FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 28, 1997

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.): I'd like to call this meeting to order. Welcome, everyone.

As you know, pursuant to Standing Order 83.1, the finance committee has held hearings across the country to listen to Canadians in a consultation process that really speaks to the issues that are very dear to the Canadian people. We are of course facing many new challenges and choices because our fiscal situation has certainly changed.

Today we have the pleasure to have, as part of the round table, from the Coalition for Biomedical and Health Research, Dr. Clément Gauthier and Dr. Barry McLennan; and from the Canadian Cancer Society, Mr. Kenneth Kyle, director of public issues.

I'm sure you know how the process works. You take approximately five to seven minutes for your presentation, and then we will have a question and answer session.

We will begin with Dr. Clément Gauthier. Welcome.

Dr. Clément Gauthier (Executive Director, Coalition for Biomedical and Health Research): Thank you very much.

First, I would like to tell you that I'd like to leave my seven minutes to the chair of the CBHR. I am pleased to be here with you again this year, but I would rather participate in the question period. Dr. McLennan will use the time that we had scheduled for both of us.

The Chairman: Welcome again, Dr. McLennan.

Dr. Barry McLennan (Coalition for Biomedical and Health Research): Thank you very much.

As I said this morning, Mr. Chairman, we really appreciate the opportunity to appear before the committee. It was interesting; this morning, as you'll recall, the agenda was supposed to be research, and we got on to a lot of aspects of the health delivery system. So maybe this afternoon we'll flip it around. Instead of having health research, we'll do the other one. Anyway, it's your choice.

The Chairman: Flexibility.

Dr. Barry McLennan: I'm hoping we can elaborate on some of the things that came up this morning and introduce some new issues.

As the Hon. Paul Martin said a few weeks ago, the need to use the emerging fiscal dividend to address mutually reinforcing national priorities such as the preservation of our health care system and Canada's position as a leader in the modern knowledge-based economy is front and centre in the policy paper, “Strong Economy, Strong Society”.

CBHR is very pleased to note the government's willingness to address this pressing challenge, which was originally identified in the May 1996 OECD job strategy, to ensure that long-term sustainability of the new, emerging knowledge-based growth model in Canada by maintaining social cohesion.

Biomedical, clinical, and evaluative health research supported by the MRC, the Medical Research Council of Canada, has been recognized by former ministers of health, particularly the Hon. Diane Marleau, as essential to the preservation of our health care system, a major element of social cohesion in Canada. She said, “Our health system, one of the finest in the world, must be defended and preserved in difficult and challenging circumstances.”

Recently our present minister, the Hon. Allan Rock, talked about the link between quality health care and quality research. He said:

Enhancing health research is about quality, because this is where the cures, treatments and technologies of tomorrow will be created, both reducing demand and improving care.

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It was very pleasing to note that last fall, at the world's first international conference on innovation in funding health research, which took place here in Ottawa, there was general agreement that government has the primary role in funding basic research and that this has to be a long-term, ongoing commitment. There are things that business and markets simply cannot and will not do. The private sector can't succeed in providing universal health care, and business does not do enough basic research, only what is in their narrow domain.

Recently Health Canada released their study on the economic burden of illness in Canada. This document revealed that the total cost of illness, disability, and premature death in Canada for 1993 was $156.9 billion. That is roughly equivalent to 22% of our gross domestic product, or put another way, $5,450 per person.

That's an astonishing figure. The direct cost of the hospital care, $71.7 billion, was the largest component. Research expenditure—and I emphasize this—was the smallest, at less than 0.5%, with indirect costs of $85.1 billion. Half of this amount was attributed to the loss of productivity—and I want to focus on that—resulting from long-term disability. This is in the document on the economic burden of illness.

I think it's remarkable that this document emphasized that in addition to the promotion and disease prevention program, things we discussed this morning, the strengthening of research is necessary in order to minimize the burden of illness in Canada.

In Canada we have 16 academic health centres. By that I mean a partnership between faculties of medicine, teaching hospitals, and affiliated research institutes and other agencies. This partnership has worked well in this country, and we need to remember that. The three products they produce are simple: education, clinical service, and research.

I shouldn't need to remind you that if you look at the mission statement of every medical school or teaching hospital, it will say that good clinical care is based on education and research. Research underscores these activities. Significant contributions to knowledge have been made by Canadian medical scientists.

Finally, notions such as the shift toward evidence-based medicine, which underpins health care reform right across this country, are primarily a product of researchers within these 16 academic health centres.

Biomedical, clinical, and health research represents a complementary contribution. Biomedical research finds the underlying causes of disease and health; produces innovative products that potentially reduce costs; improves social productivity; and generates jobs and wealth by generating industrial activity. The clinical research translates the insights gained from basic research into new and improved therapies that enhance patient care.

Finally, the more recent player in the game, evaluative health research, enhances the cost-effectiveness of medical practice and health care, thereby containing both costs. Both types of research contribute in different and complementary ways.

