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37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Monday, June 9, 2003

1530

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

Mr. Andreï Sulzenko (Senior Assistant Deputy Minister, Policy Sector, Department of Industry)

1535

The Chair

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance)

The Chair

Mr. James Rajotte

Ms. Marie-Josée Thivierge (Director General, Marketplace Framework Policy Branch, Department of Industry)

Mr. James Rajotte

Dr. Robert Peterson (Director General, Therapeutics Products Directorate, Health Products and Food Branch, Department of Health)

1540

Mr. James Rajotte

Mr. Douglas Clark (Acting Senior Project Leader, Patent Policy Directorate, Department of Industry)

Mr. Geoffrey Kieley (Committee Researcher)

Mr. James Rajotte

Mr. David Lee (Director, Office of Patented Medicines and Liaison, Department of Health)

Mr. James Rajotte

Mr. David Lee

Mr. James Rajotte

Mr. David Lee

1545

Mr. James Rajotte

Mr. David Lee

Mr. James Rajotte

Ms. Marie-Josée Thivierge

Mr. Douglas Clark

The Chair

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

1550

1555

Mr. Andreï Sulzenko

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

The Chair

Mr. Andreï Sulzenko

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

The Chair

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

Ms. Marie-Josée Thivierge

1600

Mr. Paul Crête

Dr. Robert Peterson

Mr. David Lee

Mr. Paul Crête

Mr. David Lee

Mr. Paul Crête

Mr. David Lee

Mr. Paul Crête

Mr. Andreï Sulzenko

Mr. Paul Crête

Mr. Andreï Sulzenko

The Chair

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

1605

Mr. Andreï Sulzenko

Ms. Marie-Josée Thivierge

Mr. Brent St. Denis

Ms. Marie-Josée Thivierge

Mr. Douglas Clark

Mr. Brent St. Denis

Mr. Andreï Sulzenko

Mr. Brent St. Denis

1610

Mr. David Lee

The Chair

Mr. Svend Robinson (Burnaby—Douglas, NDP)

Mr. Douglas Clark

Mr. Svend Robinson

Mr. Douglas Clark

Mr. Svend Robinson

Mr. Douglas Clark

Mr. Svend Robinson

1615

Mr. Douglas Clark

Mr. Svend Robinson

Mr. Douglas Clark

Mr. Svend Robinson

Mr. Douglas Clark

Mr. Svend Robinson

Mr. Douglas Clark

Mr. Svend Robinson

The Chair

Mr. Andreï Sulzenko

Mr. Svend Robinson

Mr. Andreï Sulzenko

Mr. Svend Robinson

Mr. Andreï Sulzenko

Mr. Svend Robinson

Mr. Andreï Sulzenko

Mr. Svend Robinson

Mr. Douglas Clark

Mr. Svend Robinson

Mr. Douglas Clark

Mr. Svend Robinson

The Chair

Mr. Douglas Clark

Mr. Svend Robinson

Mr. Andreï Sulzenko

The Chair

Mr. Svend Robinson

1620

The Chair

Mr. Andreï Sulzenko

The Chair

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

The Chair

Mr. Dan McTeague

Mr. Andreï Sulzenko

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Andreï Sulzenko

Mr. Dan McTeague

Mr. Andreï Sulzenko

1625

Mr. Dan McTeague

The Chair

Mr. Dan McTeague

Mr. Andreï Sulzenko

The Chair

Mr. Douglas Clark

The Chair

Mr. Dan McTeague

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

Mr. Dan McTeague

The Chair

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

The Chair

Mr. Dan McTeague

Mr. Douglas Clark

The Chair

Ms. Marie-Josée Thivierge

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

Mr. Douglas Clark

1630

Mrs. Cheryl Gallant

Mr. Douglas Clark

Mrs. Cheryl Gallant

Mr. Rob Sutherland-Brown (Senior Counsel, Legal Services, Department of Industry)

Mrs. Cheryl Gallant

Mr. Rob Sutherland-Brown

Mrs. Cheryl Gallant

Mr. Rob Sutherland-Brown

1635

The Chair

Ms. Paddy Torsney (Burlington, Lib.)

The Chair

Ms. Paddy Torsney

1640

Dr. Robert Peterson

Mr. David Lee

Ms. Paddy Torsney

Mr. David Lee

Ms. Paddy Torsney

Mr. David Lee

1645

Ms. Marie-Josée Thivierge

The Chair

Ms. Marie-Josée Thivierge

The Chair

Ms. Marie-Josée Thivierge

The Chair

Ms. Paddy Torsney

The Chair

Ms. Paddy Torsney

The Chair

Mr. Douglas Clark

The Chair

Mr. Paul Crête

Mr. Douglas Clark

Mr. Paul Crête

Mr. Douglas Clark

Mr. Paul Crête

Mr. Douglas Clark

Mr. Paul Crête

Mr. Douglas Clark

Mr. Paul Crête

Mr. Douglas Clark

Mr. Paul Crête

Mr. Douglas Clark

Mr. Paul Crête

1650

Mr. David Lee

The Chair

Mr. David Lee

Mr. Paul Crête

Mr. David Lee

The Chair

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

1655

Ms. Marie-Josée Thivierge

The Chair

Ms. Marie-Josée Thivierge

Mr. Serge Marcil

Mr. David Lee

1700

Mr. Serge Marcil

The Chair

Ms. Marie-Josée Thivierge

The Chair

Mr. Rob Merrifield (Yellowhead, Canadian Alliance)

Ms. Marie-Josée Thivierge

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

1705

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. Douglas Clark

Mr. Rob Merrifield

Mr. David Edwards (Legal Counsel, Legal Services, Department of Health)

Mr. Rob Merrifield

Dr. Robert Peterson

Mr. Rob Merrifield

1710

Mr. David Lee

The Chair

Mr. Bernard Patry (Pierrefonds—Dollard, Lib.)

Mr. David Lee

Mr. Bernard Patry

Mr. David Lee

Mr. Bernard Patry

The Chair

Mr. David Lee

The Chair

Mr. David Lee

The Chair

Mr. Dan McTeague

1715

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

The Chair

Mr. Paul Crête

Ms. Marie-Josée Thivierge

1720

Mr. Paul Crête

The Chair

Dr. Robert Peterson

Mr. David Lee

The Chair

Mr. James Rajotte

Mr. Andreï Sulzenko

Dr. Robert Peterson

Mr. David Lee

Mr. James Rajotte

1725

Mr. Andreï Sulzenko

Mr. Douglas Clark

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

Mr. David Lee

Mrs. Anne Bowes (Manager, Patent and Liaison, Department of Health)

The Chair

1730

Mr. Douglas Clark

The Chair

CANADA

Standing Committee on Industry, Science and Technology

NUMBER 052

2nd SESSION

37th PARLIAMENT

EVIDENCE

Monday, June 9, 2003

[Recorded by Electronic Apparatus]

¹ (1530)

[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 our witnesses returning: from the Department of Industry, Andreï Sulzenko, and from the Department of Health, Dr. Robert Peterson.

We're going to have a short five-minute introduction by Mr. Sulzenko and then we'll go right to questions. I would appreciate everybody being ready to ask questions.

Thank you very much for being with us again today on short notice. Please begin.

Mr. Andreï Sulzenko (Senior Assistant Deputy Minister, Policy Sector, Department of Industry): Thank you, Mr. Chair.

I'm joined again today by my colleagues: Marie-Josée Thivierge,director general of the marketplace framework policy branch; Douglas Clark, our senior project leader in that branch; and Rob Sutherland-Brown,our general counsel from legal services.

Members of the committee will note that we've provided to the clerk some material that responds to questions asked last week. With the chair's permission, I'd like to make a very brief statement and I will refer to some of those documents during it.

A lot of ground was covered by officials and by representatives of industry during last week's testimony. I'd like to take this opportunity to clarify certain issues that figured prominently in that testimony, issues concerning the regulations and the policy environment in which they operate.

The first point I'd like to make is that while the testimony you've heard about Canada being one of only two countries with a linkage regime is true, so too is the fact that overall we provide a lesser degree of intellectual property protection to pharmaceuticals than do our major trading partners. It follows that the continued existence of the NOC regulations is essential if Canada is to remain competitive in the global contest to secure high-end investment and innovative pharmaceutical R and D. Patent rights mean little absent effective means to enforce them.

One of the documents provided to you today is a record of outcomes from recent attempts by pharmaceutical patentees to obtain interlocutory injunctions in conventional infringement actions. To our knowledge, only one such attempt has been successful since the Supreme Court's adoption of the modern three-part legal test in 1987.

Another point that arose during last week's testimony is the gulf that seemingly exists between the Canadian generic pharmaceutical manufacturers' estimated cost of generic delay due to the NOC regulations and the government's.

You will recall that the CGPA ventured a $1 billion figure, whereas Industry Canada officials estimated that it was closer to $16 million over the last four years. This disparity can be readily explained by reference to the assumptions and scope underlying each figure.

The CGPA was looking at delays of generic drugs that have been approved as well as those currently on patent hold with Health Canada. They counted the time commencing with the filing of the court case pursuant to the NOC regulations, as opposed to the date the NOC was ready to issue. We, on the other hand, looked at only those generic drugs for which Health Canada had completed its review and in respect of which the litigation was ultimately resolved in favour of the generic. We did not make any assumptions about generic drugs currently on hold but not yet marketed, given that the litigation is not yet resolved and we cannot be certain who will prevail in these cases until they are finally concluded.

In terms of scope, as I explained in my initial presentation, in light of our view that the 1998 amendments gave rise to a substantially changed regulatory regime, we chose to focus our inquiry on litigation that has arisen since that time, and all of the material we provided you reflects this. Thus, while the government's estimate was in respect of drugs litigated from March 1998 to 2002, and more specifically the six drugs where delay has been established as per the above definition, we understand that the CGPA was referring to all drugs litigated since the regulations first came into being in 1993.

You will also recall from our testimony last week that in the government's view, early working and the NOC regulations go hand in hand: “two sides of the same policy coin” were my exact words. We recognize, however, that one of the consequences of this interdependence is that the objectives of either policy instrument can only be realized if a proper balance exists between the two. Early working cannot exist without the regulations. In our view, this cannot be overemphasized.

¹ (1535)

Finally, while the regulations are generally working well, recent court decisions dealing with timing and relevance issues require the balance to be looked at carefully.

Health Canada has faced challenges in its recent administration of the regulations as they relate to these timing and relevance matters. The challenge lies in ensuring that the regulations are duly protective of legitimate incremental innovation while at the same time ensuring that subsequent patents do not impede the timely market entry of generic versions of the original product. Greater clarity in this respect would go a long way toward bringing the certainty and stability that both sides of the industry appear to agree is needed.

Again, we look forward to any guidance the committee can provide on these issues and are pleased to respond to questions you feel remain unanswered.

Thank you for your time.

The Chair: Thank you very much.

We'll now go to Mr. Rajotte.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Chairman. How much time do I have?

The Chair: Seven minutes.

Mr. James Rajotte: Thank you very much for being with us again today.

