INST Committee Meeting

STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY

COMITÉ PERMANENT DE L'INDUSTRIE, DES SCIENCES ET DE LA TECHNOLOGIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 15, 2001

• 1533

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order on Bill S-17, an act to amend the Patent Act.

This afternoon we have with us, from the Department of Industry, Mr. Andreï Sulzenko, the Assistant Deputy Minister, Industry and Science Policy; Mr. Robert Main, the Acting Director General, Corporate Governance Branch; Ms. Susan Bincoletto, Director, Special Projects Directorate; and Mr. Rob Sutherland-Brown, Senior Legal Counsel.

You have a presentation to make to us, and then we may have some questions for you. But we'll wait to hear what your presentation is first, whenever you're ready to proceed, Mr. Sulzenko.

Mr. Andreï Sulzenko (Assistant Deputy Minister, Industry and Science Policy, Department of Industry): Thank you, Madam Chair. I'll get right into the presentation. Copies have been made available to the clerk in both languages.

The amendments contained in Bill S-17 are very straightforward in their intent. They have one objective: to bring Canada's patent legislation into compliance with two recent WTO rulings.

My aim today is to provide you with a brief review of the events that have made this legislation necessary; examine with you the impact of the amendments; and convey the time pressure the government is facing for passage of the bill.

• 1535

Over the course of the last three years, two challenges to Canada's patent regime were brought before the World Trade Organization, one by the European Union and the other by the United States. These two challenges were not related and involved different aspects of our patent regime. In the end, Canada won on some aspects and lost on some others.

On the one hand, the WTO panel validated the “early working” exception of the Patent Act. This fundamental element of our patent regime allows third parties to use a patented invention during its term of protection, provided such use is directed at obtaining regulatory approval for the marketing of an equivalent product upon expiry of the patent. In the context of the pharmaceutical industry, it is estimated that this exception accelerates the market access of generic drugs by a period of three to six and a half years. This is really important for Canadians, and therefore constituted a very important victory for Canada.

On the other hand, the panel ruled that our “stockpiling” exception and our term of protection for certain old act patents were inconsistent with our international obligations.

Overall, when you look at all the rulings together, they neither undermine nor threaten the underlying balance of Canada's patent regime. They do, however, mean that the Patent Act needs to be amended in order to comply with our obligations under the WTO.

Bill S-17 contains the amendments necessary to bring the Patent Act into compliance with the WTO rulings. The WTO arbitrator has ruled that Canada has until August 12 of this year to comply with the ruling in the U.S. challenge. Should we fail to implement the ruling by that date, the U.S. could ask the WTO for the right to take retaliatory trade measures against Canada.

Obviously, avoiding such a result requires that the bill be passed by Parliament and be given royal assent before the summer recess. The amendments contained in this bill have been deliberately kept as simple and straightforward as possible in order to facilitate the meeting of this deadline.

I'd like to take you through the U.S. and European challenges briefly. First, the U.S. challenge.

The most significant amendments before you would bring the Patent Act into compliance with the WTO ruling and the U.S. challenge. During the proceedings, the U.S. argued that certain old act, pre-1989, patents in Canada did not benefit from a minimum 20-year term of protection from the date of filing as required by the TRIPS agreement under the WTO. Instead, these patents benefited from a term of protection of 17 years from the date of grant of the patent.

In September of last year, the WTO appellate body agreed with the U.S. and recommended that Canada bring section 45 of the Patent Act into conformity with TRIPS.

These amendments would establish the term of protection for outstanding old act patents as the greater of 17 years from the date the application was granted or a minimum of 20 years from the date the application was actually filed in Canada.

There seems to be some confusion as to what these terms of protection actually mean. Contrary to what some may believe, the difference between the two terms isn't three years. In fact, an old act patent would have received less than 20 years of protection from the date the application is filed only if the patent review process took less than three years. If, for example, a patent was granted two years after filing, the patent term would effectively be 19 years. In the majority of applications, the review process took more than three years and the patent term met the minimum WTO requirement.

With respect to the European Union challenge, Bill S-17 contains some amendments that are a result of that dispute. In this particular challenge, a WTO panel ruled in March 2000 that Canada's stockpiling exception was inconsistent with our international obligations under the TRIPS agreement. This exception allowed generic drug manufacturers to manufacture and stockpile their version of a patented product during the last six months of the patent term.

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Canada has already complied with this ruling by repealing the relevant regulations in October 2000. The amendments for your consideration simply reflect our implementation of the ruling by repealing the obsolete stockpiling exception contained in the Patent Act. This would ensure that the statute itself is in conformity with our TRIPS obligations.

As to the impact of the amendments, as of January 1, 2001, there were approximately 138,800 old act patents in force. Of these, some 53,500 have a term of protection of less than 20 years from the date of filing of the patent application. It is important to note, however, that not all of these patents have commercial value. The remaining 85,300 already benefit from a TRIPS-consistent patent term of 20 years from the date of filing because it took three years or more to grant them. These patents were not at issue in the dispute and will not be affected by Bill S-17.

In the course of consultations on this issue, attention has focused on patents that cover drugs sold by brand-name companies. No other industry has made representations to us concerning the impact of these amendments.

In terms of impact, we estimate that the patents on approximately 30 commercially significant drugs would benefit from term extensions that average less than six months. To put this in perspective, there are currently approximately 5,200 prescription drugs for sale in Canada, and only 30 of those might be affected.

Further, any impact on drug costs will be negligible. The proposed amendments will not increase the overall price of drugs. Rather, they could delay by a few months the potential savings offered by generic alternatives. Let me explain this point a little further.

Even under the most generous of assumptions, namely that each one of these potentially affected drugs would be copied by a generic manufacturer and that it would immediately capture 100% of the market, the foregone savings would amount to less than one-tenth of 1% of drug sales between now and 2009, when the last affected patent expires.

As I've said, these rulings do not undermine the underlying structure of the patent regime. Canada's balanced patent regime will continue to provide effective patent protection to reward innovation in new drugs, combined with early and effective competition, to ensure that Canadians have access to affordable drugs.

The current patent regime serves Canadians well. The latest report from the Patented Medicine Prices Review Board found that prices for patented medicines in Canada are 11% below the median of international prices and 40% below prices in the United States. In addition, Canadian prices were found to be in line with prices in six major European countries with similar publicly funded health care systems. The same report also found that the brand-name pharmaceutical companies spent close to $900 million on R and D in Canada in 1999.

Now I'd like to turn to some of the discussion that took place in the Senate committee.

[Translation]

As you know, Bill S-17 was reviewed by the Senate Committee on Banking, Trade and Commerce. I would be remiss if I did not report on the differing points of view that were expressed on various issues by both sides of the pharmaceutical industry.

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[English]

The innovative drug companies represented by Rx&D were quite supportive of the bill and of its timely passage. For their part, the generic drug manufacturers, represented by the Canadian Drug Manufacturers Association, believe that the scope of Bill S-17 should be widened to include amendments to the patented medicines. These are the notice of compliance regulations, which fall under the statutory authority of the Patent Act.

On the topic of the NOC linkage regulations, let me just take a minute to situate them within the balance of Canada's drug patent policy. As you know, the early working exception provision contained in the Patent Act was validated by the WTO. I mention that it was a very important victory for Canada. In the area of pharmaceuticals in particular, it allows a generic drug manufacturer to complete the regulatory approval process during the term of patent protection of the brand-name drug it is copying.

