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 29, 2001

• 0918

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): We're going to call the meeting to order, pursuant to the order of reference of the House dated February 27, 2001, to consider main estimates for the fiscal year ending March 21, 2002, votes 1, 5, L10, L15, 20, 25, 30, 35, 40, 45, 50, etc., under Industry.

Appearing we have the Honourable Martin Cauchon, Secretary of State for the Economic Development Agency of Canada for the Regions of Quebec.

We apologize, Minister, for the confusion in the room this morning, but we do appreciate that you are here now. We had a number of members who were also late arriving because of the room mix-up. If you have just a couple of comments to open, we'll turn it right over to questions, because I know you do have another commitment at ten o'clock with cabinet.

Minister.

Hon. Martin Cauchon (Secretary of State, Economic Development Agency of Canada for the Regions of Quebec): Thank you very much. Sorry to be late, Madam Chairperson.

[Translation]

Colleagues, I'm very sorry for the delay. I had a scheduling problem. Unfortunately, these things happen in government.

I had a prepared 15- or 20-minute speech, but since we are running late and I'm expected at a Cabinet meeting at 10 a.m., I think I will make my comments very brief in order to allow enough time for questions.

• 0920

I believe you have had an opportunity to peruse the 2001- 2002 Report on Plans and Priorities of Canada Economic Development. As you know, we have developed two programs which currently work very well: IDEA-SME and RSI. These two programs represents our main avenues of intervention. We have also implemented other special initiatives, including of course the Community Futures Development Corporation Program and others which enable us to intervene in a timely manner in certain regions.

Just to give you a quick overview, IDEA-SME is our main program. It was established in 1994-1995 as a vehicle for providing support to SMEs in the following areas: innovation, design, exports, entrepreneurship and marketing.

Our second program, Regional Strategic Initiatives or RSI, allows us to intervene in each Quebec region and to target our actions to these regions' economic development. Through this program, we have supported initiatives across Quebec. While some initiatives have yet to be announced, generally speaking, we are pleased with this program's progress. If we look at the figures for 2001-2002, we note that funding for RSI initiatives across Quebec will surpass that awarded under IDEA-SME.

Undoubtedly, one of the year's two highlights is the renewal of the contract.

[English]

We are proceeding with the new agreement with the Community Futures Program. We all know that in the province of Quebec we've had 54 Community Futures. I went through a revision period to see if there was any way we could cover the whole geography of Quebec, and then following that review period, we've announced a new agreement based on a five-year period. The agreement is based on an amount of a bit more than $100 million over the next five years for the Community Futures.

It's a wonderful accord. The work that is carried out by those Community Futures is pretty important for all the communities across the province of Quebec. They're indeed our main partners in the field. When it comes time to deliver some services, very often we use the work of those Community Futures. Apart from that,

[Translation]

another initiative was the creation of the support program for the Gaspé economy. Treasury Board has earmarked a total of $35 million for this particular initiative. In addition, Canada Economic Development has opened it's 14th regional business office. When we consider the work now being done by this office, we see that it is truly meeting a local need.

Summing up, Canada Economic Development will continue to work within Industry Canada's priorities framework. As you know, Canada Economic Development operates under the Industry Canada portfolio and regional development agencies bring their message to the regions as a whole and adapt it to existing realities.

[English]

Madam Chairperson, I wanted to expand a little more, but knowing the timeframe we have, I will just turn the floor over to you.

The Chair: Thank you very much, Mr. Minister. We're going to turn now to Mr. Penson for questions.

Mr. Penson.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you. Welcome to the minister and his delegation. I too had difficulty finding the room this morning. That's because we don't meet here as often as we do a lot of other places.

I have three questions I'd like to ask. If you don't have time for the answers right now, if you could just provide them to us, I would appreciate it.

Last month the Western Economic Diversification Program, the sister program in western Canada, announced they would spend $6 million to create francophone development advisers for the western provinces, to provide enhanced business services in French. Does your program have anything similar for English advisers in the province of Quebec? That's my first question.

My second question is, could you tell us how many jobs your program has created in the last year, or even if you want to break it down further than that? How much money was spent riding by riding, if that's possible to provide?

The third question has to do with the program you talked about, the Community Futures Program. As a significant amount of money is going into that program, I'm wondering what kind of reporting is available to members of Parliament about the Community Futures Program activities. Are there annual reports, for example? Is there a track record of the loan programs? We need some kind of assessment of how that program is operating and whether good value for money is being provided.

• 0925

Those are the questions I have, Mr. Minister.

Mr. Martin Cauchon: Of course, we'll answer some of your questions with regard to official documents. But as regards the question of English services in the province of Quebec, we don't have a specific program, knowing that most of the time people in the department are bilingual. If they're not bilingual, we have the human resources to be able to offer services across the province of Quebec in English. We haven't had any complaints so far from the English community in the province of Quebec. I guess they've been served. Knowing the official language legislation as well, we have to cope with the situation, we have to fulfil our obligations under the legislation, so that's what we've done.

In my introduction I said we have 14 offices across the province of Quebec. Those offices have very good links with all the communities, and that includes the English communities in the province of Quebec, Montreal and western Montreal.

As regards the question of the Community Futures, you're quite right that they're managing public money. We have to make sure that the spending is well made and based on some principles that we all know. I would like to tell you that we at Canada Economic Development have an agreement with each and every one of them. They're bound by a very specific clause that they have to respect. They are indeed accountable to the department, and I'm accountable to the House of Commons. Of course, we have to know that Community Futures in Quebec are seen as arm's-length cooperation, so they're independent. We can't get involved in their functioning, we can't get involved in their decisions. It's a decision taken some years ago, and the philosophy behind it is that the economic development of the community would be better served. It's the people of the community who take charge of it.

Mr. Charlie Penson: Mr. Minister, could I just interject? I know that time is short here this morning. It's not just Quebec. Community Futures operates in all parts of Canada. I think there's a growing concern that these external delivery agencies don't have an adequate reporting process to let us know whether there's good value for money. I assume there is, but I have never seen anything on it, and I would appreciate knowing if there are audits available that we can look at and how you monitor these agencies.

Mr. Martin Cauchon: We have what we call in French les mesures de rendement that, based on our contract, they're obliged to give us on a yearly basis. So we know exactly what's going on, we are following that. What we can do is provide you with more detailed information in writing.

Mr. Charlie Penson: That would be appreciated, thank you.

The Chair: Thank you.

Mr. Lastewka, please.

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

I know your organization works with a lot of SMEs in Quebec and works with the various regions of Quebec on small business. One of my concerns has been and still is that we have about 125,000 new bankruptcies every year in small business. Could you share with us what work your group does in Quebec to analyse the reasons for the bankruptcies? And what is the percentage of bankruptcies of SMEs that have been assisted under the program?

Mr. Martin Cauchon: The percentage of bankruptcies I don't have now in front of me. I will provide you with the information, if you want. Broadly, when one files bankruptcy, there are many factors that could be involved. It could be the economic situation, it could be the specific field in which the corporation is involved, it could be the area where the corporation is involved. There are a number of factors that are specific to each and every case.

• 0930

But as an economic development agency, we've seen over the past years that getting involved with funding is, of course, one important component of a business success. As you know, back in 1994 we decided not to get involved with what we call subsidies. We're doing what we call repayable contribution. That's one element. Being the government, we're trying to make sure those corporations are viable. Since 1994, when we get involved in a project, we insist as well on having a fair component coming from the investors. So if you get committed to the project, we do believe there's more chance of success.