It seems to me that the main issue this committee has to really wrap its head around is whether or not there are extensions of the patents. This is the main allegation, it seems to me, made by the generics: that the injunction and the automatic stay extend the life of the patent beyond the 20-year period, especially when there are multiple patents, as in the case of a drug like Losec. The brand names claim the stay occurs within the 20-year patent period and thus there is not an extension of the original 20-year patent.

I'd just like to ask Mr. Sulzenko this. There are obviously two claims here. In your view, which side is correct? Is there an extension of these patents or is there not an extension of these patents?

Ms. Marie-Josée Thivierge (Director General, Marketplace Framework Policy Branch, Department of Industry): I think the first point to make is that patents are given a 20-year life from filing, so patent terms cannot be extended. I think the issue being posed, if I understand it correctly, is whether recent court decisions, such as the ceftazidime decision of last January, have allowed patents on supplemental new drug submissions to be added to the registry. The answer is yes.

Maybe our colleagues from Health Canada can speak to some of the administration tied to that.

Mr. James Rajotte: Would you like to speak?

I have a follow-up question if you want me to ask it.

Dr. Robert Peterson (Director General, Therapeutics Products Directorate, Health Products and Food Branch, Department of Health): All right. The only comment I would make in support of that answer is that the statistics we've had pre-circulated show clearly that the majority of the drugs listed on the patent have only one or perhaps two patents, which makes the process of continuing stays, as an example, problematic. The basis for that is in the number of patents listed, and the majority of the drugs have just one or two patents.

Once again, there are circumstances where there are multiple patents listed and therefore the environment exists whereby that could happen, but in the majority of the cases, as I think as we've indicated, the numbers of patents are relatively self-evident.

¹ (1540)

Mr. James Rajotte: It's correct that the information you've given us certainly indicates that most drugs have one or two patents. Mr. Sulzenko certainly seems to indicate that the regulations seem to have a balance and are working well for those cases. It also seems that most of the controversy is around a few cases where there are multiple patents, where there's a lot of litigation, and where there are allegations of evergreening.

I want to refer you to the chart prepared by our researchers, the theory of evergreening, because I want to ask specifically about a drug with more than one patent, with the original patent in 1980, as is presented in the chart, so that there's a 20-year patent protection for that one patent. I'm just going to present a case to you. Please explain whether I have this correct. If I'm a generic manufacturer wanting to use the original patent and, at year 20, I decide okay, I'm going to use this original patent, I cannot just simply manufacture that patent. I must address each patent linked to that drug. Is that correct?

Mr. Douglas Clark (Acting Senior Project Leader, Patent Policy Directorate, Department of Industry): Do you have another copy of that? We only have the French version.

Mr. Geoffrey Kieley (Committee Researcher): I've actually distributed all the English copies to the witnesses. I think they have the wrong side.

A voice: Okay. Sorry.

Mr. James Rajotte: I just wanted to ask a series of simple questions. I must address each individual patent--is that correct? I can do so either through saying the patent is invalid or through saying we are not going to be infringing on the patent--is that correct?

Mr. David Lee (Director, Office of Patented Medicines and Liaison, Department of Health): That's correct.

Mr. James Rajotte: Now the claim, then, of the generics is that as we get closer to this 20-year period the brands are then putting on patents, multiple patents, to extend the life of this patent. Specifically, then, if I am a generic manufacturer and I decide at year 18 that I want to use the original patent at the expiration of the first patent, the process as I understand it is that I send the letter to Health Canada and I say I intend to use this patent once it has expired so I will not be infringing, but in two years I will be manufacturing this product. Say there are eight patents in total so there are seven more patents, and I can address each of the other patents at that time. Does this mean, then, there will be no extension past that 20-year period?

Mr. David Lee: I haven't studied this outline in close detail, but if I can work with your facts, I believe what you're asking me about is if I'm a generic and I want to copy the brand drug, and I have, let's say, the original patent in that last 20 years and I go in and copy the drug in year 19. We, Health Canada, would require the generic manufacturer, when it's copying that drug, to address all patents listed against the brand drug. It's not just the base patent they have to address; it's all the others that are listed to protect that drug.

As for the timing issue, another court case or court cases would get started in year 19, and there's the 24-month stay while that litigation is going on. During that subsequent litigation, if there are other patents listed on subsequently, the generic would again have to address that new patent coming on, because it's for the drug against which they're all listed.

Mr. James Rajotte: The way in which there is an extension is if, first, I as a generic do not address it after year 18. If I address it after year 18, there is an extension after year 20 because we're addressing the other patents. That would be one case, right?

Mr. David Lee: Could I build in two factual assumptions that would have to be made there? First of all, one is that the brand would go ahead with a court case when the generic addresses it, because the stay only triggers when the brand brings a court case. So if in year 19 they addressed the further patents and there's a court case, then the litigation would be going on in that 24 months, and we have to wait to issue the notice of allegation, just to be accurate.

¹ (1545)

Mr. James Rajotte: Thank you for that.

Then the second case would be if in the last two years of the original patent there is a new patent by the brand name. Let's suppose you're having eight allegations or eight patents addressed at year 18, say, and then at year 19 there's a new patent, then obviously the generic would have to address that after addressing the original patents at year 18. Am I correct on that?

Mr. David Lee: Yes.

Mr. James Rajotte: So is there a way or has either department collected information to see...? If you look at the big drugs we're talking about, like Losec or Paxil, has there been a analysis as to when the patents have been put on, what sorts of patents, to guide us and to say that actually most of these patents were done in year 10, 11, or 12, say, and a generic could have addressed them earlier, or to say these patents were done in years 18 and 19, so that would make you a little more concerned as to when the patents were put on? Is there somewhere we can look for guidance and information to help this committee along?

Ms. Marie-Josée Thivierge: Sure. In your binder provided to you last Monday, we actually put in a table, under tab D-3, and we have provided this committee with a French version of that--translation was pending--and you have there in fact exactly that, which is a factual picture of how many patents were indeed listed and at which point.

Douglas Clark can certainly walk you through that chart if you'd like, but I think for both those examples we have tried to capture for the benefit of the committee the details of patent listings.

Mr. Douglas Clark: Essentially that's exactly what this is. What you're asking for is the information this document at least tries to convey. It's a listing history for those two drugs. It's quite complicated. As you can see, there are different ways of adding patents to the register, different mechanisms, legal mechanisms under the regulations.

If you just put that information aside, the fundamental questions you're asking are answered in this graph for both drugs. If you flip to the second page of those graphs or tables, we have a summary of the key findings that those tables convey. You can see, for instance, that in the case of Paxil, there have been five different periods of time when the patents came onto the register. There's a table here for Paxil, with interval 1, May 4, 1993, interval 2, February 17, 1998, in the left-most column of the table. That's exactly what these tables at least try to impart.

The Chair: Mr. Volpe.

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Thank you very much, Mr. Chair.

I'd like to address the issue of multiple patents again, because I think you've responded, Dr. Peterson, fairly effectively to Mr. Rajotte's question about a patent acquiring other patents. When a product is close to its expiry date, that's when it becomes strategically worth while to add a second, third, and fourth patent.

I'm looking at the closing statement of Justice Cullen's decision in Glaxo v. Apotex, May 30, 2003, referring to the issue on Paxel that's been raised by my colleague opposite and referring specifically to the fact that minister is prohibited.... I'm quoting:

...the Minister is prohibited from issuing the requested NOC for 24 months once the owner of a patent has applied for an order under subsection 6(1). The effect of this provision is to put in place a mandatory injunction that remains in force until either the case is disposed of or the 24-month period expires. The existence of additional patents allows the patent-holder to bring additional applications, thereby obtaining multiple injunctive periods. There is no need to look further than the case at bar for an excellent example of this practice.

It refers to the case where a generic, upon attempting to bring a product to market, faced an automatic stay for 30 months, and won the court case; then there was another 24-month stay, and they won that case; there was another 24-month stay, and they won that case on May 30. I note that in response to committee questions raised by my colleague, this is referred to as only one case involving a generic company that won a trial and is currently under appeal by the Glaxo group.

I think perhaps I might have been rather harsh with some of our industry officials, because this is a question of policy, I suppose, but the last couple of days we've had people from the industry give us their position. The policy of protecting patents I think is worth while. We want to protect innovation; we want to encourage innovation.

We heard from one of the patent companies that only about 10% to 15% of all research and development is actually in basic research. The company that gave us that answer said that typically they spend about $100 million. All the other companies together spend about $50 million. That last part is my conclusion, because if you're only spending 10% to 15% on a total of $1 billion, ergo, the other guys must be doing very little. I'm saying this because of the justification for these kinds of regulations. I guess I'm referring specifically to Mr. Sulzenko. It makes it kind of difficult to swallow.

Let me refer to you a couple of articles that appeared. I was in Washington on Friday, and Saturday morning I tried to catch a plane. There was an editorial that referred to one of the companies, Bristol-Myers Squibb, that earned $9 billion from Taxol, which is used to treat one million cancer patients. I'm referring to this because of my outrage at Biolase and what happened to one of our companies.

That discovery didn't come from Bristol-Myers Squibb. That discovery was made by the National Institutes of Health, which received a grand total of $35 million in royalties, even though--again according to the American equivalent of our Auditor General, the General Accounting Office--the NIH spent $484 million in research on Taxol, not the $1.5 billion that we heard quoted last time. By the way, these are real dollars, they're not the discounted variety. Those $484 million were also in ongoing research, because it says “through 2002”.

¹ (1550)

For those who are taking out their calculator, the $9 billion is the equivalent of all the moneys spent in Canada on pharmaceuticals in one year.

What does The New York Times say today? Of course the equivalent of the Competition Bureau in the United States has been studying this and asking questions like the one my colleague Mr. Rajotte has been asking. It has been doing the analysis, but it has not been picking and choosing. It is addressing one issue: why are these drug costs so high? It found that there is a gaming of the regulations. It said it specifically, Bristol-Myers Squibb. The reason it focused on that one is because--my colleagues are right--we focus on the ones that are coming up. But this one seems to be the most egregious.

The auditor general's office in the United States has been looking at the same companies, the same drugs, and coming up with the same conclusion; that is, somebody is gouging the public, or gaming the system.

The equivalent of the Competition Bureau in the United States has been looking at the same drugs, the same companies, and the same results and said there's a gaming of the system. Why do we come up with a different conclusion when the evidence from the patent companies here, last week, was that they adopt international strategies to research and development, presumably to marketing and sales? Why do we have a different view about how these regulations work, Mr. Sulzenko?

¹ (1555)

Mr. Andreï Sulzenko: Mr. Chair, I'm not entirely clear of the question here, but let me respond to some of the points made.

Most of the points were related to U.S. data, and I find those interesting, but we're only competent to deal with Canadian data, which we have, I believe, provided the committee.

On the drug cost issue, I remind the committee that for patented medicines, costs are lower in Canada than in the United States. The United States is in fact the high price leader around the world.

Mr. Joseph Volpe: [Inaudible--Editor]

The Chair: Mr. Volpe, I want to make sure we focus our discussion on the purpose for which we're here, and that's the regulations, the NOCs, and not on prices, or others. So please focus on those items.