In practical terms, this means the generic can be ready to enter the market with its version of the drug before the brand-name manufacturer's patent expires. Should entry occur, this could constitute patent infringement. Now, to avoid that situation, the Government of Canada has put in place the NOC linkage regulations. They were put in place in 1993 as part of Bill C-91. They were reviewed extensively, I should add, by this committee in 1997, and some amendments were made to those regulations to improve their functioning.

Simply put, should a generic manufacturer rely on the early working exception to complete regulatory approval and seek to enter the market before patent expiry, the linkage regulations would be triggered. In such cases, the generic must present evidence that the sale of its product would not infringe on any relevant and valid patent.

So I bring this to the attention of the committee, Madam Chair, just to demonstrate that there were really two important parts to balance off these regulations. One was the early working exception, which greatly benefited generic manufacturers by therefore allowing early entry of generic versions of drugs on patent expiry. That was offset by a process that was triggered by the NOC regulations. Those two go hand in hand.

[Translation]

In this way, these two provisions of our drug patent policy go hand in hand and are an integral part of our balanced approach: early access to generics and effective enforcement of intellectual property rights.

[English]

In spite of the interest expressed by certain stakeholders in the NOC linkage regulations, there was a general recognition from the Senate committee that these fell outside the scope of Bill S-17, and that now was not the time to address broader intellectual property issues. I believe there was also a common understanding that Bill S-17 was necessary in order to comply with the WTO rulings, and that Canada should comply with these rulings. I think, though, that it is fair to say that this was probably the only issue that everybody agreed on.

[Translation]

In conclusion, Madam Chair, Bill S-17 is necessary to bring the Patent Act into compliance with the two recent WTO rulings.

Neither the WTO rulings nor the proposed amendments will undermine the underlying structure of the Canadian patent regime. Innovators will continue to be protected and Canadians will continue to have access to affordable drugs.

[English]

This bill is in keeping with the government's stated objective to ensure that Canadian laws and regulations, including those governing intellectual property, remain among the most modern and progressive in the world. By implementing the WTO ruling on time, we need to send a signal to the international community that we take our obligations seriously. We also send a message that we take our investment climate seriously.

Bringing the Patent Act into compliance with our international obligations is the government's immediate priority. There will be other opportunities to discuss our intellectual property regime once the WTO rulings have been implemented, and the minister spoke to this effect when he appeared before the Senate committee. For now, however, we recommend a narrow reopening of the act.

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Madam Chair, I want to thank you, and I'd be pleased with my colleagues to take questions.

The Chair: Thank you very much, Mr. Sulzenko. We'll now turn to questions.

Mr. Rajotte, please.

Mr. James Rajotte (Edmonton Southwest, CA): Thank you, Madam Chair.

Thank you very much for your presentation here today. I just want to ask basically... on page 2 and in your conclusion, you state that the rulings will not undermine or threaten Canada's underlying balance of its patent regime. Now I'd just like to ask, what will the effects be of removing the stockpiling exception? Will the effects be minimal? What will the effects be on Canadians?

Mr. Andreï Sulzenko: Madam Chair, the stockpiling exception has already been removed by regulations. So it is not part of this bill, except insofar as taking the enabling provision out of the legislation. We believe—and I believe the generic manufacturers agree—that it would have a relatively minimal impact. When we proceeded to implement the WTO ruling, they didn't see that as a significant problem for them in terms of getting their drugs to market.

Mr. James Rajotte: The position is that we should address the regulations in terms of the 24-month notice of compliance later on. Now, I have just a basic question: why can we not address this in this bill? Why do we have to leave it to a later date?

Mr. Andreï Sulzenko: Madam Chair, I was in the same job in 1997, when we reviewed the regulations. It was a long, difficult debate. There were many different views. It was very difficult technically as well, in terms of the complexity of the regulations. Certainly I believe it's the government's view that, given the timeline that we've been given by the WTO arbitrator, it would not be possible to have reopened that comprehensive review at this time and still be in compliance with the WTO ruling.

So that is why I believe the minister has said that, once we get this bill behind us, then he would be prepared to revisit issues that have been raised, frankly, by both sides in terms of improvements that they would see to our drug patent regime.

Mr. James Rajotte: Based on what you heard at the hearings in front of the Senate, can I just ask why the Canadian Drug Manufacturers Association... Is their concern that just not enough is addressed in this bill? Or is it that this bill actually works against them?

Mr. Andreï Sulzenko: I can't speak for them, and I believe they will appear before your committee. Certainly my recollection of their position when we reviewed the regulations several years ago was that they felt the regulations worked against them, even with the changes we made. Their position was—and I don't believe it has changed—that we should get rid of the notice of compliance regulations entirely. That is not the position the government took, nor is it the position that I believe the government holds now.

So it is a very controversial issue. I just repeat, Madam Chair, that it's not one that we could deal with in the short time that is available to Parliament.

The Chair: Thank you, Mr. Rajotte.

Mr. McTeague.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you, Madam Chair.

Mr. Sulzenko, recently there have been comments that some of the departments and some of the ministers will be proceeding with finding ways in which to make Canada more productive, so that Canada's role vis-à-vis its trading partners might be better enhanced, and that we should look at a number of areas. I'm wondering if you would care to comment, since you raised the issue of 1997. Most members, I don't think—with the exception of the chair—were here in 1997, but we do have some concerns that have emanated—

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The Chair: Actually, it's the other way around.

Mr. Dan McTeague: It's Mr. Lastewka. Sorry, Mr. Lastewka.

Mr. Cannis and anyone else, please accept my apology

Since 1997 we have seen the value of imports in the area of Canadian trade balances with pharmaceutical and medical industries only increase from $3 billion to $5.86 billion, using Canadian dollars, while the amount of exports seems to have decreased rather significantly relative to that, to the extent that only one-quarter or 23% is now the rule as far as exports are concerned. For imports it's 76.9%. In other words, we're bringing in technology from other countries.

I have a question with regard to your definition of the Patent Act. In this bill section 55 of the Patent Act has been opened up, the issue of infringement. To your knowledge, does any section of the Patent Act allow for an automatic injunction when someone, particularly the patent holder, says it was infringed, as opposed to when a patent has actually been infringed? Is there any other example in the Patent Act that is similar to what we have here, without the basis of prima facie evidence?

Mr. Andreï Sulzenko: Madam Chair, I'll try to deal with the first part of the member's question, and I'll ask my colleague Mr. Sutherland-Brown to deal with the second part.

I don't have the trade data in front of me. My general comment on trade data is that as an importing and exporting country, Canada certainly doesn't have a trade balance in every sector. We have an overall trade surplus of rather significant proportions but not in every sector. Historically, we have not taken a sectoral approach to trade matters. There are many other sectors, such as the automotive, where we have a huge trade surplus compared with our imports. The figures may speak for themselves, but I don't see that as being specifically...

Mr. Dan McTeague: Would you acknowledge, then, that Canada's trade deficit relative to pharmaceuticals has since 1993, or more particularly 1997 since you raised it, been more defined and more pronounced with $5.86 billion?

The Chair: I think Mr. Sulzenko already said he didn't have that information in front of him so it would be improper for him to comment on it.

Mr. Dan McTeague: Then let me ask another further question.

The Chair: Your question for Mr. Sutherland-Brown is still outstanding. Can we go back to that first question?

Mr. Dan McTeague: If I have time, Madam Chair. Will you give me time?

The Chair: Yes.

Mr. Dan McTeague: Thank you. Go ahead.

