INST Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Wednesday, June 4, 2003

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1530

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

Mr. Paul Lucas (President and Chief Executive Officer of GlaxoSmithKline, Canada's Research-Based Pharmaceutical Companies)

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1535

Mr. Jean-François Leprince (President, Aventis Pharma, Canada's Research-Based Pharmaceutical Companies)

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1540

Mrs. Janet Lambert (President of BIOTECanada, Canada's Research-Based Pharmaceutical Companies)

Mr. Paul Lucas

The Chair

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance)

Mr. Paul Lucas

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1545

Mr. James Rajotte

Mr. Paul Lucas

Mr. Gerry McDole (President and Chief Executive Office of AstraZeneca Canada Inc., Canada's Research-Based Pharmaceutical Companies)

Mr. Paul Lucas

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

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1550

Mr. Murray Elston (President, Rx&D, Canada's Research-Based Pharmaceutical Companies)

Mr. Paul Lucas

Mrs. Janet Lambert

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1555

Mr. Larry Bagnell

Mr. Paul Lucas

Mr. Larry Bagnell

The Chair

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ)

Mr. Gerry McDole

Mr. Paul Crête

Mr. Gerry McDole

Mr. Paul Crête

Mr. Gerry McDole

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1600

Mr. Paul Crête

Mr. Jean-François Leprince

Mr. Paul Crête

Mrs. Janet Lambert

The Chair

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.)

º

1605

Mr. Gerry McDole

Mr. Dan McTeague

Mr. Gerry McDole

Mr. Dan McTeague

Mr. Gerry McDole

Mr. Dan McTeague

Mr. Gerry McDole

Mr. Dan McTeague

Mr. Gerry McDole

Mr. Dan McTeague

Mr. Gerry McDole

The Chair

Mr. Dan McTeague

Mr. Gerry McDole

Mr. Dan McTeague

Mr. Gerry McDole

º

1610

Mr. Dan McTeague

Mr. Gerry McDole

The Chair

Mr. André Bachand (Richmond—Arthabaska, PC)

Mrs. Janet Lambert

Mr. André Bachand

Mrs. Janet Lambert

Mr. André Bachand

The Chair

Mr. Paul Lucas

Mr. André Bachand

Mr. Paul Lucas

Mr. André Bachand

Mr. Paul Lucas

º

1615

Mr. Murray Elston

The Chair

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)

Mr. Paul Lucas

Mr. Brent St. Denis

Mr. Paul Lucas

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1620

Mr. Brent St. Denis

Mr. Paul Lucas

Mr. Brent St. Denis

Mr. Paul Lucas

Mrs. Adrienne Blanchard (Legal Counsel from Gowlings Lafleur Henderson, Canada's Research-Based Pharmaceutical Companies)

Mr. Brent St. Denis

Mrs. Adrienne Blanchard

The Chair

Mr. Brian Masse (Windsor West, NDP)

Mrs. Adrienne Blanchard

Mr. Paul Lucas

Mr. Brent St. Denis

Mrs. Adrienne Blanchard

The Chair

Mr. Brian Masse

Mr. Paul Lucas

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1625

Mr. Brian Masse

Mr. Paul Lucas

Mr. Brian Masse

Mr. Paul Lucas

Mr. Brian Masse

Mr. Paul Lucas

Mr. Brian Masse

The Chair

Mr. Brian Masse

Mr. Paul Lucas

Mr. Brian Masse

Mr. Murray Elston

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1630

The Chair

The Chair

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)

The Chair

Mr. Joseph Volpe

The Chair

Mr. Serge Marcil (Beauharnois—Salaberry, Lib.)

Mr. Paul Lucas

Mrs. Adrienne Blanchard

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1700

Mr. Serge Marcil

Mrs. Adrienne Blanchard

Mr. Serge Marcil

Mr. Paul Lucas

Mr. Serge Marcil

Mrs. Adrienne Blanchard

Mr. Serge Marcil

Mrs. Adrienne Blanchard

Mr. Serge Marcil

»

1705

Mrs. Adrienne Blanchard

The Chair

Mr. Rob Merrifield (Yellowhead, Canadian Alliance)

Mr. Paul Lucas

Mr. Rob Merrifield

Mr. Paul Lucas

Mr. Rob Merrifield

Mrs. Adrienne Blanchard

Mr. Rob Merrifield

Mrs. Adrienne Blanchard

Mr. Rob Merrifield

Mrs. Adrienne Blanchard

»

1710

Mr. Rob Merrifield

Mrs. Adrienne Blanchard

Mr. Rob Merrifield

Mrs. Adrienne Blanchard

The Chair

Mr. Rob Merrifield

Mr. Paul Lucas

The Chair

Ms. Paddy Torsney (Burlington, Lib.)

The Chair

Mr. Paul Lucas

»

1715

Ms. Paddy Torsney

Mr. Paul Lucas

The Chair

Mr. Paul Crête

»

1720

Mr. Jean-François Leprince

Mr. Paul Crête

Mr. Jean-François Leprince

»

1725

Mr. Murray Elston

The Chair

Mr. Murray Elston

The Chair

Mr. Joseph Volpe

Mr. Murray Elston

Mr. Joseph Volpe

Mr. Paul Lucas

Mr. Joseph Volpe

Mr. Paul Lucas

Mr. Murray Elston

»

1730

Mr. Joseph Volpe

Mr. Murray Elston

Mr. Joseph Volpe

Mr. Murray Elston

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

Mr. Murray Elston

Mr. Paul Lucas

Mr. Joseph Volpe

Mr. Paul Lucas

Mr. Joseph Volpe

Mr. Paul Lucas

Mr. Joseph Volpe

Mr. Paul Lucas

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

Mr. Paul Lucas

Mr. Joseph Volpe

The Chair

Mr. Paul Lucas

The Chair

Mr. André Bachand

»

1735

Mr. Paul Lucas

Mr. André Bachand

The Chair

Mr. André Bachand

The Chair

The Honourable Gilbert Normand (Bellechasse—Etchemins—Montmagny—L'Islet, Lib.)

The Chair

Hon. Gilbert Normand

Mr. Paul Lucas

The Chair

Hon. Gilbert Normand

»

1740

Mr. Paul Lucas

Mrs. Adrienne Blanchard

Mrs. Janet Lambert

Hon. Gilbert Normand

The Chair

Mr. Brian Masse

Mr. Paul Lucas

Mr. Murray Elston

»

1745

The Chair

Ms. Judy Sgro (York West, Lib.)

Mr. Paul Lucas

Ms. Judy Sgro

Mr. Paul Lucas

»

1750

Ms. Judy Sgro

Mr. Paul Lucas

Mr. Murray Elston

Ms. Judy Sgro

Mr. Murray Elston

Ms. Judy Sgro

Mr. Murray Elston

The Chair

Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance)

Mr. Murray Elston

Mrs. Cheryl Gallant

Mr. Murray Elston

Mrs. Cheryl Gallant

Mr. Paul Lucas

»

1755

Mrs. Cheryl Gallant

Mr. Paul Lucas

Mrs. Cheryl Gallant

Mr. Paul Lucas

Mrs. Adrienne Blanchard

Mrs. Cheryl Gallant

Mrs. Adrienne Blanchard

Mr. Murray Elston

Mrs. Cheryl Gallant

Mr. Murray Elston

The Chair

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CANADA

Standing Committee on Industry, Science and Technology

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NUMBER 051

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Wednesday, June 4, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): Pursuant to Standing Order 108(2), we are considering the automatic injunction provisions in the patented medicine notice of compliance regulations of the Patent Act.

    Today we have Canada's research-based pharmaceutical companies. It is my understanding that Mr. Paul Lucas will be spokesman and will be introducing the other members.

    Mr. Lucas, I would ask you to begin.

    Mr. Paul Lucas (President and Chief Executive Officer of GlaxoSmithKline, Canada's Research-Based Pharmaceutical Companies): Thank you, Mr. Chair.

    My name is Paul Lucas. I'm president of GlaxoSmithKline in Canada. With me are Murray Elston, president of Rx&D, or Canada's Research-Based Pharmaceutical Companies; Jean-François Leprince, president of Aventis Pharma; Janet Lambert, president of BIOTECanada; Gerry McDole, president of AstraZeneca Canada; and Adrienne Blanchard, who is legal counsel from Gowling Lafleur Henderson.

    Let's begin.

    We are here today to represent Canada's Research-Based Pharmaceutical Companies, or Rx&D. Rx&D is the national association, representing 23,000 Canadians at more than 60 research-based pharmaceutical companies in Canada. Our member companies are both big and small, and include several emerging bio-pharmaceutical firms. Our mission is to discover medicines to save or improve the quality of life of Canadians.

    We are here today to talk about what we believe is the cornerstone of patent protection policy in Canada: the notice of compliance regulations or the linkage regulations.

    At the heart of this discussion lie the life-prolonging, even life-saving, medicines taken every day by millions of Canadians. Let's be clear: we are not talking about frivolous items; we are talking about basic needs for people to live quality lives.

    Our members believe that the linkage regulations must be maintained for the following four reasons. One, they ensure balance within Canada's patent regime. Two, they help us meet our international obligations. Three, they help our economy prosper. Four, they encourage innovation into new therapies within Canada's research community, including bio-pharmaceuticals.

    I'll go into a little more detail behind each of these reasons.

    First, the linkage regulations provide a measure of balance between the generic industry and our own. The reason they exist is to balance the Canadian generic drug industries' early-working privilege that permits it to start copying a product before the innovator's patent has expired.

    The regulations also ensure that generic products do not prematurely enter the market before the patent expires. Canada in fact has no other practical legal mechanism by which to enforce patents, since interlocutory injunctions are not, as past history has shown, available to pharmaceutical innovators.

    The regulations require Health Canada, before approving a generic copy of a medicine, to check the patent register to determine whether there could be patent infringements. They also set out a legal process for addressing and resolving patent infringement issues through a set maximum period of 24 months, no more, that is designed to take place within the 20-year patent period.

    Health Canada data shows that the average time of these proceedings in post-1998 cases was actually just over 17 months. It's about the same time, on average, that Health Canada takes to approve a generic drug for market.

    Health Canada's submission and the Rx&D brief show that only about half of all notices sent by generics led to a court proceeding. Of those that were started, only a small number of cases resorted to a full hearing. The regulations maintain a firm and fair balance between our industry and the generics by ensuring that patents are enforced and also allowing the generics the privilege of early working.

    It is important to understand that even after a product receives a patent, ongoing research into improving it continues, for example, by reducing its side effects or using it to treat a different disease. These improvements can take years to achieve. They undergo the same rigorous process for clinical development and approvals as any other innovative medicine. Above all, they benefit patients.

    New innovations deserve to be protected. Patents, as everyone around this table knows, are not a frivolous matter. Patent applications receive close scrutiny by the Canadian Intellectual Property Office and can take several years to be granted. At the end of the day, all forms of innovation deserve to be protected and the intensive R & D investment recognized.

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    According to Health Canada research, 81% of all medicines on the patent register have one or two patents. Any question of amending the regulations, because of an allegation that too many patents are being listed, must be first viewed through the majority. Regulatory and/or policy decisions should not be made on exceptions. Exceptions don't represent abuses.

