[Recorded by Electronic Apparatus]
Thursday, April 17, 1997
.1131 
[Translation]
The Vice-Chairman (Mr. Pierre Brien (Témiscamingue, B.Q.)): I'd like to welcome everyone to this last day of our sittings on bill C-91. Pursuant to Standing Order 108(2), we are reviewing Section 14 of the Patent Act Amendment 1992 (Chapter 2, Statutes of Canada, 1993).
This morning we shall be hearing from the Government of Saskatchewan represented by the Honourable Eric Cline, Minister of Health, Glenda Yeates, Associate Deputy Minister and Kevin Wilson, Director, Pharmaceutical Services, Saskatchewan Drug Plan. Without any further ado, since we have an hour and committee members like to be able to ask a lot of questions, I will turn the floor over to you. I hope that your presentation is as brief as possible so that everyone can ask questions afterwards.
Mr. Cline, you have the floor.
[English]
Hon. Eric Cline (Minister of Health, Government of Saskatchewan): Thank you very much, Mr. Chairman. We would like to thank you for the opportunity to appear before the committee today to present our views and concerns on patent protection. I'm very pleased to be representing the Saskatchewan government on this issue.
It does concern me as the Minister of Health for our province that we are appearing on this issue before an industry committee to review an act that has had and if maintained we believe will continue to have complex implications for Canada's health system and the long-term health of Canadians. Your interest as a committee, quite naturally, is in the health of the pharmaceutical industry. My interest as a minister of health is in the health of individuals and the effect this legislation has on overall population health.
Of course your decisions will impact every health system consumer in Canada. We believe the effects of this legislation have been and will be far-reaching to the pharmaceutical industry, to provincial governments, and ultimately to every Canadian who requires drug therapy. It is in this context that I appear before you today to share our views on the impact of Bill C-91 and to urge you to consider fully all the presentations made as you deliberate on the future of this legislation.
When my colleague from Saskatchewan, the Honourable Lorne Calvert, made a presentation to the Senate committee considering Bill C-91 in 1993, he strongly suggested that extending patent protection and expanding barriers to generic drug entry would increase drug costs for the public and for government-funded drug programs. We believe this has in fact been the outcome. The committee has been presented with ample information that clearly demonstrates drug costs continue to escalate. In fact, the growth of expenditures on pharmaceuticals has outpaced all other components of health care budgets for many years.
.1135
These growing expenditures have presented significant challenges for provinces as we try to stabilize health care costs, a task that has been made all the more challenging due to dramatic decreases in federal support for health.
You've heard from various sources that Bill C-91 has resulted in higher drug costs for consumers. You have heard from seniors groups and others of the real hardships that result from high pharmaceutical prices.
Our government is frustrated at having been forced to restructure our drug program to address ever rising drug costs, particularly in the face of reduced federal funding for health. Yet the real impact of this legislation is just beginning to be felt. In discussing rising costs it is important to consider not only costs since the introduction of Bill C-91, but also costs into the future. In Saskatchewan we determined that the additional cost to consumers and our drug plan in 1996 of drugs that were caught in the retroactive nature of Bill C-91 was $3 million. In 1997 our cost will be $7 million, and by the end of the century, for this limited number of drugs alone - that is, the pipeline drugs - our conservative estimate is a cumulative cost of $31 million.
It is important to note that these are actual utilization numbers, and they are very conservative because they do not include hospital drugs or other new products. The numbers also understate the long-term impact of the legislation because they do not project the impact of the cost of new drugs. A Queen's University study that has estimated the cost of new drugs into the future places Saskatchewan's annual drug cost increases in the $13 million to $18 million range. In a province like Ontario that would probably translate to $140 million to $200 million per year.
Whatever way you look at it, drug costs have increased and will continue to increase substantially. The fact is we can argue all day about the numbers, but the bottom line would not change. Bill C-91 has resulted in increased drug costs, and unless it is changed it will continue to increase costs to consumers and payers.
I recognize that the overall cost of pharmaceuticals is a complex issue. However, patented drugs are an important component of that issue. I also recognize that price is not the only issue impacting on drug costs. Utilization is an important component. However, in any discussion on utilization the impact drug costs have on how drugs are used must be considered.
To illustrate the impact this legislation has had on consumers, one need only look to the example of the commonly known drug Prozac. Since the introduction of the generic alternative in January 1996, there has been a 70% decrease in the cost to Saskatchewan consumers. You can imagine what such a cost decrease means to individual consumers, and you can readily see what such a decrease means to a provincial drug plan.
We are left to conclude that in most cases where there is more than one supplier, competition would be the best way to ensure affordable prices for consumers. It is obvious the country needs an effective strategy to address the escalating cost of pharmaceuticals.
Your own National Forum on Health, chaired by the Prime Minister, has done extensive research on the impact pharmaceuticals have on positive health outcomes, and as a result has recommended a comprehensive national program for prescription drugs. Saskatchewan has always been interested in comprehensive pharmacare coverage and has in fact been providing it to the extent affordable for over 20 years. We concur with the forum that pharmaceuticals would, ideally, be part of a comprehensive medicare program. The question is, how do we get there from here? It is clear that a national pharmacare program can become a reality only if the federal government provides leadership by ensuring prescription drugs are affordable. Further, such a program would only be sustainable if the cost of prescription drugs remained tightly controlled. The recommendations of your committee will have a significant impact on the future viability of such a program.
Going back to increasing drug costs for a moment, you must ask what the trade-off has been. We recognize it has been beneficial to the pharmaceutical industry. And while a healthy pharmaceutical industry is desirable, the question remains, at what cost, and who will bear that cost? It remains to be seen if the trade-off has been fair.
.1140
It would appear thus far that fairness to the health of Canadians has been overlooked. Yes, international competitiveness is important, as is appropriate protection of intellectual property rights. Research and development are also important. However, these interests must be balanced with the need to seek improved health status by ensuring affordable programs that are accessible to all Canadians.
We would prefer that Canada had retained or would consider returning to compulsory licensing with fair royalties to innovators. Ministers Dingwall and Manley have indicated that the length of patent protection and compulsory licensing are not on the table because of their interpretation of Canada's international obligations. If that is the case, then I suggest there are several areas of this legislation where changes must be considered, changes that will help to ensure that the goal of a healthy pharmaceutical industry is not achieved at the expense of consumers, provinces, and other payers.
The question is, how do we provide relief to consumers and provincial governments who are bearing the burden of this legislation? In the absence of a willingness to reconsider the length of patent protection, I am aware that there are a number of technical changes that could make a substantial difference to consumers. If 20-year patent protection is a requirement, then I challenge you to ensure that it is applied appropriately. Is it appropriate that pharmaceutical companies have the ability to delay competition by evergreening their patents when this practice clearly inhibits generic entry into the product market, even after the original patent has expired?
I understand that many drugs hold multiple patents. Is it appropriate that slight modifications to an original product be considered innovative and deserving of patent protection?
I understand that other groups are proposing changes that would provide enhanced patent protection. We do not support the concept of patent restoration because it simply adds to the consumer cost of pharmaceuticals by even further delaying generic entry.
As you have already heard, the linkage regulations associated with Bill C-91 are of concern to many, and I share Minister Manley's view that the volume of litigation associated with this legislation is inappropriate. It appears that the linkage regulations have in some situations simply resulted in further delays of generic entry. Repealing the regulation is essential to eliminate unsubstantiated claims that delay generic entry. Further, drug patent disputes should be dealt with in the same way other intellectual property disputes are handled.
I would also submit that the early working and stockpiling provisions for generic products must be maintained. Removal of these provisions would again further delay generic entry and in effect extend patent protection.
The Patented Medicine Prices Review Board has presented information that suggests it has had a dramatic effect on drug prices in Canada. However, the facts clearly show that drug costs continue to escalate. Within its current mandate, the PMPRB appears to be controlling year-over-year price increases. However, the real issue is the affordability of prescription drugs for Canadians, because unfortunately the evidence is much less clear that the current mandate of the PMPRB is sufficiently broad to have a real impact on overall drug costs.
It is my understanding that drug costs are lower in OECD countries than in Canada. The question, then, must be asked: Is the mandate of the PMPRB broad enough to accomplish what it was created and intended to do?
As provinces, we must ensure that we are obtaining value for money. In the same way, the PMPRB should have the ability to go beyond price. I submit that several aspects of the PMPRB and the criteria used to judge excessive price must be reconsidered.
My first concern is the introductory price of pharmaceutical products. As you are aware, just 7% of the products, a mere 41 of the 581 products, have been designated as breakthrough products since the inception of the PMPRB. The remaining products, then, fall in the ``me too'' or line extension categories.
.1145
Are the current criteria appropriate? Are we allowing these products to be priced too high? Further, should the PMPRB guidelines be modified to encourage true innovation?
Our second concern is whether the PMPRB is using the most appropriate comparator countries. It is my understanding that the level of research and development is higher in these countries than in Canada. If the argument is that countries trade off higher prices for more research, then it is not clear Canada is benefiting to the extent that it should. Further, it my understanding that research funding should reflect the average in PMPRB reference countries, which is up to 18%.