Mr. Rob Sutherland-Brown (Senior Legal Counsel, Department of Industry): Your question, if I recall, was, is there any other provision in the Patent Act that provides for an automatic injunction? There are several provisions in the Patent Act that make presumptions. One is subsection 43(2), which provides that once issued, a patent shall be deemed valid unless there is evidence to the contrary. There is also section 55.1, which provides in respect of process patents that if a similar product appears in the marketplace, that product is presumed to be manufactured in accordance with the patented process. The onus of proof shifts to the person who is manufacturing the new product to displace the onus of proof. There are also provisions in the Patent Act under section 57, I think it is, that allow the courts to issue injunctions restraining sale, manufacturing, etc. on application.

Mr. Dan McTeague: Is the presumption triggered by a claim by the patent holder, or is it just seen as automatic?

Mr. Rob Sutherland-Brown: The presumption is there in the statute. A party has to come forward and make an allegation.

Mr. Dan McTeague: Is it a matter that if the allegation takes place, there is an immediate injunction on the individual who is alleged to have infringed?

Mr. Rob Sutherland-Brown: No.

Mr. Dan McTeague: Then this would be very different from what we have in this notice of compliance, subsection 55(4). Therefore, this would be unique.

Mr. Rob Sutherland-Brown: The stay under the regulations is unique in the sense that it's an unusual proceeding in Canadian law. It is not unique in the world. The United States has a very similar set of regulations that deals with exactly the same type of balancing act between the interests of innovators and the interests of second-entry manufacturers.

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Mr. Dan McTeague: Mr. Sutherland-Brown, I'm interested in the Canadian regime, obviously. I'd like to know why in the Patent Act one wouldn't normally follow the necessary course of filing evidence before a court of proper competence based on prima facie evidence that in fact an infringement has taken place, rather than the onus being on the person who may or may not be in violation of the law.

I'm saying this in the context, of course, of the statement of Justice Iacobucci, who referred to this section as being manifestly unjust, subjecting generic drug producers to such a draconian regime without at least permitting them to protect themselves and reduce the length of the presumptive injunction by initiating the NOC process. He found it to be inconsistent with a number of regulations.

Now that you've admitted that it is a rather unique process, perhaps someone can explain to this committee how it occurred, given that the committee didn't have an opportunity to really look into it in 1997. Perhaps it did, but I don't recall the committee looking at this, at least in some of the notes I've reviewed.

Mr. Rob Sutherland-Brown: I believe it was one of the issues that was before the committee.

The quotation from Mr. Justice Iacobucci is taken in the context that if you did this, you would make the system more draconian than it already is.

Subsequent jurisprudence has indicated that if you look at the fundamentals of what's going on between the two sides of the industry under the regulations, the system that the regulations put in place is not as draconian as it appears to be on paper.

The Chair: This will be your last question.

Mr. Dan McTeague: I hope I have an opportunity also to ask Mr. Sulzenko this question.

If I'm a large manufacturer and I've built a widget of some type and I find that at the time of the expiry of my patent someone has already copied my product, I would not have the same privileges as are bestowed on the pharmaceutical industry. Do you not think that would be patently unfair to industry in general? Pardon my pun.

Mr. Rob Sutherland-Brown: I don't like puns.

I think generally speaking injunctions are available under Canadian patent law in a large number of industries. The courts are very reluctant to issue interlocutory injunctions in the chemical industry and in the pharmaceutical industry in particular. The courts have developed a test, which is used in other jurisdictions as well. It's a tripartite test. Is there a serious issue to be tried? Is the potential damage or harm that will be suffered irreparable by an award of money damages? The third leg of the test measures the balance of convenience between the competing parties.

In other jurisdictions the courts have been more willing to issue interlocutory injunctive relief in the pharmaceutical field than the Canadian courts have. In other industries, such as the automotive industry, if you have a mechanical patent, depending on which venture it is, it's easier to obtain interlocutory injunctive relief.

The Chair: Mr. Sulzenko, do you wish to respond?

Mr. Andreï Sulzenko: Just to supplement Mr. Sutherland-Brown's point, I go back to what I said in my statement, that whereas it is unique to the pharmaceutical industry that there are these linkage regulations, it is also unique to the pharmaceutical industry that we have an early working exception. I bring to the attention of the committee that those two provisions go hand in hand. In fact, one is actually required by the other in the view of the government. So one cannot deal with one in isolation.

The pharmaceutical industry is unique, and there is a unique regime. Based on the experience we've had since 1997, when we made a number of amendments, our view is that it has been working quite well. In fact, in some cases it may have reduced litigation that would otherwise have taken place if that regime were not in place.

Madam Chair, if you want to go into the details of the regulations, which we believe are outside the scope of the bill, I'm sure Mr. Sutherland-Brown can take a lot of the committee's time to explain that in further detail.

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The Chair: Perhaps we will come back to that. We have a number of other people who want to ask questions, so we'll move along for now.

Mr. Brien.

[Translation]

Mr. Pierre Brien (Témiscamingue, BQ): Thank you, Madam Chair.

In order to enlighten me, could you tell me if making changes to the linkage regulations or abolishing these without making changes to early working would allow us to comply with our international obligations? If these two provisions were not linked, did not go hand in hand like you said, would changing one of them, for instance abolishing the linkage regulations, be consistent with our international obligations?

The Chair: Madam.

Ms. Susan Bincoletto (Director, Special Projects Directorate, Department of Industry): Thank you, Madam Chair.

Yes, actually, we would comply with our international obligations because nothing compels or forces us to have or to eliminate these.

On the other hand, the government created these provisions in consideration of what is called early working, which allows generic drug manufacturers to do research in order to obtain regulatory approval before the patent expires. Therefore, we implemented the linkage regulations to minimize or eliminate the possibility of a generic drug entering the market before the patent expires.

These regulations allow patent holders to make sure that they will be notified, before the generic drug gets to the market, that effectively there is a possibility of infringement.

Mr. Pierre Brien: I see.

Now let's go back to the number of disputes. Mr. McTeague, some of us here were already members of this committee in 1997. I was. The number of disputes due to the linkage regulations was relatively high according to the representations we heard then. Has the trend regarding the number of disputes changed since 1997? Did it go up or down?

Mr. Andreï Sulzenko: Mr. Sutherland-Brown has an answer to that question. It is since 1997.

Mr. Rob Sutherland-Brown: Since 1997. I am sorry, the answer comes more quickly to me in English.

[English]

Since 1997 there were approximately 60 proceedings, notices of allegation served on the minister and on the patentee by a generic firm. Approximately 30 of those cases resulted in a section 6 prohibition application.

In 1998 there were again roughly 60 notices of allegation served and there were about 28 section 6 prohibition proceedings commenced.

In 1999 there were some 40-odd notices of allegation, resulting in some 30 prohibition applications.

In 2000 there were roughly 20 notices of allegation served and 15 or so court applications.

In 2001, to date, there have been approximately 10 notices of allegation resulting in one court application.

[Translation]

Mr. Andreï Sulzenko: Madam Chair, we have those numbers here if the committee wants them.

Mr. Pierre Brien: I would very much like it.

Mr. Andreï Sulzenko: I can give them to the clerk. Thank you.

Mr. Pierre Brien: Finally, my last question will not deal specifically with the bill as I think that everybody agrees that relatively minor routine adjustments are proposed here. For that matter, my only question about that would be: why did we not make them earlier as we have to comply?