    Our second reason for maintaining the regulations relates to Canada's international obligations. Canada's patent laws already compare unfavourably with those in the United States, the European Union, and Japan, to name only a few. It is our view that the linkage regulations helped Canada meet its international obligations on patent protection. Not providing the necessary enforcement mechanisms would mean Canada falling even further behind.

    You have heard that the United States has recently proposed changes to its patent regime. We must remember that if these changes were to be made, the U.S. system would still remain far superior to ours in terms of overall intellectual property protection.

    I'll now turn things over to my colleague, Jean-François.

    Mr. Jean-François Leprince (President, Aventis Pharma, Canada's Research-Based Pharmaceutical Companies): Thank you, Paul.

[Translation]

    Our third and fourth ground for maintaining the linkage regulations is to ensure our industry continues to boost Canada's economy and the health of Canadians through innovation not only within the pharmaceutical industry, but also by Canada's biopharmaceutical companies.

    For the year 2001 alone, the R & D member companies invested more than $1.1 billion in research and development of pharmaceutical products. These companies employ approximately 4,600 knowledge-based researchers. Furthermore, we support nearly 6,000 medical researchers at universities, hospitals and research establishments throughout the country. Fifty per cent of researchers hold a masters or a doctorate degree, the highest proportion for all high technology industries in Canada.

    The pharmaceutical industry represents $5.3 billion of value-added to Canada's economy. For the year 2001 alone, R & D member companies paid $620 million in federal, provincial and municipal taxes.

    In that same year, our industry invested $2.8 billion in real property, plants and equipment.

    It is also important to note that based on a study done by Columbia University, every dollar invested in discovering drugs allows the health system to make savings that are seven times greater than in other medical sectors.

    Our member companies are ready and willing to participate in the Canadian government's innovation strategy, of which one of the objectives is to place Canada among the world's top five innovative economies by the year 2010.

    The pharmaceutical discoveries and constant improvements to existing medications would not be possible without effective patent protection. Strict patent protection promotes research investment, thereby allowing for the discovery of new drugs and, through innovation, improving the health of Canadians. It is critical that we all keep this in mind.

    In its last report,Tufts University assessed research and development costs of a new drug at approximately $1.3 billion and the development of just one drug can take up to 15 years.

    That is why our companies need a stable regulatory framework, which would include adequate patent protection. We would like the companies to be able to pursue their work here in Canada, and not elsewhere.

    I now give the floor to Mrs. Janet Lambert.

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[English]

    Mrs. Janet Lambert (President of BIOTECanada, Canada's Research-Based Pharmaceutical Companies): Merci, Jean-François.

    I'm Janet Lambert, with BIOTECanada. We're the Canadian biotechnology association, Canada's voice for biotechnology. I'd like to describe the Canadian biotech industry and why I'm here today.

    Biotechnology is all about innovation. Some $750 million were spent in biotech R and D in Canada in 2001 alone. Biotech can improve the quality of life of Canadians through new approaches to treat conditions like cancer, Alzheimer's, diabetes.

    Three quarters of biotech firms are small and medium enterprises, with less than two years of cash, and are several years away from making their first dollar of revenue. The key assets of a biotech company are its patents, its finances, and its management team. It's critical that investors from around the world see Canadian biotech firms operating in an environment of competitive IP. Canada is number two in the world in biotechnology.

    If we weaken IP, many of the research dollars that industry and government spend in Canada become a loss leader. This government has proudly spent $11 billion on health research and academic infrastructure in Canada over the last seven years. Why would we not protect and benefit from that investment?

    I'll now turn it over to Paul.

    Mr. Paul Lucas: Thank you, Janet.

    In conclusion, the regulations are working well. We respectfully request that you support the current system, and recommend that you do not repeal or weaken the linkage regulations.

    Thank you very much.

    The Chair: We'll now begin with questioning, and it will be the same time as yesterday.

    Mr. Rajotte, six minutes. Mr. Rajotte, if you please.

    Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you very much, Mr. Chairman, and thank you, witnesses, for coming in today.

    The first question I want to ask is the biggest question for me, which is on the whole issue of “evergreening”. Obviously this is a charge put forward by the generics, and I want to actually quote from their document yesterday and then give you time to fully and completely respond to it. The statement is:

The automatic injunction has led to a practice commonly known as “evergreening”.... The term “evergreening” captures a variety of strategies, all involving abuse of the regulations. To limit competition, patentees can use the automatic injunction to extend their market exclusivity beyond the expiry of their basic 20-year patent on a drug. A common strategy involves listing and litigating additional patents after the main patent on the active ingredient has expired. This is done to trigger additional automatic injunctions and to prolong the patentees' monopoly.As a result, evergreening keeps non-infringing generic products off the market.

    In their more substantive brief, they offer the two examples of Paxil and Losec. I want you to address fully and completely the whole charge of evergreening, and the question of whether the case of multiple patents does prevent the generic in fact from using the original patent, which has expired after the 20-year period.

    Mr. Paul Lucas: I'll start to try to answer that question. There's a lot in there.

    First of all, with regard to the allegation of abuse of the regulations, we clearly disagree with that allegation. The reason is that when we file a patent we file it with the Intellectual Property Office. Within 18 months that patent is laid open to the public. Within a couple of years we are granted that patent. And there are restrictions on how quickly we can do this. We have to take that innovation and then get it on the patent register through Health Canada. That takes time. It's not automatic. They decide whether or not they're going to list it. They make that decision. The patent goes on the list.

    So we follow that process. We clearly do not abuse the system. We're following the process as it's designed. That's basically how it works.

    The allegation that this extends patents beyond 20 years is clearly not accurate. Patents cannot be extended beyond 20 years. They have a defined term of 20 years and in no way can you extend the patent.

    In terms of strategies of using multiple allegations, again I think people give us more credit than we deserve, perhaps, on that, because the reality is that these patents we have on our products are filed usually in the U.S. by our U.S. or our U.K. or our European legal departments around the world pretty well all at the same time. So we have virtually no influence over that.

    They want to file them as quickly as possible, of course, to get the protection we require for our innovations. Again, it then takes a couple of years to get those patents approved, and they may not be approved by the patent office. Then again we go through this process.

    We don't have any strategic approach to this. This is just the normal course of events of how patents get dealt with in this country.

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    Mr. James Rajotte: The charge by the generics, which I want you to completely address, is that even though the 20-year patent does expire, then you have succeeding patents, and because of these succeeding patents, because of the automatic injunction used on these succeeding patents, then they are prevented from using the original patent.

    If you want to even take the example of Losec, could you walk us through--I believe there are eight patents on Losec--and explain to us clearly whether or not the generic can in fact utilize the first patent, which has in fact expired?

    Mr. Paul Lucas: We can do that.

    I think the important thing to remember, first of all, is that 81% of the products on the register have only one or two patents. So we're talking about a very small group of products that have multiple patents.

    I'll turn it over to Mr. McDole to address the Losec issue, and we'd be happy to address any other specific products.

    Mr. Gerry McDole (President and Chief Executive Office of AstraZeneca Canada Inc., Canada's Research-Based Pharmaceutical Companies): Thank you.

    The short answer to your question is yes, they could go forward when the first patent expires, provided that they did not infringe on the formulation.

    Ameprazol, or Losec, as you call it, is quite a unique and different type of compound. For the chemical itself the patent expired in 1999, but the chemical is of absolutely no value, and that's because it has a very difficult compound to do work with and it decays in acid. Obviously, if you're going to take something, the acid in the stomach would neutralize its effects. So it required a very specific coating process in order to protect the compound to formulate it so that it would become of some value. That took us quite a number of years to accomplish, and the patent for that accomplishment does not expire until 2008. That was filed and approved prior to the launch of the product.

    So in light of that, if in regard to the first product they want to find a different formulation that does not infringe, that's fine. In fact, that's exactly what has happened in some other countries around the world: the United States and other European countries as well have a non-infringing formulation.

    Mr. Paul Lucas: The bottom line is that we are not able to pull patents out of our back pockets whenever we want to do that.

    The Chair: Mr. Bagnell.

    Mr. Larry Bagnell (Yukon, Lib.): Thank you for coming and thank you for having your brief exactly on topic. That' s great, although I can't agree with the final conclusion that there are no problems with the regulations, because if they were perfect we wouldn't be having these hearings.

    In answer to a question I had on the first day, someone said it's not that simple. But I think the outcome, having talked to both generics and brands, seems to be simple, in that the vast majority of people agree that if we could have 20-year iron-clad protection for you and thereafter easy access by the generics, everyone would be happy. Now, this will take very creative changes to regulations or laws, because obviously the existing patent laws, etc., don't work that way.

    But I put the generics on notice and you on notice to try to think of that compromise, because it's what I personally will be looking for at the end of the day--a compromise that would come up with that.

    I want to ask a question that a number of us asked the generics, but they didn't really answer yesterday. That was, if we were to come up with a regime like I just said, roughly, and obviously in this small number of drugs, as you said, there would be less opportunity for income from brand names, what effect would that have on the Canadian economy? How much do you project we would lose because researchers would leave Canada for other international locations, as opposed to the amount we would gain by more economy in the generics? What would the balance turn out to be? Would we lose more in research than we would gain in production in generics and reduced costs to our health care system?

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    Mr. Murray Elston (President, Rx&D, Canada's Research-Based Pharmaceutical Companies): First of all, let me say two things. It is not, in my view, just a matter of some kind of arithmetic calculation we're dealing with here. If you lose research and development in this country, you lose the opportunity of leveraging yourselves into a knowledge-based economy, the generation of new technology, the transfer of technology from researchers to on-the-ground clinicians, the use of new technologies early on in the treatment of diseases that have escaped cures for so many years. At that level, we are behind the scene. No longer are we riding on the front edge of the wave; we're on the backside of it and slipping back badly.

    I think the other issue that is extremely critical for us, though, is pointed out in our paper, which we launched publicly in response to the Canadian innovation strategy—the government's papers in September of last year. That is, if there were sufficient changes made in the environment here in Canada that we could be assured of a good strong patent protection and we were sure we could be competitive with others, we could see ourselves moving to two and three times the investment that currently is made in this country.

    If things are done that destabilize our competitive opportunities, particularly against the people south of the border, who have a huge economic and research capability—the critical mass that is something your government and others have been working on in funding basic research and other clinical activities in this country—then we would stand to lose the opportunity of leveraging those types of investments.

    In addition to that, I think it's pretty clear that no matter what happens in Canada, new research is going to continue. New research will develop new products. There is a demand that we follow the curiosity that drives the research that will find new cures, and if Canada is not part of that, we will have to import it all. In that sense, we would be again a very huge net loser.

    Ultimately, I think, Mr. Bagnell, we lose on several fronts. It's difficult to quantify all of that, but we won't be able to gain the way I think our paper from last year described our opportunity.

    Mr. Paul Lucas: Janet, would you like to comment on that from a biotech point of view?

    Mrs. Janet Lambert: Sure, if that's okay.

    Your approach sounds pragmatic, and I think just as important as the pragmatic approach is the symbolism of what Canada is saying when we are working with, looking at, and changing intellectual property protection.