Clearly, the pharmaceutical industry's promise to increase support for research and development was the quid pro quo for the benefits it was to receive from implementation of the provisions of Bill C-91. And it would appear that research dollars have increased under Bill C-91. Unfortunately, the overall amount and regional distribution of these funds continues to be problematic.
The additional costs of this legislation are spread equally across the country. It would appear reasonable, then, to expect research funding to be distributed equally as well. For example, the PMPRB has reported that Saskatchewan received 0.85% of the Canadian total of research and development funds in 1993, a total of $4.07 million, while in 1995 the total was 0.78%. Yet if research funds were more equitably distributed, Saskatchewan would have received something in the neighbourhood of $21 million based on a per capita distribution.
There is no doubt that the research funds we have received have come at an extremely high cost to the province and consumers. Statistics indicate that the pharmaceutical industry is now the leading funder of medical research in Canada, and doubtless much of this work is important. However, this research needs to be considered in a larger population health context.
What of research to improve our understanding of the determinants of health? What of research to expand our knowledge base in the management of health services? Have we developed a strategy where pharmaceutical companies direct too great a proportion of the research agenda in Canada? Will the industry fund the type of research needed to enhance the cost-effectiveness of Canada's health care system, or will the industry drive medical research in Canada to meet its own priorities?
I would refer to another recommendation of the National Forum on Health: that the administration and allocation of research funds be moved away from the control of the industry itself and into the hands of public granting agencies.
I would also suggest that the committee seriously consider the recommendation that would see the pharmaceutical industry be required to contribute to a national fund for health research. The fund should be broadly defined and at full arm's length from the industry, administered by the national research granting agencies and allocated through the normal peer-reviewed granting process, with regional equity factors built in.
The National Forum on Health has rightfully suggested that this is a reasonable outcome, given that additional funding has been purchased by Canadians through the privileges conferred by Bill C-91.
Again, if we are going to accept the trade-off between higher drug costs and additional research funding, the benefits should at the very least be distributed equitably across the country. It is incumbent on the committee to recognize that a more comprehensive approach to research and development is required.
In closing, I again thank you for the opportunity to present our concerns regarding the effect of Bill C-91, and I urge you to continue these regular reviews.
The facts indicate that extended patent protection has had a significant impact on Saskatchewan consumers. I urge you to re-examine Canada's trade agreements to assure yourselves and consumers that you have explored every option. Then, if extended patent protection is to remain, your focus must be on making the legislation more effective to minimize the negative impact drug costs have on the health of Canadians. Barriers such as the linkage regulations that keep generic drugs off the market longer and that result in higher costs must be removed.
Is it possible to make a distinction between the protection provided for breakthrough drugs versus minor modifications?
I urge you to examine the mandate of PMPRB. Are we using comparator countries that lead to higher than necessary introductory prices? Is the PMPRB mandate of looking only at price broad enough to effectively impact costs?
.1150
The increased cost of pharmaceuticals resulting from the introduction of Bill C-91 has clearly fallen to the public-private payers and government-funded drug programs. Further, if escalating costs are not brought under control, a national pharmacare program could not even be contemplated. Public insurers, private insurers, and individual consumers are being increasingly challenged to pay for needed medications. Our inability to do so may eventually have a negative impact on overall population health.
I know you will consider my comments objectively and in the spirit in which they are given, with the best interests of the residents of Saskatchewan and all Canadians at heart. Our common goal must continue to be improved health status for every Canadian by ensuring affordable programs that are accessible to all.
Thank you.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Thank you. Mr. Ménard you have 10 minutes.
Mr. Réal Ménard (Hochelaga - Maisonneuve, B.Q.): Mr. Chairman, it's a pleasure to see you again and I'd like to join with you in extending a most cordial welcome to our witnesses from Saskatchewan.
In your introductory notes, Minister, you mentioned that the introduction of Bill C-91 resulted in additional costs for the Saskatchewan health system, and thus for consumers, that might be as high as $31 million by the end of the century. You are among those who believe that Bill C-91 has had a rather negative impact on our public health care system. Would you be able to give us a bit more information about this amount of $31 million?
I'll ask my three questions at once, this should allow for a more direct exchange.
Secondly, you advocate the removal of the linkage regulation but I gather that you are in favour of retaining the possibility of stockpiling active ingredients before the protection expires in accordance with the Bolar provisions. Do you not think that this really amounts to asking for the best of both worlds and that logically we cannot expect to have both since in other systems, those that constitute the basis for comparison, both possibilities are not allowed? Either the patents are for a shorter period of time or else it is possible to take legal proceedings whenever there's some type of infringement but it is not possible to immediately start stockpiling active ingredients or ingredients that will make it possible to produce the drug in the short term. Don't you think that this recommendation goes too far? I'd like you to give us some examples where such provisions are allowed.
[English]
Mr. Cline: Monsieur Ménard, on the question of the $31 million, that is our projected increased cost with respect only to the pipeline drugs - that is, those drugs that were brought in retroactive to the effect of Bill C-91 but were already on the market.
I should tell you that Saskatchewan is regarded around the world as having among the best drug information data because we were quite early in establishing a drug plan in the 1970s. We think our figures are quite reliable, but those figures are really only for part of our drug costs.
In terms of the linkage regulations and the stockpiling provisions, we don't see those two as interrelated. Obviously they relate to both the issue of Bill C-91 and to patent drugs. But with regard to dealing with the linkage regulations, we don't understand why drug companies should be put in a position superior to that of any other parties that may be rightfully seeking the patent protection and the intellectual property rights they're entitled to. Nobody else has the advantage that the linkage regulations hold.
I know that some witnesses at this committee have suggested that there's a qualitative difference between drug manufacturers - because they're in the area of health - and other patent holders. Those witnesses have suggested that the protection afforded to drug manufacturers should be less than the protection afforded to people who hold patents in other areas.
.1155
What we are saying is that at least in the area of health and prescription medications and patented medicines, they ought not to be given some super added protection that nobody else is entitled to. That's our position.
In terms of the generic companies, we believe they're entitled to get ready for the end of a patent, moving away from the linkage regulations into the stockpiling provisions now. We think they're perfectly entitled to stockpile and get ready so that when they have the right to sell, they can go ahead and sell. We don't see those two positions as being contradictory at all. They may be different from those that others may hold - certainly the brand-name drug companies - but we do not believe they're inconsistent.
[Translation]
Mr. Réal Ménard: I am not saying that they're inconsistent but it rather seems to me that you want to have the best of both systems. Let's assume that we maintain protection for a period of 20 years. You are against a restoration clause allowing for additional protection because of considerations relating to the time required for certification. Are there any other countries in the world where before the time period is expired along with the guarantees relating to ownership - we are not merely talking about a legal or academic matter here - generic companies are allowed as of the 17th year to stockpile active ingredients that will eventually allow them to occupy a share of the market?
You say that the two are not linked. It is true that intellectually speaking the two are not linked but do you recognize that this provides a great advantage to generic companies? Do you have any indications or examples, since you mentioned that the province of Saskatchewan had looked into these matters, of similar cases or provisions in other countries where generic companies are allowed to stock ingredients that will allow them one day to occupy a part of the market before the patent has expired?
[English]
Mr. Cline: No, Mr. Ménard, we do not have examples of other countries where generic companies are allowed to stockpile. But we also don't think that is the issue. We think it's perfectly appropriate and legitimate for us as Canadians to apply rules we think are appropriate as a matter of good public policy. There's absolutely no reason, from our point of view, that Canada cannot provide leadership in some of these areas. When in discussing public policy matters one simply says - and I'm not suggesting you're saying this - our hands are tied and we must do what every other country does, to some extent we abdicate any opportunity for leadership and innovation. I can't name any countries where they have a similar provision, but that doesn't mean we shouldn't maintain the provision.
[Translation]
Mr. Réal Ménard: You say that we are faced with a problem, and I'm very much aware of it, namely the matter of research and development. You noted that you had obtained only 0.85% of the money spent by pharmaceutical companies. You are quite right in drawing our attention to this. It is a serious problem.
The report of the Eastman Commission pointed out that there was little being done in the way of in-house R and D in Canada. Do you recognize that one of the positive effects of Bill C-91 was to provoke a considerable amount of research amounting to $650 million? I know that there is a problem concerning the regional breakdown, but do you recognize that there was a positive impact on R and D done by the companies concerned?
[English]
Mr. Cline: As I said in my presentation, we recognize more money has been put into research by the brand-name companies. There's no question about that.
.1200
Some of the other witnesses who have appeared before your committee have made a few points. Some of them talked about regional fairness. This is an issue not just for Saskatchewan but actually for several of the smaller provinces. It's an issue that goes beyond the patent drug companies to the MRC and indeed the new innovation fund of the federal government. I've discussed this matter with Minister Dingwall. I believe six of the provinces are at great jeopardy in the research area. So there's the issue of regional fairness in connection with research.
There's also the issue raised by the national forum and also before your committee by the Coalition for Biomedical and Health Research - namely, that there should be some public scrutiny to ensure the research is in the public interest. We're not suggesting it isn't in the public interest, but that the public interest be made the best it can be, for want of a better word at the moment. As I said in my presentation, we believe the cost to the consumer of Bill C-91 has gone towards increased research. We therefore believe the public should have some say in the research and that all regions of the country should benefit on a more equitable basis.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Thank you.