Mr. Joseph Volpe: I guess we're looking to see whether the regulations work appropriately. Just for greater clarity, other jurisdictions among our major trading partners--and this one is the major trading partner--have conducted a similar study using the same regulations, using data that's readily available for all of us. Let us keep in mind that the companies they're dealing with are adopting international strategies. It's the same on either side of the border. We come up with a different conclusion, an entirely different conclusion from the one our department comes up with. It's pretty straightforward. Why--

The Chair: I would ask for the answer.

Mr. Andreï Sulzenko: Mr. Chair, I would refer the honourable member back to my opening statement this morning. We have invited the committee, based on these recent court decisions, to look at these issues. We think there are issues there that are legitimate for the committee to review. So we're not disagreeing about this merits review. We are looking to your advice on that review and then, based on your advice, we expect to make recommendations to the government.

Mr. Joseph Volpe: Do I have more time?

The Chair: No, your time is up.

Mr. Joseph Volpe: Thank you.

The Chair: Mr. Crête.

[Translation]

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

I would like to go back to Mr. Rajotte’s first question and I am seeking clarification on that point.

If you take the case of a drug that has been patented since 1980, like the one we have been discussing, the patent would expire in the year 2000 unless I am mistaken. Ordinarily, than, if another patent is not granted, this product could be copied without further concern for the whole patent mechanism.

Could one in fact copy that drug, in the year 2000, 2001, 2002 or 2003, and market it even though it might not be as competitive as another medicine with extra added value? When the original patent expires, can this product in fact be copied or is it absolutely necessary to address the other patents? If such is the case, patents do not have à 20 life span, but a life span of 30, 40 or 50 years.

Ms. Marie-Josée Thivierge: I can answer part of your question. A molecule ordinarily has both active ingredients and inactive ingredients. As representatives of the industry testified last week, patents can be granted for the chemical composition of the drug, but they can also be granted for the use or for the formulation.

That is why, under regulations, patents can be added to the register upon request to CIPA, before applying to Health Canada for an NOC. Once the application has been made, patents can be added once the application is granted by CIPA as long as this occurs within 30 days following the granting of the application.

A given drug is not necessarily covered by only one patent. Very often, there is more than one patent. A generic manufacturer who wishes to market a generic version of the product must therefore address all the patents listed on the register for the drug in question.

º (1600)

Mr. Paul Crête: I am trying to understand. Il fact, does the manufacturer who wishes to copy the less advanced formula of the drug, that is to say the formula whose patent or patents are about to expire, would know that the medicine it is about to market is not the most recent and perhaps not the most effective? Could it go about it in this way?

[English]

Dr. Robert Peterson: I'd like to ask my colleague to respond to the question, if you don't mind.

Mr. David Lee: The wording in our regulations is fairly specific on that question. If there's more than one patent listed for the drug, no matter when, the generic has to address all of the patents, not just the one against the original version and copy.

We're in court on that. We've got two court cases arguing whether the generic can just refer to or copy the original product. The generics maintain that they can. We're actually opposing that view. So you have to address all patents on the register. That's reflected in the regulation.

[Translation]

Mr. Paul Crête: That does not make things that much clearer. Perhaps I am slower than others might be, but I would like to get a clear understanding. Suppose a patent, granted in 1980, is due to expire in the year 2000. During those years, the drug may have been improved and may have been granted other patents due to expire after the year 2000. Say I work for a generic drug firm and I decide to manufacture the original version of the drug. I am able to do that after 20 years, after the first patent has expired, without addressing the patents that were granted later on, knowing that I will not be marketing the most recent version of the drug?

[English]

Mr. David Lee: You can only do that if there are no other patents listed for the drug. If there are other patents, you would have to address them.

[Translation]

Mr. Paul Crête: Therefore, if other patents have been granted, those patents extend the period of protection. Is that necessarily so?

[English]

Mr. David Lee: You have to look at the timing upon which the patents were placed on the patent register and when the court case starts, and line that up with the expiry of the base patent to calculate the length.

[Translation]

Mr. Paul Crête: Thank you for that clarification.

I have an altogether different question now. In your document, Mr. Sulzenko, you state

“it follows that the continued existence of the NOC Regulations is essential if Canada is to remain competitive in the global contest to secure high end investment in innovative pharmaceutical R & D.”

Can the department tell us whether it has analysed the economic impact of the recommendation made by generic drug manufacturer? If the committee were to recommend doing away with the NOC regulations, what would be, according to you, the impact of that decision? If we were simply to do away with the NOC regulations, without in anyway modifying the other aspects of the scheme, what would be the economic impact?

Mr. Andreï Sulzenko: Mr. Chair, we have not done that sort of analysis.

Mr. Paul Crête: Why did you say that the NOC regulations are essential? What makes them essential? What drives you to say that? Those are strong words.

Mr. Andreï Sulzenko: It is simply because of the tremendous international competition for investment in that industry. In Canada, each year, more than a billion dollars is invested in research and development and other types of investment. If we did not have such a scheme protecting investors, the figures would no doubt be much lower than they are today. Having said that, we have not done any analysis to pin down the exact figures.

[English]

The Chair: Thank you very much, Mr. Crête. We'll be back.

Mr. St. Denis.

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

Thank you for appearing before our committee again.

I think the first question I'd like to ask, Mr. Sulzenko, is you mentioned in the early part of your presentation, in the fourth paragraph, that “Overall, we”--being Canada--“provide a lesser degree of intellectual property protection to pharmaceuticals than do our major trading partners”. Then you go on in the next paragraph to say that the notice of compliance regulations are essential for Canada to remain competitive and so on.

In your view, does the combination of current intellectual property protection plus the NOC regulations put us more or less in compliance with the international community? We had the generics suggest that moving the other way, eliminating the NOC regulations, would move us closer. The brand evidence was that would be the opposite, that getting rid of the NOC regulations would in fact put us in a worse position with respect to the rest of the world. I wonder if you could expand on those two sentences for us, please.

º (1605)

Mr. Andreï Sulzenko: Mr. Chair, I'll ask my colleague to actually refer you to some materials we had presented to the committee last week, and to take you through that. I think that's the best way of answering your question.

Ms. Marie-Josée Thivierge: Turning to tab C-2, actually after the first green leaf, you have a comparison of Canada's IP regime vis-à-vis that of the U.S. and the EU. I think, if I understand your question, the issue is whether or not we are compliant. The answer is yes, we are compliant with our international obligations. The question is--

Mr. Brent St. Denis: With the NOC.

Ms. Marie-Josée Thivierge: --with the NOC regulations. Were we to eliminate the NOC regulations, the issue is that having imported the early-working provision, which allows the generic industry to actually proceed and secure an NOC prior to the expiry of a patent, the question could be asked whether or not, by removing the NOC regulations, we are compliant with our international obligations.

I don't know if Doug would like to add anything.

Mr. Douglas Clark: I would just add that in TRIPS, under the WTO and NAFTA, we have an obligation to provide effective patent enforcement. Both sides of the industry have submitted to us legal opinions by very able counsel on this issue as to whether the NOC regulations are required under those obligations. Those opinions say precisely the opposite thing.

All we can say is that we have an obligation to provide effective patent enforcement. We think the NOC regulations do that. In their absence, I think the question is not free from doubt whether we would meet our obligations.

Mr. Brent St. Denis: I appreciate that, and I'm sorry, I didn't bring my binder with me today. I'm just wondering, for the purposes of the testimony here in this room today, if you could expand a little bit on that claim--without the binder reference--that Canada would be moving away from international compliance by getting rid of the NOC regulations. In other words, without referring to the binder, I wonder if you could, just for the record, expand on that.

I agree with you, two good lawyers on either side could make a good argument, but we're here trying to somehow figure out who's right, and whether the balance in all of the this is in the right place or not. That's really what the question is for us. What is the balance?

Mr. Andreï Sulzenko: Mr. Chair, I won't deal with this as a legal issue, but I will deal with it as a policy issue.

We've stated on a number of occasions that as a matter of policy, the government's view is that the regulations you're referring to are balanced off by the early-working exception; the two go together. Without the regulations as a matter of policy, it would be hard to imagine an early-working exception.

Whether that would then be compliant with our international obligations--well, there's an interesting legal question. But I think the first question is a matter of policy. We've stated the government's view on that on a number of occasions.

Mr. Brent St. Denis: Mr. Chair, I'll move to something else then.

It seems to me one of the...I don't think weak link in the chain is the right way to put it, but it's sort of what I'm thinking. From time to time in the discussions, the question comes up about additional patents to a given drug, and then you have to wonder who is actually making the decisions on whether an additional patent is appropriate or not and should we be hearing from people at the patent office who make these decisions.

I'm just wondering, how high is the bar or how low is the bar when it comes to adding a patent to an original patent, be it a formulation, a manufacturing, or a what have you? I asked one witness whether a new use for an old drug--in other words, you find that drug X can do something entirely different--would be the basis for a new patent or not, even though a molecule hadn't changed, a process hadn't changed. In other words, just maybe discover this other thing, then be cured.

I'm just wondering if on the patent side somebody could talk to us a little bit about that.

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Mr. David Lee: Just to clarify, it's within Health Canada that the decisions about the eligibility of patents for listing on the register are made. The decisions are made in the therapeutics products directorate.

For the bar or the test for putting patents on or not, there is some wording in the regulations, and it's in section 4. It talks about, first of all, the eligibility criteria, which, simply put, is you have to have a claim for the medicine itself in the patent or use of the medicine. Those are the words we primarily use.

Then there are rules about timing. There are rules about what patents go on and then when they go on. The primary rule about timing is you've got to apply for the patent at the patent office before you file your drug submission with Health Canada. That's the primary timing rule.

We see a number of patents come in every year, and we've set that out in our statistical report. We audit every patent, and we take a look not only at the wording in the regulations but also at the court cases. There have been many issues looked at and decided upon by the courts in respect of eligibility.

So patents for patches, patents for inhalers, patents for things other than medicine have come up, and we've had disputes about those, and we read through the Federal Court decisions in determining eligibility. So we go through a very extensive assessment, read the claims in the patent, look at the drug submission, and we weigh all that in deciding whether to put the patent on or not.

The rules are becoming complicated around some of the issues, as we keep saying. Timing is certainly one of those issues where it's become very complicated when you can put the patent on where you've got to supplement.

The Chair: Thank you very much, Mr. St. Denis.

Now I must move on. Mr. Robinson.

Mr. Svend Robinson (Burnaby—Douglas, NDP): Thanks very much, Mr. Chair.

I'm here replacing my colleague Brian Masse, who is unable to be here, but I'm also here in my capacity as health critic for the New Democrats.

I've got to tell you that the more I look into the evergreen provisions, certainly the more I come to the conclusion that this is a massive boondoggle for the big pharmaceutical companies. I hope this committee will come to the same conclusion, and recommend the repeal of these regulations.

I've reviewed the evidence from last week of the witnesses who appeared, and I appreciate the witnesses coming back again. I want to just pick up on a couple of points.