The funding of research needs to be viewed in two ways, the direct costs and the indirect costs. The indirect costs of research primarily are supported by the federal government, formerly through the EPF transfers and now through the CHST program. The direct costs of research, of course, come directly in the form of the funding from the granting councils. In the case of medical research, it's the Medical Research Council.

I am very pleased to note that the government will introduce legislation increasing the cash floor of CHST from $11 billion to $12.5 billion. As well, I'd like to commend the government for the introduction of the Canada Foundation for Innovation program. This program will desperately help the replacement of worn-out equipment in the research laboratories across this nation.

Let me speak on the direct costs for a moment. This is where we have really been hammered in the health research community. The peak level of funding was $216 million in 1994-95. That has been reduced to $205 million in 1995-96. The graph in the document that I commented on this morning explains it all. Canada is going in the wrong direction compared with our competitors.

The CFI is a good program, but I emphasize that it has more to do with tech transfer than it does with priming the knowledge-generating pump by investing in people, Canada's intellectual capital.

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The impacts of the cuts to the Medical Research Council have been devastating, and I can illustrate it in this way. The graph on page 5 of our brief shows the success rates for MRC granting competitions. I draw your attention to the dotted line at the end. If there's no change immediately in the funding to the council, we will see a 40% success rate among our experienced investigators. These are the well-trained, established, excellent scientists across this country. Now, a 40% success rate among that cadre of people is absolutely unacceptable and deplorable. It's no wonder they're leaving Canada.

The bottom line in that graph shows the success rate for new people. These are the bright young minds that were referred to this morning by some of the speakers. These bright young minds are trained in science and how to do research. They finally get a job and then they apply for a grant and we find they have a 15% success rate. It's hardly an encouragement to our young people to go into medical research.

I'll just focus briefly on the brain drain, and I'm going to quote a couple of items at the bottom of page 5 in our brief.

Dr. Gerald Wright, a protein chemist, is so frustrated he's ready to head south of the border to the United States. McMaster University wooed him from Harvard University just three years ago. “We're certainly getting clobbered”, he said. “It's making it almost impossible to do research in Canada now. It's absolutely terrible.”

Again, from the Halifax Mail Star:

“Young researchers are leaving for Ontario and Alberta, or worse, leaving for another country,” said Dr. Gary Johnston, head of Dalhousie University's department of microbiology and immunology. “They see there is no real commitment in this country to biomedical research... We are going to lose the edge internationally... It takes time to build a research capacity but no time to dismantle it.”

CBHR recently did a survey, just in late August, early September, of the medical schools across this country. We asked them to tell us in specific terms, what has the MRC cut done to you? What has the decrease in budget meant to your institution? All 16 schools have similar data, but I quote three.

From the University of Toronto, the associate dean:

Almost all Canadian Genome projects have been abandoned. As Genome research is one of the main vehicles for the future of biomedical research, Canada has virtually frozen itself out of this crucial area.

I don't need to remind you that many disciplines in health research today involve people who are trained in gene manipulation. This is a very crucial area.

Again, from Alberta:

The funding problem has put an end to clinical trials in haemophilia as well as ten other major programs across Canada.

The cuts have been very serious.

Now let's turn our attention to the industrial and investment community. We have an excellent cadre of trained scientists in this country and our reputation around the world is solid. But if we are to continue to attract foreign investment in this country in health research, we need to maintain that cadre. I quote from the Hon. Judy Erola, president of PMAC, the Pharmaceutical Manufacturers Association of Canada:

The Canadian government needs to understand the critical role played by the granting councils in providing increased support for the training of future scientists. Foreign investment dollars will not come to Canada unless we provide a suitable environment, including a flourishing cadre of well trained researchers.

At the moment Canada has been reduced to a minimal effort that results in lost opportunities to attract international investments; for example, in the high potential research field of genomics, as I mentioned, as well as in partnerships with the provinces, such as the new Ontario Health Research Fund.

So what are the needs? This is addressed on page 7 of our document.

Internationally, competitive investment targets must be set out on the basis of an objective determinate of basic research. What's the goal standard? Well, the goal standard is peer reviewed research, and our peer review system is second to none and respected as such around the world. So it's on this basis that CBHR has outlined a proposal to double the budget of MRC over a period of four years. The details are in our document.

This increase in funding is based solidly on the funding gap. This is the difference between the research level that's funded at the moment and the level that would be needed to fund all of the first-rate, peer-reviewed, approved research in this country. In other words, it's the gap between funding where we are now and funding excellent science, and that amount is $240 million annually for the MRC. The details are in our document.

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Finally, Mr. Chairman, we were asked to respond to the process of deficit and debt reduction. Government must be commended for having surpassed its deficit reduction target through the virtuous circle of restraint measures, lower deficit, lower interest rates acting to further reduce the deficit, which is then reflected in higher government revenues that have brought the deficit down even more. This virtuous cycle of basic research, growth, jobs, productivity, can sustain and activate the process of deficit reduction through increased productivity. That's the key to this document. As my colleague is showing, there's a graph that shows increased basic research yields to increased productivity and increased national income. This is a three-pronged attack now on maintaining stable or low inflation, stable or low interest rates, and a low deficit, all of which gives you this debt reduction circle. This is a virtuous circle of basic research and national debt reduction and is the mechanism we're proposing.