    I have the great privilege of talking to counterpart companies around the world, and Canada is seen as such a leader in biotechnology—in our research, in what we're doing to our commercialization, what our government's doing, in policies. I think the symbol of our looking at this, when we could be moving on.... There are so many other issues and policies we need to wrap our minds around with this transformative technology that's coming down in a big way that I would like to ask that you consider the symbolic attribute as well as the pragmatic.

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    Mr. Larry Bagnell: We've been told this automatic injunction puts Canada behind the rest of the world, with the exception of the United States. You're saying we're actually behind Europe and Japan now. Can you tell us exactly how the generics have a better opportunity in Canada than they would in Japan and Europe?

    Mr. Paul Lucas: Absolutely. It's really on two fronts. First of all, from an innovative industry point of view we have a weaker overall patent regime than Europe, the U.S., and Japan. They have patent term restoration; we don't. They have data protection, which we should get under TRIPS but don't. So you get significant differences there. In most countries you can get an interlocutory injunction as well, as part of the enforcement mechanism. We cannot get those here in Canada.

    So we have significant differences that create inferiority in terms of the overall patent regime.

    On the flip side of it, the generics, as I think you heard on Monday, have one of the most favourable if not the most favourable environment in the world—at least in the western world. They have the opportunity to early-work our patents. They have the opportunity to access our theoretically confidential clinical data. They have full access to that when they make their submissions and when they develop their product.

    When they get to market, they have a market that dictates mandatory generic substitution. In effect, over a period of 12 months, they will take 90% of the market for a product in Canada. So they have tremendous advantages here in this country.

    Mr. Larry Bagnell: Is that all within the first twenty years? Do they have advantages after twenty years?

    The Chair: Thank you, Mr. Bagnell. I must move on.

    Mr. Crête.

[Translation]

    Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): Thank you, Mr. Chairman.

    I would like to go back to Mr. Rajotte's example. Perhaps Mr. McDole could answer, but I would like to understand. Am I correct in saying that the initial patent that was granted in 1979 for 20 years was for omeprazole? Is that indeed the name of the product?

[English]

    Mr. Gerry McDole: Ameprazol is the generic name for the compound—the chemical itself. Yes, the patent expired in 1999.

[Translation]

    Mr. Paul Crête: You told us earlier that the product is not easy to use because it causes acidity problems in the stomach. But legally, strictly legally, from 1999 onward, a company that would have wanted to replicate the product could have done so; the patent had expired at that point.

[English]

    Mr. Gerry McDole: Yes, that's correct. They could have done so using a different formulation. As a matter of fact, there were two compulsory licences granted against this compound that were never used. One has to assume it's for reasons of not being able to formulate it into a dosage form that would be appropriate.

[Translation]

    Mr. Paul Crête: So contrary to what we were told yesterday, it is not because one is not legally allowed to use it, but because the product itself wasn't lucrative or wasn't appealing to use because of the scientific aspects. Is that correct?

    Based on what we were told yesterday, Losec could not be replicated because of the various patents that apply to that.

    Today you are saying that the product under patent in 1999 became available, except that nobody wanted to use it because it didn't work.

[English]

    Mr. Gerry McDole: That's basically correct, although other companies in other parts of the world chose to develop their own formulation and launched that particular product. I can't speak to the profitability reasons why they do or they don't, but the fact is they didn't.

    The other number of patents on the list are basically irrelevant, in the sense that of the 26 allegations we've received to date from five different generic companies, no one has been able to demonstrate to the court's satisfaction that they're not infringing on the formulation patent.

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[Translation]

    Mr. Paul Crête: Thank you. Now I have a clear understanding of the situation.

    My other question is on the linkage regulations. Yesterday it was suggested that the best way to proceed was to abolish the regulations.

    What would be the impact of such a decision on the pharmaceutical research industry, in 10 years, let's say? What would the general picture be in 10 years if that was done unilaterally without upsetting the rest of the balance, as was suggested yesterday, in other words the outright abrogation of the linkage regulations?

    Mr. Jean-François Leprince: That is a very interesting question, Mr. Crête. However, I think we shouldn't just look at the impact on investment in research and development, even though there would be a major impact there.

    It is important to understand that we here, around this table, represent major pharmaceutical companies. In fact, we are proud to represent those companies here in Canada. But our task is not an easy one because we must compete with our colleagues from France, Germany, England, the United States to attract investment in Canada.

    So, as mentioned, when our world headquarters looked at investments in one country rather than in another, they look at market factors. And intellectual property protection is a key factor.

    Since Canada is currently at the limit of what is acceptable, so to speak, if the linkage regulations were changed, a clear message would be sent. In fact, at yesterday's meeting, someone said that in Germany when the Cipro case arose, the German leaders of the pharmaceutical industry realized this should be interpreted as a deterioration in the status of patents here in Canada. So if that message is sent, we would no longer be able to do our work as we have done in the past.

    You spoke about R and D investments. You are correct in saying that last year we invested over $1 billion. We are ready to commit that we can triple that figure by 2010. I would say that you can forget about any mathematical equation of that type.

    But I also think a great deal about the 23,000 people working in the pharmaceutical industry, of the 4,600 researchers working in our groups and also of the 6,000 researchers working at universities in Canada who get funding from us. Both that impact as well as the economic impact of the pharmaceutical industry in Canada must be taken into account. I gave a few figures in my speech.

    Mr. Paul Crête: Would there also be an impact on the availability of new drugs or on certain measures to avoid long-term costs to the health care system? Would there also be an impact on that?

    Mrs. Janet Lambert: Canada's biotechnology companies are generally at phase 2A or 2B of their research. So we will have to wait at least another 5, 7 or 10 years before we can invest in marketing.

    For the past three years, the market has been in decline and our companies have very little cashflow. If it is decided that patents in Canada are over, that sends a very bad message.

    We are second in the world in biotechnology. That is excellent. We are on the crux of the knowledge-based economy. It is wonderful that Canada has such a strong ranking in biotechnology.

[English]

    The Chair: Thank you.

    Mr. McTeague

    Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you for being here today. We have looked forward to this day for over a year now, and are glad we've been able to settle on a time.

    Mr. Chair, I have just a few routine items to table with my colleagues here, first from the New York Times national edition for Sunday, June 1: “Washington lobbyists for the drug industry are stepping up spending to influence Congress and states and even foreign governments as the debate intensifies over how to provide prescription drug benefits to the elderly, industry executives say.” It goes on to say that $72 million that is allocated will include that the PHRMA—that is, the American version of Rx&D here in Canada—allocates $1 million to change the Canadian health care system. That's number one.

    As for number two, I wanted for the benefit of colleagues to also provide a confidential document that has been circulating here about Pfizer in the United States. It is a document that was on the Internet last year. One of the items, which I have highlighted, indicates as a direction for executives with Pfizer: “While the core patents still afford tremendous protection, newer claimants can afford substantial market positions or at a minimum slow generic entry into it by matters of years”.

    I would also like to table, Mr. Chair, the exchange with Merck Canada and Peter Jennings last year in which Merck United States said they will not engage in any practices simply to delay the arrival of generics.

    The Chair: I'm sure you're going to get to your question.

    Mr. Dan McTeague: Thank you very much.

    Mr. Chair, I'm glad to see so many members here today.

    I guess I'd like to turn to you, Mr. McDole. You seem to be quite popular here in terms of the issue of Losec, sir. So thank you, and respectfully I'd ask the following questions.

    I'm looking at tab document number 3, which was provided by Industry Canada. For the benefit of those of your industry who were here the other day, it is basically a chart of ameprazol as Industry Canada understood it.

    I see here that the initial patent on ameprazol expired in 1999. Do I have that correct, that the basic...?

    There have been at least ten patents that are listed on the register. Do I have that correct? Is that your understanding, that there were ten listed by your company, which I can see here through the Health Canada...? Is that correct?

º  (1605)  

    Mr. Gerry McDole: To be honest with you, I don't know the exact number, but it would be in that order, I think.

    Mr. Dan McTeague: I'd be glad to send that over to you, sir.

    You must be aware that a number of generic companies have developed generic ameprazol products that have been deemed approvable by Health Canada. Notwithstanding the court decisions, the only thing holding up approval of these products is the ongoing litigation of the regulations in respect to these multiple patents.

    Would you agree, and isn't it true, that there is still no generic ameprazol in Canada today, notwithstanding that the original patent expired in 1999 and a number of generics have since developed safe and effective lower-cost alternatives?

    Mr. Gerry McDole: I can confirm that the patent expired in 1999. I can't confirm whether they have safe and equivalent products or not.

    Mr. Dan McTeague: Sir, your product, Losec, was worth last year $428 million in Canadian sales?

    Mr. Gerry McDole: About that, yes.

    Mr. Dan McTeague: Let me ask you a question, then, on that. I realize that the capsule form expired earlier, but you have the tablets today. These tablets are obviously a very lucrative business. They have the second-largest sales in Canada.

    Of those tablets, sir, how many of them are manufactured here in Canada? I'm not talking about packaging. How many tablets of Losec are produced in Canada and sold in Canada?

    Mr. Gerry McDole: The tablets are not manufactured here. They are only packaged here.

    Mr. Dan McTeague: Not one tablet is made in Canada?

    Mr. Gerry McDole: No.

    Mr. Dan McTeague: Sir, are there any of those tablets, then...? Obviously, they would not be sold internationally, but you do some manufacturing here, do you?

    Mr. Gerry McDole: We do manufacturing, but not of tablets.

    The Chair: I'm sure you're going to get to the point about the regulations, and I would ask you to do so.

    Mr. Dan McTeague: It is about the regulations, sir.

    Sir, I'm interested in the fact that if these delays are successful in being challenged, and it keeps the effective generic off the market--in fact, it hasn't happened in the United States--another 12 or 13 years, the cumulative profit to your company would be in excess of $1.5 billion, or should I say the transfer away from Canadian wealth from Canadian seniors, from the poor, would be a net loss of $1.5 billion, if indeed this is as far as we're going to go with the registry.

    Would you agree with that figure?

    Mr. Gerry McDole: I would say there's no delay until after 2008, as long as they persist on trying to infringe on our formulation patent. If they choose to take a non-formulating patent, as they have in the United States, then those numbers would not be realized.

    Mr. Dan McTeague: Given that we've seen this number, where there could be a 30% challenge on the mere number alone--which is, of course, the issue on automatic injunctions--if this were to be carried out.... I'm interested in some of the comments here about the amount of research and development, but before I end the point on automatic injunctions, one question seems to come up time and time again.

    If, in effect, you're able to launch what may very well be perceived to be fair extent challenges or frivolous patent claims that often wind up being thrown out, how long do you think it will be before any generic in this country will be able to replicate a product--which is accepted as a principle all around the world?

    Why is it that Losec can do in Canada what it can do nowhere else in the world, and that's to keep its basic patent? The patent, I understand, is the capsule form, which you no longer produce. Why is it possible for you to do in Canada what we can't do anywhere else in the world? Do you not find that strange, sir?

    Mr. Gerry McDole: The original patent for 1999 was for substance. It doesn't matter whether it's a tablet or a capsule. The formulation patent expires in 2008. Whether it's the capsule, a tablet, a liquid, or an injectable, the formulation expires in 2008.