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Does the department have an assessment of the protection granted to patents here, on average, compared to what other international players do, the industrialized countries among others, that is the European countries and the United States? Would you have such a picture representing the departmental version?

Mr. Andreï Sulzenko: We don't have exactly what you are describing.

Mr. Pierre Brien: Was that ever done?

Mr. Andreï Sulzenko: It is very difficult to make a comparison between the regimes of different countries. As Mr. Sutherland-Brown said, our regime resembles that of the United States, but it is not equivalent.

[English]

Mr. Rob Sutherland-Brown: Madam Chair, I might add that since the adoption of the TRIPS agreement, that's the trade-related aspects of intellectual property rights, all developed countries are supposed to meet the standards of protection in patents of copyright and trademark, industrial design, etc., as set out in the WTO agreements. So in terms of the effectiveness of our protection, everybody is fairly comparable.

Where Canada perhaps has a less friendly regime to patentees than many of the major members of the OECD and the WTO is that we do not have patent term extension. So the United States, which has a similar system to the NOC regulations in the Canadian system, also has patent term extension.

Patent term extension is provided to patentees to compensate them for the time they lose from their patent term of protection while their drugs are being approved by the FDA. We do not compensate patentees in Canada. So to that extent our patent protection is less attractive to patentees.

[Translation]

Mr. Pierre Brien: Thank you.

[English]

The Chair: Thank you, Mr. Brien.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair.

I want to clarify a couple of items. Basically, these changes wipe out the stockpiling. It prepares the generic manufacturers to do everything else to get ready to start producing on day one. Is that correct?

Mr. Andreï Sulzenko: Yes, that's correct, the most important exception being that the early working has been actually now validated by the WTO. So I would argue we're in a better position today than we were before the case was launched because we are now certain that this is compliant with our international obligations.

Mr. Walt Lastewka: And it protects all the generics as far as doing whatever they have to do up to starting to produce? This was a question mark before. This is now gone, as you've said. This has now been confirmed by the WTO. They can do all their preparation up to, but not including, starting production?

Mr. Andreï Sulzenko: Yes.

Mr. Walt Lastewka: The items my colleague, Mr. McTeague, brought up, the questions from the 1997 review... the possible abuses by the parties that would need to be reviewed. And I just want to confirm the discussion with the minister. Is it the intention of the minister to come forward to have re-opening of the legislation?

My understanding is there's no five-year review of the legislation so it would be at the direction of the minister or, I guess, this committee. Is that correct?

Mr. Andreï Sulzenko: Yes. That is correct.

I believe the minister has said in the past, mainly when he was appearing before the Senate committee, that both sides have raised these broader issues. And I underline both sides, because there are issues on the part of the brand-name manufacturers as well. Mr. Sutherland-Brown mentioned one of them, which is the patent term extension. The have their list and the generics have their own list. They're quite different lists. However, I think the minister has made a commitment that at the appropriate time this would come forward and he would seek the help of the committees of Parliament to make those reviews. When precisely that might be is, I think, still an open question.

• 1615

Mr. Walt Lastewka: You mentioned in one area of your report, on page 6, the brand-name pharmaceuticals spending in the neighbourhood of $900 million on research and development in Canada in 1999. I know the generics spend some money on R and D. Would you have that figure?

Mr. Andreï Sulzenko: We don't have the figure with us, Madam Chair. While we could endeavour to find one, it's really the drug brand names that are being carefully monitored. In fact, on that point, their commitment at the time of the 1997 review was to hit the one billion dollar per year R and D target by 2000. The data aren't in yet as to whether they've achieved that, but they were certainly on a trend line to be there.

Mr. Walt Lastewka: I know my colleague talked about the automobile industry, which I'm a bit familiar with, and the patents. In the pharmaceutical business, access to the data is part of getting the approval of the generic. That can all be done during and prior to the expiry of the patent, correct?

Mr. Rob Sutherland-Brown: They don't actually get access to the data, but they file their own data. There are two types of submissions before Health Canada that are mandated under the food and drug regulations. One is basically for people who have brand-new, innovative drugs or veterinary products they wish to market. That's called a new drug submission, and that has full clinical studies, and the amount of data is really quite extensive. There's a second type known as an abbreviated new drug submission, and that is a submission that relies on making a comparison between the drug that particular applicant wishes to market and another drug that is already on the market. In the second type of application the person making the submission compares their version of a product to an already marketed drug, which typically has a patent on it, and proves that it is bioequivalent. So the generic can go forward with it—

Mr. Walt Lastewka: That's the word I was looking for.

Thank you, Madam Chair.

The Chair: Thank you very much, Mr. Lastewka.

Mrs. Desjarlais please.

Mrs. Bev Desjarlais (Churchill, NDP): Following up on the notice of compliance, you or someone else indicated that the notice of compliance was outside the scope of this bill, and yet you've also indicated that there was a WTO ruling that you had to have one to balance the other in regard to the early working. Did I hear that wrong?

Mr. Andreï Sulzenko: Yes, we said the early working was balanced off by the NOC regulations.

Mrs. Bev Desjarlais: You didn't say that was a WTO ruling?

Mr. Andreï Sulzenko: No.

Mrs. Bev Desjarlais: Okay. I'm just making sure, because I thought I'd heard some indication that was so. It's not a requirement, then, of the WTO ruling that the notice of compliance stay in place.

Mr. Andreï Sulzenko: No. It was never raised as an issue.

Mrs. Bev Desjarlais: Okay. So it is possible then to no longer have the injunction in regard to notice of compliance in place.

• 1620

Mr. Andreï Sulzenko: To restate what we said before, the government has taken the view that, particularly given the short timelines available to implement the WTO finding, it would be inappropriate at this time to reopen the broader set of issues the NOC regulations are part of. So it's confining itself strictly to implementing the WTO finding, nothing more and nothing less.

Mrs. Bev Desjarlais: Okay.

You're lengthening the old act patents that run less than 20 years to 20 years, but within the scope of the bill there's nothing that would shorten the old act patents that run more than 20 years to 20 years. Is there any reason that's not being done?

Mr. Andreï Sulzenko: You're correct, those old act patents that run more than 20 years are not being shortened. The reason is that the government has taken the policy position that those should remain where they are. There is no requirement to change them, and therefore they'll be left as they are.

Mrs. Bev Desjarlais: Do you know how many drugs fall in the extended area, with patents over 20 years?

Mr. Andreï Sulzenko: We don't have that figure. We have the total number of patents, which is about 85,000, but as we said, most of those don't have a particular commercial value that we know of, so it's really the drug patents.

Mrs. Bev Desjarlais: Is it possible to get that figure? No. I see.

Of the injunctions that have been automatically—I'm going to say automatically—put in place by the brand-name companies how many have been upheld? I know that might be much the same question Mr. Brien was asking, but I might have lost something in the translation, so I didn't get the particulars.

Mr. Rob Sutherland-Brown: Madam Chair, I do have some numbers that have been provided by Health Canada. To understand them, it is perhaps useful to give a little sketch of the NOC regulations and how they work.

When a body such as a generic manufacturer wishes to compare itself to another product, it is required to examine the patent list maintained by the Minister of Health, and if there is a patent on that list with reference to the medicine, they are required either to accept that their notice of compliance will not issue until the expiry of all the patents on the patent list or to issue what is known as a notice of allegation and serve it on the patentee and on the Minister of Health.