One final point. The biomedical clinic on health research offers the taxpayer a double bang in that it increases total factor productivity in health industries, but it also impacts on the loss of productivity resulting from long-term disability.

There's a third item, which makes it a triple bang, because of increased costs attributed to the loss of productivity resulting from long-term disability. This was emphasized in the “Economic Burden of Illness” document I mentioned a minute ago. There's really a triple bang here, Mr. Chairman, by investing in basic health research. Increased investment in basic research must become a national immediate priority.

As is evidenced by an article in the Financial Post last week—Hugh Segal's paper—he commended the MRC for its pioneering work in taking its base budget and expanding it into other areas. I might add, Mr. Chairman, that MRC is the only government agency I'm aware of that has subjected itself to an international review and has come out with glowing marks, very high scores.

On the last page of the document—and I'll conclude there, Mr. Chairman—the investments in basic research are a three-pronged attack on debt reduction, jobs and growth, and better health care and education. It goes back to the title of our document, that basic research is an enduring foundation for a prosperous, competitive, and healthy country.

Thank you very much.

The Chairman: Thank you, Dr. McLellan.

We'll move to the representative from the Canadian Cancer Society, Mr. Kenneth Kyle. Welcome.

Mr. Kenneth Kyle (Director of Public Issues, Canadian Cancer Society): Thank you very much, Mr. Chairman.

You've posed three very good questions. I think you have the handout. We've put the French responses on one side and English on the other. I'll simply hit a few highlights on this one-pager on your three questions.

I think cancer is on the top of the mind for many of us. There are probably few people in this room who do not know someone or have a family member who hasn't been touched by cancer. We know a lot about the causes of cancer, but today I want to talk about the causes of causes of cancer. It is something I think this committee can do something about.

I think it can be fairly said that decisions at this table and at the cabinet table are much more important than incisions on the operating table when it comes to health and health care. This is a health care institution; this is a health institution. Parliament is a health institution, probably the most important in the country.

First, on the economic assumptions, we think government investment in improving the health status of Canadians will bring short-term benefits as well as long-term benefits. You've had people talk to you about the health care system. It's important also not to forget the health system, that we need to do things to keep people healthy to prevent diseases like cancer. Decisions by parliamentarians can do a lot to do that.

You have asked us what changes there should be in the tax system. Fundamentally, there is room for increased tobacco taxation here in Canada. The Americans have been doing a great job. There's been a huge increase in tobacco taxes recently in some of the New England states, in Maine in particular. The state of Maine has had a huge increase; New Hampshire's tax increased. Alaska had the biggest state tobacco tax increase in the U.S. The U.S. Congress is committed to increased tobacco taxes.

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We think there is now room for the Government of Canada to move in the next budget to increase tobacco taxes in order that prices are more equitable on both sides of the border. It's now cheaper to buy cigarettes in Ontario and Quebec and parts of Atlantic Canada than in the United States. Taxes are higher in the states of Michigan and New York. So we think it's time to move.

There's no reason why fine-cut tobacco should be taxed at a lower rate than cigarettes. Tobacco taxation is a win-win-win situation. It meets health objectives. It certainly meets the objective of reducing the deficit and the national debt, so it's good for the finances of the country. It's good for public health. It's a winner all the way around.

Since 1994, when regrettably the federal government rolled back tobacco taxes, the tobacco industry has been increasing its profit margins and has been increasing its prices on cigarettes. Those increases are going to take place anyhow, over the next few years, so why shouldn't the government be the beneficiary of those increases rather than the tobacco companies? It only gives them more ability to engage in marketing practices and targeting our children. Why shouldn't the government, through higher taxes, receive the benefit? The end result for the consumer is the same; it will be the same price.

Our suggestion is that the Department of Finance look into changing the tax system to control the oligopolistic pricing practices of tobacco companies. For example, perhaps there could be a large percentage surcharge on all manufacturers' prices beyond the level that assures reasonable return. The amount by which tobacco manufacturers' prices decline is a further amount by which the economic gain on tobacco products can be shifted to government.

Switching to a couple of other taxation areas, we would encourage the government to continue the good work of encouraging the charitable sector in the country. Perhaps this year in the budget there could be some concentration on ways to encourage individuals to make modest donations to charitable organizations. The government is to be commended for the work in the budget last year that helped the larger donations.

We would also encourage the government to look into giving greater tax reductions for medical expenses of people with excessive costs related to the treatment of diseases such as cancer, and specifically consider amending the Income Tax Act to provide a care-giver credit for those who leave paid employment to provide care for the critically ill. We often have parents of a child who has developed leukemia or something similar who are forced to give up paid employment to stay at home to look after their child. We think some consideration should be given to that.

