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

Issue 7 - Appendix 

APPENDIX

Pursuing Innovation: A Beginning

A Submission to the Standing Senate Committee
on Banking, Trade and Commerce
by Rx&D, Canada's Research-Based
Pharmaceutical Companies
March 21, 2001

Mr. Murray J. Elston, President of Rx&D, Canada's Research-Based Pharmaceutical Companies: Mr. Chairman, our presentation will be split between Dr. Baumgartner and Mr. McCool.

[Translation]

Dr. Aldo Baumgartner: Good afternoon et bonjour.

Canada's Research-Based Pharmaceutical Companies Rx&D welcomes the opportunity to share with the Senate Standing Committee on Banking, Trade and Commerce its views onBill S-17, an Act to Amend the Patent Act which is now before you for consideration. This legislation constitutes the response of the Canadian government to two recent challenges at the World Trade Organization (WTO) - one by the United States and the other by the European Union - on certain dispositions of Canada's Patent Act. These two challenges resulted in the Appellate Body of the WTO judging Canada in violation of international agreements and recommending that Canada amend some articles of the Patent Act (and repeal others) in order conform with its obligations under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

Let us state at the outset that Rx&D fully supports the will of the Government of Canada to respect its international obligations by rapidly taking steps to correct the so-called "17/20" and stockpiling issues. Historically, Canadian governments have advocated the importance of intellectual property protection and its essential role in stimulating innovation. One notable and unfortunate exception, however, has been in the area of patent protection of pharmaceutical products.

By adopting Bill S-17, Canada will comply withits international treaty obligations. It will also restoreinternationally - albeit minimally - accepted standards of patent protection. This is not only the right thing to do to increase the research-based pharmaceutical industry's internationalcompetitiveness but is also, as Industry Minister Brian Tobin has said, the first step in advancing the government's innovation agenda. In that vein, as recently as March 13 of this year the Minister stated his priorities as: "...to stimulate and nurture a culture of innovation across the country; and to brand Canada internationally as a great place to live, work and invest."

In the January 2001 Speech from the Throne, the Government clearly identified innovation as a high priority in the following terms:

"Our objective should be no less than to be recognized as one of the most innovative countries in the world. Achieving this will require a comprehensive approach and the support and participation of all governments, businesses, educational institutions, and individual Canadians.

We must strive for Canada to become one of the top five countries for research and development performance by 2010. This is a challenge for all Canadians, but in particular for the private sector as the largest research investor in Canada."

The objectives of this submission are to provide our views on Bill S-17 and to summarize the kinds of activities that we see as necessary to fully realize the country's capacity for innovation in pharmaceutical and biopharmaceutical research and development. We also wish to highlight the role the federal government has played and must play to make Canada a world leader in these areas.

Canada's Research-Based Pharmaceutical Companies Rx&D is the national association representing close to 21,000 Canadians who work for this country's research-based pharmaceutical and biopharmaceutical companies. All member companies share a primary objective: to discover and develop innovative medicines that improve the quality of life of Canadians and enhance our healthcare system. More than 4,200 of the people employed by Rx&D members are directly involved in medical and pharma ceutical R&D activity

For more than 80 years, the research-based pharmaceutical sector has been represented by Rx&D. In 2001, Rx&Dmembership totals 58 companies of all sizes and reflects the transnational nature of the pharmaceutical industry. Canadian companies currently account for almost 40% of the Association's total membership. In fact, the four major Canadian biopharma ceutical companies are Rx&D members and smaller biopharma ceutical firms are also joining our ranks.

Although the industry currently accounts for less than 2% of all sales and employment in the manufacturing sector of the Canadian economy, it comprises more than 10% of total R&D expenditures in that sector, making the research-basedpharmaceutical industry one of the most R&D-intensive industries in Canada. It is estimated that R&D investments by our member companies exceeded the $1 billion mark in 2000. In 1998 the pharmaceutical and medicine industry accounted for 3.1% of the knowledge-based economy making pharmaceuticals the fifth largest and the fourth highest growing of the high knowledge manufacturing industries in Canada.

It is also estimated that spending by Rx&D member companies on extra-mural research and development in Canadian universities and hospitals was responsible for the support of more than5,000 additional jobs in 1998, the last year for which figures are available. Since 1987 Rx&D member companies have invested over $5.5 billion in R&D (including $1.2 billion in basic research) and in 1999 had an impressive R&D-to-sales ratio of close to 14%, as measured by the OECD definition of research and development. In the last few years, our industry has been the largest investor in medical research, spending more than the federal and provincial governments combined contributions. In 1998, the industry's proportion of total R&D expenditures in Canada stood at 42%, while the federal and provincialgovernments contributions were 19% and 7% respectively. With new federal investments, such as additional budgets for the Canadian Foundation for Innovation and Genome Canada, the relative contributions of the private and public sectors will likely be better balanced in the future.