Mr. Sulzenko made the statement, and I took a note of it, that the early working cannot exist without the regulations. That's what he said, and Ms. Thivierge indicated the same thing.

First of all, as I understand it, the early-working exception dates back to about 1972, to a Supreme Court decision in 1972. Is that not correct?

Mr. Douglas Clark: It dates back to a 1982 decision in the U.S., which was later reversed through legislation. It's called the Bolar case. That's when they introduced early working in the U.S., which we later implemented here.

Mr. Svend Robinson: At what point did we implement early working in Canada? What was the earliest point at which that was implemented?

Mr. Douglas Clark: It would have been 1993, February or March.

Mr. Svend Robinson: So 1993 was the first point at which early working.... And that doesn't just apply to pharmaceuticals, I understand.

Mr. Douglas Clark: No. Theoretically it applies across all fields of technology. In practice, it really is only an integral part of generic business.

Mr. Svend Robinson: It has been upheld, as I understand it, by a dispute panel at the WTO, as a reasonable limited exception under article 30 of TRIPS. Is that not correct?

º (1615)

Mr. Douglas Clark: Yes.

Mr. Svend Robinson: That is correct?

Mr. Douglas Clark: Yes.

Mr. Svend Robinson: The WTO decision didn't in any way link early working to the NOC regulations, did they?

Mr. Douglas Clark: The NOC regulations weren't being challenged. It was exclusively early working.

Mr. Svend Robinson: Right, so this was exclusively early working--

Mr. Douglas Clark: And stock lining.

Mr. Svend Robinson: --and stock lining. But the suggestion somehow that early working can't exist as a necessary counterbalance to the regulations or that you have to have the regulations to balance early working I think is just completely without foundation.

I want to ask about the issue of the implications of elimination of the linkage regulations in terms of our trade obligations. The committee heard last week from Paul Lucas of GlaxoSmithKline, and he said categorically that if we were to eliminate these regulations, we would be in breach of our trade obligations under TRIPS. Mr. Sulzenko said, “Well, I'm not sure about that. We haven't come to that conclusion.” Is that your position?

The Chair: Do you want to answer those questions, the one on early working and regulations, and the last question by Mr. Robinson?

Mr. Andreï Sulzenko: Mr. Chairman, I said earlier that as a matter of government policy the two are linked together. One exists with the other. As a matter of policy, if one were removed, namely the NOC regulations, then as a matter of policy the government would find it difficult to imagine how the early working would remain.

As to your specific question, I do not have a legal opinion for you on the question that you have raised. I thought it was more appropriate to talk about what government policy was, rather than a hypothetical world that was quite different from today.

Mr. Svend Robinson: Well, exactly, and I assume that you're aware that they're ministers who state government policy.

Mr. Andreï Sulzenko: Yes.

Mr. Svend Robinson: Are you aware of the fact that John Manley, when he was industry minister, when he appeared before this committee in February 1997, in fact said, and I quote, “...it is possible to abolish the regulations. That is not an international commitment.” That was the position the industry minister, your minister, took then, that in fact there was no legal obligation. In fact he said as well that since the inception of Bill C-91, “Canada already has a stronger system than what is required by the GATT treaty”.

So your minister said that there was absolutely no problem if we abolished these regulations in terms of our international trade commitments. Are you saying now that this current administration is moving away from that commitment?

Mr. Andreï Sulzenko: I did not say that. I was dealing only with the matter of policy, and not of--

Mr. Svend Robinson: Does that remain the position of Industry Canada?

Mr. Andreï Sulzenko: Which is...?

Mr. Svend Robinson: What I just quoted. What Minister Manley said. Minister Manley said that in fact these regulations could be abolished without in any way breaching our international commitments. Does that remain the policy of Industry Canada?

Mr. Douglas Clark: I think what he meant there was that it's not explicitly stipulated by any of our international obligations. Linkage isn't in there. Those precise words are not in GATT or--

Mr. Svend Robinson: I'm not asking about the wording, I'm just asking a straightforward question.

Mr. Douglas Clark: Well, I think that's what he meant--

Mr. Svend Robinson: He said--

The Chair: Mr. Robinson, in this committee we want the witness to finish the answer and then we'll go on to the next one. So would you let Mr. Clark just finish?

Mr. Douglas Clark: That's all I have to say. It's just not explicitly required by any.... We have an obligation to provide effective patent enforcement, but it doesn't specify the means specifically. I think that was what he was referring to.

Mr. Svend Robinson: Let me just ask, then.... The minister said that these regulations could be abolished without us breaching our international commitments. Does that remain the position of Industry Canada?

Mr. Andreï Sulzenko: Mr. Chairman, I don't have an answer for the witness of the context. I'm not prepared to state a legal opinion without having legal advice on that.

The Chair: Well, you might want to take the question and come back to us and have it delivered to the clerk so we can circulate it, so we can go from there.

Mr. Robinson, another question?

Mr. Svend Robinson: Certainly.

Since you say that you can't answer the question now, I would ask that you come back to provide the committee with an answer to that question.

I appreciate the time constraints. My final question is with respect to what I think is really the most appalling recent example of the abuses of this automatic injunction provision. The Losec example is an outrageous example, but there is the Paxil example, and the paroxetine example that's been cited by some of my colleagues as well. Last week they won again, despite the fact that as I understand it, the original patent expired in 1995, I believe. We're talking here about people with depression who want access to affordable drugs. We're talking about provincial drug plans that are being gouged. This drug is still not on the market because of these automatic injunction regulations.

Surely, Mr. Sulzenko, representing Industry Canada, even you said last week that there are legitimate questions for committee consideration as to whether the regulations are consistently operating in keeping with a balanced policy objective. You specifically went on to refer to the successive automatic stays against prospective generic competition.

If even you, who seems to be more of a cheerleader for industry than a spokesperson on behalf of Canadian consumers and the sick, are prepared to acknowledge there's a problem here with these successive automatic stays, what are you recommending that the committee do to deal with it? What are you recommending the committee do?

º (1620)

The Chair: I'm not sure you'll want to repeat what you said earlier.

Mr. Andreï Sulzenko: Mr. Chairman, I was quoted correctly last week, and I've said the same thing in somewhat different words today. We're looking forward for advice from the committee on this very issue.

The Chair: Thank you very much, Mr. Robinson. I must go on.

Mr. McTeague.

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Thank you for coming back here, although I must say that the original round was extremely disturbing for some of us as members of Parliament.

Mr. Sulzenko, when you refer to the Government of Canada, you of course are referring to these members who are part of the Government of Canada. I have some very serious concerns with the way in which the regulations have been administered.

I appreciate, Mr. Clark, your reliance on the courts regarding legal opinions, but I'm somewhat dumbfounded by the fact that we are prepared to set aside so many of those decisions, the most recent one being that of Mr. Kelen. I have a copy here. It's just a small thumbnail sketch. I have about 20 cases since 1998. Of the 20 cases, three have been won by the brands and 17 have been won by the generics. It's unfortunate that's the case, but I suspect it may have a lot to do with.... You have a different way of doing things, I understand, Mr. Clark. We understand that these are things the industry department has an interest in, but we are the committee looking into the behaviour of the department, especially when it had a role in creating the NOCs, which are frankly contributing to not a trivial concern, but a very important concern as it relates to the affordability of drug care.

It was suggested a little earlier by industry and by Dr. Peterson, I think, that in most cases there is not this kind of frivolous addition of patents to the list, most of them not being of any nature with respect to invention. Yet I point out to you that the comments that were raised by Mr. Robinson and others with respect to Paxil and Losec represent the second and sixth largest drugs for sale in this country.

I find it rather interesting, Mr. Clark, in your commentary here, that obviously the United States and other nations have a much better and longer patent protection system. I think you said that we provide a lesser degree of intellectual property protection to pharmaceuticals than do our major trading partners. Oddly enough, Germany, the United States, and other countries don't seem to have a problem, and they do in fact have a generic. They do have a generic called Losec.

I'm wondering if it's at all possible for us to try to arrive at an understanding of the facts. We as members of Parliament get questions from people as to why the prices are rising, and why it is that in Canada you're able to do what you know is perfectly illegal to do in the United States, as proven by the FTC.

I'll come very quickly to my question, Mr. Chair. I have a question here.

The Chair: Yes.

Mr. Dan McTeague: You stated, Mr. Sulzenko, on page 2 of your brief: “...given that the litigation is not yet resolved and we cannot be certain who will prevail in these cases until they are finally concluded”. It's pretty clear to me, certainly, in light of the current court cases, that the result in many of these claims is nothing more than to protect and to promote what was invented. How are you ever going to get to a point where you can make a determination if all you're waiting for is these multiple stays that keep coming and coming and coming? They get resolved by the courts, but ultimately, we may never have an opportunity to measure accurately the implications of very important drugs like Losec, Paxil, and Vasotec, which you've excluded from your information as it relates to the 22 months of exclusivity.

Mr. Clark.

Mr. Andreï Sulzenko: Mr. Chairman--

Mr. Douglas Clark: Are you talking to me or Mr. Sulzenko? You're quoting him, but looking at me.

Mr. Dan McTeague: Well, they're your figures, Mr. Clark; you presented these previously.

Mr. Andreï Sulzenko: Let me deal with the generality of the question, and then if there are any specifics, others can jump in.

Mr. Chairman, we've taken the view that it is wholly inappropriate for us to speculate on the outcome of court decisions. We have given the committee our methodology. If the committee wants to speculate on that, I think the researcher can quite easily, using our methodology, support the committee in that. But we are not prepared to ask “what if” questions when the issues are before the courts.

Mr. Dan McTeague: Mr. Sulzenko, that wasn't my question.

Mr. Andreï Sulzenko: I'm answering--

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Mr. Dan McTeague: Mr. Chair, he's--

The Chair: Mr. Clark wanted to--

Mr. Dan McTeague: On that point, before Mr. Clark speaks, Mr. Sulzenko, we are talking about the very regulations that your department has advocated, notwithstanding the totality of evidence that demonstrates that most of these things are being tossed as bogus. The courts will never come to a decision, ultimately, if you continue to allow under these regulations frivolous stays, which are never-ending and are designed to pre-empt generics. No other nation seems to have a problem with it. Why does the industry department have a problem with it?

Mr. Andreï Sulzenko: Mr. Chairman, as we have pointed out to the committee on several occasions, there has been four years of litigation. We believe there is sufficient evidence during that four years of litigation for the committee to draw some conclusions. We regret the fact that the courts haven't decided on everything, but we think there's sufficient evidence before the committee for the committee to consider its recommendations.

The Chair: Mr. Clark, did you want to make a comment on that?

Mr. Douglas Clark: Just with respect to the wins and losses. I don't think we're that far apart. I said 16 for the generic and Mr. McTeague said 17. There was a case decided in favour of the generics on May 30, so that would make sense, I think. Where we depart is simply on the brand wins, and we can talk about that in detail if you like.

The Chair: Mr. McTeague.

Mr. Dan McTeague: Yes, Mr. Chair, I would like to talk about it, but I'd like it if he would be kind enough to indicate, and I'll give this paper to Mr. Clark for his benefit, the ones he thinks ought to be added to the brand names.