I commend my colleagues here today on stressing the importance of health research in building jobs for the future healthy economy, and I endorse what they've said. We encourage you to urge the Minister of Finance to continue to improve on the progress that was made in the last budget to encourage Canadian businesses to invest in health research, and we encourage increases in the basic budgets of all the federal granting councils. We think this is important. It's not only medical research, it's the whole broad spectrum of health research that is important. We need to know more about how to prevent disease, and screening, as well as treating people with disease and looking after people who are terminally ill. As has been mentioned, this is a way to contain health care costs.

I've been told by many of the scientists in professions that we deal with that many of the interventions, the practices, of physicians have never been properly evaluated in this country.

We would like you to consider a fixed percentage of the health care budget to be put into research. Many companies decide that 1% or 2% of their budget needs to go into research to plan for the future, and we think it's time a percentage of the total health budget in this country be put into research to be able to make decisions based on evidence on best practices elsewhere. We really think there could be huge cost savings if we just had the money to do the research to find this out.

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I want to thank you for the invitation to appear here today and I would be pleased to answer any questions.

The Chairman: Thank you very much, Mr. Kyle.

We'll now have the question and answer session. We will begin with Mr. Anders.

Mr. Rob Anders (Calgary West, Ref.): First, I guess I'd like to speak to the issue of biomedical, clinical, and health research. In your study you make reference to the brain drain that's going on in the country. You focus most of the discussion on funding, and I can understand why when you're making a presentation before this body, but I'm thinking back to the Royal Commission on New Reproductive Technologies in, say, the area of biomedical research. Because of some of the restrictions that were put on biomedical research, that's a large contributing factor to why that research is now going on in other countries and why we're having a brain drain.

It reminds me of how Canada was a leader in the 1950s and 1960s in organ transplantation and how the medical establishment and the government of this country saw fit to have other countries take over Canada's lead in this field. We lost ground on that, and those jobs and those resources and that brain power went to those other countries. I wonder if you could comment on the royal commission and other things that may impact brain drain in this country.

Dr. Barry McLennan: Mr. Chairman, I think that's just one example of the situation we're in. You have to pay to play in the international community of research, and we're talking specifically here of health research. Unless you put the resources into your own house, so that you can develop the goods, develop the products and do the research, you can't play an international game. The fact that other countries have moved way ahead of us in this regard is just one example of that situation.

It's not too late, but it's very close to it, because our health research sector, as I said this morning, is hemorrhaging. We're bleeding badly, and you can't turn this around in three years. That will be too late. All the folks will have gone to other countries.

Your comment about reproductive biology is a fascinating one. We have some very good reproductive biology research centres in Canada, one in my own home institution, the University of Saskatchewan. Wearing my other hat as assistant dean of research in the College of Medicine, I am alarmed at how many times he gets a job offer from elsewhere. It's only a question of time; one of these days he'll be gone. It just underscores the issue you're raising.

We have to maintain an environment in this country to hold our trained scientists and to attract new ones. Why do that? Well, if we're going to provide the best health care and the best education for your children and mine, we need to do this. You can't buy these results from other countries. It will cost more, and what makes you think it will be available anyway?

Mr. Rob Anders: I guess I'm looking for a more specific answer in terms of the brain drain, or that the problems we're having in health care are not strictly a funding problem but also have to do with the regulation that has been put on by this government in terms of those jobs and some of the research advancements that otherwise would have taken place without the regulation.

Dr. Clément Gauthier: The regulation actually is also a key factor in creating a proper environment for research. For example, if there is over-regulation in an area of research whereby governments try to strike a balance between what is the perceived protection of the public and the ground rules that are needed and the flexibility or the margins that are needed for basic researchers to do research in an area like reproductive technology, if the regulation is too difficult for them to manage and they cannot do the research here, obviously they will do it or the research will be done elsewhere. This is probably what you are referring to.

This applies to regulations in other sectors as well. When we talk about the regulation of patents, for example—which is another way the government can either have a negative or positive feedback on the system of research in Canada—this all affects the capacity of researchers to do their trade and to do their research in Canada. Of course, yes, this is also a key element.

But we chose today to focus on the problem of funding of the granting councils as opposed to going into other peripheral issues—we used to do that; we used to come before this committee with four or five recommendations—for the simple reason that the need is so critical now. We are just on the borderline. The system has been stressed to its limit.

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You should also keep in mind that the researchers who do work for governments, universities or the private sector are trained through universities. So if the granting councils' funding, which is used to train people as well to upgrade knowledge, is not adequate, this will have an impact on all other areas, whatever happens with the regulations.

This is a very basic problem that we must address now. We agree that there are other problems related to regulatory matters, but in this area this is an example.

Mr. Rob Anders: I can understand your position, because supposedly the government, according to the finance minister's claims, is close to balancing the budget. If that's the case, I can understand why you come here today with cap in hand.

I move on now to the Canadian Cancer Society.

The Chairman: Can you make it very brief? Get right to it.