º  (1610)  

    Mr. Dan McTeague: That's why we're concerned, sir, because in 1998 Parliament never intended to say that a formulation, a particular brand of use, or a derivative that has nothing to do with the active ingredient would be used in such a way as to be able to continue staggering, and through a position of sequential challenges, by bringing up certain numbers.... And we understand from Industry Canada that two-thirds have been rejected.

    Is it not possible that you could envision putting another ten of these on there, and Losec would never come off?

    Mr. Gerry McDole: With all due respect, sir, it is in fact a significant breakthrough product, and it would not be possible to have the benefits Canadians enjoy today or any other patient anywhere in the world had it not been for the formulation. The compound in and of itself was of no value.

    The Chair: Thank you, Mr. McTeague.

    Monsieur Bachand.

[Translation]

    Mr. André Bachand (Richmond—Arthabaska, PC): Thank you, Mr. Chairman.

    My friend Mr. McTeague often refers to American articles and arguments, but I think that when it comes to generic drug companies, one could simply read the Journal de Montréal and La Presse. One would then see that those companies also invest a lot in pharmacies or elsewhere.

    That said, I am not accusing anyone, but I would suggest that we read the Quebec and Canadian articles. I would also invite you to take highway 20 to my riding. That would give you an idea of the investment being made in research and development in Quebec and everywhere in Canada.

    Finally, I would like to ask a question. In the document you gave us, there is reference to $1.5 billion for 2001, but Mrs. Lambert mentioned three quarters of a billion dollars. Which figure is correct?

    Mrs. Janet Lambert: It is cumulative.

    Mr. André Bachand: So it gets added together.

    Mrs. Janet Lambert: Yes.

    Mr. André Bachand: So we are talking about $2 billion. It is quite a major distinction.

[English]

    The Chair: Can we have that answer again, because it might not have been caught on the--

    Mr. Paul Lucas: You're questioning the amount of R and D investment in the country?

    Mr. André Bachand: The thing is, we have two numbers here. We have $1.1 billion from Rx & D, and then we have three-quarters of a billion dollars from BIOTECanada.

    Mr. Paul Lucas: Yes, you would add the two.

    Mr. André Bachand: Thank you. I just want to make sure we don't subtract. That's quite important.

[Translation]

    There is more and more talk about health costs. Many people think that is a ground, but it is not within this committee's purview which, let me remind you, is the Industry Committee. I don't want to play partisan politics, but everyone knows the federal and provincial governments have financial problems. We fought the deficit. But everyone realizes that health costs are increasing and that it represents a significant part of federal and provincial budgets.

    Drug costs are also higher than they used to be. So it would seem that drug use is on the rise and for that reason, the drug industry is being singled out and Canada's dreadful health care service providers are being blamed.

    I would like you to respond to that because in your report, you mentioned the impact new drugs have on Canada's health care costs.

[English]

    Mr. Paul Lucas: Yes, I think we've spent most of this week talking about economic impact, but I think this is a good question, because the health care impact of the innovations we create is of tremendous benefit to this country and all around the world.

    We are increasing our spending in this country on medicines. There's no doubt about that. It is the fastest-growing sector in health care expenditures. Many would say that's a good thing, because when you do the analysis--and there have been analyses done--it demonstrates that for every dollar spent on pharmaceuticals, you're going to save four dollars in hospital costs.

    Through our innovations--new medicines in the area of asthma, HIV, depression, schizophrenia--we've moved people out of the institutions, out of hospitals, back into their homes, where they can be cared for. The cost saving related to that is tremendous.

    In this country 10 or 15 years ago, HIV patients, once infected, would live a life of a few years, end up in hospital, and chew up all sorts of hospital costs, palliative care costs. Today they're living full, productive lives. That is a tremendous positive impact on people's lives and on the health care system.

    I could speak at length on this one. If anyone else would like to comment, please go ahead.

    Murray, did you want to make a comment?

º  (1615)  

    Mr. Murray Elston: Well, only to the extent that I was, as you know, health minister in Ontario from 1985 to 1987, and we were in those days confronted by the invasion of the HIV epidemic, as it was described then, and we had no treatments. The pain and dislocation that caused at the time was tremendous, and when there was an opportunity to intervene, there was an incredible feeling of relief for some of us. We knew it wasn't delivering people fully from the scourge of the disease, but we knew we could do better for them.

    In addition to that, if I compare the list of things we did in 1985 to 1987 in Ontario with what we do now, with respect to the new therapies, it doesn't compare. We have made huge gains in saving money with respect to the use of products like Losec, which came in for a relatively small cost, compared to what used to be operations and stays in hospitals for ulcers. It has been a tremendous gain for our health care system.

    I think if I had to put it in a context, the relief, the delivery of people from some of the diseases from those days, has provided them with a longer and better-quality life. We have moved on. And fortunately for us, the technology development, the research and development that has followed our curiosity to find new cures, and the development of biotechnology companies to focus specifically on things like Alzheimer's have led us to stuff we never dreamed we'd be able to do.

    Our health care system is doing it, and the outcomes for those patients are better as a result of the research and development taking place

    The Chair: Thank you.

    Mr. St. Denis.

    Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Mr. Chair.

    Thank you for being here to help us with this. I don't believe anybody would argue that we need to find a balance between the brand community and the generic community. If that balance is where we are, so be it. If it's somewhere else, so be it as well. Our job is to try to find where it actually is.

    I would like to quote from a presentation made by the generics association yesterday. The generics association said “If the regulations are eliminated...”--I'll skip down to where they say at the end of that recommendation--“...Canada would be in full compliance with its international trade agreements.”

    They're suggesting that if the notice of compliance regulations were eliminated, Canada would be in compliance. And in your presentation you're suggesting Canada is out of step, strictly from a patent point of view, and without the regulations we would be even further out of line. You need the regulations to get us closer to the international community.

    We're trying to find the balance. Do you have a comment on the generics association's statement that without the notice of compliance, we would be closer to the international community?

    Mr. Paul Lucas: Well, that's not true.

    Clearly, the only enforcement mechanism for patents and pharmaceuticals we have in this country is the linkage regulations. We do not have access to interlocutory injunctions.

    Mr. Brent St. Denis: Do you say that as well for...?

    Mr. Paul Lucas: Yes. So in many other countries, if a generic comes on the market and they're infringing a patent, you can go to the courts and get an interlocutory injunction and get them off the market, pending resolution of that issue. In Canada we cannot do that.

    I can explain to you the AZT case in Canada, which is a great example of that, if you'd like.

    Let me come back to your original question. If we were to eliminate the linkage regulations, we would clearly be in violation of our global trade agreements under WTO TRIPS, which requires every signatory to provide an effective enforcement mechanism. Without the linkage regulations, this country would not have any effective enforcement mechanism, no linkage regulations, no access to interlocutory injunction--no protection, bottom line.

    I can give you the example of AZT, which occurred in 1990. I think this is a great example of what happens with no linkage regulations. Before the linkage regulations were put in place in 1990, AZT, which was the first drug for the treatment of HIV, which happened to be our drug, came to market. It was on the market a couple of years.

    Apotex and Novopharm were able to get approval for a copy through Health Canada, and they immediately came to market. They were clearly infringing on our patent. They came on the market immediately after we had approval. There were no linkage regulations. That was actually how the linkage regulations were put in place, to prevent that situation.

    The generics yesterday said “We respect 20 years of patent protection. Of course, we would never infringe.” The AZT case was clear: they were infringing.

    We went to the Federal Court. We won in the Federal Court. They were clearly infringing. They were given a stay to stay on the market, pending an appeal to the Federal Court of Appeal. We won in the Federal Court of Appeal. They were clearly infringing.

    They were given a stay to stay on the market pending an appeal to the Supreme Court of Canada. We won in the Supreme Court of Canada. That took 12 years.

    And that's exactly what would happen without the linkage regulations.

º  (1620)  

    Mr. Brent St. Denis: So does that explain why the generics would prefer that these things be settled through the courts under a patent law, as opposed to NOC?

    Mr. Paul Lucas: Absolutely, because they know there is no such thing as an interlocutory injunction in this country.

    Mr. Brent St. Denis: Okay. I have a slightly different question, and I think others have mentioned it.

    On a second or third and beyond patent on the same drug, those are decisions made by people at the patent office. You apply and they agree or disagree with you. So I suppose we could ask them about how they do that.

    Basically, to get an additional patent on a drug, is the bar high or low?

    Mr. Paul Lucas: Perhaps I could ask Adrienne to comment on that and what the requirement is to actually have a patent granted.

    Mrs. Adrienne Blanchard (Legal Counsel from Gowlings Lafleur Henderson, Canada's Research-Based Pharmaceutical Companies): Certainly.

    In order to get a patent in Canada, and anywhere, in fact, you have to show that what you're claiming in your patent is new, useful, and it's not obvious. In other words, it's not something that could be arrived at very easily. So it has to be something that's inventive, and by definition follows on patents that are in addition to the original patent. It can't cover the same subject matter as the original patent, because they're always narrower in scope, because they only cover that next innovation.

    Mr. Brent St. Denis: Could a second and beyond patent include a process, and does it have to be a kind of chemical-based patent, or can it be a manufacturing, processing item?

    Mrs. Adrienne Blanchard: It could be a particular process to manufacture a drug, or it could be a formulation, which would be the combination of the active ingredient and the inactive ingredient. It could be an invention relating to a different way of getting the drug through the body to where it's supposed to go. In every case it has to be shown to be something new and inventive.

    The Chair: Thank you very much.

    Mr. Masse.

    Mr. Brian Masse (Windsor West, NDP): Thank you, Mr. Chair.

    For courtesy's sake, I'll let you finish your comments.

    Mrs. Adrienne Blanchard: That's essentially it.

    Mr. Paul Lucas: I would like to briefly add to that.

    That's only the first step, actually getting the patent granted. Then you have to go through a process to get it on the patent register, and that's another process.

    Mr. Brent St. Denis: I just want to add, the third part of that was simply whether a new use for an old drug could qualify for a new patent--in other words, if drug A later becomes a drug useful for another disease unrelated to the first disease, whether that's a new patent or not.

    Mrs. Adrienne Blanchard: Yes, it is possible to get a patent for a new use, and then if you want to get approval to market that drug for that new use in Canada, you have to go through all the safety trials at Health Canada in order to get that approval.

    The Chair: Thank you.

    Mr. Masse.

    Mr. Brian Masse: Thank you, Mr. Chair.

    How much do you spend currently on resources to lawyers and litigation? How many court cases are you involved in now, and what does that equate to?

    Mr. Paul Lucas: I'm not sure if we could answer that question. We'd have to add up everything the individual companies spend. I wouldn't even want to guess at this point.

º  (1625)  

    Mr. Brian Masse: It would be significant, then?

    Mr. Paul Lucas: That's hard to answer. Significant compared to what?

    We obviously have legal costs to deal with the linkage regulations. We have many other legal costs as well.

    Mr. Brian Masse: The reason I'm curious about that--and I asked it of the generics yesterday as well--is because right now you don't want to have any changes to the system. So I guess you're acknowledging that you're quite comfortable in spending these fees and dispensing these resources to the legal system to protect your drugs and to do the things that you feel are necessary for your businesses. Unfortunately, that cost gets passed on to the consumer.

