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.
The Chair: Good morning, honourable senators, and good morning to you,
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:
. . . 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
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
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
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
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
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
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,
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
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
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
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
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
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
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
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
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
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.
We are now ready to hear the views of Professor Frederick Abbott on Bill
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.