The other part of the answer is that at the department we have realized that we have to keep working. For example, if you're getting involved with a corporation, providing them with a contribution, that's not the end of it. You just keep going with it. You have to keep working, providing them with services, with expertise. This is what we're trying to do with our 14 offices across Quebec. This is what we're trying to do with our Community Futures. This is what we're trying to do as well with what we call groupes intermédiaires, like the chambers of commerce we have across the province of Quebec. We make sure that when we get involved in their projects, we keep working with them, offering our services, information, expertise, and so on. This is a key component of an SME's success.

Mr. Walt Lastewka: The Canada Community Investment Plan has a number of pilot programs going on in Quebec. Does your organization work with them in helping small business?

Mr. Martin Cauchon: The Community Futures program?

Mr. Walt Lastewka: No, Canada Community Investment Plan, CCIP?

Mr. Martin Cauchon: That program is funded by Industry Canada, as you know. We're not getting involved, in the sense that we're not managing those programs as well. As you know, the philosophy behind all that is to make sure that communities will better manage themselves. Maybe from one region to another there could be some links directly with the department or directly with Community Futures, but officially speaking, we don't get involved with that component.

Mr. Walt Lastewka: Thank you very much.

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

Mr. Martin Cauchon: Thank you for your questions, sir.

The Chair: Madame Girard-Bujold.

[Translation]

Ms. Jocelyne Girard-Bujold (Jonquière, BQ): I'm sorry, but I seem to be losing my voice.

I'm delighted to welcome you to the committee this morning and I have several questions for you. You've stated that as Secretary of State for Canada Economic Development, you work with the regions and with industry. You come from the Charlevoix region. We have CRCDs, CLDs and a host of other organizations involved in strategic regional development planning. Just recently, my region's CRCD tabled its development proposals and plans and priorities covering the period up to 2005.

I've observed that when Canada Economic Development intervenes, it's not always in keeping with the reality on which regional agencies base themselves in terms of developing expertise and strategies. Several weeks ago, a fact-finding debate on natural resources was held in the House of Commons. The majority of members from all parties agreed that the federal government should be involved more closely in partnerships with the provinces. As you know, the Quebec government earmarked $780 million in its last budget for regional development. It is truly in touch with regional realities.

My first question is as follows: do you intend to work in partnership with Quebec? Do you have plans to develop, as you are currently doing, your own plans which may not tie in with... In your estimates, you commented on the fact that young people are leaving the regions in droves and you need to work with the provinces to address this problem. My question to you, therefore, is this: What kind of projections are you making and what actions are you planning in the future to take into account the realities of regional development?

• 0935

Mr. Martin Cauchon: First of all, thank you for your question. When it comes to taking into account regional realities, I humbly submit that the Canadian government has been a leader in this area.

Either several weeks or several months ago, celebrations were held to mark the 20th anniversary of the first CFDC in Quebec. Of course, that's not what they were originally called. The fundamental philosophy behind this movement is to allow regional representatives to take charge of a region's economic development, taking into account regional realities and priorities. Today, I'm proud to say that we have 20 years of experience under our belts, 20 years of providing services to communities, 20 years of economic development in keeping with the realities of regional communities.

This initiative proved so successful that when the time came to rethink our approach to economic development, Canada Economic Development was the first department to develop tailor-made programs for each region. I believe the creation of the RSI program was the first initiative of its kind.

Why does the RSI program take into account regional realities? Because before each initiative can be implemented, the regional office must hold consultations. CFDCs as well as all economic development stakeholders are consulted to ensure that... As you know, regional development is not an abstract exercise. It requires concrete actions. Surely you're come to realize this through your work in your own region. Therefore, for any initiative to be successful, it must target priorities that are identified and supported by the region in question.

Take for example your own region, the Saguenay—Lac-Saint-Jean. A specific strategic regional initiative has been developed, one that targets regional priorities. Other regional concerns include technological capabilities, tourism—very important to your region—the aluminum industry and the boreal forest. These are just some of the priorities that we have and will continue to target.

In the Gaspé-Lower St. Lawrence, our SRI actions have been focused on other realities. Aside from this, it's clear the department maintains ties with middle-level groups, with entrepreneurs and with chambers of commerce. We too believe that these stakeholders play a critical role in fostering the entrepreneurial spirit. Each time I've announced a particular SRI, I've met with CFDC representatives who are in essence our partners. We readily acknowledge the existence of this partnership. Even though there is no formal regional development agreement in place between Quebec and Canada, if my memory serves me correctly, last year we collaborated on 250 ventures out of a total of 800 projects. This proves our commitment to taking concrete action. If both parties are targeting similar projects, this basically means that the initiative in question has the full support of the entire region.

Ms. Jocelyne Girard-Bujold: Why then don't you work in partnership from the outset? I note in your expenditure plan for 2001-2002 that your budget is set to increase, but only because of the National Infrastructure Program. That's what it says.

You stated that you work with CFDCs and chambers of commerce to identify priorities. I agree with you that the Quebec government has the interests of the regions at hearts, just as all regional stakeholders do.

I surveyed some 200 people in my region who are affected by regional development and 90 per cent responded that we need a federal-provincial-municipal envelop to develop our market niches, that this is critical because people are leaving the regions in droves. In my opinion, we no longer have any choice. The money we turn over to the federal government belongs to us. Barring any evidence to the contrary, the Government of Quebec is part of the Government of Canada and the money spent by the Government of Canada is not going to address regional development priorities. It's important for parties to sit down and to work together to bring about regional development.

Several weeks ago, I put a question to you in the House about the status of the Canada Jobs Fund. You responded that the information would be contained in the 2001-2002 budget. Well, these estimates have been tabled and where has the money gone? There's no question that the CJF was a boon to a region. I relied on it considerably, but now it has been abolished. That was my second question.

• 0940

I'm sorry, Madam Chair.

Mr. Martin Cauchon: I very much appreciate your question which concerns development. First of all, as far as the budget is concerned, just let me say this: our budget for 2001-2002 has been increased to $355 million. These monies are primarily earmarked for the two programs I spoke of earlier, but they will also be spent on special programs and on the Infrastructure Program. Certainly, we mustn't lose sight of this fact.

In the 2001-2002 budget, infrastructure accounts for $86 million in Quebec. It must be remembered—and this is an interesting point for all parliamentarians—that since moving to a repayable contribution system, our A base has been reconstituted. Corporations are beginning to repay contributions at an absolutely remarkable rate. As I recall, last year, companies repaid approximately $21 million and this amount is set to be even higher this year. Therefore, I think we have already achieved a fine partnership.

You also mentioned that the money belongs to your region, that it comes from Quebec. Clearly, the Government of Canada employs a certain mechanism to redistribute the nation's wealth. This mechanism is called equalization. Quebec benefits from equalization, from monies that come from all provinces. That's not the issue, however. The point is to ensure that the monies, regardless of where they come from, are put to good use.

Before answering for your region, let me say that several years ago, a choice was made. When the Canada-Quebec federal- provincial agreement on industrial development expired, a choice of sorts was made. I recall attending a press conference with Bernard Landry who remarked that when the agreement expired, he was prepared to have the province go it on its own. I found that comment so interesting that I adopted it as my own.

Moreover, you will recall that when Mr. Martin was responsible for Regional Development, he had offered the province of Quebec the chance to renew this agreement. Provincial officials responded that they weren't ready yet and that they wanted to postpone matters while we on the other hand were in the midst of the program review process. We had to move forward. We rethought all of our programs, taking into account regional development priorities as well as our expertise. The end result was two programs which, in my view, respect the regions and allow for partnerships, wherever possible, with Quebec. I mentioned the 256 projects carried out in partnership last year. The results of this approach speak for themselves.

Now then, in terms of taking into account regional development priorities, are you telling met that the initiative aimed at promoting your region as an international tourism destination is out of touch with your region's priorities? Are you saying that the efforts made last year to develop the Aluminum Technology Centre were not in response to a stated priority? Are you saying that transforming the Saint-Félicien zoo into a boreal biodiversity conservation centre is not a priority? In my estimation, these are all worthy initiatives.

