malaria and tuberculosis can constitute national emergencies.

Perhaps more important for present purposes, many of the purchases by eligible importing members are likely to be undertaken by public health authorities using the relevant pharmaceutical products for public non-commercial use. In these cases, the TRIPS agreement explicitly provides that WTO members may waive the prior notification requirement. Negotiation with a patent holder is likely to lead only to delay and not to the grant of a voluntary licence on reasonable terms and conditions.

This was the experience of the only Canadian generic producer that so far used the CAMR mechanism. I, again, strongly urge you to include an option within the new legislative framework that licences can be granted without prior negotiation with the patent holder, a flexibility expressly incorporated in the TRIPS agreement for a significant portion of cases.

To conclude, Bill S-232's core proposal of a straightforward mechanism for issuing a single licence to supply eligible importing countries with needed pharmaceutical products is consistent with Canada's obligations under the TRIPS agreement and the August 30, 2003 waiver decision.

Thank you for your attention and for the opportunity to appear before you. I look forward to answering your questions.

The Chair: We are grateful for your presence and for you taking the time to comment on this piece of proposed legislation.

Senator Greene: Thank you for that wonderful presentation.

It seems to me that most of the time that elapsed between Apotex's decision to develop the drug and the shipment of it was spent in search of a recipient country, and efforts to secure a supply contract. The administrative procedures under CAMR took about two months in total of the four years. In fact, Apotex was granted a licence at least eight months before it won a supply contract.

How would Bill S-232 have changed any of that situation?

Mr. Abbott: Bill S-232 would effectively change the conditions under which Apotex was approaching prospective purchasers. It would authorize them to supply immediately upon the award of a contract.

Apotex was dealing with a circumstance in which any prospective purchaser it addressed was confronted with the situation of knowing that its supplier was not in a position to supply the product. Even should Apotex have been awarded a contract, Apotex would then have to proceed through however many months it may have taken, and whatever consent procedure it would have required, before it could have supplied the product.

I think that had Apotex been the beneficiary of a single licence, the conditions of bargaining would have changed substantially.

Senator Greene: Do you agree that the bureaucratic procedures under CAMR were efficient?

Mr. Abbott: I was not consulting for Apotex. I was not their legal counsel and I am not in a position to address directly whether Apotex found the procedures efficient.

My understanding from reading the publications from Apotex is that they found the CAMR procedure so difficult that they vowed never to undertake such a process again unless the legislation was amended. My assumption based on Apotex's assessment is that they did not regard the bureaucratic procedures to be efficient. Apotex is in a better position to tell you precisely what it is they found about the procedures to be inefficient or ineffective. I understand that they found the process rather difficult and cumbersome.

The Chair: If I did not mishear our first witness, Mr. Taubman, he indicated that few, if any, countries have taken advantage of the paragraph 6 mechanism of the Doha Agreement. Is that correct?

Mr. Abbott: That is correct.

The Chair: What is your explanation for that?

Mr. Abbott: I have written extensively both for the European Parliament and elsewhere on that question. We have to start with a basic premise. It is that until January 1, 2005, India did not provide pharmaceutical product patent protection. Until that date, Indian producers were in a position to provide virtually any drug that a country needed off- patent. Until the pharmaceutical product patent protection in India began to take hold and bite, it was unlikely that the August 30 decision mechanism would be directly necessary.

Therefore, in all likelihood, the implementation or use of this mechanism is likely to take place over time as the situation in the international pharmaceutical market changes. India now grants pharmaceutical patents and product patent protection. For example, as second-generation antiretrovirals come under patent protection in India, it will become necessary for countries to take advantage of the mechanism.

I think that is the principal reason why this mechanism has not been necessary up to the present time while India's patent legislation was changed and generic drugs began to go off stream in India.

Senator Frum: We heard testimony yesterday that Canada has the most expensive generic drugs in the world. It might require a Senate study on the reasons for that situation. However, the witness made the point that regardless of the mechanisms we put in place — if we amend CAMR with Bill S-232 or not — it is irrelevant. We are completely priced out of the market.

Could you comment on that issue?

Mr. Abbott: Canada typically has generic prices somewhat higher, for example, than comparable Indian producers. Canada is also known as a producer of high-quality generic products and a reliable supplier of generic products. The Canadian producers will only be able to supply products effectively under a system such as CAMR if they have the opportunity to produce using adequate economies of scale. That is one reason the single licensing mechanism is necessary. If the instruction to the Canadian producer is that they can have a single contract to a single country for a two- year period, it will be almost unquestionably an uneconomic proposition for the Canadian producer to produce in sufficient economies of scale to be price competitive.

