HEAL Committee Meeting

STANDING COMMITTEE ON HEALTH

COMITÉ PERMANENT DE LA SANTÉ

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 25, 1999

• 1009

[English]

The Chair (Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)): Colleagues, thank you very much for your patience. And to the witnesses, I apologize for the tardiness.

Pursuant to our usual order of business, we are today going to be looking at the main estimates under Health Canada, the report on plans and priorities for Health Canada. We had started on a plan to examine the estimates and all those agencies and organizations that contribute to the mandate of Health Canada.

We are pleased today to have with us a couple of organizations that are not unfamiliar to us. We'll begin immediately with the Patent Medicine Prices Review Board. Welcome to Dr. Robert Elgie, the chairman, and Mr. Wayne Critchley, who is the executive director.

Is there a neutral way to say executive director? It doesn't carry any gender connations. I'm happy to hear that.

• 1010

Dr. Elgie and Mr. Critchley, you've both been here before, so you know more or less how we operate. Since we're starting about ten minutes late, we'll extend the time if that's necessary. You have five to ten minutes, more if you need it, and then we'll go into questions and answers from colleagues around the table.

I noticed that the whips are trying to get everybody together. The House opened about ten minutes ago, so they're trying to make quorum virtually everywhere. You'll see people coming in. In fact I passed a couple of members along the way who should have been coming in here and they were grabbed by whips along the way. Dr. Elgie, you're familiar with that technique, I think.

Dr. Robert Goldwin Elgie (Chairperson, Patented Medicine Prices Review Board): I've been whipped.

The Chair: I feel whipped. Anyway, good morning to you both, and the microphone is yours.

Dr. Robert Elgie: Good morning, Mr. Chair and members of the committee. I appreciate the opportunity to appear before you this morning and report on behalf of the board with respect to its plans and priorities.

With me today is Wayne Critchley, with the neutered name of executive director of the board. Following these opening remarks, I of course would be pleased to answer any questions you may have.

Before beginning, it's with regret that I must report to you the passing, rather suddenly, of Harry Eastman last month. Dr. Eastman, as you all know, served Canada and served the public very well in his role as chairman of the Patented Medicine Prices Review Board from 1987 to 1995 and as commissioner of the commission of inquiry looking into the pharmaceutical industry. He handled many sensitive and contentious issues and he earned a great deal of respect from all sides because of the way he handled those issues.

It was typical of Harry that he produced his commission's report in 1985 on budget and on time after only ten months, a considerable feat that's not likely matched very often by other commissions of inquiry. I know I miss him, and I know that those of you who had the privilege of knowing him share that sense of loss.

Since I was last here in December of 1998, the Minister of Health has announced two new appointments to our board. The first was Anthony Boardman of Vancouver, British Columbia. Dr. Boardman is a professor on the faculty of commerce and business administration at the University of British Columbia. A second appointment was made earlier this month, Dr. Ingrid Sketress, of Halifax, a former colleague of mine, who is a clinical pharmacist at the faculty of medicine and the college of pharmacy at Dalhousie University. Both of these new members bring impressive research records and experience and I'm sure will be valuable to the board in its future work.

The last time I reported to you on our Road Map for the Next Decade, which was released in September 1998 following a year-long public consultation. That road map reported on the views of many citizens about how the board fulfils its mandate to endeavour to ensure that the prices charged by manufacturers of patent medicines are not excessive. The road map sets out a comprehensive and ambitious plan of action to address their input.

I also reported to you last fall on the Auditor General's report, which made a number of recommendations consistent with many of the objectives in the road map. Implementation of the road map for the next decade and the Auditor General's recommendations are the key factors setting the strategic direction for the board in the current fiscal year and in subsequent years.

One of the issues identified by the Auditor General, and which became evident through our public consultations, is the fact that the board's role and the scope of its jurisdiction have not been widely understood by Canadians. Responding to their suggestion, we have taken several initiatives within our current budget to seek ways to expand our communications and better inform the public of our activities.

We've expanded and enhanced our website. We have added a toll-free number. We've increased the frequency of the publication of our newsletter, and last March we published an information brochure for the first time. A copy of this is attached to the copy you have of my opening remarks. We'd be pleased to provide more copies if you wish them. We will continue to seek other ways of enhancing effective communications over the coming years.

• 1015

The second key component of the road map relates to the board's approach to public consultations. At our meeting of stakeholders last November they told us of their support for the more proactive approach to consultations that we had used in developing the road map, and we have committed ourselves to continuing that approach in our new consultation policy. Improved communications and consultations are important to our goal of increasing the transparency and the accountability of our activities.

Evidence of these changes can be seen in our major initiative in the current fiscal year, specifically the working group on price review activities. This working group, which was set up last winter, is composed of representatives of our key stakeholder groups: provincial ministers of health, representatives of consumers, seniors, and health associations, and the pharmaceutical industry. We are pleased at the calibre of individuals who are nominated for our working group and very much appreciate the time and energy they've agreed to put into this work.

The three issues to be examined by the working group at this time are identified in the Road Map for the Next Decade. They are complex and sometimes technical, but each is important. The first issue, which the group is looking at at the present time, involves the appropriate use of different sources of information on drug prices in the United States for purposes of international price comparisons. The second issue the group will tackle involves the price review process used by the board at the stages prior to a public hearing, and in particular how do we make that review process more transparent and how to provide more opportunity to stakeholders for input. The third issue the group will look at is the key area of our price guidelines, the guidelines for the large majority of new drugs that are not breakthroughs or substantial improvements.

These issues will be contentious, and we know it's unlikely that there'll be a consensus on everything, but we look forward to their reports to help us assess the appropriate courses of action we should take. Consistent with our practice and with the law, we will not make any changes to our guidelines without further and broader publication and consultation on the recommendations.

In the meantime, the board continues to carry out its ongoing operations. We've reviewed the prices of all new and existing patented drug products, approximately 1,000 of them, to ensure compliance with the guidelines and the Patent Act.