The Government of Quebec can also do its share. I'm not issuing any kind of challenge, but I do think that there is a way to coordinate our actions, and from time to time, to work together.

The last two points you raised are important. With respect to young people who are leaving the regions, we put in place some programs several years ago in an effort to reverse this trend. I won't say that the results have been miraculous, but we have made some progress. Initiatives include the CFDC youth strategy and the pilot program launched at the University of Quebec at Rimouski to give future engineers or technicians their first job opportunity in the community. Efforts are being made on this front.

As far as the Canada Jobs Fund is concerned, remaining funds are set to be transferred shortly. The matter has just come before the Cabinet committee on the economy for approval of general criteria. Each regional development agency will have to apply to Treasury Board for authority to use these funds. I've already stated that the government wants to manage these monies under its two existing programs, namely RSI and IDEA-SME. Perhaps we will show greater flexibility and openness, taking into account certain needs. Basically, this new policy approach is set to be operational by the fall.

[English]

Sorry, Madam Chairperson.

[Translation]

The Chair: Thank you.

[English]

We're going to move now to Mr. Savoy.

Mr. Andy Savoy (Tobique—Mactaquac, Lib.): Thank you, Minister, for coming this morning.

The two areas I would like to ask questions about are the quality of life in rural communities, and value-added and SMEs.

The first issue I have is that in my area we have 13 small communities of approximately 1,000 to 6,000 people each. It is a rural-based riding, and a lot of situations are similar to rural Quebec, where quality of life is an issue, not just with hospitals and schools, but in other areas that economic development programs can impact, such as community centres.

• 0945

In large areas, you may have a community centre, an arena complex, for 50,000 or 100,000 people. In small areas, your catchment area may be only 10,000 or 20,000 people.

Does your program allow for flexible investment in infrastructure, such as municipal complexes or arenas? Is that considered economic development in your program?

Mr. Martin Cauchon: It's a good question.

Broadly, when we invest in a region, based on the programs we have now and the rules of Treasury Board, we get involved most of the time in small and medium-sized enterprises, or independent corporations that are there to promote entrepreneurship in a specific field, for example, but always bearing in mind the question of economic development.

Sometimes we could invest in some infrastructure programs, but at this time, as a regional development agency, our priority is to make sure we use the infrastructure program that is there. Then, at the end of the day, if we can't have access to an infrastructure program or we can't meet the criteria of the infrastructure program, sometimes we will get involved.

There are many elements that have to be taken into consideration, such as whether the economic development is supported by the community as a whole, and so on. That will happen rarely, but to be more specific, with the SME program we have, there is a component where we can get involved in infrastructure when it's seen by the community as a major program, but we don't tend to do so.

We have developed, with partnerships of course, specific programs called entreprises rurales in some rural areas of the province of Quebec.

Mr. Andy Savoy: On my second question, many of the rural areas have abundant agriculture and lumber resources, and the future in these economies is not toward producing or selling these resources as a base product, but value-adding to the resources and niche marketing.

What is being done in looking at that value-adding, in general? There are two key components to value-adding. One is the technological component and the second is the marketing component. Can you tell me what your initiatives are, through your organization, in those areas?

Mr. Martin Cauchon: First of all, with regard to natural resources, we know that in the province of Quebec we have a lot of them. Let's just take the Gaspé area as a very good example. We went through a tough period of time in economic development. It's still difficult down there, but we're seen by the community as a good partner, I guess. It's a place where you have a lot of natural resources.

In those regions we're trying to make sure we diversify the economy, based on their natural resources. That means we have to proceed with the second transformation of those natural resources. It takes time. Tomorrow won't be the eve of a success, but we still have had some successes. But to have success, in terms of diversifying the economy of a region, it takes time. We have to be in there. We have to work hard, in partnership. But in the Gaspé area, with our department, we've met a few successes so far. We're going to keep working to make sure we have a second transformation of those natural resources. That's the only way out.

You asked a question about exporting and commercializing abroad. It's one of our key components, when we look at our programs so far—export markets, of course, and helping them commercialize.

We also have, across the province of Quebec, a number of what we call incubators, to help those small corporations that are developing themselves into new fields. Of course, we tend to help them have access to new technology.

I used to say, in a speech I delivered quite often in Quebec, that we're living in a global marketplace—we all know that. It's a new era, in terms of access to information technology, innovations, and so on. My guess is that if we can help the regions better use those new technologies and have access to information and innovation, the future belongs to all the regions of Canada. But we have to keep working with them. We have had some success, and I'm sure there's a lot ahead as well. We have faith. It's our mission, and my team and I believe in it.

• 0950

The Chair: Thank you, Mr. Savoy.

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Madam Chair. Thank you, Minister, for your presentation and informative comments.

I have three questions for you. Firstly, you mentioned that there were 56 CFDCs in total operating with a global budget of $103 million. There are no CFDCs in urban regions like Montreal. Instead, we have CEDCs. What is the overall CEDC envelope? Secondly, one component of the CFDCs' mandate is unique, in that they can award loans...

Mr. Martin Cauchon: Yes, but...

Ms. Marlene Jennings: Let me finish. I want to group all of my questions together.

Mr. Martin Cauchon: It's just that your questions are not relevant. You see...

Ms. Marlene Jennings: I realize that you have to leave at 10 o'clock and I want to be certain that I've put all of my questions. If you don't have time to answer them right now, you can do so later in writing.

CEDCs don't have the option of awarding loans. Why is that?

Secondly, I want to follow up on Ms. Girard-Bujold's comments regarding the outstanding balance of $177 million in the CJF account. You responded in part that the monies would be redirected to your two existing programs and that funding criteria could be made more flexible. Are these criteria in fact flexible enough to entitle businesses in the field of social economics to program funding?

Lastly, how does the Regional Strategic Initiative Program apply to the Greater Montreal area?

Mr. Martin Cauchon: To respond to the first part of your question concerning the CEDCs, funding is awarded on an annual basis. If my memory serves me correctly—and please don't hold it against me if I'm wrong—there are seven or eight CEDCs in Montreal as well as a number of similar centres in the Quebec region. The total CEDC envelope is $2 million.

It's true that CEDCs do not have an investment envelope. Why is that? Well, when CFDCs were created, they reported to Human Resources Development Canada. They operated in areas with rather anemic economies and high rates of unemployment. These agencies were given investments funds so that they could truly serve as economic development agents and spur the economy forward.

We observed that investment capital was easier to access in urban areas such as Montreal or Quebec. However, we felt that there was a need to establish economic development corporations with closer links to the community, corporations that could offer expertise and services. CEDCs represent partnerships between three parties and operate in the same manner as autonomous corporations.

As far as the CJF is concerned, there is no question that social economics are an important component of the Quebec and Canadian economies. However, during Program Review in 1994, we made a conscious decision to target SMEs. The reality is that our budget resources are limited, although we do operate under a system of repayable contributions. We consciously chose to base economic development on SMEs and on economic development delivery vehicles such as chambers of commerce.

The ensuing RSI program was based on exactly the same philosophy. When responsibility for CFDCs was transferred to us, we worked to shift the focus of their actions to SMEs. As such, this is not part of our mandate at the present time. Does the department headed by my colleague Andy Mitchell focus more on social economics? Perhaps.

• 0955

I know that we do intervene from time to time in the field of social economics. Some CEDCs have also moved in this direction. The best example I can give you is that of RESO Sud-Ouest which has benefited from over $5 million in investment funding since 1996. This agency intervenes in this field, as do certain components of Canada Economic Development, although this is not the department's primary mission.