I have a concern with respect to the methodologies that you use to determine in the United States that there is somehow a greater period of protection. We've heard here that the number of R and D dollars that are being spent as a result of these automatic injunctions are significant, yet we see through PMPRB that the numbers are falling, and they're falling dramatically with respect to the commitment that was made. The question is on innovation. Assuming, for instance, in the case of Losec, Mr. Sulzenko, that you have drugs actually being produced in this country, which they are not, I have to ask the simple question, if IMS Health is saying that Canada's patent protection is for about 13 years, and the President of the United States is saying 11, who is right? You or them?

Mr. Douglas Clark: In terms of a comparison, I think it's fairly straightforward. The U.S. has patent term restoration. They have eight years of data protection. They have six months of additional exclusivity for pediatric testing. We have none of those.

Mr. Dan McTeague: None for data?

Mr. Douglas Clark: We have--

Mr. Dan McTeague: Sorry, Mr. Clark, none for data?

The Chair: Mr. McTeague, please.

Mr. Douglas Clark: We have it in a different way and it applies in a different set of circumstances. It's pretty much automatic in the U.S. and it's up to eight years. Here it's of little practical effect, or at least that's how the generic industry has described it.

In Europe they have ten years of automatic data protection. They have patent term restoration. In Australia they have data protection and patent term restoration. In Japan it is the same. That's the basis for why we think we've got an IP regime that's not quite as....

Mr. Dan McTeague: Not quite as...?

Mr. Douglas Clark: As favourable. That's what we've got in our opening statement.

The Chair: Mr. McTeague, one more question.

Mr. Dan McTeague: Mr. Clark, you can sell Losec in any one of those countries.

I get concerned when I hear that there is a defence that is being done, but by every objective measure it would appear that the arguments you are making do not bear ultimately in terms of validity. I am concerned that the department provides information that tends to suggest that the committee ought to find some solutions. I have a solution: let the courts do what the courts have always been able to do.

What is it about the exclusivity, the need for the NOC, that the department feels in its infinite wisdom requires that we set aside the courts and use them only when it comes to resolving these never-ending automatic injunctions? Do you have a problem with the courts of this country when it relates to patents?

Mr. Douglas Clark: I think we set those reasons out in our initial presentation. We have no more of a problem now than we did when we had compulsory licensing and circumvented the court process then. We've always had special rules for pharmaceuticals. I think we've been fairly candid about that.

The Chair: Mrs. Gallant.

Did you want to add to that? Sorry.

Ms. Marie-Josée Thivierge: I just want to point out that at tab C, the first document, in fact we have provided you with our understanding of market exclusivity data. As you were quoting two different organizations in terms of picking which one would be the right number, I would invite you to refer to tab C, the first document in the binder.

Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance): This is for Industry Canada. Why are the generics not allowed to appear in court to address the injunctions?

Mr. Douglas Clark: I'm not sure I understand the question.

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Mrs. Cheryl Gallant: It's our understanding that the generics are not allowed to be part of the injunction hearings. Is that correct?

Mr. Douglas Clark: No.

Mrs. Cheryl Gallant: Is it true that virtually every word of the existing notice of compliance regulations has been taken to court by both sides, or one or the other?

Mr. Rob Sutherland-Brown (Senior Counsel, Legal Services, Department of Industry): I think some of the concepts in the regulations and some of the effects of the regulations have been taken to court, but I don't think every word has been litigated.

Mrs. Cheryl Gallant: Is there any way we can change the regulations to allow the generics at least to be part of the hearings, to be a more active participant? Can you make suggestions for Health Canada to run scenarios of what it would be like if the regulations did not exist?

Mr. Rob Sutherland-Brown: On the first question, the regulations are designed to precipitate early litigation between a patentee and a would-be competitor. The generics are in court every time they challenge the patent.

Often the generics do not choose to file a notice of allegation and litigate; they accept that the patent is going to expire on whatever date and they will wait for their NOC until patent expiry. When they actually do file a notice of allegation, then the regulations force the patentee to make an election. That election is whether or not it wants to commence a prohibition proceeding, or whether or not it accepts that the generic's allegations are justified and they won't be infringing or their patents are invalid. That's about 45% of the time.

Mrs. Cheryl Gallant: Can you give any examples of scenarios of what it would be like if the regulations did not exist?

Mr. Rob Sutherland-Brown: Yes. It's hard to talk about the counter-factional. Canada has had a special regime for pharmaceutical and food products since 1923. From 1923 to 1993, the regime allowed for the issuance of compulsory licences to any third party that came along wishing to manufacture a patented product. From 1923 to 1969, that regime was only moderately favourable to generics because they had to be doing the manufacturing in Canada, and the Canadian market was so small that they wouldn't invest in the fine chemical business necessary to sustain the pharmaceutical business.

In 1969 the government made the compulsory licence regime much more favourable to the generics because it allowed them to import either the product itself or the fine chemical to manufacture the product. Then in 1993 the system changed such that Canada would be compliant with its obligations under both the NAFTA agreement and the WTO agreement.

So we don't really know what the system would look like absent the regulations, but informed speculation would be that the generic would go to Health Canada and file its abbreviated new drug submission. That would be confidential at Health Canada so that the patentee would have no knowledge that the generic was seeking to come to market, and would not have that knowledge short of some virtuous event until the NOC itself was issued and published.

In that circumstance, the patentee would have to look at what the generic was manufacturing, determine whether or not it was infringing, in its view, and if it thought it was infringing it would commence an infringement action. Infringement actions take a fairly long time to litigate, on average. It's not just a quick fender-bender type of.... It's very complex. It's complex both as a matter of law and it's complex as a matter of chemistry. So it takes a long time to get to trial. It takes a long time to get the trial conducted and the infringement decision concluded.

What the patentee would normally do when filing its application, its notice of infringement action, is it would ask the court for an interlocutory interim injunction, asking the court to issue an order to keep the generic off the market pending the conclusion of the trial and a determination of the issue of infringement.

The test for obtaining interlocutory relief of that nature is fairly stringent. It's common to most common-law jurisdictions in the United States. It is applied with different rigour in different jurisdictions. The Canadian courts apply it with I think the most stringent rigour of any other.

Essentially, the test is threefold. The first test, which is relatively easy to me, is do you have a triable issue and do you have a reasonable prospect of succeeding? That's pretty easy for a patentee to show if he's got a product that has the same chemistry as a generic product.

The second test is, will the patentee suffer irreparable harm if the generic version of the product is not enjoined from entering the market pending the outcome of the litigation? Canadian courts don't accept simple monetary loss--and the others--from the generic selling of the generic product during the pendency of the litigation. It's not sufficient to show irreparable harm. Canadian courts require that the irreparable harm is not just a speculative harm; it's got to be real, which puts the patentee in a very difficult position. You haven't got any competition yet selling your product, so you can't show what your damages might be.

The third test is one of balance of convenience. Is it more convenient that the patentee suffer from competition of the generic, or is it more convenient from a public policy perspective, I guess, that the generic be kept off the market?

º (1635)

The Canadian courts have, as one of my colleagues testified earlier, issued an interim injunction in a pharmaceutical patent case once in the last 25 years, and in that particular case it was during the regime that the compulsory licensing was in effect. In that particular case, the interlocutory relief was given pending the issuance of a compulsory licence.

We just don't have the right circumstances to predict with any accuracy what might happen. But if the Canadian courts continue to treat requests for interlocutory relief the way they have historically, it is likely that if you didn't have the regulations, the generic, if interested, would be on the market during the resolution of the infringement issue.

The Chair: Thank you very much.

Thank you very much, Mrs. Gallant. Good questions.

Ms. Torsney.

Ms. Paddy Torsney (Burlington, Lib.): I hope I get a similar rating.

The Chair: We'll see.

Ms. Paddy Torsney: First of all, let me say to all the witnesses that I'm surprised by the tone of some of my colleagues. I think if they have problems with the laws or how they're being applied, they should be taking that up with the political people and not with you, since you are the servants of the people. If we don't like the procedures, we need to change them, not you. So I apologize on their behalf.

The second thing is I'd like to get some information. There are, I imagine, a number of products that have been on the market for a number of years that are not genericized. I wonder if we can get that information. And I wonder what Health Canada is doing to encourage those products to be genericized, if they are important products that are being sold in Canada and have a market. Maybe there should be something where they are, if it's going to be cheaper for consumers--and that's our real issue--provided. And can we look at such a regime?

The third issue is we're very concerned about drug prices. I'm pleased that in Canada we do have a process to ensure that brand-name drug companies have to go and justify the price of their drugs, but the generics don't have to justify the price of their drugs. I guess it's the Province of Ontario that really sets out what generics are going to come in, and then everything is a substitution.

I have to say that as I think about other products, and I know you've already identified that medicines in general are treated differently than other patents, it seems to me that if this issue.... It's being presented like, “Well, there's this drug, and they keep adding all these patents and they're all frivolous”.

Firstly, how do you determine that a patent is something new, because we're the ones granting the patents? So if it's frivolous and it's not patentable, if there's no new information or new technology or new system employed, then why is it being patented? Why is there a patent existing?

Secondly, why isn't there a better process? And maybe Health Canada can answer this. If the first product could be genericized, why aren't the generic companies coming in with that first product, if there's no difference between the first product and the one's that's got the patent several years later because there's a new delivery system or there are some changes to the medicine?

The reason I think it's important is that we do need innovation. There are some drugs that have come on the market that have been improved, in the same way that there are braking systems on the market. Thankfully I have ABS brakes, and my car is safer for me because I have that innovation.

So we at the industry committee are supposed to be fostering innovation and trying to ensure these things as well as being respectful and making sure that Canadians can get the innovative product they need and at the price we can all afford, because it is the taxpayers that are paying for this.

So we control the prices on brand names, and we don't on generic. Are there products that should be brought in? And why are we patenting things if there's not any big change? And why aren't the generics coming in on the first round of products?

º (1640)

Dr. Robert Peterson: I will address at least a portion of the series of questions that you've asked and then I'll turn it over to my colleagues to talk about some of the more factual issues with regard to listing.

Health Canada does not promote a product, either a brand name or a generic name, to come onto the market or to make application. However, we certainly recognize the relevance to the health care system for brand-name innovators, second entry of a class of a product from another brand-name company, or in fact a generic copy of a product.

In fact we allocate resources for the approval of a generic brand in terms of the timeframes we have set as performance targets to be virtually identical to a new chemical entity that would provide substantial benefit to the Canadian market. Those performance time periods are 180 days for a priority review, a new active substance, something that has not existed on the market before, and we have a 180-day performance target for the review of a generic application as well. So to the extent to which we can provide recognition to the relevance of each of these different types of applications in virtue of performance and resource allocation, we have done so.

In terms of some of the more detailed questions you're asking with regard to how the list actually takes place, I'll ask Mr. Lee to respond to them.

Mr. David Lee: To go back to an earlier point, in taking a look at the patents, we're only allowed by the language to look at certain things about it. We can't say about a patent whether it's frivolous or it's a good patent or a bad patent. It's certainly not something we can do as an activity under these regulations. What we're asked to look at is whether there's a claim for the medicine itself or the use of the medicine.