In our annual report last year we reported the following major trends: manufacturers' sales of all drugs in Canada were estimated to have increased by 7%, to $7 billion; sales of patented drugs went up much faster, by almost 23% over 1996, to $3.8 billion, representing about 52% of the sales of all drugs, but drug prices did not go up. Whether we looked only at the estimated changes for all drugs, as surveyed by Stats Canada, or the changes for patented drugs as reported to us by manufacturers, average prices continued to be stable or even go down slightly. Similarly, we reported an increase in the estimates of total R and D spending, but a relatively stable ratio of R and D spending as a percentage of sales. In other words, spending on R and D increased at a similar rate to total sales so that the overall ratio of R and D to sales showed little change, at about 11.5% for all pharmaceutical patentees with sales of products. The proportion of spending devoted to basic research dropped slightly, though, to 20.7%.

The information on price trends must always be studied in context. People often ask why it is that Canadians as a whole are spending more on drugs each year, even though the prices of individual products may not be going up. One study that helps to address that question is a recent report from Green Shield Canada entitled Analysis of Drug Claim Costs 1993-1997. In that report Green Shield stated:

This report deals primarily with claim costs and not prices. The PMPRB has reported that the prices of patented drugs have actually declined in recent years. In contrast, the drug cost per claim paid by Green Shield rose at an average annual compound rate of 7.5%, from $24.74 in 1993 to $33.03 in 1997...

• 1020

The principal reason for the increase in claim cost is the replacement of older, lower-cost drugs by newer, higher-cost drugs. Added to this factor is the impact of larger prescriptions and a shift in the consumption patterns of existing drugs. As a result of these factors, the annualized increase in cost per prescription is 7.5%, while the actual prices of a representative sample of drugs decreased by 0.8% compounded annually.

We are encouraged by the work of organizations such as Green Shield and governments as represented by the federal-provincial-territorial task force on pharmaceutical prices in collecting information and reporting information that helps Canadians develop a better understanding of drug prices and the factors that influence drug expenditures in Canada.

We will be reporting shortly to the minister and through him to Parliament on our activities in 1998, including the price transfer patented drugs and the R and D expenditures reported to us by pharmaceutical patentees. We are following up on the other commitments in the road map and recommendations of the Auditor General, and we are continuing to work collaboratively with several federal-provincial initiatives, including the task force on pharmaceutical prices.

A key factor in fulfilling our mandate is to be adequately resourced and up to strength. With the two appointments of the board this year, we now have a full complement of members. We have signalled in our report on plans and priorities some funding pressures arising from the initiatives I have discussed, and we are in discussion with Treasury Board Secretariat and Health Canada about how best to address them. All in all, our plan is ambitious, but we believe doable. And we believe it will further advance the effective carrying out of our mandate.

Thank you very much, Mr. Chairman.

The Chair: Thank you, Dr. Elgie.

I'll go directly to members. Mr. Grewal.

Mr. Gurmant Grewal (Surrey Central, Ref.): Thank you, Mr. Chairman.

This is my first time having interaction with the two gentlemen here from the patent board. My question would be about the role and actions of PMPRB. I found out from your report and otherwise that your role and actions are very restrictive to produce any substantial results. I appreciate what you have said.

Just to give an example, the review on the price at which the medicines are sold at the wholesale level—I don't know what's happening after that. Also, the PMPRB acknowledges continuing dissatisfaction with the government policies regarding patent protection and performance of the board. Is there any intention to modify the performance? If yes, then could it be done without any legislative amendments?

Dr. Robert Elgie: I'll answer as briefly as you wish or as lengthily as you wish.

The first question you raised had to do with the prices in the United States, I gather, with the fact that the data that are available to us are primarily from the red book, which often is the price to the wholesaler, or what the Americans call the WAC price, the wholesaler acquisition cost.

Sometimes the so-called manufacturer's cost is listed. But inevitably the costs in the United States have been much higher than in other countries, and that continues to be a concern of ours and a particular concern of mine, whenever that level of cost is significant, in that there may be only one, two, or three countries we're able to compare ourselves to. That's the very reason for the first initiative the working group is looking at, namely to see whether or not the information that's available to us through the Department of Veterans Affairs formulary in the U.S. can be of any assistance to us in getting at what are more realistic figures of what manufacturers' prices are all about.

We've met with them and I've been present to meet with Medicaid to talk about how they deal with the manufacturers' price issue. I look forward to receiving a report from our working group on that issue.

• 1025

As to how the board or whether the board intends to change its practices and evaluate its performance, well, clearly the establishment of a working group to look at a number of initial issues and subsequently perhaps even more, and a total change in the way we do business through the opening up of the doors and letting the sun shine in, as I used to say on another occasion, I think is very important. We now publish regularly a summary of what happens at board meetings and make that public, because there's nothing that needs to be hidden except information that's proprietary under the legislation.

So we're endeavouring to review the way we've done business through our guidelines to see whether or not they are appropriate in today's climate and whether they continue to be in compliance with the Patent Act and its regulations, because we can't step outside those bounds.

In terms of evaluation, we'll be looking at a number of ways in which our performance might be evaluated, and I expect I'll be receiving some recommendations from staff on that sometime within the current year, and I'm sure we'll be able to talk about that at future occasions.

Mr. Gurmant Grewal: On another issue, on page 8 of the estimates, which is the Road Map for the Next Decade that you already touch on in your report, after a year of extensive consultation with the stakeholders there are some concerns about transparency, accountability, guidelines, methodologies, and so on. Could you throw some light on what are those concerns raised by the shareholders that provide any new insight into the different analysis of issues, and so on?

Dr. Robert Elgie: Well, one of the issues of course is the one I discussed, namely the use of prices obtained from U.S. data sources. We're exploring that through our working group committee to see whether or not the new formulary information that we now are able to obtain from the Department of Veterans Affairs in the U.S.... That's one area we're looking at, that particular concern that many of us have had about the high prices in the U.S. being used as part of an international price comparison.

We also have explored ways to verify the information that's supplied to us by companies with respect to manufacturers' prices in the other six countries we compare ourselves to. A paper on that was published with the road map, entitled “Verification of Foreign Prices”, which I'd be glad to give you a copy of if you wish to review. I think the data in that is pretty convincing, and the methodology is pretty satisfactory to most people who have read it to date. I think you'd be interested in reading that.