As for your question concerning the CJF—I will wrap up with the question on the Montreal RSI, Madam Chair—funds will be available as of next September. There was no other alternative, because when the announcement was made last June, a number of files had yet to be reviewed. Human Resources Development Canada dipped into the budget envelope for the year just ended. Monies were not, therefore, returned to the Consolidated Revenue Fund, but rather went to businesses.

Regarding the RSI program, we developed an RSI initiative for the Greater Montreal Area targeting such things are science and technology, SMEs, constructive internationalism and culture. The results to date have been very encouraging. I have them here with me. A total of 1,600 projects have been undertaken, and investments in excess of $1 billion have been generated. Obviously, Canada Economic Development did not work alone. All federal stakeholders worked in partnership. The fact remains, though, that since the inception of the RSI program, nearly $290 million has been invested in the Quebec region as a whole.

We are now considering the possibility of implementing phase II in which we would target our actions to regional axes outside Montreal, without necessarily creating another RSI.

The Chair: Thank you, Minister. Thank you, Ms. Jennings.

[English]

One last question, Madame Girard-Bujold.

[Translation]

Ms. Jocelyne Girard-Bujold: Thank you, Madam Chair.

You stated in response to Ms. Jennings' query that HRDC was unable to transfer these funds because certain files were pending. Could we have a list of those files which have been settled?

Secondly, can people apply right now for funding under this new program? You stated that funds would be available as of this fall. Correct?

Mr. Martin Cauchon: To answer your first question, you should be able to find that out through access to information.

Ms. Jocelyne Girard-Bujold: I tried, but I was unsuccessful.

Mr. Martin Cauchon: That is not my area of responsibility. I can't answer for HRDC. I would gladly answer if it concerned Canada Economic Development, but I can't answer for another department.

To answer your second question, applications will be received as of this fall. It's quite simple. People can apply through normal CED channels because we plan to use the same two programs, namely IDEA-SME and SRI.

Ms. Jocelyne Girard-Bujold: How much funding will be available as of this fall?

Mr. Martin Cauchon: That information is still confidential. Treasury Board approval is till pending.

Ms. Jocelyne Girard-Bujold: Can you give me a ball park figure?

Mr. Martin Cauchon: A ball park figure?

An hon. member: ...seven million.

An hon. member: Over four years.

Mr. Martin Cauchon: Apparently it's no secret then, since the figures are listed in the document.

Ms. Jocelyne Girard-Bujold: I didn't read your submission, but merely listened to your presentation.

Mr. Martin Cauchon: Well then, subject to Treasury Board approval, a total of $177 million will be available over four years.

Ms. Jocelyne Girard-Bujold: Over four years?

Mr. Martin Cauchon: Yes.

[English]

The Chair: We want to thank you, Minister, for being here this morning. We apologize again for the room confusion. We look forward to meeting with you again in the future.

Mr. Martin Cauchon: Thank you very much, Madam Chair. Thanks to all colleagues as well.

The Chair: We're going to suspend for about two minutes while we change to our next group of witnesses.

• 0959

• 1005

The Chair: I call the meeting back to order.

We'll now turn to Bill S-17, an act to amend the Patent Act. There's a request to have an additional witness, and we have one before us now. Mr. David Lee is a patent officer from the legal and therapeutic products division of Health Canada. With him is Ms. Anne Bowes a patent officer from the science, health products and food branch of Health Canada.

I understand you have some opening remarks, Mr. Lee.

Mr. David Lee (Patent Officer, Legal, Therapeutic Products Division, Health Products and Food Branch, Health Canada): Yes, I do, Madam Chair.

The Chair: We'll be happy to hear your remarks, and then we'll move to questions.

Mr. David Lee: Thank you.

Madam Chair, we would like to outline very briefly what happens under the food and drugs regulations and the patented medicines notice of compliance regulations. Those two fit together, and we'll run through a brief description so you can see technically how the patents work with the drug submissions.

Health Canada is responsible for reviewing drugs before they can be marketed in Canada. No person can sell or advertise a drug without getting what we call a notice of compliance. A notice of compliance is given when the minister is satisfied that a particular drug is safe, effective, and of high quality. NOCs are issued for both what we call brand-name manufacturers and generic manufacturers.

It's in regard to the issuance of notice of compliances that the patented medicines notice of compliance regulations fit in. The primary administrative duties we have, with respect to the patented medicines notice of compliance regulations, are to maintain a patent register and ensure that subsequent entry manufacturers, or generics, address that information when they come in to copy the innovator's drug.

The patent register consists of a series of patent lists, which are forms submitted by first persons, patentees, or innovator manufacturers. On the list, the manufacturers, or first persons, describe the drug they want to protect with patents. Then they take the patents they want to protect the drug with and list them on the forms, so they match up the patents with the drug they're trying to protect.

Section 4 sets out the requirements for a first person bringing a patent to us to list on the patent register. Not all patents that are granted in respect of a drug by the Canadian intellectual property office—the patent area—are eligible to be put on our patent register. It's basically only patents that contain a claim to the medicine or a use of the medicine.

There are also timing requirements involved in being able to list a patent on the patent register. The timing requirements that a first person has to observe in filing a patent list are very specific, and they involve a knowledge of how drug submissions work. I will just spend a moment on how drug submissions work under the food and drugs regulations.

Please recognize that's a different regulatory regime. The food and drugs regulations require that if you're a first person and you want to get a drug approved, you have to file what we call a new drug submission. Those are very big drug submissions. They actually bring them in on pallets because they contain a lot of scientific data about the drug that relate to its safety and efficacy for use by Canadian patients. The minister looks over those data to approve the drug. That's the new drug submission, and it results in the notice of compliance.

There's also another kind of submission, known as the supplemental new drug submission. It's important to notice the difference. Any manufacturer who wants to make a change or improvement to a drug is required to file more information with the minister, so the minister can take a look at that, in terms of the safety and efficacy, and approve it.

• 1010

The changes you can make to your drug product range. You can change a formulation and all sorts of things about the drug. You can get a new use for it. But you file those by way of a supplement.

So those are the two types, new drug submission and supplemental new drug submission. That's a brief description of how an innovator brings a patent to the minister and lists it on the patent register.

The patents are sitting there, protecting a specific drug. On the other side of the equation, when a generic comes in to get a drug approved, they also have to file a drug submission, but it's a different type. It's what we call an abbreviated new drug submission. The abbreviated new drug submission is much smaller than the innovator drug submissions. There's much less data. That's because what the generic is really trying to establish is that its drug contains the same medicine in the identical amount. They're bio-equivalent, which means the medicine gets into you and does what it's supposed to do in a comparative way between the generic and the innovator product.

So that's what they're proving in their new drug submission under the food and drugs regulations side. If they are coming in to copy, in that sense, a drug for which a patent appears and is listed on the patent register, then they're going to have to address the patent. The way they do that is to file with us another form, called a form V. For instance, they tell the minister they're going to make this drug and address the following patents. They send a notice of allegation, which is really a letter to the innovator company that owns the patent or has licensed the patent and listed it. The letter has to say one of usually a few things—for instance, your patent's invalid, or we're not infringing, or it's expired, or the way you listed it is not correct.

On the basis of that notice of allegation, the innovator gets 45 days in which to consider whether to bring an application to the Federal Court. If the innovator does so and decides to say, “We're going to court to determine whether my patent's invalid or whether you're infringing”, then when they file the notice of application with the Federal Court a 24-month stay automatically takes place. That stay tells the Minister of Health not to issue an NOC for this drug until either 24 months or a resolving of the court case. That means we just hold up on issuing the NOC.

That points to something important. There are two parallel processes here. There's the court process, which is where the innovator has filed the notice of application and they seek to prohibit the minister from filing the NOC. On the other side, once the generic has addressed the patent, they can go to drug review. So their ANDS goes off to our scientists and takes a look at it for the purposes of the food and drugs regulations. And those run concurrently, typically.