Mr. Rob Anders: All right.

Considering the high tax levels in this country, I must say I'm not impressed to have somebody come before the committee to ask us to raise taxes and to use other countries as an example—for example, that because states just across the border have higher taxes, therefore Canada has a perfect opportunity and should go ahead and raise taxes on tobacco.

Mr. Kenneth Kyle: I think all of us here would want to reduce the tremendous burden of health care costs in the country. One third of the burden of cancer is from tobacco use. It's young people who are replacing the older smokers who are dying off. The most important thing government can do is to not give an incentive to young people to smoke.

When the government rolled back taxes in 1994 we saw a huge increase in smoking uptake amongst young people. I don't want to comment on other taxes, but this is one tax that we feel very strongly should be increased back to the level at which it had been. It will do more to reduce health care costs than just about anything we can imagine in this country.

The Chairman: Thank you, Mr. Kyle.

Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Welcome, sir, to the finance committee. I wish to congratulate you on your brief, although I do not understand your comments on pages 8 and 9 very well. You praise the government often for meeting its targets. Allow me to quote point number 7 at the bottom of page 8, as there is something here that intrigues me:

In view of its October 1996 recommendation that "health care spending be at least sustained and guaranteed at the current levels for a minimum of three years", CBHR is pleased that government "will introduce legislation increasing the cash floor of the Canada health and social transfer from $11 billion to $12.5 billion".

While you may congratulate the government on meeting this target, we should put these figures into perspective. There seems to be a problem here because the government announced that it would be investing a further $6 billion over five years in health and social programs. Of this total, $3 billion will go to health care over the next five years. For the same period, that is up to the year 2003, the federal government already has plans to cut $42 billion from social and health programs, including $21 billion from health care. You seem pleased to be getting an additional $3 billion over five years, whereas the federal government is preparing to slash $21 million in the coming years. In light of these facts, how can you be pleased?

[English]

Dr. Barry McLennan: I think you've asked several questions. I'll take them one at a time.

We need to distinguish between supporting the health care system or supporting health or supporting health research. These are different things. Let's separate for a moment the funding that we're requesting in this proposal for health research, which is at one end of the continuum.

At the other end of the continuum...and I think we have to give credit where credit is due. The Canada Foundation for Innovation is an excellent program. The Canadian Medical Discoveries Fund, which started from MRC funding, is an excellent program, but both of those—

[Translation]

Mr. Yvan Loubier: One moment, Mr. McLennan. There is one small problem. How can you congratulate the government? Clearly, you are praising the government because it is putting an additional $1.5 billion into social and health programs over and above its spending projections.

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You congratulate the government on making the adjustment in health care spending, whereas in reality it will continue to cut an additional $21 billion up until the year 2003. I'm not making this up. You're the ones congratulating the government.

Furthermore, a portion of the $42 billion that will be cut by the year 2003 will affect post-secondary education, and more specifically basic health care research done by universities.

Personally, if I were in your position, I would find it very difficult to be happy with the situation and to congratulate the government on its performance in the research and health care fields.

I remind you that of every dollar slashed by the provinces from the health care budget, 93 cents represent cuts made by Mr. Martin to transfer payments. These cuts are slated to continue until the year 2003.

You're given a few goodies, and at the same time, the government is cutting directly to the bone in terms of health care and research funding.

The Chairman: Dr. Gauthier.

Dr. Clément Gauthier: I would simply like to add that the statement on the bottom of the page pertains to the recommendation that we made last year when we were facing an even more dramatic situation. At the time, we were rapidly losing ground. We called on the government to bring some stability to the situation, or at least to stop the haemorrhaging for a three-year period to allow us time to use new research methods and perhaps set an attainable objective in terms of health care and post-secondary education transfers. We were simply trying to stem the flow.

Mr. Yvan Loubier: Are you not facing a similar situation today? The Finance Minister did not announce to us in Vancouver that he was shelving his planned budget cuts to 2003, cuts announced in his 1996 budget. He told us that he was staying the course, but that he would also be cutting a little less. Instead of imposing cumulative cuts of $46 billion to the year 2003 in the area of social and health care programs, he announced he was limiting his cuts to $42 billion.

I'm quite willing to concede that this might be less painful, but there's no reason to congratulate the government and this does not correspond in any way to your recommendation that the government stay the course for three years.

Dr. Clément Gauthier: I agree that this is not our final objective. Nevertheless, the government has agreed to slow down the pace of its cuts. You are quite right, however, in saying that the cuts in transfer payments to the provinces have had a real impact. They have resulted in a decrease of anywhere from 18 per cent to 30 per cent in available resources for research in universities and hospitals.

This is a reality we have to face, but we hope that the move to reverse this trend is a starting point and that the government will go one step further and put an end to the cutting. The recommendation we made last year did not go that far. We merely called upon the government to slow the pace.