    There's no doubt that you're making a profit. There's no doubt that you're having to sustain an industry. But that money is then transferred into the actual cost of the drug.

    So what would you suggest? Can you not suggest anything that would improve the current situation so that consumers aren't basically funding lawyers through a system here where we have rising drug costs that Canadians--not only individuals but insurance companies, organizations--are all claiming are too high? What can be done? Why is there a complacency to accept litigation for years and years?

    Mr. Paul Lucas: I think the simple answer is that we do not want to spend our money on lawyers. We do not want to spend it on litigation. We want to spend it on innovation. If the generic industry were not engaging in strategic patent-busting and waited until our patents expired, we wouldn't have to spend that money.

    Mr. Brian Masse: But you're quite comfortable to come to the committee here today and say the status quo is good and the status quo is what you want. I find that perplexing, because the cost of these resources is being passed on to the consumers, and at the same time you're advocating that the status quo is good.

    Mr. Paul Lucas: Let me use the AZT case again. If we didn't have the regulations, we'd have a similar situation as the AZT situation. Over a 12-year period, I don't know how many millions of dollars we spent on lawyers defending ourselves in court, but that was a whole lot more expensive than what we spend on lawyers today to litigate these notices of allegation. So this is a much better situation.

    The reality is that it's a fairly litigious business. The generics want to get our products, and we want to keep our products.

    Mr. Brian Masse: I guess my frustration in this is that I don't think you're paying for lawyers. I don't think the generics are paying for lawyers. The consumers and the sick in this country are paying for the lawyers. That's what's happening under current restrictions.

    Voices: Hear, hear!

    The Chair: I'd hate to have to clear the room, so I would ask for quietness, just like you were yesterday. It was perfect.

    Thank you.

    Mr. Masse.

    Mr. Brian Masse: Thank you, Mr. Chair.

    Do you currently note in your research and development the costs of marketing, the costs of going out and advocating for your products? Is that all tied into your research and development figures?

    Mr. Paul Lucas: Clearly not.

    Mr. Brian Masse: Okay, those are separate.

    I'd like to touch upon what you have in your submission here:

Canada's patent laws already compare unfavourably with those in the United States, the European Union and Japan, to name just a few.

    But also you're saying you're going to triple R and D over the next few years. How come? If it's such a bad deal here for us, what's the reason that's going to create this R and D?

    Mr. Murray Elston: Last year we responded to the government's paper, the so-called innovation agenda, with a document of our own that listed a series of places in which we felt there could be changes made that would permit us to be more competitive with respect to the international community's need for research and development expansion.

    That paper identified the stability required around patent protection. It identified data protection, which Mr. Lucas has already mentioned. It has identified changes with respect to the prices review board, which caps our prices. It identified drug review times and several other places where, if changes were made, it would permit us to assist the government in moving Canada from fifteenth to fifth on the list. That's why we say we can move it in that direction if the changes are made to make us more competitive.

    The interesting thing about that whole process is that while Canada is looking.... I think I have noticed that all the parties, basically, in the federal jurisdiction and without exception across all the other jurisdictions in this country are saying we have to get into the knowledge-based economy and we must be on the front rung of this whole development, or else.

    The problem for us is they're doing it in the U.K. In particular, Tony Blair has done some work with the pharmaceutical sector over there to say he wants things done. The Danish embassy has sent delegations to visit us to see what they should do with respect to moves on biotech and pharmaceuticals. Everybody wants to go there. So what we have identified are the critical elements that will make us competitive.

    I think what's so critical for me is that it isn't just the research and development. Coming from where I did, in public policy--like you are--and from the health department in Ontario, what it will deliver to us is the ability to be at the forefront of delivering the new technologies for treatment to people in this country.

    I was not one necessarily convinced of this at another time, but I am fully convinced that if we didn't have the intercession of the technology, we would not be able to have our health system performing at such a high level as it is performing at now. So that is the thing that really is important for us.

º  (1630)  

    The Chair: Thank you.

    There is a fire alarm, so we are going to have to leave the room and return immediately after it has been called off.

º  (1631)  

---

º  (1658)  

    The Chair: We'll go from Mr. Masse to Mr. Marcil.

    Mr. Volpe, what is your point of order?

    Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): On a point of order, Mr. Chairman, are you going to add onto the end of the meeting the time we were out?

    The Chair: Yes. We were outside about 21 minutes, so we'll go on until at least 5:50.

    Mr. Joseph Volpe: Thank you.

    The Chair: Mr. Marcil, please.

[Translation]

    Mr. Serge Marcil (Beauharnois—Salaberry, Lib.): Thank you, Mr. Chairman.

    From what you said earlier, Canada is the only country with linkage regulations and they do not exist in countries where one has a right to interlocutory injunction. That means that when a manufacturer forges a drug prior to the expiry date of the patent, the original manufacturer can ask a judge to issue an interlocutory injunction, with the effect of suspending operations until it has been proven that it really is a case of violation.

    You say that such a measure does not exist in Canada. I would like to know why?

[English]

    Mr. Paul Lucas: Mrs. Blanchard will answer that one.

    Mrs. Adrienne Blanchard: For interlocutory injunctions, which is what you would apply for to try to get a generic off the market during the patent term, the standard in Canada has been set very high. We have a test that's somewhat similar to other countries, but you have to show that you will suffer what's called, in legal terms, “irreparable harm”. That means harm that can't be compensated by paying damages.

    In Canada, the courts don't consider an immediate or devastating market loss to constitute irreparable harm. They do not consider the effect of not having money to invest in research and development in Canada or to employ researchers in Canada, and they don't take into consideration the difficulty, or extreme difficulty, in determining damages 12 years down the road.

    In other countries--for example, in the United States--if you have a patent, say, on a molecule and a competitor comes out with a product that's using that molecule, there's a presumption of infringement if you can show that the patent is valid. So the test is a little bit different in some other countries.

    In Canada, over the past 15 or 20 years, it has been impossible in every attempt that pharmaceutical patentees have made for them to get an injunction.

»  (1700)  

[Translation]

    Mr. Serge Marcil: As for the AZT case, which took nearly 12 years to settle and went to trial, wasn't the original manufacturer compensated for lost revenue and other damages incurred during the time the forgers had marketed the product?

[English]

    Mrs. Adrienne Blanchard: In the case of AZT, on the reference for damages, which is what happens after there has been a finding of infringement, you have to bring yet another court proceeding to determine how much you're entitled to in terms of damages.

    In the case of AZT, that hasn't happened yet, and it will probably be a few years before that's concluded.

[Translation]

    Mr. Serge Marcil: It has not yet been settled.

[English]

    Mr. Paul Lucas: No.

[Translation]

    Mr. Serge Marcil: After many many appeals to the government, the famous linkage regulations were introduced so that both parties would avoid huge legal expenditures.

    It is quite complicated for the average Canadian, and often for Parliamentarians as well, to clearly understand the scope of a patent. My former premier, in Quebec, always said that politics is a matter of perception and I think that also applies to industry. It seems that a company, even if it knows from the outset that without an brand name drug there cannot be any generic drug, it lines its pockets with money, thereby stopping other companies from also filling their pockets. There must an innovator right at the beginning of the process.

    The problem is the following. Imagine you want to apply for a drug patent. You file it with Industry Canada—and not with Health Canada—, which grants patents based on the criteria you listed earlier, namely that it really is a new product and so forth.

    You then tell Health Canada that you want to market your drug. The department says “Time out”, because it must check whether the drug is harmful, among other things. So it takes approximately two years. Is that correct? So, if I go back...

[English]

    Mrs. Adrienne Blanchard: The process to determine whether a product is safe at Health Canada takes about 8 to 12 years for the first end of a product. It can happen at the same time as the patent term. A lot of your patent term is actually eroded by the time you spend doing the testing and demonstrating to Health Canada that your product is actually safe and effective.

[Translation]

    Mr. Serge Marcil: So if Health Canada tells you the drug for which you received a patent can be harmful to the health of Canadians, Health Canada will prohibit you from marketing the product. Is that correct?

[English]

    Mrs. Adrienne Blanchard: I'm sorry.... Does Health Canada have the right to give you the right to market the product in Canada?

    Yes. You need their approval before you market the product.

[Translation]

    Mr. Serge Marcil: Approval from Health Canada is required.

    So let me get back to Industry Canada. Do you think the criteria used by Industry Canada to issue a patent are strict enough and clearly show that it really is a new, valid invention, that is not just a matter of adding colour or coating and so on?

»  (1705)  

[English]

    Mrs. Adrienne Blanchard: In terms of patent protection, the tests that are applied are the same that are applied elsewhere in order to get your patent granted by the patent office.

    In terms of getting a patent on the patent register, which is different under Health Canada's rules, it's much more limited in terms of the patents that you can actually get on a list. You can only list a patent that has a claim to the medicine or a claim to the use of the medicine. It's not for every patent that you get to take advantage of the linkage regulations.

    The Chair: Thank you very much.

    Mr. Merrifield.

    Mr. Rob Merrifield (Yellowhead, Canadian Alliance): Yes. Thank you.

    It is indeed a complex issue, one that has been talked about from both sides of the issue for quite some time. As a parliamentarian, I'm doing my best to get a handle on it.

    What strikes me is your first rationale for the linkages. You are saying that the linkage regulations provide a measure of balance. I guess what we are here to discern is whether the balance is being tipped or not.

    To get a handle on that, I'd like to go back to what my colleague was talking about on the evergreening and the notice of compliance. As I understand it in layman's terms, you have the 20-year patent law. In that time period, you are continuing with your experiments and research, and you have other innovative ways of dealing with the original patent over the 20-year period. Then you patent the process, whether it be one, two, three, or however many you want.

    What I'm trying to get a handle on--and this was my question yesterday to the generic people--at the end of the 20-year period, you are saying that the generics have the full right to be able to go to the market with the original 20-year patent product compound. Is that the way you see it?

    Mr. Paul Lucas: Correct.

    Mr. Rob Merrifield: Okay. Help me with this one.

    They are saying that the only way they can do it is if they go back and address—I think that was the terminology—all of the other patents you've put on during the 20-year period on the compound. Is that true?

    Mr. Paul Lucas: It is, only if they don't want to develop a non-infringing product. If they develop a non-infringing product, they can get it on the market. The problem is that they're attempting to use our innovation, copy our innovation, so that they can get on the market.

    Mr. Rob Merrifield: Okay. They are saying that they want to produce the original patent. Catch me if I'm wrong here. Let's say there are two or three other patents on it. They're saying that they want the original patent.

    The word “address” is the thing that's confusing me. They're saying that they have to address the other three patents. Let's say there are another three patents there. If they say that it's original and let them at that, then you'll say no, to be sure of addressing it, issue a notice of compliance and start court action that initiates a two-year stay.

    Is that the way it works?

    Mrs. Adrienne Blanchard: It's probably best to go back to the way the process works. The patentee has the opportunity to put patents on the list, but not every time the generic wants to come to the market do they have to get locked up in a linkage proceeding.

    Mr. Rob Merrifield: Who initiates that?

    Mrs. Adrienne Blanchard: The generic does, because they decide that they want to come to the market with a product that has patents listed.