So we've had, for example, in the past, way-out patents, like a patent for a bicycle brake on an IV stand, that are put on to protect drugs. We take them off. Those are not okay to put on because they don't contain a claim for the medicine itself or the use of the medicine. But there are other patents that are not as clear a case. The way they relate to a drug or contain a medicine or use of the medicine is harder to read, and when we're doing our audits we get instructions from the court cases on that. So there's no look at whether there's a frivolous patent or not, but certainly we've got to stay within our wording. That's what we're supposed to do when we're regulating, and we do that.

We presume and in fact there is a presumption in the Patent Act that all the patents granted are valid, and we honour that presumption when we're looking at listing them.

Ms. Paddy Torsney: Are there a series of drugs that are being sold in Canada that have no generic and they're well past 20 years?

Mr. David Lee: Yes, we can confirm that.

Ms. Paddy Torsney: So why aren't they?

Mr. David Lee: To state a number, we don't know. But I think we've got between 25,000 and 30,000 drugs, so it's harder to get the breakdown on that number.

º (1645)

Ms. Marie-Josée Thivierge: Adding to what my colleague has said, in terms of granting a patent per se, CIPO--actually their examiners, who are trained professionals--are the ones who actually look at the patent applications as they come in.

There are three criteria that are specified in the act: it has to be new; it has to be non-obvious to a trained eye or a trained expert in the field of technology in which the patent is being requested; it also has to have a new utility. So those three criteria need to be met before a patent can be granted. Now, not being an expert examiner, I will stop there.

In terms of data available and in terms of those drugs that have or have not been genericized in Canada, what we have managed to pull together for the committee, under tab C-4, is a list of drugs where we have a generic version in Canada and there is also a comparable generic version in the U.S. What this table shows for a number of drugs is that in most cases for the drugs listed in that chart, the drugs were available in a generic form in Canada before they were available in the U.S. So that information we had and shared with the committee.

The Chair: Do you have the reverse?

Ms. Marie-Josée Thivierge: I'm sorry...?

The Chair: Where there are drugs available in the U.S., but not in Canada.

Ms. Marie-Josée Thivierge: All of this is in the table. That's correct. So by simply looking at the drugs that are listed, you know exactly when they were made, when they received their NOC, and when they were made available.

The Chair: Thank you very much, Ms. Torsney. I must move on.

Ms. Paddy Torsney: It's a part of it. I want to know how many are held by generics.

The Chair: It's in the book.

Ms. Paddy Torsney: No. How many of the patents are held by generics, versus held by the brand name? How many of the generic medicines are there that are patented?

The Chair: Do you have a quick answer?

Mr. Douglas Clark: It's anecdotal evidence of some patenting by the generic industry, but we don't have any data.

The Chair: Thank you.

Monsieur Crête.

[Translation]

Mr. Paul Crête: Thank you, Mr. Chair.

Among the applications to duplicate filed by generic manufacturers, how many would go to court?

Mr. Douglas Clark: Approximately 50%.

Mr. Paul Crête: Therefore, there are 50% of these applications that would never be litigated.

Mr. Douglas Clark: That is right. But we make no distinction between the first, the second or the third generic drug.

Mr. Paul Crête: I do not quite understand the sense of what you’ve just said.

Mr. Douglas Clark: The generic manufacturers tell us that the first generic drug is always litigated and that might skew the percentage figures. I do not know if this is true or not; it is impossible to check. I am only passing that information on to you.

Mr. Paul Crête: The generic drug manufacturers quoted some figures to explain their profitability problems and said to us that if the regulations were not revoked, their survival would be at risk in the short term, within the next few years. I would like to know what the Department of Industry thinks of that. Is my question clear?

Mr. Douglas Clark: As with most private corporations, we have no means of verifying that sort of allegation. We have no way of knowing what the financial situation of most of these companies is.

Mr. Paul Crête: Has there been no new trend in these last few years, especially since the regulations came into force in 1998. Has profitability gone down or has there been no change in that respect? Are you in a position to tell us?

Mr. Douglas Clark: With regards to profitability, there is no way we can say. There has been, of course, an obvious growth in sales. The documents that we have handed out contain graphs showing that, since 1993, the sales of generic drugs have grown by approximately 240%.

Mr. Paul Crête: The sales have increased 240% since 1993. If the companies are not profitable enough, could it be because their sales price is too low? That does not seem to be the case. Do you have any further information on that point?

Mr. Douglas Clark: That information is not available to us.

Mr. Paul Crête: I would like to get back to my first question. Forgive, if you will, my non sequitur. When a generic manufacturer wants to copy a brand medicine, can it ask to copy only the original medicine and not the one that has been patented between 1980 and the year 2000? Could it, and does it do that? Could it seek permission to copy only the original patented medicine or does it always have to copy the medicine with it successive improvements?

º (1650)

[English]

Mr. David Lee: The answer to that question really demands to know whether there's one patent on the register, or many. So if a generic were to copy the brand drug and there's one patent on, after expiry, presumably, the generic would go on at that point.

If there are other patents listed on subsequent changes to that drug, and the generic just wants to copy the original, they still have to address the patents for the changes if those changes are indistinguishable on the patent register from the other drug.

I'll give you an example as it relates to a change in manufacturing formulation. If a brand makes a change to the formulation of the drug through a supplemental new drug submission, it lists the patent on it, the generic will still have to address that patent, notwithstanding that it's only comparing to the old, original product. That's the rule, because the rule says it has to address each patent on the patent register listed for the drug.

The Chair: Mr. Crête, may I add with you, why? Why, if you're only going to copy the original one, must it have to continue to justify all the way downstream?

Mr. David Lee: Because the words we have to work with, under the regulations, are patents listed for the drug. The drug is taken to be the composite of all the changes made throughout the years. By the way, that does make some sense.

So if a brand creates a new use for a drug, and lists a patent subsequently on the use, then what the generic will do is at the end, when it's just about to go to market, it will probably update the product monograph. Putting the new use in only amounts to just twigging the product monograph before it goes to market to add that indication, if that's what it wants to do. So it may be referring to later versions, but we may not know it at the time when it makes its submission. It's a factual determination we'll pick up later.

In terms of drawing a factual determination each time of whether the generics in fact refer to one version or another, for some drugs there are many changes that occur over the years. That would mean going through each change and determining why the version was brought in. We don't administer that because it says to address each patent on the register for the drug.

[Translation]

Mr. Paul Crête: Do you have any figures concerning the number of medicines covered by more than one patent and where a generic firm seeks to copy only the original molecule?

[English]

Mr. David Lee: I have not done that assessment, but it can be gained from the materials we've given to you, and we could undertake to do that.

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

Mr. Marcil.

[Translation]

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

Our job, on this committee, is not to debate drug prices. Patent medicines are regulated by the government of Canada and their price is under provincial jurisdiction. It’s a completely different matter. What we wish to know here is whether the pharmaceutical industry is abusing regulations or whether the generic manufacturers are trying to get around them. It’s one or the other.

I would get back to the question that Mr. Rajotte and Mr. Crête asked you. You tend to complicate matters.

Let me give you an example. In 1980, say I wish to manufacture a medicine and apply for a patent. You grant me a patent and I develop my product in order to market it. I would call it A and I wish to market it. While I am in the process of developing this drug, my research team comes up with a new process. That my second drug. So we therefore have medicines A and B but I am not ready to market the second one. There is only one that I am marketing. I have just developed a medicine and it is being marketed but I am continuing to research the first medicine in order to find a new formula for which I will be able to obtain another patent. The generic industry can copy the one that has been marketed after 20 years. Is that correct or is it not? That medicine is being sold. Even if I am trying to improve it, I have marketed a product. Can the generic industry copy it after 20 years?

º (1655)

Ms. Marie-Josée Thivierge: It depends on whether or not there was a patent...

[English]

The Chair: Carry on. I know Mr. Lee wants to answer also, but please carry on.

[Translation]

Ms. Marie-Josée Thivierge: What we need to know is whether your first medicine was covered by one patent or by several. More than one patent can be taken out on one medicine. You can patent the active ingredient, the formula, the use and so on. Before applying to Health Canada for a notice of compliance, what you have to do is apply to CIPO for a patent. The patent does not have to be actually granted. That is why in certain case perfectly legitimate patents are later added to the first. That does add another 20 year patent to the first 20 year patent with a bit of a time lag, than a third 20 year patent can also be added. These patents are perfectly legitimate and they are linked to the initial drug.

Mr. Serge Marcil: I have another question. Take the case of the medicine that I registered in 1980. Fifteen years later, since I have continued to develop it, I come up with a second one that I have not yet marketed. That is the one I wish to market because it is more effective than the first; therefore I get it registered and you grant me a patent. We know that the generic industry can begin to develop its drug before the expiry of the 20 year patent period.

Obviously, since I am not marketing the product in question, and that I have registered my second drug after 15 years, the generic industry cannot copy that one; what it wishes to copy is this one. I am thinking out loud, but I would like to know if I have correctly understood the situation.

Instead of coming out in the year 2000, this medicine is going to come out in the year 2015, and the generic manufacturers will have to wait another 20 years before they can copy it.

Is it this type of case that the courts have to deal with under regulations? The pharmaceutical industry develops a product and manages to modify its formula in the course of its development. It does not market its first product though that is the one that has been registered and patented. It also patents the improved version of the drug, and that is the version that the generic industry wishes to copy, but it wishes to copy it although it was patented 20 years earlier, in 1980.

It’s as though we were to tell the company that it had not modified its product to a sufficient extent and that it must modify the product it has been working on for 15 years, that it is not marketing its first product and that others want to copy the first version as though it had been patented in 1980 with the patent expiring in the year 2000.

Do you understand my question? Would you care to answer.

[English]

Mr. David Lee: In terms of drug A and drug B, it will depend on what the change is, as between A and B. If it's the medicinal ingredient, for example, a different salt form of the compound in this medicine, then generic A, without making any resort, doesn't have to address any patents listed for drug B. Not all changes to drugs, though, result in that clear a distinction between A and B. Sometimes A and B equals A. In other words, there's the B change, if it's a change in formulation or a change in use, that will still be drug A.

So the patent is being listed on, whether marketed or not. It's not required that a change be marketed, by the way, to put a patent on the register. The patents going on go on for drug A in some instances but not others. You have to break those out change by change.

» (1700)

[Translation]

Mr. Serge Marcil: Theoretically, when you grant a second patent, there is no infringement since it is a new patent. Theoretically, it is a new product which should be subject to the same regulations as the first and patented for 20 years.

I would like to ask the gentleman another question. You have heard the witnesses; you yourself testified and then, after you, we heard other witnesses. The first time you testified, you told us that we had balanced regulations that favour the generic manufacturers and that also protect innovative companies. I do not wish to make you say something you did not say, but I understood you to say that the regulations are fine as they are, and although they are not perfect, they are balanced and protect both industries compared to what is done in other countries.

Now, in your second round of testimony, after having heard the testimony of the people representing the various industries, do you stick by what you said before when you told us that these regulations are good, that they are balanced and that they allow both industries to work and to profit equally from the regime we have here?