Mr. Yvan Loubier: Can I give you a piece of advice? Today, we know that the government will be balancing its budget by the end of the current fiscal year. We also know that there could be a surplus if growth continues at the same rate. The GDP has been growing at a nominal rate for the past two to three years. According to some estimates, the surplus could even exceed $5 billion. I would advise you, therefore, to be rather forceful when you make demands given that over the past three years, you have paid dearly and you will continue to pay dearly until the health of Quebeckers and Canadians is affected.

Your brief is sound and well researched, but you are not aggressive enough. You need to take a more forceful approach in order to heighten the awareness of my colleagues, even those in the Liberal Party. Apparently, their caucus can be quite a lively place.

Dr. Clément Gauthier: Thank you for the advice.

The Chairman: Thank you, Mr. Loubier.

[English]

Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you very much.

First of all, I would support a higher tax on tobacco. Sometimes there are taxes that are good, especially if the money could be funnelled into the research, instead of going into the general coffers, for finding a cure for cancer. I think it would be better if we could just eliminate tobacco because we know the problems that causes.

But I have a question for Barry and Clément. In your document here you're saying “foreign investment dollars will not come to Canada unless we provide a suitable environment”. This is the commercial sector and so therefore, I assume, people who are going to come to this country are going to probably develop products, etc. I would assume, also, that there's tremendous competition out there to get good researchers in their countries and support them in developing products, etc. What do we have to do to get foreign investment in this area?

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Dr. Barry McLennan: Several things, Mr. Chairman. Let me start off by saying a couple of decades ago governments of the day, both federal and provincial, said to the university community, go find another funding partner, because the flow of funds from the federal and provincial governments will decline—and did they ever decline. So universities went and found additional funding partners.

Now, in the health sector, one of the major private sector opportunities is in the pharmaceutical industry. That's a global industry, and Canada, I might remind you, is a very small player; about 4% of the world's total. Even though we think we're great, and we are, we're a very small player.

So the question is this. If a medical research director for one of the pharmaceutical companies in Canada wishes to have investments come to Canada, he has to persuade the head office in Basel, Switzerland, or wherever it is, to send some investment dollars to Canada. The decision will be made on the relative merits of investing in Canada. Do they have a cadre of research scientists? Are they any good at doing research? What is the taxation basis? What is the cost of doing business in Canada? All these factors come into that business decision.

I just remind you we're dealing here very much in a global marketplace. Our researchers are highly regarded. Our scientific papers are well reviewed and respected around the world. But we are in a competition, and as the data in our graphs show, we are slipping. The OECD numbers show we've slipped badly. While we have the cadre of people, if we're to continue to attract that investment—$624 billion last year in Canada—and continue to attract that foreign investment not only from the pharmaceutical industry but from others, medical device companies and so on, we need to maintain a playing field or create an environment that will attract that business and create the jobs and so on in Canada.

The Chairman: Dr. Gauthier.

Dr. Clément Gauthier: I can substantiate it a little with one case study I was involved in. It was for the Astra Pharma investment in Montreal of $300 million announced last fall. Two years before I tabled before this committee a letter received from the head office of Astra Pharma, asking to accord them some assistance in trying to determine how many researchers, Ph.D.s, would be trained over the coming five to ten years in areas that were relevant to the company. To decide on their long-term investment plan they had struck a task force to decide on where they would invest over the coming 10 to 15 years, so they asked us for information. We managed to get it quickly and sent it to them.

Finally, five sites were considered around the world. Montreal was one of them. Another province in the country was too, but finally Montreal got it, probably because it had a higher pool or critical mass of researchers and the capacity to produce quickly enough the kind of researchers they need.

Let me close my remarks with another more recent fact that was brought to my attention. Merck Frosst, which is, I would say, the biggest foreign investor in pharmaceutical companies in Canada, is now short 200 specialist researchers in Montreal. They need 600. They have 400. They placed a call quickly to try to find a way to boost the system so we produce more of the kind of people they need to continue to attract funding from the main office; bring that to Canada.

This gives you an idea about the acuteness of this process and these two pillars of training of highly qualified personnel. Of course, the provincial governments and their regulations and what they do in terms of the Patent Act and so on, as well as the federal government, are also relevant. The training of people—and that is done mainly through granting councils' research money—is important as well.

The Chairman: Mr. Pillitteri.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you, Mr. Chairman.

Thank you for the opportunity.

I would like to commend Mr. Jones for having noticed the difference between a health issue and tax issues, contrary to Mr. Anders, who cannot tell the difference—of course he hasn't been here long enough—between what is a health issue and what is a tax issue.

Ms. Paddy Torsney (Burlington, Lib.): Mr. Jones is brilliant.

Mr. Gary Pillitteri: Of course, when someone comes in here and just asks a question and leaves, Mr. Chairman, I get a little hot under the collar. I just wanted to go on record on what the feeling is about what that individual did.

The Chairman: But you do have a question?

Mr. Gary Pillitteri: Yes, I do have a question.