Mr. Hill.
[English]
Mr. Grant Hill (Macleod, Ref.): Thank you very much.
I welcome you here.
One thing, Mr. Cline, you talked about is the patent disputes are handled differently in this industry than in others. I wonder if you could amplify on that, please. How are they handled differently?
Mr. Cline: My understanding is they're handled differently in that if a generic drug company wishes to introduce a generic drug, a patent drug company holding a patent that drug might be related to has the ability to file a document that has the automatic effect of keeping the generic drug off the market for a period of 30 months or until the patent expires, I believe.
In any other area where someone owned a patent and another person came along and wanted to produce a product that might infringe upon that patent, in the normal course of events that individual would be required to go to court and apply to a judge for an injunction. A judge would decide if there was what lawyers call a prima facie case or a pretty good argument there would be a breach, in which case the judge would order the product not be sold. In some cases the judge wouldn't order that because there wasn't a good case. But in this area drug companies are entitled to an automatic stopping of the generic drug whether or not a judge oversees it and decides there is a good argument in favour of it. We think the drug companies should be put to the same test as anybody else who owns a patent. But there is a special super added rule for drug companies, which came along, I think, with Bill C-91. I don't know if it came along with that.
Mr. Grant Hill: Fair enough.
You did comment about the amount of money that's spent in Saskatchewan now that Bill C-91 is in place. I think it would only be fair to say what funds were spent in Saskatchewan prior to this bill being enacted. Can you look at it historically and tell me where we stood?
Mr. Cline: I don't have the figure, but in Saskatchewan we probably are receiving more research dollars from drug companies than we have in the past, and that has occurred, I believe, since Bill C-91. There's no question about that. Of course the cost of that has been that we pay more for drugs. For example, in 1997 we estimate additional research spending in Saskatchewan will be $5.5 million, but increased costs due to Bill C-91 will be $7.3 million. So we welcome the research funding, but we don't like the increased costs. Certainly there is a trade-off between the two, and so far we haven't received what we think we might receive.
Mr. Grant Hill: One of the issues that has come up in this review is that much of the information for prescribing is provided by the drug companies to the physicians. I have tried to see if there is any consensus for a rather more independent method of giving prescribing information to the medical community. This fits into your evergreening and moving down the road. I'd like to know if you have any comments or thoughts on that sort of a process.
.1205
Mr. Cline: Yes, I think it's a very good point. I didn't raise it in my presentation, but we are concerned about direct marketing to consumers. I believe you are a physician, so you're familiar with that, as well as the drug companies' marketing efforts that go on at great expense.
We try to do two things. We have a drug formulary under the drug plan, and we try to approve the least expensive but equally effective drug, if I can put it that way. It's not referenced-based pricing. It's just a formulary that we have whereby the drug plan covers certain things and not others.
The other thing that we think needs to be done is academic detailing, which you may be familiar with. We try to get objective people, perhaps from the College of Pharmacy and Nutrition in Saskatoon, to deal with the issues directly in order to try to present a balanced and objective view to physicians, and not just the view of the drug company. I believe the Department of Health in Saskatchewan is just in the process of entering into a pilot project with Saskatoon District Health in order to see what we can do with academic detailing.
We think that if we get the information out to physicians, we can make a substantial difference - some estimate in the area of about 10% of drug costs. Whether or not that would be the case remains to be seen, but it's certainly something we should all follow up.
Mr. Grant Hill: You did also mention that this mandated review is useful. Of course it was mandated, it was legislated, and this had to happen. Do you see this sort of review as being worth while enough to legislate again, so that this could be turned over one more time in five years?
Mr. Cline: Yes, absolutely, and for two reasons. The experience we've had to date is not all the experience we will have with Bill C-91. We really haven't seen the full effects of it. So I think that should be reviewed. And the other issue is one of accountability. If there are obligations on the part of the drug companies in the area of research and development and in employment - as there obviously are - I think it presents a good opportunity to parliamentarians to examine whether or not the goals that have been set have been met and to hold the companies accountable. Without this kind of review, we may lose sight of what is really a very important issue, especially in light of the fact that the National Forum on Health and some federal politicians are talking about expanding medicare into the drug area.
Mr. Grant Hill: One thing that's missing in these discussions is the fact that we talk so much about price but don't talk about the benefits of the pharmaceutical industry. I don't mean in terms of jobs, but in terms of health. There is the example of a fairly famous politician recently getting so ill, virtually almost losing his life. The cost of treating his disease - his amputation, the intensive care and what not - was huge. If that problem had been diagnosed and treated early on with potentially a very expensive medication - let's say the medication cost $10,000 - it could have prevented a huge cost afterwards.
I say this almost in a philosophical sense: There is not just the cost of the start of the process, but the overall cost that we must look at. Would you just comment for me on that?
Mr. Cline: I think that's a fair point, Dr. Hill. People like myself who are raising some of these issues about Bill C-91 should not be taken to be saying that people who are innovative and work hard and invest money in research should not be rewarded. As the implication from your question suggests, we think people who are innovative and invest money in research should be rewarded. There's no problem with that, and there's no problem with patent protection. Of course the question is what the patent protection needs to consist of.
.1210
I would offer this perspective. One could argue that we actually don't reward innovation as much as we should, in the sense that we give the same protection to a drug company that comes up with a breakthrough product such as the one that would have had the beneficial effect you're talking about as we do to someone who is evergreening a product.
So even under Bill C-91, which of course is supposed to encourage innovation, we don't really draw a distinction as to when someone is truly innovative.
And I suppose we would argue that we should look at the level of research that goes into the development of the drug in a practical and factual way, and we should also look at the innovation involved. The PMPRB looks at whether something is a breakthrough drug. Maybe they're entitled to all the patent protection they presently have and maybe the others aren't. I tried to suggest that in my presentation. Maybe some distinctions should be drawn.
I certainly think your point is well taken. We're not here to say that nobody is entitled to any protection. We're here to say that we think there's a need for a greater balance than we have now.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Thank you. I now recognize Mr. Bodnar.
[English]
Mr. Morris Bodnar (Saskatoon - Dundurn, Lib.): Thank you, Mr. Chairman.
Mr. Minister, it's a pleasure to see you here today in an environment different from the one in which we normally meet.
You've talked about drug costs escalating and the high costs in the province of Saskatchewan. Of course you've related it to lower transfer payments. I won't get into a discussion with you over that, or we may end up spending considerable time here, but -
Mr. Cline: If I were you, Morris, I wouldn't want to talk about it either.
Voices: Oh, oh!
Mr. Morris Bodnar: I just might touch on that too, because it does relate to the lower interest rates that the province has, which tend to wash out the transfer cuts that occurred.
But with respect to the drug cost escalation that you talked about, you have not differentiated between generic drugs and patent drugs. Patent drugs are within our jurisdiction, and the fact we have before the committee is that the amount spent by consumers on the generic drug industry is far greater than the amount spent on drugs in the patent drug industry. And we don't have jurisdiction over the generic drug industry, so it creates a bit of a problem for the federal government.
Mr. Minister, cooperation is so crucial in this particular area for the control of prices, and since the generic drug industry is not controlled right now - while the Patented Medicine Prices Review Board controls patent medicines - I'm wondering whether you can indicate to us if you agree with the way they control it. It's another point, perhaps, that can be streamlined. But is the Saskatchewan government willing to authorize giving the PMPRB jurisdiction over generic drugs for the purpose of controlling the prices of generic drugs?
Mr. Cline: First of all, Morris, let me say what a pleasure it is to see you here on your turf - although Saskatoon also is your turf, I hasten to add.
Let me say first of all that according to Health Canada and the information that has been put before your committee, of the drugs that are prescribed by physicians to Canadians, $4.8 billion of them per year, I guess - my note doesn't say, but I think it is per year - are patent medicines and $2.9 billion are non-patented. And I suppose some of those would be generic.
But the point is that the majority of prescribed drugs are patent medicines. In Saskatchewan, the top 50 drugs account for 40% of the total acquisition for the cost of drugs covered under our plan, and over 50% of the top 50 drugs are on patent. The average acquisition cost for a non-patented drug in the top 50 is $22.54. For patented drugs, the cost is $41.35.
So in the area of prescriptions, my information is that most prescribed drugs are patented drugs. My information from our department is that generic drugs tend to be much cheaper than patented drugs.
.1215
But to get to your question about whether we would consider giving the PMPRB the authority to also look at the costs of generic drugs - and that would involve some inter-jurisdictional delegation - the answer is yes. We are quite willing to cooperate with the federal government in any way that will help control the costs of drugs to Canadians.
I might add that I've made it quite clear to the federal government that given appropriate circumstances we will also cooperate with the federal government with respect to initiatives that it may wish to take in the area of a national drug plan.
Mr. Morris Bodnar: Mr. Minister, included in the cost of a drug isn't just the cost to the manufacturer; there's a cost to other levels in the marketing of any particular drug, including the dispensing of that particular drug.