The other areas we're looking at have to do with the price review process, which includes what comparators the board uses when it looks at a new drug that's not a breakthrough drug, and other issues similar to that.

So I think the road map and the research agenda, which we now have made public, for the next year, and which you may receive a copy of if you haven't already, and which is subject to consultation as well, make it pretty clear where we're heading in terms of trying to re-evaluate the role of the board and determine how we may best serve the public.

Mr. Gurmant Grewal: But does it address the issues raised by the Auditor General?

Dr. Robert Elgie: The issues raised by the Auditor General are issues we're dealing with on a regular basis. Of course at some time when we're complete with that we'll be pleased to report on it. As you know, the Auditor General will return to visit us, if I may kindly put it that way, in September of the year 2000. If you wish to be there for that celebration, I'd be pleased to invite you.

Mr. Gurmant Grewal: We will have the copy of the report by when?

Dr. Robert Elgie: Copy of what report?

Mr. Gurmant Grewal: You mentioned that you will send a copy of the report.

Dr. Robert Elgie: Oh, the verification papers and the.... Yes.

Mr. Gurmant Grewal: Okay. We'll get it in the committee, the papers?

Dr. Robert Elgie: Well, I think most members of the committee have it already from a previous gathering last December, but we'll be glad to make sure you get a copy.

Mr. Gurmant Grewal: I'm a new member, yes.

The Chair: Madam Picard.

[Translation]

Mrs. Pauline Picard (Drummond, BQ): I simply wanted to talk about the consultations you have done as well as the report.

• 1030

You mentioned the auditor general earlier on. Were the concerns of the stakeholders you consulted with different from those of the auditor general in 1998? Did these consultations bring out new facts or analyses different from those supplied by the auditor general? What changes does the board plan on making?

[English]

Dr. Robert Elgie: I hope that the road map for the next decade outlines the areas we are asking the working group to look at, which may result in changes with regard to how the board does business. We're attempting to make certain that we are doing business in keeping with the intention of the legislation and its regulations and serving consumer interests. What we do in that area is always subject to public consultation, so it's impossible for me to say ahead of time exactly where we'll be heading.

The Auditor General's comments were generally in the same area, but there were some differences. One, for instance, is that he thought we should explore cost-effective means of verifying the sales data and the R and D data, and we'll be looking at how that can be done. He expressed concern that we weren't able to quantify the contribution other parties have made to controlling the price of drugs in Canada, namely, provincial governments and private insurers, and we're exploring that as well. As I said, I hope to receive some recommendations about an evaluation process by the end of the year, and we'll be pleased to report on that as soon as it's completed. So I think, generally, the Auditor General has given us some food for thought.

The public consultation process was immensely valuable, and the members of the stakeholder group who attended a November meeting were very enthusiastic about the fact that we were reaching out and trying to see what people were saying and what they were thinking.

[Translation]

Mrs. Pauline Picard: You mentioned that Canadians aren't very familiar with the role of the Patented Medicine Prices Review Board. Do you know why and what are you prepared to do to demystify you role and your mandate?

[English]

Dr. Robert Elgie: I think the reason for it is that we're not in contact with the public in any regular way.

But we're doing a number of things to try to improve that, many of which I have listed in my opening remarks, such as expanding our website; setting up a toll-free line; and increasing the number of newsletter reports containing a summary of the board's minutes for stakeholders to read. As I've said, we've recently developed a very straightforward pamphlet, which will be forwarded to every person who writes to the board or who phones the board so that they'll get some better idea of the role we're trying to perform and the limitations we face.

[Translation]

Mrs. Pauline Picard: Thank you.

The Chairman: Is that all, Madame?

Mrs. Pauline Picard: Yes.

[English]

The Chair: Ms. Minna.

Ms. Maria Minna (Beaches—East York, Lib.): Thank you.

I'd like to go back to the drug prices, Dr. Elgie, if I could, because I'm having some difficulty understanding the assertion that prices have not gone up and some of the other statements you've made. As I look at your statement, and I think I touched on this last year, I'm not sure that we're getting at the actual value as to whether drugs are in fact going up vis-à-vis what was happening before Bill C-91, if you want to look at it that way.

You say that the profits for the patent companies are up considerably, but then you also say the—

Dr. Robert Elgie: I said that the sales revenues were up.

Ms. Maria Minna: Sales revenues, that's right. Sorry, not the price of drugs, fair enough, but that the profits were up, and this was due—

Dr. Robert Elgie: I didn't say that. I don't know that.

Ms. Maria Minna: The sales revenues.

Dr. Robert Elgie: The sales revenues are up, yes.

Ms. Maria Minna: Okay, and a lot of it had to do with the large majority of new drugs that have come on the market. Previously you said that one of the things you're looking at is the large majority of new drugs that are not breakthroughs or substantial improvements.

• 1035

I'm trying to look at all of these different pieces. The principal reason for increases is the replacement of older, lower cost drugs by newer, higher cost drugs. It all seems fine if you read it separately, but if you put it together.... I looked at the fact that of the new drugs on the market, there are no major breakthroughs or substantial improvements. Those, obviously, are new drugs and higher costing, but therapeutically they provide no major improvement to the individual taking them. Am I right? Do we look at that and say, if there is no substantial improvement to the therapeutic effect of the drug, should that drug cost more or not? Is it caught under a new patent or is it under the old?

Dr. Robert Elgie: Any new dosage—

Ms. Maria Minna: Just to finish, these are all new drugs, and you say that the costs are up because they're replacing older drugs. Are the new drugs replacing older drugs, these ones that don't provide a substantial improvement, and therefore driving the sales up and therefore costing more money?

Dr. Robert Elgie: You'll be aware from the annual report that we categorize drugs in three ways in terms of the entry pricing that's allowed: Category one drugs are line extensions of existing drugs, as with variation in the dosage form. That new price has to bear a reasonable relationship to the price of the drug that's already on the market. The second category is drugs that are a substantial improvement or a breakthrough. That doesn't mean that it's a minimal thing. It means there's a significant element to the improvement they introduce into the health care system. The third category is drugs that offer no or moderate improvement. In that category we look at other comparators that are appropriately suited to that drug and then establish a price that's in line with the highest comparator that's appropriate for that drug. So that's how it's done.