I have never yet heard of a generic manufacturer or an innovative pharmaceutical company going bankrupt.

[English]

The Chair: Comments?

[Translation]

Ms. Marie-Josée Thivierge: As Mr. Sulzenko said in his presentation, both this time and last week, we feel that the basis for these regulations is solid.

That being said, decisions recently handed down by the courts lead us to believe that it is entirely appropriate to review the regulations and to ensure the continuing balance between our two policy objectives.

[English]

The Chair: Thank you very much.

Mr. Merrifield.

Mr. Rob Merrifield (Yellowhead, Canadian Alliance): Still, the interesting thing is to try to get the golden balance, try to understand exactly whose numbers are right. We're relying on the department, I suppose, to give us the factual information, and it's quite complex. When you look at this 20-year patent law, the generics came forward last week and said that they respect that, they don't have a problem necessarily with that. If that's the case, can you tell me, have the generics challenged the 20 years? Have they tried to put a product on before the 20-year period?

Ms. Marie-Josée Thivierge: Yes.

Mr. Douglas Clark: I'm not aware of any blockbuster drug where they haven't.

Mr. Rob Merrifield: The notice of allegation, I understand, is just for when it comes off the 20 years. Is that not right?

Mr. Douglas Clark: It's anytime in the life of patent. Early working allows you to do just that, to bring your regulatory submission forward at any time during the life of the patent or patents, as the case may be.

Mr. Rob Merrifield: If you're bringing this forward, you're saying, obviously, that the patent is inappropriate. It's not that they're complying with the patent, because the patent is for 20 years. Is that not right?

Mr. Douglas Clark: There are three basic types of allegations you can make, but within those types there are obviously multiple scenarios that you could envisage. It depends on the nature of the patent.

If it's a product by process patent--i.e., it claims the active ingredient but only when made by a certain process or its obvious chemical equivalent--usually the allegation you'll see in respect of that patent is “We've come up with a different process, and it is sufficiently different from the process claimed in the patent that we're not infringing”. For use patents, the allegation will be “We're not seeking approval for that use; we don't intend to sell it for that use.” If it's a particular solid state form of the molecule, the allegation will be “We're not using that solid state form”. It can vary.

In terms of the first patent, generally it's a product by process patent, which is the basic patent. It is often called the basic or pioneer patent, and the allegation will be, as I said, a different process.

Mr. Rob Merrifield: Once they apply and they go into the 24 months, it's going to come down to a court settlement. Let's say it goes beyond the 20-year period during that process. That obviously holds the generic off the market during that court proceeding.

Mr. Douglas Clark: By definition, it can't go beyond the 20-year process, because the stay expires the moment the patent does. It's only in the eventuality that there are other patents on the register in respect of that drug that still need to be addressed that the stay could continue.

Mr. Rob Merrifield: The original molecule.

Mr. Douglas Clark: The original patent.

Mr. Rob Merrifield: The original patent, even if it's in the 24 months.

Mr. Douglas Clark: As soon as it expires, the 24-month stay is over and done with.

Mr. Rob Merrifield: And the generic can go on the market with that product.

» (1705)

Mr. Douglas Clark: Assuming that there is no other patent operating as an impediment, then yes.

Mr. Rob Merrifield: Assuming that there is no other patent as an impediment, which is what we get down to in addressing this whole area.

Mr. Douglas Clark: Right.

Mr. Rob Merrifield: Which means that you have to prove that you're not infringing on these other patents that have been put on.

Mr. Douglas Clark: You have to address them--i.e., make an allegation and then give the patentee an opportunity to decide whether they are in accord with that allegation. If they are not, and they initiate litigation under the regulations, the 24-month stay commences at that point.

Mr. Rob Merrifield: If it commences, then you're holding them off.

Mr. Douglas Clark: That's what the stay does, it holds the generic, presuming that Health Canada is ready to issue the NOC, the approval. It's only on patent hold under those circumstances. Health Canada has to review the safety and efficacy of the drug in question. You have to be careful about saying things like “held off”. It's not really held off if the drug is not ready to be approved.

Mr. Rob Merrifield: Fair enough. I think I understand it, although it is quite complex when you see the different levels of what can be patented and what isn't.

That takes me to the other point. What we've heard around the table is they're saying “Get rid of the notice of compliance, because if they're infringing, the courts will just deal with it.” What's your response to that? Do you think our courts are just not strong enough?

Mr. Douglas Clark: I think our response has been consistent throughout. There were 35 drug products, I think, litigated between 1998 and 2002. Probably half of those have generics on the market now as a result of the outcomes of the litigation. If the generics were ready to go in respect of all 35 of those products, and there was no regulatory injunction, then conceivably all of those products would be genericized right now. Litigation in respect of those.... All you would do is take the 83 cases that commenced between that period under the regulations and substitute 83, or perhaps somewhat fewer, infringement actions with the generic, if past precedent is any indication, with the generic continuing to sell until the trial has been resolved and an appeal has been resolved and an appeal of the appeal has been resolved.

Mr. Rob Merrifield: I was actually interested in the one in which I think the brand-name companies were here saying that there's a product that is not actually made in Canada but it's packaged in Canada and it's sold here. I can't remember which one it was, Losec or one of the tablets. Maybe I shouldn't be bringing this up if I don't know exactly what I'm saying. It doesn't matter what the exact product is, but what's really important is the concept.

The concept is that we're bringing in a product that's not made in Canada. We're packaging it here. It's a brand name. I'm just wondering if the same applies to the generics. Can the generics bring in a product, say from the United States, package it here under another label, and sell it that way? Is that happening now?

Mr. David Edwards (Legal Counsel, Legal Services, Department of Health): Drug products obtain approval in Canada.... Essentially, a manufacturer of a drug who sponsors a drug submission can obtain approval to either manufacture the product in Canada for sale in Canada or to import the product for sale in Canada. They're not treated differently.

Mr. Rob Merrifield: Then I go back to Mr. McTeague's comments with regard to the product that is genericized in the United States, Losec. Because that's a different formula, and it doesn't infringe on the patent law from the United States, why could that not be brought in and sold here?

Dr. Robert Peterson: Just briefly, an application would have to be made for the approval of that product at Health Canada. The requirements under the notice of linkage regulations would have to be complied with here before Health Canada could issue the notice of compliance.

Mr. Rob Merrifield: It would take 24 months to get it through. Is that what you're saying?

» (1710)

Mr. David Lee: It could take more time than that, or less time than that, depending on what the patent situation might be and the food and drug situation.

What the two witnesses have just referred to is actually in the food and drug regulations. There are rules about what generics can and can't do when they're copying a brand drug. Whether they're importing raw materials from the States or final dosage form from the States or the U.K., they still have to get their notice of compliance. As long as they're seeking a notice of compliance with us, they have to go through these patent linkage regulations. They still are under these regulations. They still have to address the patents.

It's not the case that generally a generic can just go and copy the brand drug in the States. They usually have to have a drug here in Canada, marketed here in Canada, that Health Canada knows something about because we've approved it. That's usually the drug they copy in most instances. They still are copying a brand drug that's marketed up here in Canada.

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

Mr. Patry.

[Translation]

Mr. Bernard Patry (Pierrefonds—Dollard, Lib.): Thank you, Mr. Chair.

[English]

I am not a regular of this committee. I have one very brief question to try to understand what Mr. Crête, Mr. Rajotte, and also Mr. Marcil mentioned.

Let's say there is a drug by a brand-name company that came out on the market in 1990 and they have ten years to go on the patent and that medication is taken four times a day. It's very easy to understand.

[Translation]

This medication is to be taken four times a day. In 1995, the company decided to modify the drug. Instead of selling tablets to be taken four times a day, the company intends to sell a capsule that you take only once a day. My question is simple. In the year 2000, when the patent for the tablets expires, can a generic manufacturer copy the tablets or does it have to address the fact that the medicine is currently being sold as a capsule. The patent holder has done this for very good reasons. It is much easier for the patient to take the proper dose if the medicine needs to be taken once a day rather than four. It makes things easier for the patient. I would like to know, then, if the manufacturer of generic drugs can copy the drug that is to be taken four times a day ou s’il doit respecter le brevet applicable à la capsule qu’on ne prend qu’une fois par jour.

[English]

Mr. David Lee: Once again, very unfortunately, the answer to that question is it depends, but it depends on something specific. It depends on whether the two dosage forms you've talked about between the four times a day tablet and the capsule are comparable. If those two are comparable, then the generic would have to address the patents. If they are not, then the generic would not have to address the patents on the capsule if it's copying the tablets.

Whether it's comparable or not depends on what our scientists do with it under the food and drug regulations. If they accept a comparison between the tablet and the capsule, and sometimes they do based on the science, then we on the patent side say that those are comparable and you have to address the patents. If the scientific reviewers say no, they are not comparable dosage forms, then we will not require the generic to address the other.

Mr. Bernard Patry: Not require--does that mean they can copy it right away in the year 2000?

Mr. David Lee: Yes, if there's just the one patent for the tablet dosage form.

Mr. Bernard Patry: That's clear.

Merci.

The Chair: Just an addition to that, if you make the decision saying they don't have to go any further, that they can proceed, what are the chances of your being taken to court by the brand companies?

Mr. David Lee: That has happened on a number of instances, sir.

The Chair: No matter what decision you make, you're going to court?

Mr. David Lee: Not always, but we do tend to be conspicuous in the frequency of challenges just at the moment.

The Chair: Mr. McTeague.

Mr. Dan McTeague: Guests, witnesses, I am concerned about a number of things, but no need to worry about apologies at this point; after all, you draft regulations, not us. That's one of the reasons we're looking at this issue.

I have a couple of very quick questions that deal specifically with your concerns.

Originally, Mr. Sulzenko, in your presentation to us last week, you stated on page 7 that absent special rules, even the most manifestly infringing generic drug products can remain on the market pending trial. Understanding, of course, that a generic itself that was able to get damages would get it at their price, versus a brand name, which would get it at a percentage that's much higher, is it not the case that if a generic does this, it would be liable for damages? Why did you not present this?

» (1715)

Mr. Douglas Clark: Presumably, if it's found to be infringing at the end of the day, then yes, it would be liable for damages. In the meantime, it could continue selling, and who knows when the end of the day is and who knows whether they can recover those damages even when they're awarded.

I'm thinking of enalapril. You heard the example of GSK's drug, AZT, last week. Enalapril was litigated, and I think the litigation started in 1991. It went to trial in 1994. It was appealed in 1995. The court upheld the decision in the patentee's favour. I think it's just recently that the company in question has started to touch some of the damages that were awarded back then. There's other litigation ongoing in respect of that drug, because more infringing product was ordered in the interim.

Mr. Dan McTeague: I appreciate that, Mr. Clark, but a generic that copies or is ultimately determined to be infringing will have to pay brand-name prices while receiving generic rewards. According to your own argument here, it would appear that it's an important consideration when it comes to damages. I would have to pay damages plus 30% at the very minimum, so that just doesn't make sense.

Mr. Douglas Clark: I'm not sure what you mean by plus 30%.