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My question is, Mr. Kyle, instead of increasing the taxation in the tobacco south of the border, mentioning New York and Michigan—or was it Pennsylvania?—a couple of states, do you think that if the taxes in other states keep increasing as they have in those two or three states, it will have an effect that the higher taxation there could be a reverse coming back into Canada, that some of the industry could set up here in Canada? Do you think it is just a tax issue or a health issue, or could it entice some of them to come back and invest here in Canada?

Mr. Kenneth Kyle: I don't think we want to entice tobacco companies to come to Canada, but there is a real danger. We had a problem of smuggling into Canada. I suspect that probably smuggling of cigarettes into the U.S... I think the best idea would be to have the same prices for tobacco products in both countries, so we would eliminate the crime associated with the smuggling problem, because that has a host of problems associated with it.

The thing about tobacco taxation is that kids are very price sensitive. Older people and people who are well educated can read the health information. They can make a decision not to smoke or to smoke, but kids are very price sensitive, as are poor people. So if we are really interested in helping lower socioeconomic people and children—there are many children in that group—I think we have to not give them incentives to buy tobacco by artificially having lower tax rates here in Canada than they have across the border.

Smuggling is a world-wide problem. We made some suggestions back in 1994 as to what can be done about it. For example, we can have tax paid markings on individual cigarettes. A bill was passed in Parliament to allow that, but the Department of Finance and the Department of Revenue have never acted on it. The authority is there; the minister just has to decide to move ahead with that. The tax paid markings on cigarettes in Canada on the package are on the cellophane wrapper, but we would prefer to see them on the package itself.

There are some things that could be done and could be announced in the budget that do not require legislation that can do a lot to prevent cancer.

The Chairman: Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): I also noticed this morning that reference to the percentage of medical procedures that did not have the backing of sound research behind them. It made me think that, to the extent that we are successful in conducting such research, the beneficiaries of it are the provinces, in terms of reduced medical care costs.

When I looked at the expenditures by federal and provincial split, I noticed that the provinces since 1993 have remained relatively flat whereas the federal government has gone up by some $20 million. So it kind of begs the question about whether or not there is an interjurisdictional equity here, noting that I think there is not much question. I think you have demonstrated very clearly on the expenditure side that we are falling behind and that the competitiveness and the impact on the social as well as the fiscal health of Canada is very dependent upon a competitive research environment.

I did want to ask about the National Forum on Health. They spent two years looking at Canada's health care system, representing some of the most eminent people in Canada on health issues. I remember issues very strongly about the need to invest in children and some of the other fundamental things, basically concluding that there is enough money in the health care system; it is just not spent as wisely as it should be and if we did some re-engineering we could meet that.

Refresh me, because I did not read the whole study; I read the executive report. Did they come out and support or identify the risk or the lack of funding in research, if you are aware of their position on that? Other than relative expenditure patterns, do you have anything else to offer us in terms of how we measure the “successfulness”, if I may use the term, of our research in Canada relative to international success rates?

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Dr. Clément Gauthier: In our report we referred—and I would like to use the English version here—to the way to evaluate. Indeed, worldwide, a very well-recognized way to compare the performance of research systems between countries is to run a study of citation indexes, a citation of publications written by Canadian scientists. Publications are quoted and cited by other scientists across the world and the relative percentage of that on the basis of their total amount of publications is put on the basis of dollars, so it gives you an idea of the quality of the science and of the productivity of the researchers. This is what we have quoted. It was in our document to the committee this morning.

It basically showed a study that was run over a period of 14 years, ending in 1994. It showed that Canada was rated number one in terms of citations to the publication index on the basis of dollars invested in research. We were doing the highest quality of research and were the most productive, in terms of what we really did—and it is what was cited out of the work we do—per dollar invested in Canada. This study is actually quoted in the report we gave you this morning.

It was actually very surprising. The results of the study were published in the New York Times. We were also twice as productive as the United States researchers, which is probably the reason why even though the cuts in the budgets... Actually, we have been lower than everyone else for years, but we have been able to survive until this point because of the high quality and high productivity of the research done in this country. But we've just stretched the system to a point where we are about to fall, plus this drop in the budget will catalyse that.

Basically we are number one in terms of basic research. This survey was related to basic research. Within the science samplings, the same investigation on the citation index shows that biomedical, clinical, and biological research are the three strongest fields in Canada. The coalition tables document of the past two years refers to that sort of study, the citation index. This is one way we compare the quality of science and productivity worldwide.

So we are still number one, but you should keep in mind that those studies are done on publications and career people who were trained 10, 20 or more years ago and did publish. It does not reflect at all what is happening to young researchers this year or what the state of research is this year. In 10 years from now we will know...or we might not be here to tell you, depending on whether we keep ourselves in the race.

Mr. Paul Szabo: Do you have any thoughts on the National Forum on Health?

Dr. Clément Gauthier: The National Forum on Health made recommendations and was mainly focused on health research. They said very little about biomedical and clinical research. We still have to treat the people who are sick. We also still have to find better ways to evaluate surgeries and and so on.