The result has been that since 1993 prices on average have not gone up or have gone down, even though costs go up, because, as the Green Shields report says, there are more drugs being sold and more new drugs being added to the basket as older ones leave.

Ms. Maria Minna: I'm also interested in the impact of the new legislation and the new treatment. Does the extension of the patent period and the extra extension with the bridging that's there mean that the new drugs are on the market at the entry price for a longer period of time? When their life is over, does a modest or moderate change to that drug continue their high price by the drug patent manufacturer? How significant does it change that drug to continue it further?

Dr. Robert Elgie: Let's step back to 1987 with Bill C-22 in which the period of exclusivity a company had with a drug had to with the time it got its notice of compliance. So there were a lot of preliminary things before that. There was then seven years of exclusivity—

Ms. Maria Minna: That's right.

Dr. Robert Elgie: —unless the chemicals were manufactured in this country, in which case there were ten years of exclusivity.

The changes contained in the 1993 Bill C-91 removed compulsory licensing completely and gave the companies exclusivity from the time of the filing of the patent as opposed to the time when they received a notice of compliance and could start to sell it. The time it takes from the filing to the notice of compliance will vary from drug to drug, so I can't tell you how long they have an exclusive period for. One would assume it's in the neighbourhood of 15 to 17 years, although some drug company claim they have much less than that. I have no way of confirming what the correct figure is.

As to what happens at the end of 20 years and whether or not the price stays up, it really depends on whether they still have a degree of monopoly in the industry in terms of the drug. Is it a single-source drug? That very issue of the price of single-source drugs that are not patented is being considered by the federal-provincial-territorial task force.

• 1040

You may know that at the meeting we held with persons who had sent in briefs to us, the Minister of Health in Saskatchewan attended that meeting and asked that the board be given jurisdiction over single-source drugs. There's still some talk going out about that. What will eventually happen, I don't know.

So if the patented drug, when it comes on patent, still remains a relatively single-source drug, the price may remain high. If it's not, then competition will enter the marketplace and the price will go down, presumably—

Ms. Maria Minna: Hopefully.

Dr. Robert Elgie: —unless you're selling vitamins.

Ms. Maria Minna: In your area of research, you noted that research had gone down slightly. Do you know why? Is that a trend, do you think?

Dr. Robert Elgie: We said sales revenues had gone up and R and D had kept up with that increase in sales revenue, staying relatively the same.

Ms. Maria Minna: No, but the proportion of spending devoted to basic research dropped slightly, to 20.7%.

Dr. Robert Elgie: Yes, it has continued to decrease slightly over the past few years. Its highest level at one time was 28%. I've said in other occasions my personal view is that the amount of R and D devoted to basic research is, in some sense, representative of the commitment the company has to the country because that's where our children will have jobs, as scientific researchers and other similar positions.

Ms. Maria Minna: I guess I'm asking that because during the whole fight of patent versus what have you, the pharmaceutical plant companies' major lobbying—to me anyway, for the last five years, every time I met with them in my riding—was constantly how they do the basic research and the others don't. It seems to me it's going down and maybe they should be put on notice that this isn't acceptable. I don't know whether you have any role in that at all. I know it's the government policy, as well, but maybe....

Dr. Robert Elgie: You probably have more influence over that than I do.

Ms. Maria Minna: Sure. But in your discussions with them anyway....

The Chair: Dr. Elgie, thank you very much for that answer. Just to piggy-back on Ms. Minna's comment there, I want to express public appreciation for your having included that last item in your report. You'll recall at a previous meeting that item had been left out of your annual report, but you indicated you would bring it back in, and you have. That puts into perspective what members of Parliament often consider, and that is the amount of energy devoted to public policy, in terms of developing some basic research.

The people who are going to follow you, Dr. Friesen and the Medical Research Council of Canada, have been very successful lobbyists for basic scientific medical research. As a matter of public policy—and I know you've seen it every time you've come before the committee when I've been here—it is a question that is raised by committee members.

There's the perception of a commitment. I say perception guardedly because the actual facts are often in contention. But you've put it back in and you've given us an indication of what's been happening to basic research commitment and investment on the part of the patent companies. It seems to be going down, not precipitously, but as a proportion of its research and development, it's not as high as members would like to see.

I thank you for bringing that back into your analyses. I'm repeating myself, I know, but last year it was out and you committed that you would bring it back in, and you have.

Just before I go to Ms. Wasylycia-Leis, there's an issue here on pricing, if you'll bear with me for a moment, that I want to illustrate. It causes me, and I gather it causes some other people, some concern. I'm going to refer to a little issue that happened last year. It emanated out of Italy. It's a little like the vitamins issue to which you alluded.

• 1045

There's a particular drug whose patent has about two years to go—somatostatin. It was selling at bouncing-ball prices in Europe because of an increased demand. But the actual price about five months ago had dropped down to its usual level of about $25 Canadian per unit. In Canada that same unit was selling for $265. It wasn't because there was an increased demand—and it's a single-source product. As I say, it was toward the end of its patent period, and there was only one company producing it.

I had become involved because the issue of the price seemed to be a little out of sorts. The response given to me by the company was “Well, Mr. Volpe, this is what happens when we have a slow period of approval in Canada”. You made reference to the fact that some companies, from the moment of filing to the issuance of the notice of compliance, may take a varied period of time. I'm just wondering whether you've come across other products like the one I've just referred to.

It's probably a question more for Mr. Critchley than for you, because it's a rather specific one, Dr. Elgie. I hope you don't mind me just kind of lobbing it back out. But when I saw that and had that kind of reaction I said “There has to be something our Patented Medicine Prices Review Board can do—does do—to capture this sort of situation”. The price in Italy, by the way, was higher than the price in the rest of Europe.

Dr. Robert Elgie: That's very unusual.

The Chair: So the $265 represented a substantial increase over an already exaggerated price.

Dr. Robert Elgie: I'm afraid, as you suspect, I don't have information on that personally. I don't know if Mr. Critchley does. If not, we'll get the information to you.