Since the regulations were brought into effect in 1993 there have been 463 instances of the regulations applying to abbreviated new drug submissions. Of those 463 the second entrant, or generic manufacturer, did not issue a notice of allegation in 70 instances. That means to say that either the second entrant manufacturer accepted that it was infringing or there was not otherwise a reason to challenge the validity of the patent.

That leaves the other 393 submissions where they served an allegation. That is to say, they served a notice on the patentee saying their patent was invalid or what they were doing would not infringe the patent. Out of those 393 the patentee did not commence proceedings in 183 instances. That's about 47%. The patentee did institute section 6 proceedings in 210 cases, which is 53%. Out of the total number of proceedings instituted, 59 have been dismissed, 82 have been withdrawn, either by the generic or by the patentee. They withdraw these things for a variety of reasons, which we can't break down from the data the Minister of Health keeps. A prohibition order was issued in 38 instances, a partial prohibition order was issued in three instances, and there are 28 proceedings that are still pending.

• 1625

Mrs. Bev Desjarlais: Just to clarify, so the prohibition order was for the generics to not proceed?

Mr. Rob Sutherland-Brown: That's correct. Well, the prohibition order issues against the Minister of Health, preventing the Minister of Health from issuing a notice of compliance, which is essentially marketing approval, to the second entrant.

So roughly speaking, only 50% of the number of applications that go in under abbreviated new drug submissions are impacted in any sense. For the others, the patentee concedes or the generic concedes.

The Chair: Thank you.

Ms. Torsney, please.

Ms. Paddy Torsney (Burlington, Lib.): Following up on Madam Desjarlais' comment, roughly how long does this process take? Obviously some could take forever and some would be very quick. What's the usual...

Mr. Rob Sutherland-Brown: I don't know what the current averages are, but I think right now an NOC proceeding on average runs 15 or 16 months. The Minister of Health approval time for a generic abbreviated new drug submission is running 17, 18, 19 months.

These two processes run concurrently. It's important to understand that. The generic or any other second entrant cannot market their product until they have a notice of compliance. It takes the Minister of Health 17 to 19 months in a typical case to issue a notice of compliance. During that period, if the patentee institutes proceedings for a prohibition order it normally takes the courts about 15, 16, 17 months. But that's an average number; some run longer, some run shorter.

Ms. Paddy Torsney: The concern for some in those 210 cases is that basically it's a delay tactic, in that things that could be on the market are being held up. But if you're saying that they run concurrently, then there's even less of a concern.

Mr. Andreï Sulzenko: I think that's right. And I might add to what Mr. Sutherland-Brown said that the numbers he was quoting are much lower than they used to be, on both the court procedures, which have been expedited, and also on the Health Canada procedures. I believe that even at the time of the 1997 review, those averages were something like 27 months.

So the whole system is accelerating, which means it is becoming much more efficient and there is less chance of delay.

Ms. Paddy Torsney: To you, Mr. Sulzenko, how did you calculate, on page 5 in English, less than one tenth of one percent cost?

Mr. Andreï Sulzenko: I'll give you a general description and then my colleagues can fill in the detail, if you're interested in pursuing it.

There are a number of drugs that will benefit from the enactment of this legislation. They are relatively few. And as we said in our statement, the average term extension is about six months.

• 1630

So if you then ask what are the annual sales of those drugs, obviously if it's averaging six months then you have to adjust for that and then make the calculation on the assumption that a generic drug would be replacing those drugs the same day they expired, and on average at about 70% of the cost of the patented drug. In other words, the savings to the system of drug users would be about 30%.

If you do all those calculations, it's a very small number relative to over a period of eight years, because the extension for these patents will be for that period of time. That's how we get to less than one-tenth of 1%. And that is based on very heroic assumptions about the generic drug being available literally the day after, which is virtually impossible.

I think in legal terms you'd call it de minimis in terms of the kind of impact. If the committee wanted, we could take the committee through the numbers, but that's generally how we've worked it.

Ms. Paddy Torsney: As my last question, is there some concern about companies choosing not to seek a patent in Canada because they are concerned about our patent legislation, or they have been in the past—that you need consistency among different countries so that we do have access to the most innovative drugs?

Mr. Andreï Sulzenko: That is certainly a position the drug companies have taken with this. It is very difficult to measure empirically what their actual investment decisions have been and on what basis. My best measure is going back to the 1997 review, when the innovative drug companies said to the government that if they could stabilize and improve to some extent the regime in Canada, they would respond by substantially increasing their investment in this country.

Since that time there have been a number of announcements by some of the major drug companies for substantial new investments in this country, but also collectively they've made a commitment to increase their R and D performance to, as I mentioned before, $1 billion per year by the year 2000. When we get the data we'll know whether they met it, but they were at $900 million in 1999, and from a base of about half of that when they were first raising it. My reading is that they have in fact increased substantially those investments.

Ms. Paddy Torsney: You're the ADM for science policy. How does this industry compare to other industries? We've spent a lot of time doing a science and technology review and how we get to be a more innovative country, and there's been reference to the research that's been done in this sector. How does it compare to other sectors in terms of investment?

Mr. Andreï Sulzenko: Madam Chair, as a very quick and general answer, in terms of R and D investment, this industry is one of the major contributors to industrial R and D in this country. I'm sorry to say that, because although it does very well, it means that many other sectors don't do very much R and D in this country at all, whether they're Canadian-owned or foreign-owned. So if we combine this sector and the telecommunications sector, together they're probably doing about 40% to 50% of total industrial R and D in this country. That's why they're really important to us and to the government in meeting the target it set in the Speech from the Throne of putting Canada in the top five countries among the OECD in R and D.

I might just say that translating that from where we are today means approximately two and a half times the level of R and D performed by all performers in this country over the next ten years. This is a monstrous target. Certainly we need much more from many more industries, but we also need to maintain and enhance what we have in this sector.

• 1635

The Chair: Thank you very much, Mr. Sulzenko. Mr. Brison, please.

Mr. Scott Brison (Kings—Hants, PC): Thank you very much, Madam Chairperson, and thank you to the witness for appearing here today.

The generic manufacturers have indicated that the NOC linkage regulations extend patents beyond 20 years. Are you saying this is not the case? If in fact it is the case, how do the NOC regulations relative to linkage extend the patents beyond 20 years?

Mr. Andreï Sulzenko: Madam Chair, there are two issues here. I'll speak to one, and perhaps my colleagues can speak to the other.

Certain old act patents, as we indicated in our statement, actually have an effective life beyond 20 years. New patents put in place since 1989 are 20 years from filing, that's clear. This is the actual situation with the group of patents in transition from the old regime to the new regime as required by WTO.

As to the impact of the regulations on this...

Mr. Rob Sutherland-Brown: Madam Chair, it's important to understand the NOC regulations cease to operate on the expiry of a patent. If the patent is a 20-year patent and the 20 years is up, then any prohibition under the regulation is eliminated as soon as the expiry of the patent happens. It's the same with a 17-year patent. Sometimes there is more than one patent with different expiry dates on a particular product, but the regulations themselves cannot extend the term of protection.

The Chair: Mr. Brison.

Mr. Scott Brison: You've mentioned that our patent protection regime here is less attractive than in the U.S. in terms of patent protection or extension. What impact does this have, not just on “big pharma”—on the research based pharmaceutical industry—but on Canada's biotechnology industry? It strikes me that the impact would be even greater on biotechnology, because of the nature of the companies and their activities. They're usually dealing with one or two drugs or a platform, and the risk, of course, is far more significant in many ways.

What would be the impact on our biotech industry of this disadvantage?