That's the process. When the NOC is just about ready to issue on the food and drugs side, the court case is hopefully resolving in a judicial order. The judge will either dismiss the application, in which case the NOC will be issuable, or grant the prohibition, in which case the generic will probably be ordered to await expiry of the patent, however long that's going to take. The patent will say when it expires.

That, very briefly, is an outline of the process.

The Chair: Thank you very much. We have a number of questions for you.

Mr. Penson.

Mr. Charlie Penson: Madam Chair, I think this morning's brief session with these people from Health Canada really just points out the need to address this issue in some detail. We should probably undertake further study on these issues in the fall.

It seems to me that on Bill S-17 we should proceed, in order to bring in the necessary legislation to bring us into compliance on our WTO rulings, and then we should look in some detail at this huge issue of regulations, notice of compliance, and the 24-month stay, and have all of the parties come before us to be able to have a reasonable debate in the future. That would be my only comment.

• 1015

The Chair: Mr. McTeague.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Madam Chair and committee, I wanted to begin by thanking not only our guests for appearing here but more specifically the committee. I realize the rather oppressed nature in which we are putting this bill forward, and the committee has seen fit to accept a recommendation and allow Mr. Lee, from Health Canada, to be here. I wanted to thank every member. I think it's very significant. Notwithstanding the fact that we may or may not have a guarantee of a commitment to look at this more abundantly down the road, the reality is that it is having a tremendous impact on the bottom line for consumers and health care in Canada.

Mr. Lee, I have three questions. During these hearings we're heard a lot about evergreening and what some have referred to as multiple patents on the same medicine. Could you explain to us here in this committee how it's possible and how common the practice is? Bearing in mind I only have a few minutes, try to make it as brief as possible.

Mr. David Lee: It could get very complicated, but I will just outline.... The primary criteria of eligibility are that the claims of the patent contain the claim for the use of the medicine or for the medicine itself. Those are the primary eligibility concerns. It's possible to patent a number of inventions concerning a particular drug. When patent lists come in we audit them to make sure they comply with the requirements in the regulations, both from a sense of timing and also the eligibility requirement I just pointed to. So it is possible to list more than one patent on the patent register for a particular product.

Mr. Dan McTeague: So as a result of multiplying these patents, are there cases where even after basic patents on medicine expire a generic competitor is still blocked from going onto the market because of the 24-month automatic stay given to brand names under the NOC?

Mr. David Lee: There have been some instances, if what you're calling the basic patent is what we call the compound. That's the real, strong patent, because if you're protecting the compound itself, the medicine itself, it's hard to make a claim to non-infringement. Where we have seen some patterns, though relatively few.... Before I answer this, I would like to point you to 4(5) and 4(4) of the regulations. That contemplates patents coming on after the time when usually they would. But you're asking about an area where a patent comes on after expiry of the compound patent.

There are some instances where other patents have come on through supplemental new drug submissions—and I explained what those are. Those are improvements to drugs for the NOCs. It has the effect of having another court case.

Mr. Dan McTeague: Mr. Lee, a number of us are concerned about the WTO ruling. It removes obviously the ability to stockpile, so in effect you are now beginning the process almost at the point in which the 20-year patent expires, and of course it takes a long time for these drugs to be introduced.

I understand that your department, Health Canada, sometimes tries to remove certain pharmaceutical patents from the list if it considers them inappropriate. I also understand that brand-name companies usually object. Can you give us a description, perhaps an illustration, of how many times cases have occurred in which Health Canada has been sued over the past 12 months by brand-name pharmaceutical companies because they are trying to do your job in removing improperly listed patents so that they cannot automatically block competitors for 24 months?

Mr. David Lee: Yes. I would respond to that generally first.

Originally, when these regulations came into force, there was a 30-day window where all the innovators could bring in all the patents they wanted and just list them with Health Canada. At that time, those lists were not audited for the criteria. There were so many that they were basically put in binders, and it was called the patent register. In 1998, as you know, there were amendments, and part of the amendments included the add or delete, the minister may add or delete, and those are the primary verbs we have taken to take a look at the patent register in terms of eligibility—go from one end to the other and measure out which patents are eligible to be there on the register and which are not.

• 1020

There have been a number of court cases, yes, disputing whether specific patents should be listed or not. Most of these are very frontier issues, so we're never very surprised when they do go to court. We've had an answer on some, for example intermediates, where the patent is for a compound that's used to make the medicine—the compound is the medicine, for example. Those are not eligible to list against the medicine. Another is mechanical devices. You can't put a patent on an inhaler. The courts have given us answers on those. A number have gone to the court of appeal.

So we're getting some certainty as to some eligibility questions.

The Chair: Last question, Mr. McTeague.

Mr. Dan McTeague: The question, obviously, that may confuse many members is of course that you're Health Canada and one would assume that you're the ones who ought to be the individuals who oversee this act, not from an industry point of view but from a consumer and public health perspective.

I'm interested in understanding, if you have this role to play of at least trying to do your job and yet you are confronted with the prospect of being sued by brand-name companies, what does this really say about the process? Is it internally going to be embroiled in legal battles as opposed to common best practices that result in good medicine and available products for Canadian consumers?

Mr. David Lee: Perhaps out of some acknowledgement of that in our unit, while we're not technically carved off from the rest of Health Canada, we're seen as a strange little bunch doing its own mandate. As you know, Industry Canada is the primary authority here and we work in close relation with them.

We administer the PMNOC regulations and report up through our channels, but we do so while acknowledging that it is a separate regime from the food and drugs regulations, though it relates to how the submissions work. Because we're situated in a place where we see all the drug submissions coming through and the NOCs are issued there, administratively it matches up technically because we have to actually review. Before every NOC goes out we have to make sure there's not a patent issue involved. So we're part of that whole processing chain, but we try to keep the issues discrete from the food and drugs regulations.

Mr. Dan McTeague: Did you want to comment on the the number of lawsuits, on how many times you've been sued by brand-name companies for doing your job?

Mr. David Lee: I'd like to refer that to my colleague. She has the numbers.

Ms. Anne Bowes (Patent Officer, Health Canada): There have been about 12 cases in the year 2000-2001, but it's important to remember they're not all brought on by brand-name companies. Two that come to my mind were in fact initiated by the generic companies as well, so it's not perhaps as one-sided as to say it's just the brand-name companies that judicially review the patent register or the eligibility criteria on the patent register. The generic industry likes to also put their two cents in when it comes time to address what patents and which ones they must address, that kind of thing.

Mr. Dan McTeague: Thank you.

The Chair: Thank you very much.

Mr. Brien.

[Translation]

Mr. Pierre Brien (Témiscamingue, BQ): I have a question. Do these court rulings clarify the situation so that the going is easier for you in the future?

[English]

Mr. David Lee: So long as we get clear instructions from the court. I might say that on many of these cases they've been very good in commenting on some of the issues for us. And yes, we expect as the jurisprudence builds we'll get more and more guidance.

[Translation]

Mr. Pierre Brien: When the 24-month period is over and a disputed matter is before the court, you say you continue to do what a generic company would normally do to obtain a notice of compliance. Generally speaking, do you complete this work before the court hands down a ruling or do both events take more or less the same amount of time?

[English]

Mr. David Lee: Yes, notionally, it should take about the same time, and case by case it differs.

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There are a lot of reasons a drug submission can get slowed down on the food and drugs side. Again, on the court side, there can be delays. If the food and drugs regulations are done first, if the drug is approved first, what we do is we place it on what we call “patent hold”. We wait. We don't issue the NOC until we see the court order before us. Then we take a look at what the court order says and whether it's been dismissed or granted.

During that patent-hold period, we usually just notify the drug submission sponsor that the food and drugs regs are done. Then we certify the time at which it's approved, because that can be important later on with the damages section. They have to know when they're being delayed off the market from the end of the review time, so we always stipulate that date.