Mr. Wayne Critchley (Executive Director, Patented Medicine Prices Review Board): I'm not familiar with it offhand, so I would have to look into that as well. I'll certainly check into the price information and get back to you as to what's going on.

Under our guidelines, the price cannot go up in Canada any faster than the CPI. Unless we've had complaints or it's been brought to our attention that there's a problem with that, we probably would not have cause to look at it otherwise. But with information like that, we'll certainly look into it and get the facts.

The Chair: I'd be delighted to share with you the information I have.

Mr. Wayne Critchley: Thank you.

The Chair: Thank you.

Ms. Wasylycia-Leis.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you very much, Mr. Chairperson.

Thank you, Dr. Elgie and Mr. Critchley, for your time with us again today. I wish we had the same time available that we had back on December 8, 1998.

Dr. Robert Elgie: Nothing's perfect in life.

Ms. Judy Wasylycia-Leis: I'm sure if I don't speak quickly I will get cut off really soon.

Let me zero in on one specific issue you're familiar with that just came to my attention last week. That is the issue of Sustiva, which is one of the drugs now available for HIV/AIDS.

The concern came to my attention from Janet Conners, who you know is an activist in the whole area of helping people with HIV/AIDS, as well as from the Canadian Treatment Advocate Council in Toronto. I believe you or the members of your staff have met with people associated with this organization.

As I understand it, the concern of the folks I've talked to is that Sustiva is categorized as a non-nucleoside reverse transcriptive inhibitor. However, it appears that staff with the PMPRB offered the manufacturer of this product, DuPont Pharma, the option of either categorizing it as an NNRTI or a protease inhibitor, which is a category where drugs are priced at a much higher rate. It appears that DuPont Pharma took advantage of that flexibility and have categorized Sustiva as a protease inhibitor, making it, I'm told, about 50% higher in cost than other non-nucleoside transcriptive inhibitors.

The concern is, why did that happen? My question today is whether this issue can be reopened. Is it possible to go back and say it truly is a non-nucleoside drug, versus a protease inhibitor, and therefore allow the price to come back to what other drugs in that category are and make it more accessible to folks who feel this is one drug that's an important part of the cocktail of drugs they feel is necessary for living longer?

• 1050

Dr. Robert Elgie: Thank you very much.

Let me just start off by saying I don't ordinarily get involved in pricing issues unless it's a matter that may come before the board. As you'll know from your previous life in government, one of the great dangers a tribunal member has is that he or she may be seen to be biased or there may be the perception of bias. So I have a difficult Chinese wall to honour in the job I play.

Getting to this specific issue, I did happen to obtain information about it. I spoke at a meeting in Washington, and the issue was raised by someone from British Columbia's Centre of Excellence for HIV/AIDS. So I'm aware of the problem, although I did not speak to him about it, because I felt that if I were to have that discussion with him privately, I would have to have a series of other private meetings. Then I really would be quite useless, and as the lawyers would say, I would become functus. And as you will know, Mr. Jackson, being functus is not a funny thing to be. Anyway, I intend to retain my capacity to hold a hearing on this issue.

The issue as he outlined it at that meeting is that we had used a comparator that allowed a higher price. That's the issue about which board staff are now having several meetings with that group in British Columbia. And I might say that we don't have jurisdiction even yet. Sustiva is a drug in what's called a patent-pending status, and we do not have jurisdiction formally until the patent is issued. But we've made it clear in our policy that when it does issue, we'll go back and review the sales price from the time it first started to be sold.

So staff are having discussions with them. Yes, they did, as they do with any company that comes in and wants to talk about how a drug might be treated, talk to the company. They did have the Human Drug Advisory Panel look at it, and it was the Human Drug Advisory Panel, who are external experts, who suggested that the comparator you mentioned be available.

However, in light of what's been said and the information that we hope to receive, the matter will be reviewed by staff. Whether or not it gets before a hearing, I can't say, nor do I want to get into any further discussion about it. But if you wish to be briefed on it by staff in any detail, they'd be pleased to do so, as any member could be briefed.

The Chair: Please be very brief.

Ms. Judy Wasylycia-Leis: I appreciate the response and I will certainly pass on to folks that have called me that this matter is under ongoing review and there's some possibility of changes with respect to the particular drug Sustiva.

Dr. Robert Elgie: I didn't say there is a possibility of change. I said there's an ongoing review. Whether there will be changes will depend on what happens in the discussions and if there's a hearing.

Ms. Judy Wasylycia-Leis: Let me just ask a general question then, since you don't feel this is the right time to talk about the specifics. What is the latitude or discretion of the board when a drug like this comes before the board for pricing, when it appears to fall in one category, but the board is able to suggest it might fall in one or two different categories, thereby affecting how that drug is priced? Are there strict guidelines now in terms of where a drug falls? How did this happen? Is it likely to happen again, and what steps can be taken generally on this issue?

Dr. Robert Elgie: Well, as I said, the ordinary practice with drugs such as this is to refer the matter to the Human Drug Advisory Panel, people from across the country who are experts in these areas, and that will continue. But the one thing I did mention in my opening remarks, which I think is relevant to what you're asking, is that the working group on price issues is also looking at how stakeholders other than the company may have some input into pricing matters. One has to be careful that you don't create a stalemate in the process and end up with nothing being done. But at least those are matters that we're looking from a policy perspective.

The Chair: Mr. Patry.

• 1055

[Translation]

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

[English]

I just want to make two comments, and one is a comment to Maria about what she mentioned at the beginning.

First of all, for me there is no reduction in the research and development in this country—

A voice: Basic research and development.

Mr. Bernard Patry: No, no, let me finish. You see, there is an increase in value, not of the money, but it's stable if you're looking at it as a percentage of the sales.

Now, research and development, as mentioned here, is 7.5%; it's about stable if you're looking at percentage of sales. But if you're looking at basic, at that time the basic was 20% of research and development. It's not 20% of all the sales. That means that for all the research and development together, there is an increase in value. It's stable as a percentage, but from this percentage there is a little bit of a decrease in basic development. That's a little bit different.