Mr. Andreï Sulzenko: Well, I would be loathe to agree that Canada is at a fundamental disadvantage. We've come out in a somewhat different place in terms of the overall balance of our regime.

The brand-name manufacturers and many of the biotechnology-based companies would like certain enhancements to patent protection—patent term extension is one of them, but it's not the only thing on their list. The generics, on the other hand, have a different list, as I mentioned. It's been the government's job to try to figure out where the right balance is among the competing interests.

I don't believe we've had any representations in the recent past, while I've been involved in this, where manufacturers came to us and said that if they didn't receive from us a patent term extension like the one they would get in the United States, they were going to move everything to the United States. It's on their wish list, but I don't think it's something that is particularly urgent or is actually damaging our prospects for increased investment; in fact, quite the contrary. Our regime has attracted very substantial investment over the last number of years.

• 1640

We're differentiating between what they would like in their best possible world and what is quite acceptable to them as a good business environment for the industry.

Mr. Scott Brison: Have you looked at the impact of strong patent protection on our universities and our medical schools, in terms of tech transfer and commercialization opportunities, as part of your criteria when you're developing policies in this regard?

Mr. Andreï Sulzenko: Yes, we have.

In fact, some time ago the Prime Minister's Advisory Council on Science and Technology was asked to do a review of university research commercialization. The expert panel's report was a public document, and I'd be more than happy to make it available to any committee members who have an interest in this.

There were some very constructive suggestions on how this could be improved. We are advising the government in the context of its major theme of innovation on how this might be accomplished. I can't tell you now what advice we're giving the government, but it is an issue very much actively under consideration.

Mr. Scott Brison: You mentioned the biotech industry earlier—and this is my last question, Madam Chair. You didn't really address then the degree of impact strong patent protection might have on the biotech industry. I'd appreciate your comments on that industry, because of the strong linkage between the biotech industry and our universities, and because of the great potential we have in the biotechnology industry in Canada.

I'd be very interested in your comments in that regard.

Mr. Andreï Sulzenko: The biotech industry has its own association. I believe they recently changed their name. It's called BIOTECanada now. As I recollect it, their position on patents is very similar to that of the Rx&D. They're very strongly supportive of a very vigorous and internationally competitive patent regime.

I wouldn't make any major distinction between the position of those two groups on the patent issue.

The Chair: Thank you, Mr. Brison.

Mr. McTeague, please.

Mr. Dan McTeague: Thank you, Madam Chair.

I'm interested in the your comments, gentlemen, with respect to investment by brand-name manufacturers. I can well appreciate the minimization of what the generics have invested in this country or elsewhere around the world. This might help explain, while the graph you put forward may presumably not be the question of people not having any difficulty with contests—certainly notice of allegation—but rather that so many may be scared to go to this process because they know they're going to get hammered.

Mr. Sutherland-Brown, you suggested a little earlier that this situation is unique. You did, however—along with Mr. Sulzenko—triumph the fact that in terms of early workings you were able to get something from the WTO and you were quite happy with that.

We'd feel happy with this, too, except I'm wondering if you could tell me—in your learned opinion, Mr. Sutherland-Brown—are there other types of products able to get early workings approval but not subject to this rather unique right of automatic injunction?

Mr. Rob Sutherland-Brown: The provision in the statute, sir, applies to any industry where there might be some sort of certificate, or notice, or authorization required before a product can be manufactured or sold or advertised.

Mr. Dan McTeague: So you have early workings in other areas under the Patent Act. That's not exceptional; we have it elsewhere.

But it is unique that the pharmaceutical industry happens to have had section 55, notice of compliance, inserted after the committee had deliberated in 1993. Is this correct?

Mr. Rob Sutherland-Brown: My recollection, sir, and I hate to—

Mr. Dan McTeague: When do they come into effect, in other words?

Mr. Rob Sutherland-Brown: I hate to concede that I've actually been working on this file for that long, but I do believe there were amendments made at report stage in the House of Commons. I think section 55.2 was one of those introduced at that time.

Mr. Dan McTeague: Thank you.

• 1645

The Chair: I just wanted a point of clarification.

Early working—is that an exception, or is that a norm? I thought that was unique to this legalisation.

Mr. Rob Sutherland-Brown: No. Early working is an exception from infringement liability, which is set out in paragraph 55.2(i) of the Patent Act. And what it provides, essentially, is that it says, it is not an infringement of a patent to do the following.

The Chair: I understand. I want to know if it's an exception, or is that normal? Is that unique to the Patent Act? I just want to clarify that.

Mr. Rob Sutherland-Brown: It operates as an exception from patent infringement. Patents establish a bundle of exclusive rights—the right to sell, manufacture, and use a particular invention. They do that for a term, a defined period of time known as a term of protection—17 years under the old act, 20 years from the date of filing under the present legislation.

To defend the exclusive use, a patentee would bring an infringement action. What the paragraph 55.2(i) does is it provides statutory protection for third parties who wish to use or work, in terms of patent law, a patent during the time of protection for the purposes of obtaining regulatory approval or some other authorization from a governmental authority, whether in Canada or a province or abroad.

The Chair: Okay.

Mr. McTeague.

Mr. Dan McTeague: I just raised that, and I guess I thank you, Madam Chair, because I think it's important.

You've given the impression here that what we got was a bit of a trade-off—and you'll pardon my inference—and that somehow, because we got early workings for the generic drug manufacturers, we should be out there championing the fact and saying this is a great thing. My concern deals with the whole regime that has brought us, arguably, the highest and fastest-growing cost to consumers, in terms of drug care in this country. There is every evidence to demonstrate that slow approval of generic drugs may be at the root of why Canadians are paying more for drugs.

But I want to talk to and ask a specific question, because I think it's very clear that the impression you left was abundantly in the wrong direction. To suggest that somehow we have a good trade-off and we should cheer the fact that the WTO has given us early workings... it obviously applies to everyone else. However, what does not apply to everybody else is this unique and rather excessive construct that has been created under section 55.

So my question to you is on the further issue that you raised of R and D at the outset. You suggested that $900 million is a good number. I will give you the numbers from 1999—$5 billion in imports were imported into Canada. That is at least a 5:1, maybe even a 5.5:1 ratio. For every dollar that the drug patent companies brought into the Canadian market, we have at least $5, $6, $7, or $8 that was spent outside of this country. More importantly, I'd like to ask the question: has your department considered what is deemed to be R and D, in terms of the $900 million? Does it include advertising?

Mr. Andreï Sulzenko: Madam Chair, before I answer the R and D question, let me just go back to a point that Mr. Sutherland-Brown was making, and that is the use of the term “unique”.

My understanding is that, when we were defending the early working exception before the WTO, we did some research to determine whether any other industry was making use of that provision, and we couldn't find any. So when we say “unique”, it's unique in practice, as far as we understand, to the pharmaceutical industry. So I just want to clarify that point. It's a question of practice or law, but what we think is important is the actual practice.

Mr. Dan McTeague: A point of order, Madam Chair. I was referring to the section on infringement as it relates to the Patent Act. And the answer by Mr. Sutherland-Brown... I think the record will clearly show that it was unique relative to all other patents, save and except this industry.

Now, Mr. Sulzenko, I think you're crossing hairs here.

Ms. Andreï Sulzenko: Excuse me, Madam Chair. Maybe I misunderstood the member's question, but I thought the point was that, whereas the NOC regulations are unique to the pharmaceutical industry, the early working exception is not unique to the pharmaceutical industry. And I guess my response, if that is the proposal, is that in practice they are both unique to the pharmaceutical industry because no other industry uses the early working exception. So, if I've misunderstood the question, then I apologize.