I've indicated before in our meetings that I'm very familiar with that because I'm on medication as well. In fact I have the misfortune of being on a patent drug and also on a generic one.
One of the biggest problems that I see in the cost of that drug - that's a visible problem - is the dispensing fee. In the province of Saskatchewan it is impossible to get a drug dispensed for a whole year. The dispensing fee has to be paid for every month. In other words, twelve dispensing fees have to be paid.
Here's what occurs. On one drug that I have, the cost is $18 a month. Of that, $6 is a dispensing fee. If you take the increase from $12 to $18, that's 50% in the dispensing fee. If you look at it the other way and discount it, it's one-third. But it's really a 50% increase in that drug, just for dispensing. That could be eliminated with a change of policy.
Has the province looked at controlling drugs in that area? Obviously in patent drugs we control the price of the patent drug, but in the areas of marketing, all the way to going to the consumer, has your province, our province, looked at controlling the prices in those particular areas?
Mr. Cline: In fact we do, in the sense that the dispensing fee is, to state the obvious, a fee that goes to the pharmacist, not to the government.
We enter into a province-wide contract with the pharmacists to set maximum fees. The pharmacists can charge lower fees if they want to, and in fact some of them do. Some of the larger chains have a smaller fee than some of the independents do.
But I think in fairness to the pharmacists I would say that our concern when it comes to drug costs is not the dispensing fee to the pharmacists. I appreciate your point and I understand it, but we are talking about very expensive drugs being a problem to Canadians and consumers. We're not talking about dispensing fees being the big problem. In fairness to the pharmacists, a lot of these people throughout small-town Saskatchewan are very important to their communities. They're running their small businesses in their communities. They depend upon the dispensing fee in part for the health of their businesses.
I understand your point, but we do not see this as a major issue, nor do we believe that the pharmacists are being unfairly paid, although I know that it can be a bit of an aggravation.
Mr. Morris Bodnar: Mr. Minister, with respect to Bill C-91, I believe you've indicated that the problem of Bill C-91 is the escalating drug costs. Yet when I look at Statistics Canada reports, I see that from 1991 to 1992 the cost of drugs in Saskatchewan dropped. From 1992 to 1993 it dropped again. From 1993 to 1994 it dropped again, and that's where my stats end.
.1220
There has been a drop every year, yet you're saying you are frustrated in trying to deal with the rising drug costs in Saskatchewan. Drug costs are dropping. In fact, when it came before this committee the PMPRB indicated that patent drug prices have dropped in the last three years, while the generic prices have been going up. Is there in fact a problem with drug prices, or is this just the ongoing, continuous rhetoric that occurs between federal and provincial governments trying to put the blame one on the other for the rising prices, costs, or difficulties in any particular area?
Mr. Cline: No, it is not. If we were here to engage in rhetoric, the tone of our presentation would be considerably different from what it has been.
As you know and as the committee has heard, there is a difference between the cost of drugs and the price of drugs. We understand what has happened with the prices of prescription drugs under the jurisdiction of the board. Nevertheless, the overall cost of drugs has increased. That is obviously due to a variety of factors, such as utilization - which I mentioned in my presentation - and may be due in part to something happening on the generic side.
In terms of the overall cost that we're spending on drugs, I'm not sure. I understand you have some figures there. My officials tell me that this is not necessarily our understanding, but there may be reasons for why the figures you have indicate what they do, and they may involve changes to the drug plan. I don't know, but we'd be happy to discuss that further.
The fact that patent drug prices have come down under the jurisdiction of PMPRB does not necessarily mean the prices are fair. For the reasons that I and others have indicated, maybe they were too high in the first place.
I guess I would say that in every area of health care across the country, costs have been contained. From Health Canada and from the presentation of Mr. Dingwall in front of this committee, we know costs haven't been contained in the area of drugs. It's a very real problem. Bill C-91 isn't the only component of the problem - I said so in my presentation as well - but it's undoubtedly part of the problem, in our opinion.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): That would be the last.
[English]
Mr. Morris Bodnar: I have one question to deal with. Of course I have others I'd like to deal with, but I don't have the time.
A problem that I see in changing the patent period for drugs is the destruction of the biotech industry in my province. Such an industry can easily pack up and be gone, what with the changes in a return to licensing that occurred with the pharmaceutical industry some years ago. It also occurred with the farm chemical industry years prior to that, and that industry moved out of the country. I don't want to see that happening to the bio-pharmaceutical industry.
As you have indicated, Mr. Minister, getting research money set aside into a separate agency - whether or not it's a federal agency - for dispensation on an equitable basis across the country can be done by the federal government, but only in dealing with the patent drug industry. Is the province willing to cooperate to see that a similar amount of research money is set aside from the generic industry in order to be dispensed in a similar way for the purpose of research?
Mr. Cline: First of all, let me say that in terms of the ag-biotech industry and the biotech industries that are developing in our province, I'm sure you're aware that it's part of the strategic economic development plan of our government. It has been for some five years since we assumed office -
Mr. Morris Bodnar: Both governments.
Mr. Cline: - yes, and your government - to foster that in the province of Saskatchewan. In fact, we've been very successful. But what I would suggest to you is that for me to say the drug companies are not entitled to the special protection afforded by the linkage regulations is not to say the biotech industry in Saskatchewan is not entitled to the intellectual property rights that it enjoys. But there are degrees of fairness.
.1225
It is our suggestion, which I've presented in detail, that even if you continue with Bill C-91 as it is, there are a variety of technical changes the government can make that would be fair. Those changes do not impact at all on the intellectual property rights enjoyed by the biotech industry in Saskatchewan. Of course it is not our position that those rights should be affected at all.
In terms of your question about the generic drug industry, I must admit that is something we haven't looked at. But I have to say I think the generic drug industry in Canada has done a pretty good job of employing people in the country. Undoubtedly they do some research. I don't know what their books are like, but if there's the capacity on their part to contribute to research, as we believe there would be given the profits of the brand-name companies, and if it would be fair for them to contribute to a research fund that would be distributed equitably across the country, then certainly if it's fair and reasonable the Province of Saskatchewan would be willing to cooperate with the federal government in bringing about that kind of system.
One of the issues we're very concerned about is the inequitable distribution of research funding in this country, including under the Medical Research Council, where if we don't do something, pretty soon six of the provinces aren't going to have any federal health research money. So yes, we're very interested in working with you in that regard.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Each party can have one question on the second round. Mr. Ménard.
Mr. Réal Ménard: Thank you, Mr. Chairman, that's awfully sweet of you.
First of all, I apologize for missing a part of the exchange but I had to leave the meeting because Minister Allan Rock announced very important measures for the constituency I represent.
You twice mentioned that there are six provinces; you didn't identify them but it's still a large number that will no longer enjoy any federal R and D support. Are you referring to the reductions in the transfers? What exactly do you mean?
[English]
Mr. Cline: No. The six provinces are those other than Quebec, Ontario, Alberta and British Columbia. It's the six smaller provinces. I believe, Mr. Ménard, the Medical Research Council's budget in Canada has been cut by about 10%, a real cut of 36% in medical research funding from the federal government in the last number of years.
Of the money the Medical Research Council receives, in the last several years the amount that goes to the four larger provinces has increased from about 83% to about 92%, I believe. If that trend continued, then early in the next century all of the funding for the Medical Research Council would go to the four larger provinces. This is an issue not just for Saskatchewan but also for Nova Scotia and all the rest.
One of the things we're trying to do in cooperation with Mr. Dingwall is to say we need some regional factors built into that system. We believe the same applies with regard to the innovation fund that was recently announced in the federal budget. And we believe something also has to be done with regard to the research money that is provided by the patent drug companies.
Mr. Joseph Volpe (Eglinton - Lawrence, Lib.): Mr. Cline, I don't really have much of a question, but I would like to make just a brief comment, if you'll permit.
First of all, it was a very balanced presentation. I appreciated the tone. I might take some exception to your opening comment that it's the industry committee that's reviewing this particular piece of legislation. It's also the industry committee that defends the interests of consumers, and the industry committee was augmented by a representative from the health committee, specifically the parliamentary secretary for health, to make sure the considerations of this review were taken in the context of health matters for Canadians.
.1230
The one question I would have for myself and on behalf of patients and consumers everywhere is that if in your view the status quo does not translate into lower prices and lower costs, does the list of five suggestions you proposed for consideration of the committee result in lower prices and lower costs for the consumer?
Mr. Cline: First of all, Mr. Volpe, I'd like to say I certainly appreciate your point that the industry committee also looks out for the interests of consumers. In fact we had not mentioned that in our presentation, and I think it's a fair point.
We believe the five points we raised would result in generic drugs being available to Canadians earlier, in particular the abolition of the linkage regulations and the continuing of the ability to stockpile. Our experience has been that the cost of generic drugs is roughly two-thirds of that of patented drugs. So yes, we think that would assist in lowering the cost of drugs, not just keeping them under control but actually lowering them by getting the generics onto the market sooner.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Thank you, Mr. Minister, Ms Yeates and Mr. Wilson, for appearing before our committee this morning. I'd like to thank you for your presentation. I now suspend our meeting for a few minutes to allow our witnesses to take their place.