Now, you're talking also about what's happening after the 20-year pattern. What has happened is that, first of all, with Bill C-91 the generics have a chance to do the early work and the stockpiling, and if they're doing so and they're coming onto the market afterwards, there will be a decrease because they're going to sell it a little bit cheaper, usually 75% of the brand name. If there is no copy, it's probably going to remain the same, but if there is no copy, it's because there is no money to be made by this generic company. That's the major reason there is no copy.

As for the slow approval, that's another comment. It is, in my concern, quite slow in the country. I'm looking at one of the products that were studied. Everything was done here in Quebec, in my riding, and our country was the thirteenth or fourteenth country in the world to accept this drug. It was accepted in some other countries before being accepted in our country.

Now I have one question.

[Translation]

When we studied Bill C-91 two years ago, you told us that the Patented Medicine Prices Review Board had had to intervene several times to obtain a reduction in the overly high price charged for certain drugs when they first came on the market.

During the course of last year, did you have to intervene to obtain a drop in the price of breakthrough drugs after their commercialization?

[English]

Dr. Robert Elgie: First of all, may I comment on some of the other remarks you've made.

I have not been aware that the length of time it takes to get a notice of compliance has been increasing in this country; indeed, the evidence is that it's decreasing. A recent report received from the Centre for Medical Research in the United Kingdom has shown that Canada has been improving steadily and we are now ranking third or fourth or fifth in the world. So although individual drugs may be a matter you wish to draw to the attention of members, generally I think it would be fair to say that the Canadian system has been improving dramatically over recent years.

Have we had to step in during the past year with respect to the price of a drug on the market that was felt to be slightly high? Well, board staff have before them a number of drugs that they are reviewing, and whether or not they will come to me with a recommendation with respect to how something needs to be done is a matter I don't know yet. But we do have one hearing coming up, and that's with respect to an anti-smoking drug called Nicoderm. Staff have alleged that there has been excessive pricing over the years with respect to Nicoderm, and a hearing is about to commence.

So that's the only hearing I have in the offing, but there are a number of drugs under review to determine whether or not they should be referred to me or whether or not a voluntary compliance undertaking might be an appropriate remedy.

[Translation]

Mr. Bernard Patry: Thank you.

[English]

The Chair: Mr. Grewal.

Mr. Gurmant Grewal: I'm done.

The Chair: Madame Picard.

[Translation]

Mrs. Pauline Picard: I would like to make a brief intervention and come back to Dr. Patry's comments regarding drug licensing. If the process is quicker, that has only been the case for a few years or perhaps just one year, because I remember that in 1993-94 we several times in the House had to call upon the Health Minister to bring about a speeding-up of the process in cases where the drug had been looked at for three of four years and approval had still not been given.

• 1100

Companies are complaining. It takes 10 years of research to obtain the licensing of a product and, once it is ready to be licensed, another discovery has already been made, because technology and research are today very advanced. So as soon as a product is launched, another higher-performing one is right on its heels. The product that has been licensed is already obsolete. That is a problem.

I am not really that convinced, Dr. Elgie, that we are that advanced as far as drug licensing is concerned. A lot of breakthrough drug manufacturers are complaining about the slowness of the drug licensing process. We have also been told that science labs and their staff have been slashed and that this is why it is taking so long to get drugs approved.

[English]

Dr. Robert Elgie: With respect, those are questions that should probably best be put to the Health Protection Branch when they appear before you. All I was reporting on was that at a recent meeting I was at, the Centre for Medical Research in the United Kingdom reported on the improving situation in this country.

[Translation]

The Chairman: Thank you, Madam Picard.

Ms. Redman.

[English]

Ms. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman.

I am one of the newer members of the committee, so I may be asking something that everybody has known for years. Can you tell me what teeth the review board actually has? It talks about being a quasi-judicial review.

Dr. Robert Elgie: If staff are unable to resolve an issue with a company, they may refer the matter to the board, the board being myself and the other members I've mentioned. At a hearing, then, the issue of what is not an excessive price is before the board members. If they find there's been an excessive price, then they have a number of remedies.

Let me just tell you what happened in the last full hearing we had, which involved a company called ICN Pharmaceuticals Inc. The board found that not only had the price been excessive for a number of years—it had gone up 300%, and therefore they had to repay that entire amount of money and reduce their price—but it had also been a policy of the company to deliberately do this. Therefore, the amount they had to pay the government was doubled.

If it had to, the board could also order the reduction in price of another drug from a company that's not before the hearing. If you're unable to recoup the funds in excess from the single drug you're hearing discussed before you, then you may make an order with respect to another unrelated drug the company has.

So they're fairly good teeth. Mine aren't, but they are.

The Chair: We will probably be paying careful attention to what you have just said.

Ms. Karen Redman: I appreciate that point. On the point about the funding that is going to basic research, about the fact that it's dropped to 20.7%—and again I appreciate having that information in your report—has a statistic or a benchmark ever been looked at on what would be optimal or beneficial, other than more? Dropping from 28% to 20.7% seems to me quite substantive.

Dr. Robert Elgie: Let me just reiterate what Dr. Patry said. The funds involved in basic science research have increased, but the amount of basic science research as a percentage of the overall dollars has not. It has been going down slowly. That's the point he was making, and it's quite accurate. The dollars have increased, but as a percentage of the total dollars expended on R and D, they've gone down.

When Bill C-22 and Bill C-91 were lurking on the horizon there was a verbal commitment given by the industry that R and D would increase to 10%. That target, according to the data we received, was met some time ago and it's improved slightly up to 11.5% of the sales revenue today. So the goal established at the time those bills were lurking in the distance was at least 10%.

• 1105

Ms. Karen Redman: Given that several yardsticks can be used—one is the finite dollars, the other is the percentage of sales—I would ask you whether it is within your realm of responsibility to review that. Or is that something you could make a comment on that the government may want to review? Is the high jump a little low? Should we raise the bar a bit?

Dr. Robert Elgie: I have always presumed that the reason the act requires us to report that is so the government can have an ongoing review of the amount of R and D being done and what areas it's being done in. We also pointed out in our annual report that there are several companies that are what I call “free riders”. Some have no R and D whatsoever and some have less than 10% in R and D. That's another issue put before the government through the annual report.