    Mr. Rob Merrifield: That's another thing that confuses me. Yesterday they said that the brand names initiate it. I'm a little confused with the testimony that we're getting.

    Mrs. Adrienne Blanchard: Yes. There's a patent list the patentee adds its patents to, the patent register. There's a list of patents.

    When the generic decides to come to the market with a product that is a copy of a product with a listed patent on the register, it has to tell the patentee. Half the time when it tells the patentee that it wants to do this, the statistics show that the patentee says that it's absolutely fine. It's probably in those cases that the generic tells them exactly what they're going to do.

    In many cases, in their allegation, they don't make it clear enough as to what they're going to do. The patentee starts a case and, as the proceeding goes through, the issues are narrowed. Oftentimes the case doesn't go forward to a hearing. Oftentimes the patentee may have two or three patents on the register, but only takes issue if it looks like the generic is infringing on one of the patents.

    It is a technical and complex process, but it's not every case and it's not every patent. Many times, the cases will actually resolve themselves without going to trial.

»  (1710)  

    Mr. Rob Merrifield: This is the other confusing part. They're saying that 75% of the cases are ruled in their favour. That means to me, as a layperson, that you're saying that they're infringing. Then it goes to court and the court says no.

    Mrs. Adrienne Blanchard: Again, because of the technicalities and the way in which the regulations work, it's not only a matter of looking at who wins when you finally get to court at the end of the day because of all of the different ways in which the cases can be resolved.

    For example, in a great number of cases, the generic will actually withdraw the allegation. The case starts and the information is exchanged. As they go through the process, the generic will actually withdraw the allegation. In essence, it means that it admits that it can't come to market.

    If you look at all of the ways the different cases can be resolved, both sides are winning their share of cases. In our view, the brands are winning more. The numbers fluctuate over time. It's clearly not only a matter of looking at the decided cases.

    Mr. Rob Merrifield: I hope you understand how difficult it is from our perspective. Generics yesterday said that it was two-thirds. You're saying that you're winning the majority of cases. They're saying that you initiate the court action. You're saying that they do.

    Mrs. Adrienne Blanchard: It is very technical. If you were to look strictly at the cases that are decided by the courts, it would be about 63% to 37% at the moment. It fluctuates as the court decisions come in. It doesn't take into account the other ways in which they resolve it.

    The Chair: One more quick one that they can answer in a second. Let's see what happens.

    Mr. Rob Merrifield: To show you how confusing this is, generics say that it takes 13 to 14 years to have a pre-market for your product. What's your number?

    Mr. Paul Lucas: Our number is a little over ten years. If you want a longer answer, I can give you one.

    The Chair: Ms. Torsney.

    Ms. Paddy Torsney (Burlington, Lib.): Thanks.

    First, let me put on the table that I want to make sure that my constituents have access to all of the best medicines. That means the very latest products for the weirdest diseases that we haven't really heard as much about.

    I also am concerned about the cost of those products. I know that there is a process where, any time you list a product, you have to defend the cost.

    To Mr. Masse's comments earlier, I don't think that the anticipated legal fees at the end of the patent are part of the cost estimation. I imagine that most of the legal fees are taken out of the profits to shareholders for most of your public companies.

    There is certainly a role for generics for some of the mass-produced products that perform a very important role in our health care system. I'm concerned that they don't have a review process for what price they come on the market at. They cream off on the big products, some of the products, because they come in at less than a certain price point. Whether it costs them that much to produce the product or not, they use the recipe that you published through the patent and come on stream.

    Could there be a process for them to justify the cost of every generic drug that's coming on the market? Do they do research that's helpful to our economy? Are they patenting their own products, quite apart from the things that you're doing?

    How many patents are coming in the next 20 years, for instance, that we can expect to have “genericized”? Are we being held up in Canada from getting access to certain generic drugs that are freely available in the United States, Germany, France, or wherever? That would concern me, because even the 30% differential is an important saving for our health care plans, and for our constituents who are actually paying.

    The Chair: I need those answers.

    Mr. Paul Lucas: Sure.

    Let me start at the beginning, which is the generic price review. We don't advocate a generic price review system. We think it's a waste of taxpayers' money. Generic drugs are commodities. Just like any other commodity, they should compete on price. The best way to compete on price is to open it up for a regular tendering process. That's how we all buy commodities.

    Unfortunately, in Canada the prices of generic drugs have been regulated high, because basically Ontario says to the generics, you can price no higher than 70% of the brand price. So they come in at 70% of the brand price, and that's what the taxpayer pays.

»  (1715)  

    Ms. Paddy Torsney: Never less.

    Mr. Paul Lucas: Well, they pay less because a subsequent generic that comes in I think goes down another 5%, but typically those prices remain way above what the global pricing levels are. Typically, for a generic drug, within a year, when a brand is genericized, the price in the U.S., for example, would go to about 10% of the brand price. In Canada it's somewhere between 50% and 70%. We are paying too much for generic drugs.

    On the research that the generics do, I was here yesterday and heard the generics denigrating the R and D that we do, which was quite unfortunate and a bit of an insult to all of the researchers across this country who are striving to find solutions to the diseases that patients have. The generics do R and D, I think you heard that yesterday, but the R and D they do is strictly devoted to copying our products. I think that's evidenced by the fact that since 1968, when compulsory licensing came into Canada, not one new single innovative medicine has come out of the generic industry in the last 30 years. They don't innovate; they imitate, and that's where they spend their R and D dollars. I think that's very clear. If you could get access to that data, that would be very clear.

    Your next part of the question was what's happening in the market in terms of generic potential. It's been well documented and well written about in the press that there are billions of dollars of innovative medicines coming off patent in the next few years. This is going to be the biggest peak for the development of generics the world has seen, because there are major products coming off patent in the next few years. They're going to have access to all sorts of products.

    What I can tell you from my own company's point of view is that in the next two years, five of our major drugs are coming off patent in Canada, which they will have access to. Only one of those is going through the linkage process. For the other four--and I think this is a good example of the fact that not every drug goes through this process--the patent expires, a generic comes to market, no linkage proceeding. There's tremendous potential for the generic industry over the next few years, and they'll have many, many products available to them.

    The last part of your question relates to whether generics are being held up in Canada versus the rest of the world. I think it's a great question, because when you look at the analysis and you look at the 50 top-selling medicines in Canada today—and I think this goes back to stepping back and not seeing the forest for the trees on this issue—there are six that have been on the market more than 13 years. One of those has been on the market more than 15 years. Virtually half of those are not on patent and could be genericized if somebody wanted to make the investments to copy them.

    So there is a very small group of products that have been on the market for over 13 years. You would expect if there was widespread abuse and a huge advantage to this industry, we would have many, many products on the market for 15 years-plus. That is not factual. It does not exist. That's the data. You would also expect that if we had an unfair advantage in Canada, there would be a large number of products that have been genericized in major European countries and the U.S. and not genericized here.

    When you look again at the 50 top-selling medicines in this country, there are virtually none that fall into that category. Where's the issue? I've been here for three days, and I've clearly seen that the discussion has revolved around widespread abuse, but we've talked over the last three years of maybe two or three products. Frankly speaking, if we're spending our time focusing on public policy for two or three products, we may not be doing the right thing here.

    The Chair: Thank you, Ms. Torsney.

    Monsieur Crête.

[Translation]

    Mr. Paul Crête: Thank you, Mr. Chairman.

    It is a fairly unique industry because of its product line. Moreover, there is no other sector where companies do research and development. There are also companies that make generic products. That did not occur in the automobile industry, for example, or in any other sector.

    Do you think that if the linkage regulations stay as they are, that the model will be the same in 10 or 20 years? Do you think there will be a tendency to see more companies doing research and producing generic drugs? Are we heading towards a system where the two sides will continue to be at war?

»  (1720)  

    Mr. Jean-François Leprince: Mr. Crête, I think you are asking an excellent question because it projects into the future. The question you are asking, which is somewhat outside the purview of this committee since it deals with linkage regulations, is however interesting. Indeed, it is the future of pharmaceutical groups, whose driven force is innovation, that is at stake.

    Of course we are not challenging the fact that the future of our pharmaceutical groups is seriously jeopardized, especially if we are unable to market innovative drugs, with the relevant protections. It is not a matter of thwarting generic companies. As Mr. Lucas said, they will have access to the huge molecules that will be “genericised” in the coming years.

    So I think major pharmaceutical and biotechnology companies must focus on innovation, come up with innovative products, ones that are really new. By innovation, we mean products that bring value added to existing treatments. The notion of products that bring a value added to existing treatments has been somewhat forgotten. But that, in fact, is why drug consumption is up a little. It is what is known as the therapeutic transfer phenomenon. Everybody wins. The big winner—and I think there is a tendency to lose sight of this in the discussions—is the patient.

    Let start marketing drugs that will allow patients to stay at home rather than in hospital. That is the responsibility and challenge for pharmaceutical groups and biotechnology companies.

    So if we cannot meet that challenge, our future looks very bleak but we are optimistic. We think we can meet that challenge anyway.

    Mr. Paul Crête: I have another question. We are faced with two possibilities. On the one hand, generic companies are telling us to abolish the linkage regulations, and on the other, you are telling us to leave them there.

    Can you tell us whether there is a potential causal link with the price paid for drugs? If the linkage regulations are abolished, will this have an impact on availability and price? That should be clarified. There is the question of perception of reality.

    People are currently very concerned about the high cost of medication. They always find they pay too much and the costs are indeed high. Does the current discussion have any bearing on the price of drugs or is there no link per se?

    Mr. Jean-François Leprince: I will respond to one part of your question and then I might ask Murray Elston to respond to your question about the link.

    I think there is a great deal of confusion around this table between the price and cost of drugs. The price of patented drugs, not generic drugs, is controlled here in Canada by an organization called the Patented Medicine Prices Review Board. The result is that the price of patented drugs has not increased since 1995 in Canada.

    People play with that perception and confusion between drug prices and their cost. The cost of drugs is increasing, yes, but why? Because they bring a certain value added to Canada's health care system. So the price is something completely different because Canada now has the PMPRB, an agency that ensures that the price of drugs in Canada is not excessive. The proof thereof is that other countries—our neighbours, not to mention them by name, are very happy to come here to buy Canadian drugs.

»  (1725)  

[English]

    Mr. Murray Elston: Just to follow on for a brief minute, if a product in Canada was launched in 1993, the conditions of the market with the Patented Medicine Prices Review Board, which applied to our products, and the relationship of that organization with the provinces has meant that there has been virtually no increase in the price for that product between 1993 and today.

    The issues for us have been that the prices have been controlled in such a fashion for us to have actually lost ground against inflation. In that sense, we have seen a real reduction in the prices charged for our products over that time period, and in fact it would reduce any margin of saving that may be alleged by the generics if they could come on the market.

    The issue for us as well is that they don't choose to copy every product. They choose only significant volume products because, as Mr. Lucas said, they are interested in the commodity sizes that mean they will be able to mass produce and mass sell with a minimum of investment on their part for copying and otherwise.

    The opportunities for real savings if you took away the linkage regulations I think are illusory. If you took away the linkage regulations, it would not permit us to carry on with the research and development we have undertaken here. More importantly than that--and this is I think something--

    The Chair: I need you to conclude, Mr. Elston.