I will now turn the floor over to my colleague Terry McCool.

[English]

Mr. Terry McCool: Thank you Dr. Baumgartner.

Patents allow individuals to disclose their inventions so that others may build on that knowledge. As a result patents are internationally recognized as a critical driver of innovation and technology transfer. Without adequate patent protection for their inventions, individuals and businesses would not invest in or undertake the often large-scale risks associated with the expensive R&D in Canada and other countries.

As the Committee knows, intellectual property rights are governed internationally at the WTO by TRIPS, which is the most comprehensive multilateral agreement on intellectual property that exists. The Agreement applies to copyright, trademarks, and patents and deals with three main areas: standards of protection; enforcement of rights; and dispute settlement mechanisms and procedures. Bill S-17 is before the Senate as a result of the first and third components.

As mentioned earlier in reference to the Speech from the Throne, the Government of Canada outlined its plan to at least double the current federal investment in research and develop ment by 2010. The Prime Minister also challenged the private sector to do the same. As an industry, we are prepared to rise to this challenge, but we believe that Canada's ability to provide an internationally competitive environment will determine whether we are on the leading edge of research and investment and able to respond to the Prime Minister's invitation. In the pharmaceutical sector, patent protection is the lifeblood of the industry because of the long development time that consumes 10 years or more of patent life before a product is marketed. As a result protection of intellectual property is a primary factor in investment decisions by transnational companies.

It is important for this Committee to note that while TRIPS sets out these international standards of patent protection, TRIPS is actually a minimum standards agreement. Member countries may provide more extensive protection of intellectual property. In fact, many do including the United States, the European Union and Japan

Canada has committed significant resources to discoveries in biotechnology, mainly in the biopharmaceutical sector, through investments by the public and private sectors, particularly through venture capital. Many small and medium-sized Canadiancompanies are continuing to make significant investments in research and development without the benefit of product sales. On the verge of significant growth and expansion, these companies must seek crucial, long-term investment to bring their products to market and to patients.

There are hundreds of products in development - products that will diagnose, treat, cure and possibly prevent intractable, chronic and often fatal diseases. However, it is most likely that this development will stagnate if environmental conditions and the business climate are not positively modified to make Canada a more attractive place for international investment in research and development. Competitive intellectual property protection with effective enforcement would reduce the investment community's doubts in the strength of our patent laws and make a clear and strong statement that we value innovation.

In 1993, by introducing the WTO minimal requirements for the protection of intellectual property, Bill C-91brought Canada closer to the standard of intellectual property protection held by its international competitors. The legislation recognized that our country does not operate in a vacuum, but in a global environment where competition for investments is nothing short of fierce. In order to remain competitive, we must at least do what our competitors are doing - and we are not. The amendments put forward in Bill S-17 will improve Canada's reputation by correcting a situation that should never have occurred in the first place. But more should be done to meet the government's innovation agenda.

Times have changed considerably since 1993. The process of innovation and the economic development which innovation drives are crucial to the prosperity and competitiveness of any nation, and excellence in all aspects of science and technology is fundamental to a successful innovation system. In today's society, the building of successful knowledge-based, high-technology industries is pivotal to a thriving economy, and to the ability of a country to be globally competitive. The winners, as stated by the Prime Minister and the Ministers of Finance and Industry on several occasions, will be those countries that quickly adopt measures that anticipate and stay ahead of the competition, placing themselves in a leadership position to take advantage of the opportunities arising from this competitive environment.

In its media release announcing the tabling of amendments to bring the Patent Act into conformity with the WTO Agreement, the government stated:

"The Speech from the Throne set out the Government of Canada's commitment to ensuring that Canadian laws and regulations, including those governing intellectual property, remain among the most modern and progressive in the world. Meeting international obligations is a necessary first step. Once the World Trade Organization ruling has been implemented the Government of Canada will look forward to engaging parliamentarians and Canadians in a broader dialogue to explore the role of the intellectual property regime in building an innovative economy and sustaining an attractive environment for investment."

We look forward to contributing to this dialogue. Our ultimate objective is to work in partnership with the government in developing fair and competitive policies. Rx&D would like to offer its support to ensure that Canada's investment climate and regulatory framework make this country a world leader in innovation.

Thank you very much for your attention.