[Translation]

Mr. Pierre Brien: Therefore, a generic company forced to postpone the marketing of a new drug would be able to continue its quest for compensation, given this date?

[English]

Mr. David Lee: Yes, that's in the regulations.

[Translation]

Mr. Pierre Brien: Perfect.

Now then, many figures and statistics have been thrown at us. Generic companies claim to have won 80% of their cases. Could you give us some additional clarifications? Ultimately, who wins in court? How many cases have gone to court and who in fact has been able to claim victory?

[English]

Mr. David Lee: If it would be of any assistance, the numbers Industry Canada has given you we've verified. We have done a small diagram. If it would be acceptable to give it to the clerk, we thought it might be helpful to take a look at it. They're the same numbers, but it breaks them down so you can follow the order of them.

Thank you.

[Translation]

Mr. Pierre Brien: That concludes my questions.

[English]

The Chair: We have an English copy only, so it's up to you whether or not we distribute it now or wait until we get it translated. I apologize.

Mr. David Lee: Yes, I apologize for that.

[Translation]

Mr. Pierre Brien: Yes, but next time, it would be interesting to have them. I would imagine that Health Canada is capable of providing that material in both official languages.

An hon. member: Absolutely.

Mr. Pierre Brien: I trust my concern has been duly noted. I have no further questions.

I would like a copy, but I want to state for the record that in future, they should also be available in French.

[English]

The Chair: Thank you very much, Mr. Brien. We appreciate that.

Mr. David Lee: I apologize once again. This is not my usual....

The Chair: Mr. Lee, we've given you very little notice to appear before us, so we do appreciate that.

Madam Torsney.

Ms. Paddy Torsney (Burlington, Lib.): Thank you.

I'd like to clarify a couple of things. First of all, I thought the presentations were very clear.

Who chooses when to initiate the process with the NOCs?

Mr. David Lee: It's always the drug submission sponsors who will choose when they want to bring a submission in, so that once the drug submission sponsor, whether it's a brand name or what we call a generic manufacturer, gets their submission together, they will bring it to Health Canada. It's entirely up to the submission sponsor.

Ms. Paddy Torsney: So that 24-month automatic stay is...the timing of that, for the generic company or the second entry, is at their choice?

Mr. David Lee: It should match, but I'll just clarify that the actual starting of the stay period involves the court process. To clarify that, it might help to say what happens when a notice of allegation isn't answered.

Ms. Paddy Torsney: Okay, that's the 45 days.

Mr. David Lee: The generic comes in, they put a submission in, an ANDS, and they send their notice of allegation to the brand name. The brand name says, well, we don't want to go to court on this one, so there's no stay. The stay doesn't start, because basically there's no notice of application filed in the Federal Court. In that case we could just issue the NOC when we're done with the food and drugs reg review.

Ms. Paddy Torsney: So in the table you just delivered to us, in 183 cases there was no process started.

Mr. David Lee: Right.

Ms. Paddy Torsney: Then in the 210, 82 of them were withdrawn, so that wasn't 24 months. So if there was any delay of entry of the generic into the marketplace, it was all related to approving that the drug was bio-equivalent and safe and all that?

Mr. David Lee: Yes. If I could clarify that, withdrawals can be for different reasons.

Sometimes they don't get the food and drug regs approval, so the drug submission is sent out of Health Canada again. On the other side, sometimes they are withdrawn by the brand name, who doesn't want to go ahead in court. So there can be different reasons for that breakdown.

• 1030

Ms. Paddy Torsney: On the issue of what some people are referring to as evergreening, the second entrant could apply to produce the first patent. Is that correct?

Mr. David Lee: Yes, if you mean the first patent, the first invention, the first drug—

Ms. Paddy Torsney: Right.

Mr. David Lee: —the drug that it's listed against, yes, they could apply for that.

Ms. Paddy Torsney: You mentioned the palette that's used to bring in the submission for the new drug entry, that it's 100 to 300 volumes of data and a pretty lengthy process. In terms of the timing for the first drug and the cost of the first drug process, how does that compare to the second entrant's cost and time of process?

Mr. David Lee: I don't know that I can speak to the cost, but certainly in terms of the volumes of data, there is a cost in Health Canada. We actually have cost recovery for the different types of submissions, and there's a big difference. I think it's close to $100,000, although I'm not certain of that figure.

In terms of the volumes of the submissions, they really are brought in on palettes, and they involve clinical studies—

Ms. Paddy Torsney: The first ones.

Mr. David Lee: The first one, the brand name. They involve going out and finding people with the condition that you're going to treat, getting clinical protocols together. It takes a long time to study those.

The abbreviated submissions are usually about eight binders or so, master volumes, and they really consist of finding volunteers. You give the volunteer the innovator's drug and the generic's drug and take their blood and see how the medicine is in there. So it's not a long time for development.

But as to costs in the industry, I couldn't speak to that.

Ms. Paddy Torsney: No, but certainly some of your friends in the private sector legal field are probably making a lot of money—

Mr. David Lee: I'm sure they would.

Ms. Paddy Torsney: —compared to what you would get, and each of those pages probably costs a lot.

Yet the PMPRB sets a price for the brand name and there's no price set for the generic. That's really up to the provinces and their 70% rules, or whatever. So if a cost comparison was 300 to one, there's no 300 to one reduction in the price of the generic. It's only a 70% reduction in the cost.

Mr. David Lee: Thirty percent.

Ms. Paddy Torsney: Sorry, 30%, that's right. Too bad it's not 70%.

I think you've covered everything, and this chart is certainly very helpful. Thank you.

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

[Translation]

Mr. Ménard.

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ): Thank you, Madam Chair.

I'd like to ask one question.

The generic drug industry claims that when it wants to bring a new drug onto the market, it looks at the regulations from the standpoint of procedural fairness. It argues that it is standard procedure for a 24-month hold to be automatically ordered on the drug. It further claims that the Supreme Court has acknowledged this bias, or prejudice, and that from the standpoint of procedural fairness, there is a problem in that it is prevented from making its position known.

Is this opinion shared by other parties?

Secondly, the Patented Medicine Prices Review Board maintained in several reports that truly innovative drugs with new therapeutic value may account, depending on the years, for between 8 and 10 per cent of new drugs. Do you agree with this assessment?

[English]

Mr. David Lee: Thank you.

If you'll allow me to answer in English, on the perception of bias and prejudice, there have been a number of allegations made both in the court cases and out, under the regime—I might say on both sides. We are aware of those. We take those in and try to deal with them as fairly as we can.

In speaking to the generic industries' concern with the automatic stay, I must say to you that we only administer it. We keep an eye on when it starts and stops. It's for Industry Canada, I believe, to say what its values are in that sense. I will say, though, that we strain to make sure we provide a balance wherever possible, and we work hard at that. Again, when we go to court we try to bring out everything that's happening and walk up the middle as much as we can in administering the regulations.

• 1035

On the second point, I think I understand what you're asking. Could you repeat the question, though?

[Translation]

Mr. Réal Ménard: When the Patent Medicine Prices Review Board divides drugs into three categories under the regulations, it's saying that between 8 and 10% of these new drugs on the market have new therapeutic value. Do you agree with this assessment? Perhaps this is not your area of responsibility. I'm something of a visitor here and far be it for me to be out of line, Madam Chair. However, I'm curious as to whether or not you agree with this assessment of the situation.

[English]

Mr. David Lee: I think you're correct that I'm not the one to answer it. There is a cost-of-drugs area in Health Canada, and we're not that area.

We don't, however, distinguish between some innovative drugs and others in terms of people coming over to give us patents on their drug. We look at the primary eligibility requirements in the regulations and don't look to issues such as whether there is something in the same therapeutic class out there on the market. We don't consider things like that.