.1231
.1238
The Vice-Chairman (Mr. Pierre Brien): We are resuming our sitting. I'd like to welcome the representatives of the government of British Columbia, the Honourable Ms MacPhail, Minister of Health, Ms McFarlane and Mr. Hudson. We'd like to welcome you to the Standing Committee on Industry studying Bill C-91. We would request you to make a brief presentation so that we have more time for members' questions. We have an hour altogether. Without any further ado, I give you the floor, Ms MacPhail.
[English]
Hon. Joy K. MacPhail (Minister of Health, Government of British Columbia): Thank you very much. It is a great pleasure to be here. Although I think I probably should have brought you lunch in order to put you in a good mood, unfortunately I couldn't find anything. I know I'm the last presenter of the day, so I really do appreciate that you are taking the time to hear us, especially given the hour.
As the last speaker you're going to be hearing from, and as Minister of Health, I want to shift the focus a bit from industry's interests to the interests of patients. I know my colleague the Hon. Eric Cline also took the same focus.
I recognize that this committee and this process are not focused on the full range of issues relating to the drug industry, but it really is important to review the drug patent law within the broader context of patient care.
.1240
The Government of British Columbia has serious concerns about how multinational drug companies currently operate in Canada. We recognize that drug companies exist to make profits, but drugs are not just another commodity. We're not just talking about shampoo or toasters here; we're talking about an essential element of the Canadian health system. We believe the large multinational drug companies have had their way in the past, and it's time to stop. It's time to put the interests of patients ahead of drug company profits.
I see us today - the committee and our provincial governments - at a crossroads. This committee has a chance to do much more than simply rubber-stamp the status quo. You really will be choosing between serving the interests of patients in Canada or ignoring patients while instead continuing to fill the pockets of multinational drug companies.
The National Forum on Health says that we must have a national drug plan for Canadians. British Columbia agrees, and is prepared to play a leadership role in bringing one about, but a viable national drug plan simply will not be possible as long as the drug patent law stays as it is today. The costs would simply be too great. If you're not prepared to make the necessary changes to Bill C-91, it is my view that a national drug plan simply will not be viable, and the future of B.C.'s pharmacare program will continue to be threatened.
If we extrapolate the most conservative estimates of the Queen's University study, Bill C-91 is costing Canadians hundreds of millions of dollars every year. People in my province of British Columbia alone are paying about $40 million in excessive drug costs each year. There are some charts on this in your own kits, but we also have them available here for you. It's really $40 million that could be better spent in expanding pharmacare benefits. The chart that you have shows what that could pay for. That $40 million is about a year's worth of life-saving insulin for 20,000 diabetics. It would pay for 2,500 heart operations in my province. It would be enough to provide 8,000 cancer patients with treatment for a year. The cost of Bill C-91 is very real, and it has put B.C.'s pharmacare program at risk.
If you have the courage to amend Bill C-91 and make other changes to more effectively regulate multinational drug companies, it will then be possible to move forward on a viable national drug plan. British Columbia has developed initiatives that could play a really big role in the success of a national drug plan. Over the recent years we've worked hard to improve and to protect our pharmacare program, but we now know we just can't do it alone.
In my presentation today I want to focus on two major areas of concern. The first is excessive prices of new drugs and the second is excessive and inappropriate drug use.
The prices of most new drugs being introduced in Canada are excessive, particularly new drugs that are not significant breakthroughs. The Government of British Columbia strongly supports patent protection for breakthrough drugs. We have a thriving biotechnology industry in B.C., and we're well aware that developing totally new medicines is a risky business. Canadians badly need basic research into conditions such as Huntington's chorea or Alzheimer's disease, for which there is currently no drug therapy.
Patent protection for breakthrough drugs is essential if we're going to encourage high-quality research into new drugs. Think of what Canadian science has accomplished in the past, starting with Banting's and Best's discovery of insulin. We have a rich research tradition producing such recent breakthrough drugs as 3TC for AIDS patients. These breakthroughs have benefited patients as well as industry, and they're valuable and should be encouraged.
Unfortunately, instead of focusing on research into areas in which there are few or no drug therapies, the multinational drug companies instead focus on researching and marketing drugs that differ only marginally from what's already on the market. That's because it's cheaper to develop me-too drugs that can be brought to market and can produce significant profits more quickly while being protected by Bill C-91. One of the graphs in your charts shows that more than 90% of new drugs introduced each year into Canada are me-toos or line extensions. Fewer than one in ten represent a real drug breakthrough.
.1245
Because me-too drugs offer no significant therapeutic improvement over existing drugs - they're riding on the coat-tails of true innovations - me-toos don't deserve the same patent protection or the same level of introductory pricing as true breakthroughs. Bill C-91 must be changed to encourage innovation and not imitation.
You've heard from others that the price increases for regulated drugs have been modest in recent years. However, these claims suffer from a major flaw. A record of low price increases is meaningless if the introductory prices are unreasonably high in the first place, and that's what's happening consistently, particularly in the case of me-too drugs. I just want to provide one example that's based on the daily cost to our pharmacare program.
Toradol was probably the fifteenth or sixteenth non-steroidal anti-inflammatory drug introduced onto the market. Like other me-too drugs, there was no evidence that it was superior to Ibuprofen, which cost 3¢ a day for each patient. However, Toradol's introductory price was 61¢ a day, 20 times as much.
You can see from this next chart how skilful marketing can capture substantial market share in the absence of therapeutic advantage. This chart describes our own province from 1992 to 1995. Toradol was prescribed 165,000 times compared to the 140,000 times for the much more cost-effective Ibuprofen, and that was only due to very aggressive marketing.
I must say that our concern about the high prices goes beyond patent protected medications. There's also a problem with the pricing of drugs that aren't patented but are produced by only one supplier, because they have a particularly specialized or small market. Patients requiring such medications are often really at the mercy of big drug companies. These drugs are susceptible to unreasonably high prices and then on top of that have been subject to outrageous price increases.
In your package there are copies of two letters that highlight the problem. They're letters from my province. Activase is the potent clot-buster that has changed the way we have managed the acute phase of a heart attack. Hoffmann-La Roche recently imposed a $500 price increase for each dose, raising the price to $2,700. In this case, the drug company actually gave up the patents to escape the PMPRB regulatory authority. Now I know that this practice has been recently regulated. However, because this drug, Activase, is still not captured by that new regulation, this price hike will cost British Columbia $680,000 in extra costs for this drug alone, each and every year.
Myasthenia gravis is a rare chronic neurological disorder that used to be universally fatal. Drugs that were developed forty years ago, when taken on a daily basis, can restore normal function. In 1995 a single-source supplier arbitrarily tripled the price of these drugs to patients suffering from myasthenia gravis. Again, the regulatory framework of Bill C-91 provides no recourse for this outrageous price inflation.
Because of examples like this, we believe the regulation of drug prices should be extended to include single-source drugs that don't have patent protection.
Another contributor to unreasonably high drug costs is the unfair Bill C-91 barriers that stand in the way of generic competition once patent protection for a drug has expired. You've heard from others about this concern.
Bill C-91's notice of compliance provisions cause unreasonable and unnecessary further delays to the introduction of lower-cost generics for patients. This provision exists nowhere else in Canadian patent law. It strips the rights of generics and provides special protection to brand-name drugs. It could be eliminated today by the federal cabinet with a stroke of the pen, and it should be eliminated.
.1250
Another barrier to the generic market entry is evergreening, the practice of taking out additional patents strategically timed to extend the effective period of patent protection. I'll just give you an example of that. I understand that enalapril, a commonly used anti-hypertensive, has more than 40 separate patents. This actually is a drug whose patent was restored under Bill C-91.
These barriers to generic entry hurt all of us. Neither of them stands up to the test of common sense that you or I, as average Canadians who may be patients, would expect of them.
Whether we're talking about me-too drugs instead of breakthroughs, excessive prices or barriers to generic entry, the result is the same. The multinational drug companies are getting protection unlike any other industry. As a result, they have the highest profit margin of any manufacturing sector. It's twice as high as that of the banks. The people who are paying are patients and drug plans, such as our publicly funded B.C. pharmacare.
To establish a national drug plan without changes to Bill C-91 would continue to take dollars out of the pockets of patients and put them right into the pockets of the multinational drug companies. That's just simply wrong.
I'd like to share with you what we're doing in B.C. to get the best deal even with the failings of Bill C-91 and also to cope with cuts in health transfer payments. I'm sure you know that British Columbia has the most comprehensive drug plan of all the provinces, but our pharmacare program is under tremendous pressure as increasing drug prices, new drug prices, and the proliferation of expensive me-too drugs have increased financial pressures on our plan.
I want to share with you the progress we've made in B.C. to protect and actually expand our drug plan in spite of that. I'm going to start with our reference drug program, which is the first of its kind in Canada. Under this program, when several medications are proven equally effective, pharmacare will pay for the one that's the most cost-effective. The program does not in any way limit what the physician can prescribe. For example, if there's a reason for a second-line medication, pharmacare will still cover the cost on the recommendation of the physician. The reference drug program protects British Columbians from the cost of expensive me-toos in certain areas of common drug therapy. It does this by using the best scientific evidence to determine the most cost-effective therapy for a given condition.