However, if Canada were literally the world's least price-efficient generic producer, then I would suggest to you that Canada's generic industry would already have ceased to exist and Teva Pharmaceuticals, the world's most successful generic producer, would not have purchased one of Canada's two top generic producers if Teva found that Canada was an inefficient or incompetent producer of generic pharmaceutical products.

The global generics market is a highly competitive market that requires companies to be price competitive. One advantage that Canada has is that companies like Apotex and Teva Novapharm are well known for being good at engineering complex molecules. A number of the second-generation antiretroviral drugs, ARVs, and other products that might be exported fall right into the border of the types of things that Canadian producers might be good at producing.

It is strange to me to hear as an argument for not providing an opportunity under Canadian legislation that Canadian producers are inefficient or not competent to compete on the international market. If that is the situation, we might as well suggest that the Canadian generic producers shut up shop now, because they will not be able to compete on the international market. There is no good answer to that, other than to making your generic producers more competitive.

Senator Frum: That is a good answer. Thank you, Dr. Abbott.

Senator Gerstein: Dr. Abbott, my question relates to diversion under Bill S-232. As I understand it, the safeguard provisions in the waiver, which were incorporated in the CAMR, were agreed to by all WTO members, including Canada, to ensure that it would be used to achieve the stated goal, providing for exports of generic medicines to developing and least-developed countries that do not have a capacity to produce these drugs domestically. By including the safeguard provisions, WTO members sought to ensure that supplies of generic drugs under the waiver would reach those in greatest need and would not be diverted to unintended or unauthorized markets.

How can Bill S-232 meet this requirement when it allows for the unlimited production of generic copies of any patented medicine for export to any developing country under an open-ended, compulsory licence with no reporting or monitoring of shipments?

Mr. Abbott: As I understand the bill, it does not provide an open-ended, produce-as-many-drugs-as-you-want system. The system is designed to meet the requirements of developing countries, (a), that are either least developed and virtually, by definition, have little or no pharmaceutical manufacturing capacity; and (b), countries that notify the TRIPS Council that they lack adequate manufacturing capacity for the pharmaceutical products in question and that they require them to address a public health need. The mechanism is only triggered based on the requirements of the eligible importing member that notifies the Canadian supplier, who notifies the Commissioner of Patents and the WTO TRIPS Council, of the expected quantities of products that the member requires.

Furthermore, the eligible importing member has an express obligation under the decision not to promote or to restrict the diversion of the incoming products. The obligations under the decision in paragraph 4 and elsewhere are imposed on the eligible importing member not to permit diversion of the product. Therefore, there is an obligation. There is also a provision that says if any member considers that the measures being undertaken to prevent diversion are inadequate, they can consult with the TRIPS Council at the request of the member. As well, a large number of notification requirements are imposed on the importing and the exporting members, including notification to the TRIPS Council of the specific shipments by the exporting pharmaceutical company when the shipment is made.

The system has built into it any number of provisions directed to minimizing or preventing diversion, but the system does not impose on the exporting member an obligation to impose those restrictions. The decision, by its terms, imposes the restrictions on non-diversion on the importing members. That is not to suggest if there is not significant evidence of misuse of the system that the Canadian Commissioner of Patents could not determine that the terms of the licence are not being complied with. For example, presumably the contract that will come from the importer to the supplier and be tendered to the Commissioner of Patents will indicate the destination of the drugs and that the drugs are not intended for re-export from that destination inconsistently with the terms of the agreement and the licence. If those conditions are breached, then that would be one of the grounds that would presumably authorize a Commissioner of Patents to terminate exports to that country.

I think all those elements go into the decision. CAMR is not failing to introduce anything that is required by the WTO decision.

Senator Oliver: What you have said is important to us as Canadians, because when we were considering the first bill, CAMR, you told us that you came to Canada and you were a witness before the House of Commons committee for the bill. At that time, you proposed several recommendations, not all of which were incorporated into the bill that became the CAMR. I am curious to know whether any of your recommendations that were not included in the original bill in 2004 are included in Bill S-232. That is my first question.