The Chair: Thank you.

Mr. Lastewka, please.

Mr. Walt Lastewka: I have only one question left, since the other has been answered. I want to go back to your chart, just to make sure I have a clear understanding. I'm not sure where the box that says there were 70 where the second person agreed to wait patent expiry comes into place.

Mr. David Lee: You want an explanation for that box?

Mr. Walt Lastewka: Yes.

Mr. David Lee: Those are instances where instead of serving a notice of allegation, a generic has come in and they've made a comparison to a drug that has a patent listed on the patent register.

One of the things the generic can elect to do is to just await expiry. They won't go to court. So they don't serve the notice of allegation; they just tell us, we're going to await expiry of the patent. We do our drug review, hold the NOC until the patent expires, and then just issue it. That's the way those 70—

Mr. Walt Lastewka: So that 70 is outside the 393?

Ms. Anne Bowes: There is a little bit of overlap. On this one, it's outside, but it's important to remember the 393 is not representative of the total number of abbreviated type of submissions. It's simply the notices of allegation. So it's possible to serve more than one notice of allegation per abbreviated new drug submission. Prior to 1998, you didn't have to have a drug submission in place before you served the notice of allegation. There are effectively more notices of allegation than there are generic drug submissions, so that number can't be equated to the number of abbreviated new drug submissions before the minister.

Mr. Walt Lastewka: I want to walk down the notice-of-allegation chart.

Mr. David Lee: Yes.

Mr. Walt Lastewka: As I look down from the 393, in 183, there was no court application commenced, for one reason or another. What would be some reasons?

Ms. Anne Bowes: They believe what the generics are saying, that they will not be infringing, or something along those lines maybe.

Mr. Walt Lastewka: Right. So when I go down to prohibition granted and partial prohibition granted, it would say to me that 11% or 12% of all the notices of allegation get granted to the brand companies. Is that correct?

Ms. Anne Bowes: Where the prohibition is ordered, the generic is required to await the expiry of one or other patent, yes.

Mr. Walt Lastewka: So of 393 notice of allegations, only 11% become valid for the brand companies. Is that correct?

Ms. Anne Bowes: In that sense, but we have to remember there are things that are withdrawn because there could be agreements between the two companies, things like that. I'm not sure—

Mr. Walt Lastewka: Where does that show? Is that—

Ms. Anne Bowes: The application would be withdrawn, but the reason behind that withdrawal would not necessarily be known to us.

Mr. Walt Lastewka: Could we get a breakdown of that application withdrawal?

Mr. David Lee: That would be a lot of work, but we could try to undertake to do that.

Ms. Anne Bowes: We could try it.

Mr. David Lee: I don't know what our timeframes would be, because not all of them would be traceable in our files.

Mr. Anne Bowes: These are manual paper files that we maintain, so we generated the numbers by counting—

The Chair: Yes, and just to clarify, our researcher has advised us as well that in a lot of cases when applications are withdrawn you don't have to give reasons for withdrawal, so it would be very difficult for that number to be broken down as to what exactly it may or may not mean.

Ms. Anne Bowes: Yes.

• 1040

The Chair: Mr. Lastewka.

Mr. Walt Lastewka: I agree with Mr. Penson that we need to get into detail early in the fall.

The Chair: Thank you, Mr. Lastewka.

[Translation]

Have you any further questions, Mr. Brien?

[English]

Mr. Cannis has a brief question, and Mr. McTeague.

Mr. Cannis.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Madam Chair—

The Chair: And Ms. Torsney.

Mr. John Cannis: I have just a brief question. I know it's been touched upon, but maybe you could elaborate for us, Mr. Lee. You talked about abbreviated drug submissions. It's been discussed here with respect to good practices, good health for the public, and so on. Health Canada—how do they accept these abbreviated drug submissions? Are they not concerned for the safety of Canadians and what we put in our system, or will they just say, “oh, we'll just take this abbreviated”? That's a responsibility you guys have.

Mr. David Lee: Absolutely. In fact, it's a very careful process, which is part of why it takes quite a while to review the drug submissions. In the ANDS, just for your reference, there's a special section in the food and drugs regulations, C.08.002.1, and it says what you have to put in an ANDS so that you can get approval on the safety and efficacy side. The drug submission rests basically on the underlying assumption that you have what we call pharmaceutical equivalence, which means, among other things, that you've got the identical amount of the identical medicine as the brand name.

Mr. John Cannis: What do you base it on for comparison?

Mr. David Lee: The medicine?

Mr. John Cannis: Yes.

Mr. David Lee: We take a look at the substance. The drug sponsor has to identify what substance they're putting in and the dosage form they're selling. So if it's the identical amount of the identical compound—the same medicine—then we know that the brand is already selling, and we've approved that medicine, so we know it's safe and efficacious to give the generic to patients.

Mr. John Cannis: But what do you make your decision to accept the abbreviated drug submission based on?

Mr. David Lee: On the food and drugs regulations. It's got all the requirements, and our scientific reviewers go over the data that's produced by the generic manufacturers and make sure that what they're giving Canadian citizens is safe and efficacious. Also, I might mention that they look at how it's manufactured. They even look at the manufacturing sites to make sure it's of high quality and consistent quality also.

Mr. John Cannis: And the quality is based on what standard, again?

Mr. David Lee: Again, the food and drugs regulations.

Mr. John Cannis: And you got your regulations from where?

Mr. David Lee: They're made under the Food and Drugs Act.

The Chair: Okay.

Mr. John Cannis: Thank you, Madam Chair.

The Chair: Thank you, Mr. Cannis. I'm going to ask people if we could be brief because we are over time here.

Mr. McTeague.

Mr. Dan McTeague: Thank you, Madam Chair.

The numbers that I have, according to the schedule you've given here, are very interesting, and I'm not sure if the numbers are correct. Of the issues that have been...based on applications commenced and removing the pending resolutions, I'm looking at an actual...at least a minimum of 70%-30% in terms of cases that ultimately were without merit.

I think...and it serves the real question of the need to address clearly the automatic injunction. Clearly it's not working. What I'd like to ask you, Mr. Lee, is, do you, given all that you've said, keep track of the length of time in which these cases are before you? I understand you have difficulty laying down markers—you don't know when they're established or when they're withdrawn. There's a hefty number here that are triggered but obviously are not followed through. If I include those in those numbers, the number is more like 90%-10%. Can you give me an idea of just how long these things are held up in court, particularly the areas of 28 and the pending resolution?

Mr. David Lee: Yes, we do keep some track, and the ranges vary considerably.

Mr. Dan McTeague: Since 1993, would you like to give us an average?

Mr. David Lee: Yes. For prohibitions dismissed from 1993 to May 1, 2001, the total average was 14.8 months. The range goes from one month to actually 45 months.

Mr. Dan McTeague: To 45 months?

Mr. David Lee: One to 45 months.

The Chair: The average is 14.8.

Mr. David Lee: The average is 14.8. For prohibitions granted, 19.5 is the average. The range went from 8 to 66 months. For the withdrawals, 15.3 is the average we have. Again, the range goes from one month to 56 months.

Mr. Dan McTeague: Mr. Lee, I can't thank you enough for those facts. I think they're extremely telling.

• 1045

The Chair: Okay. Ms. Torsney, please.

Ms. Paddy Torsney: First of all, how long does the first submission process take—those 100 to 300 volumes of materials? How many months or years does that take?

Mr. David Lee: I think it's between 21 and 24 months, although I'll undertake to make sure that's accurate.

Ms. Paddy Torsney: The first drug, the first patent.

Mr. David Lee: Sorry, the first—the NDS, when the brand name brings in the drug for the first time?

Ms. Paddy Torsney: Right, for the first time.