I want to show you how this comparison shopping works. This program is projected to save us $74 million over two years. Here's exactly what has happened. We have a drug of which one dose costs 14¢. It's equally therapeutically effective as a new me-too drug that costs $1.12 per dose. We pay for the 14¢ one. If the doctor says to us, ``I'm sorry, my patient needs the ranitidine'', then they merely send in a form and within 24 hours they have approval to pay for the higher-cost drug.
Again, as I say, this program has saved us $74 million over two years on our drug program, which has annual costs of $430 million. In this way limited public dollars can actually provide the greatest possible public benefit, and pharmacare covers therapies that have been proven to be effective. The reference drug program has been attacked by the multinational drug companies, but it is working for British Columbians.
Actually, as the National Forum on Health observed, given the balance of economic interest it's probably not too far-fetched to suggest that the probable effect on drug costs of any public or private reimbursement policy can be gauged by the tone and vigour of the industry's response. I will tell you the industry's response to our reference drug program has been aggressive, vigorous, and unrelenting. They lost their first court attack on us, but they're proceeding with an appeal.
.1255
The savings, I might add, of our reference drug program have all been plowed right back into our pharmacare coverage. We've added new coverage for patients with cystic fibrosis. We just listed and are paying for betaseron, a breakthrough drug for multiple sclerosis.
The reference drug program is a success for British Columbians, but the reality is that over the long run it has to be supported by some action here in Ottawa. If B.C. is to continue to protect our pharmacare plan and if we're going to create a sustainable national drug plan, we can only do it with changes to Bill C-91.
So I'm recommending that the federal government take action to bring down the prices of new drugs for patients by limiting protection for me-too drugs and discounting the introductory price of me-toos. In order to help patients get lower-cost generic alternatives sooner, cabinet should immediately eliminate the notice of compliance linkage provision and stop the abuse of patent protection represented by evergreening. To protect patients who need specialized drug therapies, it should expand pricing regulation to also cover single-source, unpatented drugs.
This brings me to my second major area of concern; that is, excessive and inappropriate drug use because of the marketing practices of the multinational drug companies. This is an area of concern that has been specifically excluded from Bill C-91, and legislation must be developed to cover this area. The pharmaceutical industry in Canada spends more on marketing than it does on research. In 1995 it spent 16% of sales on marketing compared to 12% of sales on research and development. That works out to $950 million spent on marketing. That's more than we spend on all 16 medical schools in Canada.
Recent articles in the Canadian Medical Association Journal have raised serious concerns about the self-regulation of drug company marketing to physicians. In Canada the regulation of marketing by multinational drug companies is very limited, and enforcement of the current self-regulation is deficient. Right now Canadian physicians get most of their information on new drugs directly from drug company sales agents or from advertising. The proof of the pudding is that the drug industry spends an average of $20,000 per doctor on marketing. I think physicians need and deserve accurate and unbiased information about new drugs that's free from the marketing hype. The reality is that drug industry marketing is intended to encourage more drug use and not necessarily appropriate drug use.
The current marketing practices of the multinational drug companies really put our physicians in a difficult position. At the inception of medicare the average physician needed to know about fewer than 200 different drugs, but today that physician and new physicians face an array of more than 2,500 different drugs, with more coming out every month.
Drug industry marketing aimed at doctors, known as commercial detailing, literally bombards our physicians with very narrowly focused promotional materials. On top of that, free drug samples are a part of this marketing strategy. For instance, powerful antibiotics, the quinalones, are handed out as free samples, and the unnecessary use of these samples contributes to an alarming rise in antibiotic resistance in the community.
An appropriate professional relationship between doctors and the drug industry must begin in medical school. Hamilton's McMaster medical school really has set an important precedent by restricting drug company promotional activities in the faculty.
In British Columbia we're not just concerned about marketing targeted at physicians. We're equally concerned about the potential damage of drug company advertising aimed directly at consumers. British Columbians want education about prescription drugs, but we don't want advertising. Drug advertising directed at consumers has only one purpose, and that's to increase drug sales. Anyone who tries to argue otherwise will sound remarkably similar to the tobacco industry, which has also long denied that its marketing is done to increase sales.
.1300
We only need to look at the U.S. experience. In a few short years, the money spent by drug companies on direct-to-consumer advertising has increased tenfold. We cannot afford that, and we don't want this type of advertising to spread in Canada. On my trip out here on the red-eye, I was reading a magazine purchased here in Canada. This is an advertisement - a copy of it is in your kit - out of Redbook, a very popular women's magazine from the U.S. American magazines coming into Canada have this kind of advertising in them. This is advertising Serevent, an asthma-treating drug that our government has serious concerns about. We've put it on special authority. Yet there it is being advertised in the same way in which they advertise cosmetics through the use of direct-to-consumer.
I must say that when I travel in the U.S. and see the U.S. magazines - and I confess I read the women's magazines when I'm travelling and relaxing - I am amazed that in some magazines there are more drug advertisements now than there are cosmetic advertisements. They are targeted in the same way and aim to do the same thing as cosmetic ads: they target and promote youth and wellness - and that's wellness from a point of view of youthfulness and beauty. The ads are targeted in such a way that will only say to the uninformed consumer that he or she needs this drug.
I'd like to share with you what we're doing in B.C. to actually provide some independent, science-based information about drugs. We've developed three initiatives as alternatives to dependence on the drug company marketing.
First, we have the therapeutics initiative. It brings together physicians and pharmacists to assess new drugs and to provide physicians with independent information on their clinical effectiveness. It's based on the best scientific evidence.
Second, we've initiated a pharmaco-economics initiative designed to independently assess the relative cost-effectiveness of different drug therapy. It's not just aimed at short-term cost-effectiveness. It looks at the long-term cost-effectiveness of drug therapy, and at the whole health care system as well.
And third, we have a demonstration project on the north shore of the lower mainland. It is a community drug utilisation program that offers physicians an unbiased alternative to drug industry marketing and enhances their quality of prescribing. We have unbiased health professionals. They actually visit the physicians and provide accurate information on drugs without any sales pitches. We get the doctors there by advertising that they get pizza, but when they get there they actually have to pay for the pizza themselves. There's no marketing strategy to even get to them to attend.
Just as with drug prices, we need national action in this area. I am recommending that the federal government must regulate drug industry marketing targeted at physicians. We need to expand national therapeutic and pharmaco-economic initiatives such as COHTA, as well as an expansion of the use of successful strategies such as academic detailing. We need to prohibit direct consumer advertising and we need to restrict drug company promotion at Canadian medical schools. We will then truly be putting science ahead of salesmanship in order to improve prescribing in Canada. We will be putting the needs of patients ahead of profits for multinational drug companies.
Chair, I will conclude by reminding you that the drug patent law isn't just an industry issue; it's about the health of all Canadians. A viable national drug plan for all Canadians is essential, but it won't be possible if Bill C-91 remains unchanged.
I know you're reporting very shortly, but I know you're going to take into account all of my comments even with your quick reporting. You really do have an ability to make a difference to millions of Canadians who all, at one time or another, have to rely on drug therapy. So I say on behalf of the people of my province, British Columbians, and those all across the country: stand up for patients and stand up for a viable national drug plan.
.1305
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Thank you for your presentation, Minister. Mr. Ménard, you have ten minutes.
Mr. Réal Ménard: I very much appreciated your presentation. I realized that you're certainly the kind of minister who gets things done. I appreciate particularly the humanistic approach taken in your presentation and your concern for consumers and the sick.
You raised several rather unusual points that were not mentioned by other witnesses. I'd like to go back to three aspects of your presentation to be sure I've understood.
You made mention of the action taken by Hoffmann-La Roche, something you deplore. The company gave up a patent to get around regulations and this resulted in considerable costs for the public system. Would you explain exactly what they did? I hope that it will be clearly noted in the minutes of this committee so that we can share your indignation, provided we clearly understand what exactly you are referring to.
[English]
Ms MacPhail: There is a letter in the kit explaining in detail the drugs I'm referring to, so if I get any of the medical details wrong, they can be corrected by the letter. It's a letter from Dr. Nakagawa, who is a pharmacist.
This drug therapy is not a new drug therapy. There were no added costs to change the research attached to it. There were absolutely no changes to the drug therapy whatsoever, but the drug company, which is the single-source drug company of it, since no one else manufactures this drug, just announced -
[Translation]
Mr. Réal Ménard: Do I take it that the patent for the drug had expired and Hoffmann-La Roche no longer came under the Board's authority?
[English]
Ms MacPhail: No, it wasn't. Well, they gave it up. The drug company said it didn't need a patent on this, because it was the only one producing it, so it willingly gave up its patent to avoid being subject to the price review board. By giving up the patent, nobody had control over it. It was taking a very, very low risk in giving up the patent because the company was the only one producing the drug. Nobody therefore regulates the company, and in that unregulated environment it increases the price of the drug by $500.