My second question follows closely the question put to you by Senator Gerstein. Many people who have concerns about Bill S-232 are concerned that it will eliminate various safeguards under the TRIPS agreement and that it will permit licences to be granted without notification to the patent owner. I heard you say near the end of your presentation today that you like Bill S-232 a lot, and it includes many things you think should have been included in the original bill, but, you said, we need to have some form of an amendment that will permit manufacturers to operate and licences to be granted without prior notification to patent holders. That is what I heard you suggest as an amendment. If
I heard that correctly, do you have draft wording for such
an amendment?

Mr. Abbott: I will address both of your questions.

At the time that I testified before the house committee, the single-most serious defect then in the proposed CAMR was a condition that was proposed to give the originator companies, the patent holders, a right of first refusal with respect to taking over the contract that had been negotiated by the generic company. I spent a good deal of time, both in the committee hearing and in various meetings in Canada, explaining how a system such as that definitively could not work. Fortunately, that provision was eliminated from the legislation and did not become part of the CAMR.

The other mechanisms that I thought should be included were a provision to take into account the fast-track mechanism under article 31(b) of the TRIPS agreement, which was not included in the original legislation, to do away with the formalized list of pharmaceutical products that could be exported, and to make it consistent with the WTO decision and the implementing legislation of other countries. For example, in the European Union, any drug is subject to authorization under their mechanism, and that is the case for all the countries that have adopted legislation, save Canada. The Chinese legislation was recently amended in that same direction.

Finally, one matter I testified about at the original hearing was extending the right to export to least-developed countries that were not members of the WTO and why that right should be allowed. I thought that was consistent with the WTO framework, and again that was included in the legislation.

To summarize briefly, my main concern had been addressed. My two secondary principal concerns — the lack of a fast-track mechanism and the list of medicines — were not addressed, and the issue of exporting to least-developed countries that are not members of the WTO was addressed.

Senator Oliver: Did you mention anything about the single-licence mechanism at that time?

Mr. Abbott: Not during those hearings. I noted in the publication, International Legal Materials, that one of the difficulties that confronts CAMR is the requirement of licensing on a case-by-case, destination-by-destination basis, which, frankly speaking, as a practical matter, makes it extremely difficult for any producer who needs to gear a production line, for example, or cannot today produce generic drugs in Canada because the product is under patent and they need to develop a production line for a single product for a single destination. That proposition will be an expensive one if it is limited only to that one contract for a two-year period; to reverse-engineer the drug, develop the product line, go through all the testing, prepare the drug for export and then have the contract terminated in two years. It is simply an uneconomic prospect for a generic producer.

On your second question, the legislation as currently drafted builds in a waiver of prior negotiation. As drafted, the legislation includes what I proposed in the initial hearings before the House of Commons, and I urge you to keep such a provision in the current legislation.

The Chair: I do not think there are any more questions, Dr. Abbott. Is there anything you wish to add?

Mr. Abbott: I truly think that Canada has done a great thing in leading the world in its initial decision to move forward in implementing the August 30 decision, and in expressing the desire to use the strength of Canada's generics industry to support addressing public health needs in developing countries. The Canadian bureaucratic infrastructure — and I use "bureaucratic" in a nice way, not to imply critique — in respect to the directives it has been given by the legislature, has done a commendable job in exercising its responsibilities under the legislation. I think that the legislation creates serious impediments to its effective use, and with the types of modifications proposed in Bill S-232, Canada really can step forward as a leading supplier to the developing world of medicines needed to address public health needs.

My critiques of the Canadian effort are made in the friendliest of spirits and in the hope and expectation that Canada can fulfill the objective that it states it has, which is to seriously assist developing countries with public health needs to address their requirements. For that reason, I very much appreciate the opportunity to appear before you.

The Chair: We are grateful to you, Dr. Abbott, for taking the time to appear. You obviously are familiar with the country and you have been here on a number of occasions. We appreciate that while we did not have you appear in person, the wonders of teleconferencing seem to have improved over the years; you did not jump about in your image and we heard you loud and clear. We are all agreed on the ultimate objective. Sometimes there are disagreements as to how to arrive there, but all of us around the table, including you, are clearly committed to the objective of providing low-cost drugs to those in the greatest need.

Thank you very much for aiding our understanding and in perhaps stimulating our thought process as to how to move forward. No doubt we will have occasion to cross paths again. I hope so. In the meantime, thank you so much.

(The committee adjourned.)