    Mr. Murray Elston: It is not well understood that we have a tremendous series of partnerships with universities, research institutes, and academics to drive basic research in this country.

    I'm sorry, Mr. Chair.

    The Chair: Mr. Volpe.

    Mr. Joseph Volpe: Thank you very much, Mr. Chairman.

    Mr. Elston, I find a little bit perplexing what you just said, that your income wouldn't have been able to match inflation. I have to come to the defence of our own department, because they provided us with information. I hope the guys from the industry department will appreciate the compliment.

    Here it is: the change from previous years over the course of the last ten has been that your revenues have increased, starting from 1995, 7.5%, 9.9%, 7.4%, 10.9%, 19.2%, 12%, and 15.3%. This is all through the Patented Medicine Prices Review Board, which monitors all this.

    Mr. Murray Elston: I was speaking, Mr. Chairman, about the prices, if we launched a product in 1993—virtually no increase in price. The issue is about cost, which was of course well identified by Mr. Leprince. The costs of medications and the prices are two different things. They're affected, obviously, by utilization and other elements.

    Mr. Joseph Volpe: Thank you.

    I want to stay on the question of abuse of the linkage programs. Mr. Lucas, you just raised another issue for me. You focused our attention on two or three, but Industry Canada gave us an indication there are 238 over the last ten years and 108 over the last five years. I think again there's a little difference in numbers. But I'm going to resist the temptation of getting off the game for a second.

    You referred to AZT. I was a guest at your place and you talked about this approximately seven years ago. You're very proud of that product. You bought that product from a Canadian biotech innovator, and I compliment you on your wisdom.

    I wonder if you can give this committee an indication of any other breakthrough drug that your research and development--maybe Mr. Elston, who represents the entire organization, can answer this--has provided for Canada.

    Mr. Paul Lucas: Maybe right at the start I can correct you on the AZT situation. That was a development of GlaxoSmithKline, and we did not buy that from a biotech company. You might be thinking of 3TC, which is a different AIDS drug.

    Mr. Joseph Volpe: Well, my question still stands. We had one. The PMPRB says that there are two in Canadian industry--one of them insulin. I'm just wondering whether there's another one that the PMPRB is not aware of.

    Mr. Paul Lucas: Sure, there are a number of other ones.

    Do you want to talk to that?

    Mr. Murray Elston: Singulair was discovered in Montreal. Vioxx. There are a couple of examples. In fact I can think right now of about some 300 under development around the world. Canadians are playing a very high level of activity on a number of them.

»  (1730)  

    Mr. Joseph Volpe: Let me just go on here. I was here before Bill C-91 came, and I heard the argument then that I heard repeated today: that we need this; we need an improvement, an improved intellectual properties climate, in order to encourage investment and to generate new products. PMPRB hasn't yet caught up to your answer, because they think that it's just insulin and AZT that have been produced--

    Mr. Murray Elston: Not ATZ, 3TC.

    Mr. Joseph Volpe: Okay, thank you again.

    Mr. Murray Elston: Plus Singulair, plus Vioxx, plus others.

    Mr. Joseph Volpe: Hold on. I'm going by their report, okay?

    In the process, ever since you got what you wanted.... I don't dispute that you should have what you want. You're in business; you're not in any other thing. Some of us have been talking about the great things that happen. You're a good business, and God bless you, we want good businesses in Canada. The percentage of investment in R and D that your industry has put into Canada, again, according to the PMPRB and produced for us thanks to Industry Canada, shows that you have decreased as a percentage of revenues every year since 1997, the last time we had a review on Bill C-91, when these issues came forward.

    In fact, as I look at the figures, the difference between the ratio of research and development to revenues now and in 1993, the first year after Bill C-91, was only 0.8%. I'm sitting here and I'm--

    The Chair: You need to ask your question because you're going to run out of time.

    Mr. Joseph Volpe: --wondering whether I'm hearing the same argument over and over again, but the money doesn't flow into Canada.

    Mr. Murray Elston: No, the money does flow. That's not correct.

    Mr. Paul Lucas: You're talking percentages, and what I'm telling you is that there has been an increase in R and D every year since the patent laws changed in this country, in absolute dollars.

    Mr. Joseph Volpe: That's like saying revenues have increased every year. And you're right, they have increased. They've more than doubled.

    Mr. Paul Lucas: Revenues have increased.

    Mr. Joseph Volpe: Yes, they've more than doubled.

    Mr. Paul Lucas: They've increased, you're right, and so has R and D investment every year in this country.

    Mr. Joseph Volpe: It's increased by 0.8%.

    Mr. Paul Lucas: That's not correct. You're saying that R and D has increased 0.8%. Over what period of time?

    Mr. Joseph Volpe: The difference between when you got Bill C-91 and last year is 0.8% of your revenues. That's all it is.

    The Chair: From 1997 to the present.

    Mr. Joseph Volpe: The difference in the ratio is still only 0.8%.

    Mr. Paul Lucas: Let's step back for a minute.

    We made a commitment to the Government of Canada when Bills C-22 and C-91 were passed to spend a minimum of 10% of our sales in R and D. We have delivered that every year since that agreement was made.

    Our proposal, which Mr. Elston talked about earlier, has said that since 1992, when Bill C-91 went through, we said that if the environment improves beyond where it was at that point, we could do more. The reality is we have done more year after year. Those investments in R and D have increased every single year—not as a percentage necessarily, but in absolute dollars. Those investments have increased, and we're very proud of that when you consider--

    Mr. Joseph Volpe: I'm glad about the absolute dollars.

    The Chair: Mr. Volpe, we'll have to move on.

    Maybe what the group can do is provide us those dollars since 1997--

    Mr. Paul Lucas: You have it. You have it in the PMPRB report.

    The Chair: All right. I must move on. I apologize.

    Mr. Bachand.

[Translation]

    Mr. André Bachand: Thank you, Mr. Chairman.

    What my colleague opposite basically tried to make you say was that you really are not doing anything in Canada. You are not discovering any new drugs. You are not doing any research. With Bills C-93 or C-22, the 1997 and 1998 changes mean that no research is done in Canada. Virtually all that should be abolished. At the end of the day, it is useless because there aren't huge numbers of made-in-Canada drugs.

    There are two issues. First of all, I really wonder what you do to justify the expenditures for 4,600 researchers. Why did Merck Frosst invest $250 million in Quebec and Ontario? I thought you were private companies. You are not that crazy, you do not spend money needlessly.

    I would like you to explain to the committee how pharmaceutical research works. We know that several researchers in various countries can work to meet the same challenge; and that is often the case in universities. I am not asking you to tell us what those 4,600 researchers do every day, but how research and development works so that we can clearly understand why you pay Canadian researchers the salaries that you do.

»  (1735)  

[English]

    Mr. Paul Lucas: I'll try to keep it fairly short. R and D is complex, but it is fairly linear too. The basic science is done in research laboratories all around the world, and it's important to state that pharmaceutical R and D is a global effort. Not all drugs are discovered in a single country. They are discovered in different parts of the world through the efforts of scientists all over the world.

    The basic science is done. They'll look at, for example, asthma. What is the cause of asthma? They'll discover what the cause of asthma is. Then what we apply ourselves to is trying to develop molecules that then have some effect on the disease. So you are still in the basic research side of the R and D, and that occurs in many of our research centres around the world.

    Once we have a molecule that actually works, then we put it through extensive testing. We have to make sure first of all that we test it in animals to make sure that it's safe. We then put it into humans and we put it into different phases of clinical research—phase one, phase two, phase three—and that research, the pre-clinical toxicology and the clinical work, is done all over the world. Again, this isn't all focused in one country.

    In Canada we do basic research. We do pre-clinical toxicology. We do early phase clinical development. We do late phase clinical development. Once you have this molecule, you also have to find a way to get it into the human. You have to have a delivery system. We apply our pharmaceutical research scientists to creating a formulation that will actually work in the human body. And then, once we have done all that and we have all the data from those studies, we put it all together, put it into a submission, and apply to the regulatory authority. Then we get approval.

    That process takes on average about ten years.

[Translation]

    Mr. André Bachand: Very quickly, what I wanted to point out was that...

[English]

    The Chair: I'm shortening the time so we could all have.... Make it very short.

[Translation]

    Mr. André Bachand: Fine. Thank you very much, Mr. Chairman.

    I just want to make a short comment. Research is a global activity; Canadian companies, manufacturing companies invest in Canada, but they must also fight internationally to attract investment to Canada.

    I just wanted to make it clear that the process really is international in scope.

    Thank you, Mr. Chairman.

[English]

    The Chair: Mr. Normand, four minutes.

[Translation]

    The Honourable Gilbert Normand (Bellechasse—Etchemins—Montmagny—L'Islet, Lib.): I beg your pardon?

[English]

    The Chair: Four minutes. Make your questions right to the point, and I'm sure the answers will be also.

[Translation]

    Hon. Gilbert Normand: If you take something away from the generic drug companies, you give it to the patented drug company.

    If there is price control on patented drugs, you don't need generic drug companies. Right now, those who copy, those who forge a product, cause immeasurable damage to the system.

    You said earlier—and I think it is true—that generic companies could copy several drugs whose patents have expired, but they always choose the most lucrative ones.

    I would like to know what the profit margin is for a patented drug company versus the profit margin for the same drug when it is copied, because the price can be different, but the profit margin for generic drugs may be bigger. What is the difference in profit margins?

[English]

    Mr. Paul Lucas: I don't think we can answer that question, basically because the major generic company in Canada is a private company, so that data is not available. We don't really have that data to do that comparison.

    The Chair: Plus, you are going away from the patents and regulation discussion that we wanted to have today.

[Translation]

    Hon. Gilbert Normand: From a scientific perspective, as the new drugs become more sophisticated with the use of nanotechnology and genetics, it will become increasingly difficult to copy them.

    Let me give you an example. I will use a drug that everyone knows, aspirin. If I wake up tomorrow morning and find a gene in a fruit that enables aspirin to act directly, for example, on joints, will I be allowed to patent that gene? Yet aspirin has been in existence for a 100 years and serves many purposes.

    So with nanotechnology and genetics, drugs will be much more complex and then generic drug companies will want more because they will need more time to successfully copy them. That is my first question.

    My second question is on diagnosis because there are many inventions in that field as well. There are many new laboratory tests, for example, to detect microbes, to identify illnesses, be it using nanotechnology or chemistry. Are the same arguments being used for diagnosis as with cures using the drugs? And yet the same legislation applies, but we never hear of any arguments when new laboratory tests are created or when new equipment is invented.

    Let's take SARS as an example. A Swiss company invented a tool to take the temperature from a distance. Right now could anyone copy it?

»  (1740)  

[English]

    Mr. Paul Lucas: Who wants to answer that? Get the lawyer to answer this one.

    Mrs. Adrienne Blanchard: It depends on whether there's a patent or not.

[Translation]

    Mrs. Janet Lambert: If companies are interested in making copies or not... It is much more specific with diagnosis, with nanotechnology. Not many people can benefit from this diagnosis or product.

    Hon. Gilbert Normand: So they will take only what is very easy and lucrative.

[English]

    The Chair: Mr. Masse.