Ms. Anne Bowes: The figure I have in the annual report, which I have before me—and it's found on the website if you are interested—is 614 days for the new drug submissions, but I can't quite calculate in my head to put that into months.

Ms. Paddy Torsney: Okay.

So those drugs can't be brought into the marketplace until that whole process is completed?

Mr. David Lee: Correct. They have to have the NOC.

Ms. Paddy Torsney: Okay.

When does the 20-year patent start?

Mr. David Lee: When it's granted from the Canadian intellectual—

Ms. Anne Bowes: It's when it's filed with the patent office.

Ms. Paddy Torsney: So those 21 to 24 months are consumed out of that first 20 years?

Ms. Anne Bowes: As is the drug development that went into making the data to make the submission, presumably.

Ms. Paddy Torsney: Okay.

Again, this process, this 24-month stay, and all of that stuff—that starts before the 20 years is up?

Ms. Anne Bowes: Of a particular patent? Yes.

Ms. Paddy Torsney: That process can be started at any point during that 20 years?

Mr. David Lee: It's up to the drug submission sponsor.

Ms. Paddy Torsney: So it's for the generic drug to decide where in that 20 years? So if there's an extension beyond 20 years because of not receiving a notice of compliance, then that's really just poor planning on the part of the generic?

If they thought it was going to be 24 months or more, then they should have started at 16 years or at 15 years, or whatever they wanted to do.

Mr. David Lee: I would like, actually, not to comment on that.

Some hon. members: Oh, oh!

Ms. Paddy Torsney: Okay.

Secondly, are all drugs that have a first patent, where all that investment and research has been done—and presumably there's a market or somebody wouldn't have gone to all that trouble...are all of those copied? Is there always a second drug entering?

Mr. David Lee: No, not by any means.

Ms. Paddy Torsney: So how many patents would there be in the first instance, and how many in the second instance? What percentage of drugs would get copied?

Ms. Anne Bowes: I don't have a good feel for that. I guess, with any business, the drugs with the higher sales figures are the ones that we've seen more likely to be copied. But I have no idea on numbers at all.

Ms. Paddy Torsney: Okay.

It's just a comment, really. I guess if the issue were strictly the cost of drugs, and everything comes in at 70% of the cost of the first entrant, then everything should be copied when it becomes available.

The Chair: Thank you, Ms. Torsney.

Madam Jennings, please.

Ms. Marlene Jennings: It hits on the same thing.

Is there a way for you to be able to tell this committee, over the last five years or the last ten years, how many first patents expired, meaning they were eligible to be copied by the generic, and how many applications you actually received from second persons to copy?

You wouldn't be able to give the information, because what would really be interesting is.... You made the point, Madam, that they're not all copied, and probably it's the ones that are the most profitable that are being copied. So it would be really interesting to see every year that, say, there are 1,000 first patents that are now eligible to be copied, and you receive applications for five of them to be copied. If I look at the 393 notices of allegation, it's not very many, because you're talking about 1993 to 2001.

Mr. David Lee: Again, I think we'd have to undertake to look as to what we could produce.

Ms. Marlene Jennings: Would it create a major burden on you to provide that information?

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Ms. Anne Bowes: At least it's summertime, and we could have some students in to work.

Ms. Marlene Jennings: But seriously, neither the research-based pharmaceuticals nor the generic pharmaceutical companies were able to give us that information. Meanwhile, both come with all kinds of allegations and statements.

Thank you.

The Chair: Thank you, Madam Jennings.

Mr. Lee, we appreciate you staying. Before you go, I want to get some clarification here in the numbers and the averages, math not being one of my areas of expertise these days. If I see that we have 59 dismissed cases and the average is 14.8 months, and we hear this number of 45 months, obviously you must have numbers that can break down how many are less than 24 months and how many are greater than 24 months. If the average is less than 24 months, we have to think the majority of cases take less than 24 months, and the same with the prohibitions granted and the applications withdrawn. I see some numbers that concern me, with extremely long lengths of time, but I have to think the majority of cases take much less than that, because the averages are less than that.

Could you clarify that? We've been left with some astounding numbers here, and I want to make sure, for the record, that we're clear that the majority of cases take less than 24 months.

Mr. David Lee: I think our sense is that the majority of cases are within the 24 months.

There are some anomalies in the ranges. Where you go down to the one month, one of them was, for example, a summary dismissal, and that mechanism came about. So they could do things in a shorter amount of time under the summary mechanism.

When it goes longer...as you know, the stay period used to be 30 months, and because both the drug review times and the court times were coming down over the years, it was shortened to the 24-month period. That they were able to track in 1997-98.

The Chair: But these numbers go back to 1993.

Mr. David Lee: Yes.

The Chair: So we don't have a breakdown since 1998.

Mr. David Lee: No, and we tried to prepare it as best we could.

The Chair: Okay, we appreciate that.

Monsieur Brien.

[Translation]

Mr. Pierre Brien: Continuing with this train of thought, how often has a drug been approved while the case is still pending before the court?

Mention was made of the number of times a drug was finally approved under such circumstances.

[English]

The Chair: Madam Torsney, do you have a brief question?

Ms. Paddy Torsney: On the point about the 38 prohibitions granted, if one of them was 66 months, that's five years and some. So it clearly was something that was started in 1993 for us to be seeing this number, if it has been resolved. So if the whole process has come down.... Obviously to get an average of 19.5 months, many more of them are close to the range of 8 months than the 66 months that was presented. Otherwise your average wouldn't be less than 20 months.

The Chair: My point was, when you get the ranges, you have to remember that there's the low end and the high end. We have to focus on what the average is, and the average—

Ms. Paddy Torsney: All of them are less than 20 months.

The Chair: Exactly.

Thank you very much, Mr. Lee. We appreciate you coming here today.

This part of our meeting is now finished.

We are supposed to continue our review of the Lobbyists Registration Act.

Monsieur Brien, I'm not sure if you are prepared to do that at this time, because I know it was Madame Girard-Bujold who was doing that. If that's the case, we'll have to postpone it, unless you're prepared.

[Translation]

Mr. Pierre Brien: I wouldn't want to be responsible for any delay. I'm quite willing to continue, but if you prefer to wait, I don't have a problem with that.

[English]

The Chair: Okay.

I would just remind members that we have a revised version coming to your offices today. So we could wait.

[Translation]

Mr. Pierre Brien: No. I would prefer to wait for the revised version.

[English]

The Chair: You would prefer to wait? Okay.

Would everyone prefer to wait?

Then we'll adjourn now. But before we adjourn, I want to give you a heads-up for this afternoon. We have witnesses again, and we have clause-by-clause consideration. We will have votes in between, so it's going to require us to go and come to committee. It appears there will be a vote this evening. The committee was scheduled until 6:30 p.m.

As well, for next week, on Monday we are going to extend our hours to review the report on science and technology. We're going to schedule it from 3:30 p.m. into the evening to give you time to go through it thoroughly. If we finish a large majority of it on Monday, we'll only need the two hours or so that we've designated right now on Tuesday, but we're also extending Tuesday's meeting into the evening in case we have a lot of revisions to that report as well. So I want to give you a heads-up on that for your agenda for next week.

Ms. Torsney.

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Ms. Paddy Torsney: Maybe it's something to bring up this afternoon, but in terms of process, I wonder if there's not a way we could make suggestions for minor revisions, just send them on in and you choose to regard or not regard—something simple.

I just saw one day. Well, obviously it's one day per week. Is there going to be much debate about that?

The Chair: With regard to what you would consider the minor revisions or typographical errors, if you could contact the researchers now—

Ms. Paddy Torsney: Yes, just send those in.

The Chair: If you could do that now, not just send them in, because by Thursday it's going to be too late.... If you could let them know now so that we have them before us for Thursday, that would be wonderful.

The meeting is now adjourned.