What happens if a patient is subject to the cost of that drug? It's really unconscionable. There was no therapeutic necessity or research necessity for increasing the costs. In fact the company basically said it was what the market will bear.
[Translation]
Mr. Réal Ménard: Mr. Chairman, like me, you have taken note of the witness's answer. I hope that before the end of our work Hoffmann-La Roche will be able to provide us with an explanation. We know that in some respects the company has been an excellent corporate citizen but practices such as those you describe are completely unacceptable.
You also refer to another example or technical detail explaining why the Price Review Board was not required to intervene. I did not quite understand what you were talking about. You gave two examples, the first relating to Hoffman-La Roche. What exactly was the second one?
[English]
Ms MacPhail: It's the drug from myasthenia gravis. It's an old drug. It's 40 years old, but it has proven to be very effective. There is no patent on it because it's a 40-year-old drug, but it's a single-source drug. No one else produces it. It's unregulated. It's not subject to the price review board, and the company substantially increased its price again.
Our point is that in the case of single-source drugs, where there is no market competition, probably because they're single source, and they don't require a patent or the patent has expired, those drug prices need to be regulated and controlled. The patient has no choice, nor do we as the payers of the drug. We really are the consumer. We have no choice.
.1310
[Translation]
Mr. Réal Ménard: In this case the Review Board was unable to intervene because the patent had expired?
[English]
Ms MacPhail: Yes.
[Translation]
Mr. Réal Ménard: You know that once patents are expired, obnoxious practices may take place and you are recommending that the committee take a close look at this specific aspect of the price control of drugs.
[English]
Ms MacPhail: Just for single-source drugs, where no one else is on the market.
[Translation]
Mr. Réal Ménard: You also spoke very eloquently about the kind of advertising aimed by pharmaceutical companies at physicians. You said that pharmaceutical companies spend an average of $20,000 per physician to convince them of the efficiency of their products. You say that at one time a physician had to be familiar with about 200 products, but now with advertising there are 2,500 products. You drew to our attention the discrepancy between what a physician is expected to know and the kind of pressures brought to bear when it comes to prescribing drugs.
You noted that 16% of the expenditures of pharmaceutical companies were devoted to marketing and 2% to R and D. We have to be careful about this. I'd like you to table with the committee your sources for this interesting information. Do you agree that at the present time the advertising of prescription drugs is forbidden?
[English]
Ms MacPhail: To consumers, directly to consumers.
[Translation]
Mr. Réal Ménard: To consumers. What you want is for us to -
[English]
Ms MacPhail: Yes.
[Translation]
Mr. Réal Ménard: Be more strict on advertising aimed at physicians. Is that what you are asking for?
[English]
Ms MacPhail: Well, I'm saying two things. First, it's a myth to say that there is no direct-to-consumer advertising. I got the advertisement I showed you in Canada. You can go to the cigar store or the local corner store right here in Ottawa and pick up a dozen magazines that have direct-to-consumer advertising, because American magazines are coming in here and we do nothing about it.
The statistics on the percentage of drug sales spent on advertising comes from a Canadian expert, Dr. Joel Lexchin, who has recently published an article in the Canadian Medical Association Journal, in which he addresses the self-regulation of drug companies. He is a renowned expert.
[Translation]
Mr. Réal Ménard: In any case, if it is possible, I would appreciate your tabling this information on physicians with the committee. Mr. Chairman, you know that documents are precious to us. I know that you yourself read them. You are a man who does his reading very assiduously.
You presented an unusual point of view that we haven't often heard. You've made a very original and interesting presentation, quite progressive in its outlook. I think that we committee members should take action on a certain number of points that you drew to our attention, particularly the behaviour of Hoffmann-La Roche.
That being said, you will recognize that it is desirable for pharmaceutical companies to engage in R and D. As for the amount of their income that these pharmaceutical companies spend on marketing to physicians, I think that that is their prerogative. Don't you think that a distinction should be made between advertising to consumers and the advertising that pharmaceutical companies aim at physicians?
[English]
Ms MacPhail: Yes, I do, but let me be clear. The evidence certainly in our province is that advertising to physicians increases excessive drug use without any therapeutic value.
I have another example. I didn't include it in my kit because even I'm shocked at how dramatic it is. This says ``I Have a Rendezvous with Death''. Over that it has the name of a drug company, Coreg, and it reads ``Call and Cancel''. This is advertising directly to physicians. There's nothing on this page that has anything to do with physician education. It's excellent advertising, but it doesn't have anything to do with education. This is in a medical journal. I didn't want to put it in the kit to skew my argument about direct-to-consumer advertising, but that is to doctors.
.1315
Let me just be clear on what percentage of research actually is on breakthrough research. A very minuscule amount of the research money is actually spent on breakthrough drugs.
In terms of our physicians, let's just talk about our health care providers or our -
[Translation]
Mr. Réal Ménard: You are getting onto sticky ground.
Be careful, because you know the importance of accurately reflecting the facts. As committee members we have had access to different figures mentioned in the annual reports of the Patented Medicine Prices Review Board. As you know - judging from your appearance, I don't think you could be much more than 35 years old - as part of the recommendations it made around ten years ago, the Eastman Commission, presided by a Canadian of Swiss origin, claimed that there was not any domestic research industry in Canada.
We must at least recognize that since Bill C-91 was adopted, the brand name drug industry has invested more than $600 million. So you cannot claim that there has not been any R and D or innovation. I suggest you be a bit more cautious. That does not mean that certain aspects of the regulation should not be reviewed.
Mr. Chairman, when this kind of thing is circulated, there is reason to be concerned. As a matter of fact, I'll show it to you, Mr. Chairman.
The Vice-Chairman (Mr. Pierre Brien): That will be your last comment. You may speak now, Ms MacPhail, followed by Mr. Hill.
[English]
Ms MacPhail: On advertising to doctors, we have the evidence that the minute a more expensive drug comes on the market and drug companies start aggressively marketing it to doctors, the change in prescribing patterns skyrockets towards the aggressively marketed drug, at great expense to our pharmacare program. There's direct evidence.
I must also say that doctors themselves, especially young doctors and the medical school students I've talked to, are really crying for a different method by which they become educated about pharmaceuticals. They really are desperate for it.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Mr. Hill now.
[English]
Mr. Grant Hill: Thank you very much. It's very interesting testimony.
I read in your presentation that drug companies have higher profit margins than the banks do. I'd like to have you expand on that for me.
Ms MacPhail: It's from Statistics Canada. The profit margin on banks is 14% and on drug companies it's 28%.
Mr. Grant Hill: You'll source that for me?
Ms MacPhail: Yes, I will. It's before tax in both cases, but I'll source it for you, yes, absolutely.
Mr. Grant Hill: Okay.
I was also intrigued by the interesting example you picked with neostigmine, which is the drug for myasthenia gravis. In my 25 years in practice I diagnosed two cases of myasthenia gravis. Now, I'm not a neurologist; I have a general practice. I wonder whether you could speculate for me why there are no competitors for Hoffmann-La Roche and neostigmine.
Ms MacPhail: Again, I'm an economist and not a health care expert at all, except for the fact that I'm a politician responsible for the system and take it very seriously.
My understanding is that the drug works fine. You're right, there are very few patients who would make it in any way profitable for anybody else to do any more research to have a breakthrough drug when there's a drug already on the market that works just fine. That would be my view.
Mr. Grant Hill: Let's just say that the equipment the company used to manufacture this product was outdated and it had to undergo significant expense to bring it into the frame of reference. It was good manufacturing practice. That's in fact what happened with this particular medication.
Ms MacPhail: I'm sorry, did that happen?
Mr. Grant Hill: Yes.
Ms MacPhail: No, it didn't. In fact, in both the examples we used, we were looking for some explanation from the companies for the change, that perhaps, as you rightly point out, it was a single-source drug and there were changed circumstances in the production, but there was none in either case. We actually did seek that information.
.1320
Mr. Grant Hill: I'm not sure you sought it out properly, but at any rate the issue here -
Ms MacPhail: I stand to be corrected if that's the case.
Mr. Grant Hill: The issue is whether you would then have this drug off the market, if the company said it could not effectively market the product. Would you have it off the market? Would you have it produced in another country and imported into Canada?
Ms MacPhail: We need the drug.
Mr. Grant Hill: We do need the drug.
Ms MacPhail: We need the drug and certainly accept that a drug company has the right to make a profit, but excessive profits, no.
Mr. Grant Hill: This is one of those orphan diseases for which it is not economically viable - In fact many of the patients who have this prescription and who are in those parts of the country where there are not pharmacare plans get it for free. The company gives the medication away to the patients for free.
Ms MacPhail: In no way are we suggesting that the company should go out of business because it is being charitable - in no way - and that merely because they're single source in some way should they be treated differently than any other patented company. What we're saying is that they should be treated the same as a patented company, whereby their prices are regulated. That's all.
Mr. Grant Hill: Controls of that kind would drive those orphan drugs right off the market, and they would be unavailable to those two patients I diagnosed in that -
Ms MacPhail: What is the evidence of that, sir, if you're allowing them a profit?
Mr. Grant Hill: Well -
Ms MacPhail: Anyway, we don't need to engage in dialogue.