They focused their recommendations mainly on health reform, but evidence-based research is needed. I believe one of their recommendations is to use 1% of the total sales of pharmaceutical companies and invest it in research.

Mind you, a similar recommendation came out of the industry committee's report on the Patent Act. This was one of the recommendations they made for investment in research. They did something to that effect.

The Chairman: Thank you, Dr. Gauthier and Mr. Szabo.

Mr. Jones, this is the final question.

Mr. Jim Jones: Thank you very much, Gary. Conservatives do have a social conscience and do care.

The question I have is about a new industry that's starting out, the gambling industry. When they introduced all these casinos in Ontario, they put in $300 million to treat the people who were addicted to gambling. There's probably going to be a lot of stress with that. Have we done any research about stress causing cancer? Maybe we could be causing a lot of health costs with these proliferating gambling casinos all over the place that are making gambling easily accessible.

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Mr. Kenneth Kyle: I don't have any recent research on that, but I was here at the committee hearings last year and I believe it was the College of Physicians and Surgeons of Canada who made the point that gambling is going to have impacts on health. Perhaps the researchers for the committee could dig up that material from the presentation last year.

Mr. Jim Jones: Thank you.

The Chairman: Dr. McLennan.

Dr. Barry McLennan: It is amazing. It's a question of priorities, I suppose. It is like the bingo games across the country. I have been at bingo games in support of the raising of funds to support my son's hockey team. Some people say the money you get from bingo games is simply a return of taxes already paid.

Your comment about gambling is interesting. It reminds me of the smoking issue. If 40,000 Canadians were killed by a plane accident there would be a public uproar. We kill 40,000 Canadians from the ill effects of tobacco, and here my colleagues and I are pleading this again. It is a question of perspective.

The Chairman: I understand Mrs. Redman has a final question.

Mrs. Karen Redman (Kitchener Centre, Lib.): You talk about a complex issue. We've gone all across Canada and have heard from a lot of people, and generally speaking everyone is really glad we have our fiscal house in order.

One of the groups we listened to—I think it was a group of economists; we listen to so many, forgive me—said that one of the targets we should use in projecting the future is regaining our triple A rating as a nation.

You talked about the international research scene, and certainly we've heard some really compelling arguments to reinstate the funding for agencies and that research has a lot of value outside of just medical advance. But from your perspective, has Canada's rating on the international scene impacted positively on their view of us, even in so far as medical research?

Dr. Barry McLennan: I would say so. Several studies, some quoted in our briefs, show—and Dr. Gauthier commented on this a minute ago—that the calibre of the science done in this country is good. That is evidenced by the fact that industry is prepared to invest here. It is reflected by the fact that the graduates of our universities and medical schools have no trouble getting a job elsewhere. The reputation is solid.

What we are trying to convince you of most seriously is the gap. Let me put it another way. The CMDF money is illustrated by this graph. The increase in the bars is the increase in venture capital funding that has been realized by the investments through RRSPs of Canadians in the last couple of years. It is a fantastic amount of money. Where did that come from? It came as a result of investments in basic research 20 or 25 years ago. What we are worried about, and so desperately trying to make clear to you, is that we have to continue priming that pump.

I would not want to venture a guess, but I would say that if we don't do something immediately about our health research situation I will not be able to make the statement 10 years from now that our science is respected in this country. As I said a while ago, you have to pay to play. If we want to train and turn out the best students in the country and attract the best scientists and clinicians to our hospitals and teaching centres, we have to give them an environment in which they can do the job they've been trained to do.

It is a difficult concept because we are not talking of something in three or four years; we are talking of something that takes longer. That is why I am so worried about this gap between what we're doing and what we have not done in the last few years. But I think we're now fiscally ready.

I applaud the government's attempt to get our house in order. You have to keep your house in order and so do I. This is absolutely essential. However, I think we are now ready as a nation to fill in some of these holes that are appearing.

Mrs. Karen Redman: You've made that point very eloquently and we've certainly heard you. I personally have.

My question is, when you talk about the large multinational pharmaceutical agencies or conglomerates that look at where to put the research, is Canada's fiscal house being in better order one of the bargaining chips they look at when they ask, will we go to Canada for this research project or somewhere else?

Dr. Barry McLennan: Yes, in so far as maintaining the environment to do research. This is how it is linked: no company is going to invest in a region where there's uncertainty. They are not going to invest because they do not think there's the calibre of people there to do the work. If we don't have the equipment or the laboratories that are first rate so they can do cutting-edge science, they are not going to invest there.

Mrs. Karen Redman: Thank you.

The Chairman: Thank you, Mrs. Redman.

Thank you, Dr. McLennan, Dr. Gauthier, and Mr. Kyle. On behalf of the committee, I would like to express to you our thanks for your input; you've given us useful information and have outlined clearly the challenges you face as an organization. Not only have you outlined the challenges, you've also given us some possible ways and means to deal with those challenges. These will be very useful as we prepare to write the report and give recommendations to the Minister of Finance.

On behalf of the committee, once again, thank you very much.

The meeting is adjourned.