• 1650

Mr. Dan McTeague: Mr. Sulzenko, does that mean your department is not aware of the fact that early workings applies to agricultural products, new pesticides, medical devices, heart monitoring, X-rays? You've just brought in evidence and even a little graph here from Health Canada. Surely you could have asked Health Canada if in fact they have an industry that is also very conversant with the issue of early workings. You're suggesting Industry doesn't know that and yet has made conclusions about this regime? I'm just asking.

The Chair: Mr. Sutherland-Brown.

Mr. Rob Sutherland-Brown: Thank you, Madam Chair. I would like to go back and check the research that we did in support of the WTO defence that we've created. My recollection is this: that although the exception from infringement liability is available to anybody where there's a regulatory approval process in place, no other industries were in the same situation as the pharmaceutical industry insofar as there was a vibrant generic competitor in the marketplace that would be seeking government approval to market a competing product to a product protected by a patent.

The Chair: Thank you.

Thank you, Mr. McTeague.

Mr. Rajotte.

Mr. James Rajotte: I have just one general question. What would be the impact... what if this legislation was not passed? What would be the effect of not implementing these WTO rulings?

Mr. Andreï Sulzenko: Well, it is hard to know, but certainly it would open up the prospect of the United States taking further proceedings under the WTO to find us not in compliance. I think that would be fairly straightforward. Then the United States could seek leave to move to some form of retaliatory action, and that would still require the WTO's approval.

In that regard, there would be a negotiation or discussion as to what the value of that should be, but I might say that it need not be in the pharmaceutical sector. It could be anywhere. So it is a bit of an unknown, and it's not one that I think the government would contemplate gladly. That is why the government wants to put this legislation through before that ever becomes an issue.

Mr. James Rajotte: That's it. Thank you.

[Translation]

The Chair: Mr. Brien.

Mr. Pierre Brien: As we are already slightly beyond the bounds of the subject, I will go a bit further. The Patented Medicine Prices Review Board is controlling the price of brand name drugs on the market. Do you presume that upon expiry of a patent, while there still are generic drugs on the market, normal competition kicks in and from that moment on there is no more need to control the price of drugs?

Indeed, the prices of generic drugs are not subject to any control, be it the generic versions of the initial manufacturer or of the second manufacturer. Is there a price control on the generic version?

Ms. Susan Bincoletto: Actually, there is no control on the price of generic drugs. We have information coming from a federal-provincial-territorial group studying the prices of pharmaceuticals.

• 1655

Their study showed that in 1997, for instance, generic drugs were on average between 27% and 37% cheaper than their brand name equivalent. It is a question of competition.

There are also the provincial forms that reflect a reimbursement policy which dictates, so to speak, the price trend of the generic drug; if, for instance, the reimbursement granted goes up to 70% of the brand name drug price, the generic will more or less follow the reimbursement policy.

But the federal government does not have any role to play in that matter.

Mr. Pierre Brien: I remember that at the time, in 1997, some people had said that ultimately the markets created upon expiry of patents were not necessarily fully competitive. They thought that there were grounds for reviewing the price levels as they were often aligned with the maximum refundable percentage. What you are telling me more or less confirms that.

Have you ever asked yourself if the powers of the Patented Medicine Prices Review Board should extend to those of the second version?

Ms. Susan Bincoletto: This is under the jurisdiction of the Department of Health mainly. We are not really in a position to give you an answer on that.

Mr. Pierre Brien: Right.

[English]

The Chair: Thank you.

Mrs. Desjarlais.

Mrs. Bev Desjarlais: Again, I know you'll correct me if I'm wrong, but was the reason that the notice of compliance regulation wasn't going to be looked at under this bill was because of the timelines that we were dealing with? Was that accurate?

Mr. Andreï Sulzenko: Madam Chair, it's obvious, especially given the interest—not so much in this bill but more in the regulations today—on the part of the industry on both sides, that as a practical matter it would not have been possible to reopen that whole issue and pass this legislation in the time available.

Mrs. Bev Desjarlais: Why was that?

Mr. Andreï Sulzenko: Because it's very controversial and divisive. I might say—

Mrs. Bev Desjarlais: Before you proceed, then—because I'm not going to get a whole lot more time—in the WTO ruling on this issue... The normal time given is probably 15 months or so for any country to meet the WTO requirements. In its submission, the United States had indicated in the WTO ruling that:

31. The United States submits that Canada has a parliamentary system, which means the government with its parliamentary majority can effectively ensure that whatever legislation it wants to pass will be passed in as short a time-period as it likes. Thus, if Canada is committed to passing the bill promptly, there is an ample scope to do so using the legislative steps outlined by Canada, particularly given the controlling majority of the Liberal Party in the Parliament following the recent election, and the fact that the legislative procedural rules only require an average of one mandatory sitting day each for the first reading, the second reading, the committee stage, and the report stage and third reading taken together.

32. The United States asserts, as past practice illustrates, that many bills have been swiftly passed by this government. For instance, in the 36th Parliament... of the 78 government bills that received Royal Assent, 40 were passed in four months or less. Indeed, bills have been enacted in as short a time-period as one week.

I would suggest that, if this government was truly committed to being fair in this whole process, those regulatory changes could be made, which would thus give a true balance to this whole process.

Mr. Andreï Sulzenko: Madam Chair, I guess the only point I would add to what I've said before is that we ultimately did go to an arbitration process because we disagreed with what the United States' position was. But that's the end of the road.

Mrs. Bev Desjarlais: That's something we all agree with.

Mr. Andreï Sulzenko: Well, I think the arbitrator sawed it down... I don't know if it's down the middle, but it's more or less there. That's the final word, and we have no further recourse in terms of WTO or beyond that.

• 1700

All I can do, Madam Chair, is reiterate the government's decision. I'm here to explain the government's decision only—namely, that it was to be a narrow bill to deal with this and then to give due process to the broader issues that cannot, in its view, be settled this quickly.

Mrs. Bev Desjarlais: Thank you.

The Chair: Mr. McTeague.

Mr. Dan McTeague: Mr. Sulzenko, I think you can appreciate that as members of Parliament, we represent—on this side at least—a fairly significant part of the Government of Canada, and that in most legislation that comes before us, if there is reference to that legislation, as it is in this case in Bill S-17, it clearly denotes that there is an opportunity for us to deal with the rather contentious issue of infringement.

I can appreciate being dragged before a court of international competence and being forced to defend the position. I'm sure it's very difficult for your industry to do that. Certainly you don't want to be perceived as taking sides, and neither do we. But on the question of simple fairness, and the question of what Parliament's role ought to be, and certainly what this industry committee's role ought to be, there is no doubt in my mind that the question of infringement has to be addressed, and it has to be addressed immediately or we'll have further excuses down the road not to deal with this.

I'm not asking you to comment on what the minister has said. Rather, can you explain to me why, at any time in the past, you did not signal to your minister or to our committee the interest or importance or significance of the provision of subsection 55.2(4)—its impact on generics, its impact on higher-cost drugs, and the fact that it has received a rather unique role, and has a unique place, within Canada's patent law? That's my first question.

My second question is very brief. Has anybody from the brand-name industry been contacting you or lobbying on this bill over the past couple of months since its introduction or prior to its introduction?

A voice: —

[Editor's Note: Inaudible]

Mr. Dan McTeague: The generics are not the ones getting the bill here.