Mr. Grant Hill: I think it's one of those issues. More controls for an orphan drug will drive it off the market, at least in Canada. It's remarkable you would use this one. It's a drug of particular interest to me.
Ms MacPhail: It's of particular interest to us as well. I expect we could also assume that large multinational drug companies are not just producing a single drug. Drug companies produce a range of drugs. Of course they do cross-finance drugs as well. They don't do it for charitable reasons; they do it because they're in the business of producing 2,500 drugs.
Mr. Grant Hill: You have made fairly aggressive comments that the me-too drugs are really useless. Dr. Hudson shakes his head to say that's not accurate. You were pretty vigorous in your comments that aggressive marketing was the only reason for drugs that have a line improvement being used.
Ms MacPhail: There's no increased therapeutic value.
Mr. Grant Hill: No increased therapeutic value?
Ms MacPhail: I'm not saying they're useless.
Mr. Grant Hill: I turn to Dr. Hudson, who shook his head last time. Do you agree with that?
Dr. Rick Hudson (Director, Clinical Support Unit, Ministry of Health and Ministry Responsible for Seniors, Government of British Columbia): Yes, I do.
Mr. Grant Hill: No improvement?
Ms MacPhail: He disagreed when you said I said they were useless.
Mr. Grant Hill: If there's no therapeutic improvement, let's just say, for practical purposes, they're useless. Do you say that?
Ms MacPhail: No.
Dr. Hudson: No. We know that these drugs are compared to a placebo rather than to the standard treatment in practice, and very neatly get to sidestep any comparative information for doctors. The therapeutics initiative, for example, in British Columbia has actually tried to seek out imperative information, and it simply isn't there in the scientific literature. I'm sure that the drug houses can provide you with wheelbarrows full of in-house studies, but information in scientific peer-reviewed journals simply isn't there. They, themselves, when they bring forward their applications for MRC, describe them as little or no improvement.
Mr. Grant Hill: That's a very broad statement, and I think it's far too broad. There are instances in which what you say is accurate, but I'm afraid your statement is painted with far too broad a brush.
Ms MacPhail: Do you know what we then need for you physicians? An independently based group that gives us the real facts, just as the therapeutics initiative does. In the therapeutics initiative, independent, science-based evidence determines the therapeutic advantage of a drug. A pharmaceutical economic initiative determines the cost-effectiveness of the drug.
.1325
Mr. Grant Hill: On that issue we're in direct agreement. I couldn't agree more.
I think I'll pause here.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): Thank you. Mr. Murray, you have the floor.
[English]
Mr. Ian Murray (Lanark - Carleton, Lib.): Thank you, Mr. Chairman.
Minister, thank you very much to you and your colleagues for joining us. It was a long way to come and we do appreciate it.
You've taken quite a run at the brand-name pharmaceutical industry. Early in your presentation you mentioned that Canadians badly need basic research into conditions such as Huntington's disease and Alzheimer's disease, for which there's currently no drug therapy. Are you aware of what research is going on within the brand-name pharmaceutical companies in those areas? I just wonder how familiar you are with the research that's being done in Canada.
Ms MacPhail: Do you mean generally, by the brand-name drug companies?
Mr. Ian Murray: Are you aware whether research is or isn't being done into those diseases by brand-name companies?
Ms MacPhail: Yes, research is being done. In fact some of it is being done in British Columbia.
Mr. Ian Murray: Would it be reasonable to accept that this would not be done without the brand-name pharmaceuticals having a profit motive, if you will, to carry it out? Would it not be beneficial to Canada then? If we're trying to achieve that, I'm wondering why I didn't hear much that was positive in your presentation about the brand-name pharmaceuticals.
Ms MacPhail: I totally support research into breakthrough drugs. I totally support this. In my province we are on the cutting edge of being leaders in biotechnological research. It's very exciting. What I believe will be breakthrough research is going on in the area of Alzheimer's treatment by a former MLA, Dr. Patrick McGeer. I very much support that.
I also know that a good percentage of the claims of research by the brand-name drug companies are mandated clinical trials and have nothing to do with breakthrough research.
I know that some of you may walk away from here saying that there's a holy war being waged against the brand-name drug manufacturers, and that's simply not the case. I met with brand-name manufacturers as recently as last month to say let's work in partnership, because the health care system is the most important thing to Canadians of any issue. All approaches to our health care system have to be made in partnership. But I haven't had a reply yet.
Mr. Ian Murray: You mentioned the thriving bio-pharmaceutical industry in B.C. Do you take issue with their view that the patent protection that exists now is fundamental to encouraging investment in that industry?
Ms MacPhail: I am certainly not going to challenge the 20-year patents and haven't on behalf of my government. I accept that as part of our drug patent laws. What I am suggesting, though, is that there is an opportunity here for this committee and subsequently our federal government to change the extension of that 20-year patent and therefore access to an exclusive market in terms of the NOC linkage and what I think is a really abusive practice of evergreening. But a 20-year patent, yes.
Mr. Ian Murray: I have one quick question - I want to share some of my time with my colleague - on the question of marketing to physicians.
You mentioned that you have a project whereby unbiased health professionals visit physicians to provide accurate information on drugs without any sales pitches. I just wanted to know how those health experts are educated about the drugs. When new drugs come onto the market, where do they find out about them?
Ms MacPhail: They're pharmacists themselves. It's from independent research and the therapeutics initiative as well.
.1330
Dr. Hudson: When physicians need to know how to treat community-acquired pneumonia, for example, the drugs of choice are cheap, safe, and generic. When they get a visit from a drug detail person, it will be the latest, bells-and-whistles, expensive, novelty antibiotic. Essentially, it's difficult for busy practising physicians to get an overview of current state-of-the-art treatment because commercial detailing focuses on one product. That information is available. The therapeutics initiative in British Columbia provides a newsletter to all prescribing physicians in the province on state-of-the-art prescribing. I believe the committee has heard from them. The difficulty we have is the drugs of first choice for most community-acquired infections are generic, and no one is advocating the use of these drugs.
Mr. Ian Murray: In the interest of time, I'll pass it over to my colleague, Mr. Chairman.
Mr. Joseph Volpe: In the interest of survival, you mean. Thanks, Mr. Chairman.
Madam Minister, my compliments on the quality of your presentation and the support your staff has given you. An indication, I suppose, of the level of quality of your presentation is probably to be read on the faces of those in the room, which you couldn't see but I could. I think there was a song in the sixties entitled A Whiter Shade of Pale.
Ms MacPhail: You're not talking about my make-up, are you?
Some hon. members: Oh, oh!
Mr. Joseph Volpe: It was a pleasure to hear your presentation. I thought it was lucid and balanced, even if it might have rubbed some people differently. Unfortunately, not all of my colleagues are here. However, your presentation has been read into the record.
If I might, I'd just like to focus on one very brief item. Over the course of the last two years your program has saved the government some $74 million, which I think is an accurate figure. I think you said you invested that money back into the health care system. Did you use any of that money for reinvestment in basic research and development?
Ms MacPhail: Yes. In fact, we have put some directly into research on health-related issues and also on science-based technological issues that spill over, for instance, into biotechnology. I have a list of the direct research initiatives our government funds. It's a total of almost $50 million per year. I'd be pleased to give you a list of those. Some of them are basic health research, but there's technology research as well.
Mr. Joseph Volpe: Some of those figures might be interesting for committee members to consider. We have as a committee heard many figures and statements regarding investment in R and D, although we have yet to narrow down exactly where that money is going. One of the statements the committee has had to deal with is that the industry is the biggest contributor to research and development, but we don't know yet for sure if that's basic research and development. As I recall the figures thrown around before this committee, the $74 million would represent an amount in excess of that contributed by industry for basic research and development.
I'm wondering if there is a strategic plan on the part of your government to redirect further savings into that area and to minimize the impact of industrial investment in basic research and development so that the universities and other biotechnological groups might be freed from the encumbrances that come with focused investment.
Ms MacPhail: We may actually be faced with that situation in British Columbia not through choice but by being forced into a corner. The brand-name drug companies have said we're just not part of the level playing field for investment in research and development because of our reference drug program. In a very polite and businesslike way they said we would become a level playing field and be considered for investment in research and development if we removed our reference drug program. So we may soon be forced into the situation you mentioned anyway.
We are meeting with the universities on a regular basis to ensure my ministry and our government as a whole cooperate with advancing the research that's going on in the areas of biotechnology and health. We have commitments to fund it, and I'll give you these examples. Also, the therapeutics initiative and the pharmaco-economics initiative are partly funded directly by my ministry, and are also well supported by the universities themselves, and that support will continue to grow.
.1335
Mr. Joseph Volpe: Thank you very much. My compliments to you.
Ms MacPhail: Thank you.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): I'd like to thank you for your presentation. You are the last witnesses in a long series of people we have heard in the course of the past weeks. I'd like to thank you for the quality of your presentation and I wish you a good journey back to British Columbia. Once again, thank you.
[English]
Ms MacPhail: If there's an election, I wish you good luck.
[Translation]
The Vice-Chairman (Mr. Pierre Brien): The committee is adjourned.