Mr. Dan McTeague: Mr. Clark, if I were to infringe or to copy a product and damages were awarded--the damages that I have infringed a person's product--I would be liable to their sales at their cost; that is, the brand cost. We know that generics are 30% less, so if I come along with a generic product at 30% less, I'm not only paying what I reaped in terms of rewards, I'm going to pay 30%. You don't understand that?

Mr. Douglas Clark: It depends on the circumstances what you can get by way of damages. Whether you elect damages or profits as an equitable remedy, it will depend on the circumstances surrounding the case. If the generic company in question isn't solvent at the end of the day, I don't think you're going to get 30% of anything.

Mr. Dan McTeague: Mr. Clark, the point is that it is a very substantial, unequivocal, and clear deterrent.

On my second question, Mr. Sulzenko, you can choose whomever to answer it. On page 8 of the original you state: “Finally, there are the infringement cases themselves: the fact that the patentee wins in those cases does not always translate into recoverable damages at the end of the day.” Is the opposite not clearly true--i.e., if the generic wins the infringement issue--it may not be able to collect damages. Why have you presented only one side of the argument?

Mr. Douglas Clark: We are presenting the policy rationale for the regulations. The other side of the argument is are the policy measures in place to facilitate and expedite generic market entry and sale? Those are early working, the abbreviated drug process, provincial automatic substitution policies, and we talked about those as well in the speech.

The Chair: Mr. Crête, you can have a short question and then I will go to Mr. Rajotte.

[Translation]

Mr. Paul Crête: Thank you, Mr. Chair.

Ms. Thivierge, you said, earlier on, that the regulations were correctly drafted, but that it was worthwhile reviewing them in light of decision recently handed down by the courts. Would you identify those elements for us? I do not remember hearing them outlined. A brief answer would do, but will there be one or two things or situations that you might wish to change in light of recent court decisions, or that, in any case, you might want us to review in light of those decisions?

Ms. Marie-Josée Thivierge: I could ask my colleagues from Health Canada to elaborate further, but I do remember that in last week’s presentation, we said that certain court decisions have impacted on the time frame within which a patent could be added to the register. These decisions have also impacted on the issue of whether the patents was in fact connected to the drug in question. There are then two or three recent court decisions which might bring about a change in the situation as we knew it or in the philosophy underpinning court decisions in these matters. Since 1993, the case law was relatively stable concerning the balance within the NOC regulations. Two recent decisions in particular may put that balance at issue or at least oblige us to see whether the balance has been maintained.

» (1720)

Mr. Paul Crête: Do any of our documents deal with that point?

[English]

The Chair: Is there anything to add? I have to go to the next person.

Dr. Robert Peterson: I'd like to just briefly respond to that as well. It's not just the decisions that I'll ask my colleague to specify briefly; often when it is a split decision there is a dissenting opinion as well. This is the area we are referring to as being particularly challenging in our ability to administer the regulations.

Mr. David Lee: We would concur that the cases being discussed have to do with both the timing upon which you can list a patent and what kinds of patents.

I would also add a third. If you'd turn back to the original opening speech from Health Canada, there we also point out section 5, which is where a generic has to address the patents, and we've had some recent jurisprudence on that as well, which is affecting our administration of making address. I'm referring specifically to the Biolyse case in that mention. That's a third area we would add.

The Chair: Thank you very much.

Thank you, Mr. Crête.

Mr. Rajotte.

Mr. James Rajotte: Thank you, Mr. Chairman.

I just want to get a couple of questions on the record and then have you address them. Last time you were before us, I asked whether there'd be some way to improve the regulatory framework in having Health Canada, Industry, and the intellectual property office working more in concert or even in one shop together. Is there a way of doing that?

There's a second question I want to get on the record. The generics have called for one automatic stay, as President Bush has suggested, sort of assuming moving more toward a U.S. system. But in your note in section E, you talk about how the U.S. linkage system works differently. You talk about a full-blown patent infringement action in the U.S., a 30-month automatic stay, as opposed to a judicial review proceeding. Also, on tab C, you point out some other differences in terms of patent term restoration and data protection. From what I'm hearing, the brands would actually be flying with that system if you moved more towards a U.S. system. Is it an option for us to move more towards what the U.S. has in terms of a system?

Just following up on that, particularly with regard to data protection, in Canada it's provisional. In the U.S., they have it. It's an automatic five years for new chemical entities and three years for changes to a drug. Can you explain in layman's terms what you mean by data protection, as well as the difference between the two countries? Could you address each of these?

Mr. Andreï Sulzenko: Do you want to start?

Dr. Robert Peterson: Sure.

David.

Mr. David Lee: I could begin by describing what data protection is. That's a commitment that comes from a number of international instruments. It's in 1711 of NAFTA, in sections 5 and 6, and it's actually been implemented in the food and drug regulations. It was in 1995.

The way it works is that where a company comes along with trade secret information relating to a pharmaceutical and has to give it to a federal regulator like us, Health Canada, there is an exclusivity period of five years dating from the date of their approval.

In Canada, though, there was one court case on it. It went all the way up to the Supreme Court. It set a three-pronged test, which we use. First, it requires a generic to actually make a submission, which, second, causes the minister to refer to the brand data. We don't usually do that, and I'll make that an aside right now. We don't usually refer to the brand data in approving a generic or reviewing a generic, because they do their own file equivalent study, so we don't crack the books on the brand. That's usually the missing step. Third, we would only issue a notice of compliance to the generic company if it's relying on our referral to the brand data, which again doesn't always or typically happen.

That's a summary of data protection as implemented in Canada.

Mr. James Rajotte: Well, Mr. Sulzenko, then could you address my two other questions? Is there a way to have more of a one-stop shop and improve the regulatory process? Second, is the American system preferable? I know you're looking for advice from the committee, but we're obviously looking for help, guidance, and advice from you as well.

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Mr. Andreï Sulzenko: Mr. Chairman, with respect to the broad question of the cooperation between the two departments, I can say certainly from my point of view that the cooperation is very good. Whenever we contemplate--and it goes back to 1998--any amendments to the regulatory environment, both departments go forward together. That is reviewed by our respective ministers and then by the cabinet, so there is a joining of policy views. Obviously the health department has a great interest in ensuring that whatever regulatory changes we might make will actually be administrable.

We work with each other regularly, but the one point where we do separate is that we in Industry Canada do not get involved in any of the resolutions of any of the cases before the health department. That is their job. We monitor the litigation very carefully. We do that analysis and we talk to them. I think the reason we're here together underlines that point.

With respect to the question of the U.S., I'll refer it.

Mr. Douglas Clark: Yes. In terms of the one stay per drug submission, I think what we're trying to point out in the materials we gave you is that there are a few differences between the two regimes that are significant in this particular context, a primary one being that in the United States, because the automatic stay is in respect of an infringement action, and here it's in respect of a judicial review or proceedings in the nature of judicial review, the rules about issue estoppel res judicata--whether you can bring forward another argument or whether you've got one kick at the can--differ.

In the U.S., if you're going to argue that you're not infringing a particular patent, you have to make all your arguments in one shot. If you later try to come up with a different and better argument, the court will say “No, sorry, you can't do that. You had one kick at the can. You should have been able to come up with this at the time that you went forward with your allegation.”

Here in Canada, because it's a judicial review proceeding, those principles don't operate in the same way. What we have seen here, very early on as a result of a court decision back in 1994-95, I think, is that the courts have explicitly sanctioned multiple allegations. Where it's a new and different argument, you can bring forward another allegation. So in the context of one stay per generic drug submission, our concern is.... And I think it's a misconception out there that there's a lot of repeat litigation and it's always due to the further addition of patents. In the majority of cases, it's simply the generic bringing in another allegation. A new patent hasn't been added. They're dealing with the same patents. It's just a different argument. The first one failed or was withdrawn or what have you.

If that type of change were brought here, the concern is that the first allegation would trigger the stay for the brand and they would litigate on that allegation, but then the stay would be exhausted and they'd bring forward another allegation because they're allowed to do so and there'd be no stay to protect the brand's patent rights over the drug. You could just easily circumvent that mechanism by bringing in a second allegation. You just can't import changes like that, you know, in--

The Chair: This must come to a conclusion. We have another group of people coming here at 5:30, and I have Mr. Bagnell for one small, short question and a quick answer.

Mr. Larry Bagnell (Yukon, Lib.): I just have one short question for Mr. Lee.

Could you explain the effect of the recent Eli Lilly case? Has it become easier for brands to list multiple patents as a result of that case? If so, could you explain how, as well as the implications for evergreening?

Mr. David Lee: There has been an impact, which we've recently been able to measure. I'll turn to my colleague, Anne Bowes, who's been tracking that impact. Certainly more patents have gone on as a result of that decision. We're talking about a certain class of patents, though, formulation patents in particular, and they're now more eligible than they were formerly.

Mrs. Anne Bowes (Manager, Patent and Liaison, Department of Health): Yes, and in particular those formulation patents. Eleven have been added to the register to date strictly on the basis of the decision made in that particular case. There have been five additional patents that in the past would have been refused for listing, but we will not refuse them now based on the decision. So there has been an immediate impact: we do see more patents being added to the register.

The Chair: Thank you very much.

It's time to conclude, but I had one question to ask. I haven't been, as a chair, asking questions, but I wanted to get a better understanding.

If a brand files a new patent after the first automatic injunction has been granted the generic must file a new notice of allegation. Then when another patent is added, they have to go at it again. Why can't the generic be permitted to just amend as patents are added? Why do they have to start all over on each patent?

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Mr. Douglas Clark: Technically they do amend, but amending does prompt, as soon as they amend, to include addressing that patent. That can give rise to a separate proceeding if the brand contests it, and so re-triggering the stay. It's specifically provided for in the regulations that this is the process.

The problem is you've got a whole patent, a whole new issue to litigate, and it would be difficult to accommodate it within the original proceeding, which may be half-way through or three-quarters of the way through. It just wouldn't lend itself to that.

The Chair: It seems that we have created the regulations in such a manner to encourage legal action on an ongoing basis. Health Canada makes a decision on something, and one or the other will take them to court.

We've gone through 250 legal actions since 1991 in that area, and I guess the thing that we as a committee are trying to do is get the facts that the generics, the brand, and the government, Health Canada and Industry Canada, can agree on, because what happens every time we get into this process is we get into a whole pile of accusations. You saw it in the newspapers, we get it in letters. It's an ongoing accusation of one against the other, and we're trying to come up with, as the questioners have been saying, what are the facts in getting things done.

So I'm sure the researchers will be coming back to you to clarify items such that we can, as a committee, at least have some good discussion. It seems that it's ongoing. Where I have a problem as a chair of committee is I don't understand how the courts or the advisers to the judges have all the expertise on the regulations that you make on behalf of the Government of Canada, and why we can't come up with a system that would remove some of the legal actions and still have what we're trying to do, which is have good patents.

So I leave that question with you. I don't want an answer now, because we have to adjourn because the Deputy Speaker of the House, a former referee, is ready to call the whistle.

I will call this meeting adjourned by thanking all the witnesses and committee members.