Ms. Karen Redman: Thank you very much.

Dr. Robert Elgie: You're very welcome.

The Chair: Thank you, Dr. Elgie.

I know Ms. Wasylycia-Leis wanted to say something, but she has only about one minute to do it.

Ms. Judy Wasylycia-Leis: I will take up your offer to meet with Wayne for an in-depth briefing on the questions around Sustiva. I want to come back to it very quickly, because I haven't really had an understanding about the general policy in this area.

It seems to me that what we're dealing with is a drug fits one category, yet the PMPRB gave the company producing the drug some latitude in terms of where it would categorize the drug. It seems to me this is a precedent that perhaps opens the door to prohibitive costs. It is what B.C. has raised as a concern, because they can't fit the drug under the formula because it's priced so out of line.

So I don't understand why it has to go to a review committee, why it would be part of the price review working group you set up. Is it not just a matter of ensuring that PMPRB staff categorize the drug where it belongs, and then the pricing of that category is the guideline for the actual price that is set?

Dr. Robert Elgie: I didn't want to mislead you into thinking that the working group is looking at Sustiva. They are not. They're looking at the whole policy issue of how one should deal with these things.

I suspect that with this drug, as with some others, there have been studies comparing one class of drugs with another that has the same or similar functions. When that comparison is done, a drug outside the class may be selected as an appropriate comparator.

I don't know if that's the way we should continue to do it or not. The general policy on that is an issue I expect to receive some help on from the working group.

By the way, we did not approve the price. Let's understand that. There was a non-binding discussion by the staff and the board who may hear a case, but they are not bound by anything.

The Chair: Thank you for that clarification, Dr. Elgie.

Dr. Elgie and Mr. Critchley, thank you both for being with us. As always, it's an interesting exchange. We hope it is the same for you as well. We look forward to seeing you again.

Dr. Robert Elgie: Thank you. It's a pleasure to be here. It's not quite as charged as it's been on other occasions.

The Chair: We have new members. They have to get familiar with the issues.

We'll take about one minute and then we'll have the MRC before us.

• 1110

• 1113

The Chair: Colleagues, our second list of presenters this morning is from the Medical Research Council, relative to the 1999-2000 estimates reports on plans and priorities. We have with us Dr. Henry Friesen, Mr. Guy D'Aloisio, and Dr. Mark Bisby. Dr. Friesen is not a stranger to this committee—although, Dr. Friesen, you're going to find that some members are new to you and to your colleagues.

For those around the table who are unfamiliar with Dr. Friesen, I made reference to his organization being great lobbyists. A couple of the doctors around the table were really impressed with the fact that the proposal you made for funding, which many people regarded as kind of a best-case scenario—if everything went your way, what would you like to have—actually turned out to be exactly what you would have liked in the last budget. So I guess this is one chairman who would like to tip his hat to somebody who is successful in getting a point of view across. It sounds to me like Parliament responds to those people who put forward reasonable plans and proposals and can carry them forward.

Anyway, so much for an introduction. Dr. Friesen, you're familiar with the way we operate. The microphone is yours.

Dr. Henry Friesen (President, Medical Research Council of Canada): Mr. Chairman, members of the committee, I am absolutely delighted to be here this morning and to follow up on the chair's comments about the vision the council put forward in concert with a very broad coalition for a vision for health research in this country during the last year. On behalf of that very broad coalition, I thank all of you for responding so generously and affirmatively to the view that Canada should be a leader in health and medical research. The entire Canadian health research community would join me, if they were here, in expressing that sentiment.

• 1115

I will in fact take the liberty in a few moments to read some of the comments that have come my way. They should really come to you as well, and I hope they have. They express what a transformative decision the government took in announcing and supporting an enhanced budget for a reshaped Canadian institutes for health research enterprise in this country.

You should know that in this year's transitional budget an additional $50 million is conferred upon the various councils, $27.5 million to the MRC. That led to a number of decisions taken by the council in the spirit of CIHR to move Canada towards a more internationally competitive health research enterprise, some new awards for young Canadian scientists, and a partnership initiative. I had the opportunity just three weeks ago, as part of that enlarged opportunity, to meet with the Minister of Health and Economic Development for Saskatchewan, to strike a partnership agreement between MRC and that provincial government to ensure there is a threshold level of research available in all of the regions of Canada with a special regional partnership program.

These are tangible benefits. You should know that Canada has in its citizens some extremely productive, creative scientists. Those of you who read the Globe and Mail just this weekend noted the the editorial about Dr. Ji-Won Yoon's remarkable discovery in Calgary that offers new hope for juvenile diabetes. Several months ago there was a wonderful story about Patrick Lee developing a new approach to treating cancer with an inactive virus.

Let me indicate some of the comments that have been made. From Toronto: “Outstanding health care can only be delivered in the context of excellent reseach. I'm so encouraged the federal government has taken steps to reverse a decline.” Another one: “I was truly honoured”, said a young post-doctoral fellow, “to receive an MRC doctoral research award as a result of CIHR. It has given me new-found optimism.” One of the students who has now developed a new career in the London Regional Cancer Centre said: “The award has changed my life and that of some of my people quite dramatically. The money will allow me to maintain a research technician, a post-doc student, and a graduate student. This is the best time of my career thus far.”

We know that many of our finest researchers were beginning to express concern about the Canadian environment. I think the announcement this year of the largest investment ever by any government in support of health reseach has signalled that this country's commitment to excellence is on a solid footing. We hear that expressed. I've had the joy of hearing that expressed many different places over the last months.

We're now in the process of ensuring that the transition that will take MRC into the CIHR environment happens in a smooth and a seamless fashion so that those who now are part of the MRC family will in fact find their home and their new venue in CIHR. There's an interim governing council that was appointed by the minister to advise him on the legislative program that is necessary to establish the Canadian institutes for health research. That legislation likely will be tabled this fall. I look forward to working with you and your colleagues to ensure that the legislation has speedy passage and that we enter the new environment in the 21st century with a whole new health research platform.