Mr. Andreï Sulzenko: I guess—

Mr. Dan McTeague: But you have consumers—

The Chair: Okay, we have a question here.

Mr. Andreï Sulzenko: The only thing I can add to what I said in response to the last question is that the government implemented in 1997 a comprehensive review. That took some time, as some members may recall. We have since that time made further amendments to the regulations as issues came up.

My own personal take on this is that it hasn't, frankly, been that long since we made some very substantial changes to the regulations. We believe, based on what we see from both sides—the actual evidence, and some of which Mr. Sutherland-Brown has put to the committee—that just because the system is working fairly well it doesn't mean either side is 100% happy with the results.

Mr. Dan McTeague: I'm sorry, but are you again referring to this chart that you supplied from Health Canada?

Mr. Andreï Sulzenko: I am referring to the overall regulatory process, the regime that is in place. My point is, it wasn't that long ago that there was a very substantial review. The urgency point that you're making is one that the government disagrees with at this point, obviously, but a lot of issues have been building up, and we will, as the minister has said, at the appropriate time look at them again.

Mr. Dan McTeague: Mr. Sulzenko, there are two since 1997. The amount of imports of drugs into Canada, which of course do not affect any province that may claim to have an interest in this, has doubled, from $3.079 billion to $5.856 billion. At the same time, we've seen a number of formularies and a number of drugs checked off. You may not have noticed them from a regulatory point of view, but we certainly have noticed them from the perspective, sir, of consumers.

Perhaps you could give me an illustration as to why you don't believe a $3 billion loss to the Canadian economy is significant.

Mr. Andreï Sulzenko: Frankly, Madam Chair, I don't think I have anything to add to the points I've made.

The Chair: Mr. Lastewka.

Mr. Dan McTeague: There's a final question.

The Chair: There's another question you didn't get an answer to?

Mr. Dan McTeague: I think you know which one it is. It's the question about being contacted by brand-name manufacturers.

Mr. Andreï Sulzenko: Oh, excuse me, I apologize.

The Chair: Maybe it's that both sides have lobbied. That would probably be sufficient.

Mr. Andreï Sulzenko: Well, that is a fact. They talk to us all the time.

The Chair: Both sides do.

Mr. Andreï Sulzenko: Yes, both sides.

The Chair: That's what I thought.

Mr. Lastewka, please.

Mr. Walt Lastewka: I was just going to add that both sides have been talking to all of us. If you haven't, I'll send them to you.

• 1705

Mr. Dan McTeague: Which one wins?

Mr. Walt Lastewka: I'd just share this with the committee, that when the time comes that the minister says to open up and review the legislation because of contentious issues, all I ask is that everybody be prepared to meet three, four, five times a week for four months, as I said, and to take our time, without a deadline date, to review it, hearing all sides, all those people who want to contribute.

Thank you.

The Chair: Thank you, Mr. Lastewka. I appreciate that.

Mr. Cannis.

Mr. John Cannis (Scarborough Centre, Lib.): I have one question, if I may, for Mr. Sutherland-Brown, on the question my colleague Mr. McTeague asked about companies having the early exception. Doesn't that apply to all companies, the early exception?

Mr. Rob Sutherland-Brown: As I think I said earlier in testimony before the committee, the exception from infringement liability in subsection 55.2(1) applies in any industry where there's a pre-marketing or pre-manufacturing regulatory process that has to be gone through before the party making the application can do whatever it is it wants to do.

What distinguishes the industry that seems to be of great interest today, the pharmaceutical industry—perhaps I did not say this before—is that the process is different for different members of the pharmaceutical industry. The brand-name manufacturers have to come in with a full new-drug submission. Second-entrant manufacturers, whether it's another brand or whether it's a generic, have the advantage of being able to rely on the fact that the first entrant into the market has been to Health Canada and has put in all the data that supports the safety and efficacy of the therapy at issue for the purposes claimed by the inventor.

Now, typically the brand industry spends eight to ten years getting their product approved. As Mr. Sulzenko indicated in his opening remarks, the generic industry can go through the abbreviated new-drug submission in a period of three to six years. So it's fairly unique in that regard.

Mr. John Cannis: Mr. Sulzenko, in your presentation... and it starts on page 5 and goes to page 6. As I recall, I also read a report not too long ago in one of the local papers about the cost of drugs. I too read about the prices being 40% less than in the United States. I don't think the paper misled me, obviously, and I don't think you're misleading me today, because we have to respond to our constituents who are always calling us up and saying...

I'm not here to debate the issue with my colleague or anybody else, but I really want to lay two things to rest—the accuracy of these figures and of course what we are really attempting to do with Bill S-11. As a nation we're always going to the WTO when we seek arbitration, when we feel we're not treated fairly with our products. We ask for a ruling from the WTO, most most recently in an argument we had with Brazil. We're asking our international trading partners to comply.

Can you please re-emphasize what this bill is all about, for the record, for me and everybody, and what we're attempting to do here?

Mr. Andreï Sulzenko: Madam Chair, as I've said several times, the purpose of the bill is very narrow, simply to implement the obligations we've incurred under the WTO. It's not meant to do anything more than that or anything less than that.

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Just in response to the lead-in to the question, drug prices in Canada are controlled, as you know, by the PMPRB. This is another feature of our system—and I don't know that it's unique to Canada—that certainly is part of the balance that's been sought in terms of the rights and obligations of the two main sides.

They are, as you said, substantially below those of the United States. They are also below those of many other countries. According to data from the PMPRB, they're lower than in Sweden, Germany, U.K., and Switzerland. Italy and France have prices below those in Canada, on average.

Mr. John Cannis: Can you provide that data at some future time to members of the committee?

Mr. Andreï Sulzenko: We took this right out of the PMPRB report, but we'd be happy to leave it with the committee if it helps members.

The Chair: We'll take a copy of that as well. Is it different from the one we already have?

Mr. Andreï Sulzenko: I don't believe we've shared this with the committee.

The Chair: Okay. I had thought you'd shared two sets of graphs.

Ms. Torsney, you had a last question?

Ms. Paddy Torsney: Yes, thank you.

I just want to clarify something again. Bill S-17 brings into compliance all the products that were in the old system, and everything for which someone applies a patent today is under the new system. So it's really to correct a very small group of patents, to bring them up to the current system. If people have a problem with the current system, it affects a whole bigger range of patents, and it would be bizarre to fix, in this bill, whatever they think they have a problem with in the other area, because this bill is just making the two regimes equal.

Am I wrong? Right?

Mr. Rob Sutherland-Brown: I think that's a fair characterization. Individually, the patents that will be affected are affected differently, because their terms are different. If an old act patent, which was granted 17 years of protection from the date it was issued, took less than three years to get approval in the patent office, it would be termed efficient by amount, and it varies, from ten days to fifteen months or so, from patent to patent. But that's all that is being done; that extra piece of time, the difference between 17 years from the date of grant and 20 years from the date of filing, is being added to the end of the patent period.

Ms. Paddy Torsney: Thank you.

The Chair: Thank you very much, Ms. Torsney.

I want to thank you for being here today. It's been a very enlightening discussion. I think we do recognize that a very comprehensive review was done in 1997, followed by a further review that resulted in the regulation changes in 1998, and that Bill S-17, the legislation before us today, is to deal specifically with the WTO ruling. I trust all committee members will keep that in mind as we move forward in the coming days.

We thank you very much, and we look forward to meeting with you again.

The meeting's now adjourned.