    Mr. Brian Masse: I have a couple of questions, and I'll give them to you both upfront here.

    First, Mr. Lucas, you noted that you have five major drugs coming off the market. Do you have any replacement products for those particular drugs that will be introduced, either to some or all of them?

    Second, I have a growing concern.... According to information I have here, the trade deficit with drugs is increasing continually through this country. What we have right now, since 1998 until today, is $16.8 billion in a trade account deficit, and currently this year it's $4.7 billion in itself. Why are brand names not manufacturing, and how long can we sustain importing expensive drugs from abroad? In the case of R and D, I know that we participate through grant programs, tax incentives, as well some employment programs. Can the R and D that we do here be used to export more manufactured drugs outside this country than are imported here?

    Mr. Paul Lucas: I'll answer the first part of your question, on replacement drugs. As I think about the ones that are coming off patent, unfortunately we have nothing to follow on those compounds. We'll be out of that business in a year from the date that the patent goes off.

    In terms of the trade deficit, does anybody want to tackle that one? I'm not prepared to answer that one.

    Mr. Murray Elston: There are two items that I think are important. While the trade deficit identifies pharmaceuticals, it probably speaks as well to fine chemicals. Fine chemicals are imported not only by us but also by generics. In fact, I know a couple of organizations—fine chemical producers—that were previously Canadian that have actually moved their operations to the United States, where they find the business climate slightly better. That means some of those active ingredients that are produced for use by generics as well as by ourselves are imported and would form part of the basis of that.

    I can also make one other observation: that one of the ways we had hoped we could make up some--if I could describe it so--lost ground, from the standpoint of losing technology transfer to the clinicians with respect to research and development, was actually by aiding the development of products to a higher degree here in Canada.

    If we move, as our paper announced, in September in response to the government's innovation agenda to expand our research and development twofold or threefold, then obviously we're going to get into a circumstance, with the assistance of programs through CIHR and CFI and other places, where commercialization will develop the platforms here.

    I have one other comment. With respect to the nature of the global market, roughly 50% of the market for most of the pharmaceuticals discovered is in the United States. The size of that market compared to ours is well known. As a result, there are often steps taken to comply with the activities required by the FDA, the drug authority in the United States. This means a number of people look south of the border to produce their products there in compliance with the FDA. It's not that you can't produce those products here in Canada; it's just that in many ways it's easier to do it there and then bring the product back from a larger manufacturing facility there.

    I could note as well that when 1969 came on us here in Canada and compulsory licensing was implemented to really develop a most-favoured-industry program for the generics in this country, we lost a number of manufacturing facilities, which in today's world are probably very difficult to replace. That ultimately as well has contributed to the type of deficit that you have just noted.

    The bottom line is I don't recommend that we destabilize the patent protection regime here, or it will make it more difficult for us to keep the good number of facilities that we have and it will prevent us from thinking about expanding those facilities in the future.

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

    Ms. Sgro.

    Ms. Judy Sgro (York West, Lib.): Thank you, Mr. Chair.

    I'll try to be quick with complicated questions and you can be quick with your answers, and I think we can get three questions in here.

    One of the documents that we received from Industry Canada raises questions, given an answer to one of my colleagues, about generics copying other drugs. In looking at this report, it shows that Apotex in 2001 spent more on R and D in Canada than--without naming them--five of the large pharmaceutical companies.

    When we talk about copying, I find that it sounds like we're copying a recipe. Evidently when you're spending as much money on R and D as generics are—they're spending more, it appears, than the pharmaceutical companies—they're certainly not making anywhere near the kinds of profits that the other companies are. I question how much of the R and D you are truly spending, based on what we're seeing here from Industry Canada. Where is it going? How much of it is being used for marketing? What's been the use of that R and D money in Canada?

    Mr. Paul Lucas: First of all, with respect to Apotex's R and D, I think you'd have to challenge them on what that money is spent on and where it's spent. We suspect that investment is their total global investment in R and D and that the R and D is clearly copying products, because they've never discovered or marketed an innovative product.

    They're a private company. Nobody has access to that information.

    The second part of your question was.... I'm sorry.

    Ms. Judy Sgro: What you spend on R and D. How much of that is for marketing, versus clinical research?

    Mr. Paul Lucas: Again going back to yesterday, we certainly take exception to the generic industry's denigration of the R and D that we do and the accusation that this is for marketing purposes.

    Let me give you a few examples. We spend as an industry, as you heard earlier, over $1.1 billion a year in this country in R and D. That is all eligible R and D as determined by Revenue Canada and as determined by PMPRB, so that has to be innovation-related. So that's very clear, and that involves a whole spectrum of investment.

    Let me take a minute and go through that spectrum. I'll start with one that is being announced in the next couple of days.

    My company is investing $500,000 with the CIHR this week to do research into SARS. We may never see a return from that investment. It's a basic research investment. And there are many others we could talk about. We invest in pre-clinical toxicology in this country, looking at whether or not drugs are safe before they go into humans. We invest in global clinical trials, looking at, in the first stage of clinical research, whether or not the drugs are safe and effective in human beings, and then we have to scale up into larger clinical trials and more patients in order to submit to agencies like Health Canada to get approval.

    In addition to that, we do pharmaceutical or formulation research. In addition to that, we have donated, and many of my colleagues have donated, a significant number of academic research chairs in this country to our universities and to our researchers. I'm not sure if I missed anything, but I could give you numerous examples of the specific investments we have made, all valid research and development.

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    Ms. Judy Sgro: When you look at the profit levels--and I'm not disputing them--that are given to us by the department where you have the major pharmaceutical companies making billions of dollars and employing fewer people than the generics, the question becomes a concern about what's going into Canada. How much of the money that you spend as an organization goes into basic research, research manufacturing, and packaging in Canada?

    I don't expect you to be able to give me those numbers, but if you could supply--

    Mr. Paul Lucas: I think in general when you look at R and D and the total R and D investment, pharmaceutical companies typically spend about 15% to 20% of their total R and D budgets on what you would call basic research. In Canada we are basically in line with that.

    Mr. Murray Elston: But we're not credited.

    Ms. Sgro, we are not credited against the $1.1 billion plus for package designs and things like that. That is all research that is eligible for a tax credit for what is called SR and ED, a tax credit under Revenue Canada.

    So none of that can be marketing. I want to make it very clear: none of that is marketing; none of that is packaging. It is all going to the innovation that is required of research. It's got to end up in a product.

    Ms. Judy Sgro: Then what happens to the other 80%?

    Mr. Murray Elston: What 80%?

    Ms. Judy Sgro: You said 15% to 20%, or did I misunderstand?

    Mr. Murray Elston: We are into clinical research, basic research, and doing all the regulatory requirements that are required before we can get on the market.

    The Chair: Thank you, Ms. Sgro. I apologize, but I must move on to our last questioner.

    Ms. Gallant.

    Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance): I'll make it quick, Mr. Chairman. Thank you, and thank you to the witnesses.

    I'm concerned that the expenditure of time, effort, and money that the existence of the linkage regulations require gives rise to diverting time, effort, and money away from the development of new drugs. So if you look at your annual reports expressed as a percentage of your total expenses, what would be the apportionment that would go to research and legal fees defending the NOCs and the marketing expenses?

    Mr. Murray Elston: It's a tough one for me to comment on. I'm one step away from it.

    But I can tell you that since I've been here over the last five years--that is, here at Rx&D, not here with you--we have almost incessantly been investigating the number of briefs that we have to submit either to this committee, to Industry Canada, to Health Canada, to courts, to others with respect to defending the patent regime here against weakening. It has consumed the time of innumerable volunteers, because our association works really through committees of volunteers from companies, and I know that a number of our companies have graciously, quite thankfully, donated a lot of people to us so that we could prepare for these. It has been incessant for five years.

    And, Mrs. Gallant, what that does is it destabilizes the perception that Canada is a good place to do business. That instability is what we have been working to try to overcome, and it is why we have as a bottom line here in a sense not to cause us more instability by weakening these regulations.

    Mrs. Cheryl Gallant: I'll simplify my question. Is more money spent on marketing the drugs or on research of new drugs?

    Mr. Murray Elston: My guess is that probably we're spending more on the research around it, because we're doing $1.1 billion a year here on research.

    Mrs. Cheryl Gallant: We have some representatives of actual companies here. Perhaps they could--we can look it up easily enough in future--let us know right now, what gets more money, marketing or research?

    Mr. Paul Lucas: I can probably comment on that. In my company they get about the same. We do $100 million of R and D in this country. But you have to keep in mind what marketing is. Let's be clear on what marketing is in this country. That's taking these products that we develop and bringing them to market, and they're no good unless health care professionals know how to use these products. So we spend a significant amount of time with health care professionals, talking to them about these molecules and what they do, what their side effects are, what their efficacy is, and so on.

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    Mrs. Cheryl Gallant: And the legal fees associated with defending these, how do they compare to those investments? Minimal?

    Mr. Paul Lucas: Compared to those, it's very minimal.

    Mrs. Cheryl Gallant: All right. Brand name pharmaceutical companies also have generic subsidiaries. It is my understanding that the regulations aren't launched against generic companies that come under the corporate umbrella of brand name pharmaceuticals. Perhaps that's where we see the discrepancy between what they say and what you say in terms of the number of cases launched against the generic companies, because you're not including your own companies that are coming to market with generics.

    I would like you to give me a couple of examples, or even one, of what amount was paid out to the generic company to compensate for the loss of money in coming to market from a failed prohibition proceeding. Has your company ever paid any money out?

    Mr. Paul Lucas: No. I can let Adrienne address that.

    Mrs. Adrienne Blanchard: There is an ability for generics to bring actions for damages under the regulations. There have been seven cases commenced, and all involve the same company, I believe. But none of those cases have actually been heard yet and been decided.

    Mrs. Cheryl Gallant: So not a single cent in damages has been repaid to generic companies where the judge has ruled in favour of their case.

    Mrs. Adrienne Blanchard: That's true, and there's been no determination of whether any of those products were actually delayed, either.

    Mr. Murray Elston: Mr. Chair, may I clarify something that Mrs. Gallant said?

    All of the material we have been speaking about today in relation to the NOA and NOC process involves actions that have been taken by named companies. We can go through the entire list and demonstrate how those things went through, and how we've come down to the conclusion that they win some, we win some, and these regulations are therefore working the way they should, and the process works.

    It has nothing to do with whether our companies have or have not generic subsidiaries. Many of our companies have no generic subsidiaries. So your definition of the question you put wasn't, in a sense, proper. Most of our companies aren't in that. There are some that have generic subsidiaries, but all of the stats we talk about with the NOAs, NOCs, those are all enumerated.

    Mrs. Cheryl Gallant: I wanted to ask whether or not they're being abused.

    Mr. Murray Elston: No, they're not being abused. That's absolutely what I said.

    The Chair: Thank you very much. I'm sure the researchers will be going over those pieces of data.

    I want to thank the witnesses. Again, I want to thank the audience for their patience so that we could have a good two hours today. I apologize for the false fire alarm, but those things happen.

    I want to thank the witnesses for coming forward. I'm sure there will be a number of questions that need to be answered, and I'm sure when the researchers call we'll get your help on it.

    Thank you very much.

    This meeting is adjourned.