We continue to do our business through peer review. Dr. Bisby, the director of programs, can speak to the peer review system, which is the basis for science evaluation. It's rigorous, it's fair, it's open. And if any members of the committee wish to attend any of those peer review committees to see first-hand, you're more than welcome to do so.

• 1120

We also recognize that science is international. Last year the Prime Minister, in a visit to Singapore, signed an agreement on behalf of the Canadian government, MRC, and the Singapore Institute of Molecular Biology. The follow-up of that visit is a $3 million program negotiated in the last several months, with Singapore investing in the University of British Columbia in a partnership.

We're also mindful that in the rapidly changing environment of research important ethical issues, imperatives, must be addressed. Constant scrutiny about these issues must be dealt with. MRC, along with the other councils, has been in the lead in formulating what is really a first in the world where all the breadth of science is now seen as part of an ethical framework.

Since you just heard from the Patented Medicine Prices Review Board, I thought it's perhaps worth referencing the agreement that MRC has with the Pharmaceutical Manufacturers Association. As part of the discussions at the time of Bill C-91, we engaged the pharmaceutical industry in a process that encouraged their greater investment in research. We continued to see that as an important expectation, an expectation to particularly foster basic research initiatives. We are now in a new environment: this is the first time in modern history when new molecules entering clinical trials have their origin in laboratories such as those that exist in Canada, as opposed to the main laboratories of the big multinationals. So it's an opportunity for Canada to position itself for strategic advantage. And in the Canadian institutes for health research environment, we see that as an opportunity for Canada especially.

There's no doubt, in conclusion, that the birth of the Canadian institutes for health research will mean the expansion of research in this country, building on the excellence and the platform that is a legacy of 40 years of investment by the Medical Research Council. We look forward with anticipation and a keen sense of excitement to the future.

Thank you.

The Chair: Thank you, Dr. Friesen.

I'm reminded that my colleague, the parliamentary secretary, who wanted very much to be here for your presentation, was called away to debate in the House. She sends her regrets that she couldn't be here to ask questions specifically of you. Anyway, we thank you for your presentation.

Mr. Grewal.

Mr. Gurmant Grewal: Thank you, Mr. Chairman.

Mr. Chairman, I would like to go, with your permission, over nitty-gritty stuff in the estimates, because they are not clear and they are more about accounting aspects of the estimates. When we look at the main estimates.... I don't know if you have a copy of that or not, but if you do, then on page 10-2 we see some figures of $275,019,000. This is the main estimates for 1999-2000. Do you have a copy of that, or should I provide you the copy if you want to get the details?

Dr. Henry Friesen: Carry on.

Mr. Gurmant Grewal: Okay.

I see these figures. There is some contradiction in the figures. The 1999-2000 figure is $275,019,000. But when you look into this blue book, which are the estimates of the Medical Research Council, in table 3 and table 5 the figures quoted are $302.5 million. There is a difference of $27.5 million. I don't see, after analysing it, where this $27.5 million is hidden in the estimates. I have absolutely no clue, going through the figures, whether it is the operating grants or what this difference points to. So the figures are two different figures in the same estimates for the same year.

Dr. Henry Friesen: Thank you very much. I think the difference is due to the attribution to the council as a result of the decision by the government, in the February budget, to allocate $27.5 million as a transitional contribution to the Canadian institutes for health research. That accounts for the difference. Of that $27.5 million, all but I think $1.5 million is for operating grants and program support for personnel, our regular research activity. So $1.5 million, it's my recollection, is what is going for administration of the $27.5 million. The rest is for research.

• 1125

Mr. Gurmant Grewal: If that's the case, then the $27.5 million you said is for operating grants.... In table 6 the general research grants are completely eliminated from the previous years. So operating grants don't cover the general research grants? Are they two different things we're talking about, or should they be part of the operating grants?

Dr. Henry Friesen: Perhaps I'll invite our director of finance to clarify that point.

Mr. Guy D'Aloisio (Director of Finance and Administration, Medical Research Council of Canada): The general research grants on table 6 were one-time grants given in the year 1998-99 as a result of the additional funds we got last year. It's not an ongoing program.

The $27.5 million is the difference, as you see below that, in other grants, which has a note 10 on it. That is because when these were done the council hadn't met, which was in March past, and the decisions on how to allocate those funds were not made yet. Those decisions have been made now. The $27.5 million has gone to a number of programs, including operating grants, personnel awards, and a number of the other line items along here.

Mr. Gurmant Grewal: Don't you think that in the future estimates these points should be clarified?

Mr. Guy D'Aloisio: It's a little bit confusing in the sense that the estimates do not show the $27.5 million because they were prepared under the rules of government before the budget announcement. Even in here you'll see the difference between planned spending and authorized planned spending, because for the $27.5 million we have to go back to the supplementary estimates process before we can get them formally voted. It is confusing, I agree with you, but these are template things with which we have to comply. The reason is the timing. The $27.5 million was announced in the budget; it didn't have time to get into the main estimates. We were instructed to put it in the part III of the estimates here for disclosure purposes. That's why you see that discrepancy, and the $27.5 million is one line item.

Mr. Gurmant Grewal: That's not the only discrepancy. There are some more discrepancies as well. On table 1 of the MRC estimates, which is on page 19, the main estimates indicate a figure of $227.3 million, but when you go to table 3 of page 20 the forecast spending for 1998-99 is $271.5 million.

Mr. Guy D'Aloisio: Yes.

Mr. Gurmant Grewal: That's a huge difference. Again, is that the same reason?

Mr. Guy D'Aloisio: Yes, it's the same reason, because we have to compare table 1; we're instructed to compare estimates to estimates. Last year that was what was in the estimates, because the additional funds that were approved in last year's budget, in the budget of 1998, which added approximately $40 million to our budget, were not in the estimates last year. So table 3 is a forecast for the current year that includes the $40 million. Table 1 is the estimates from last year, which is just how the estimates were, which did not include the additional funds that were announced in the federal budget of 1998.

Mr. Gurmant Grewal: In other words, when you forecasted for 1998-99 the problem was there.

Mr. Guy D'Aloisio: Yes.

Mr. Gurmant Grewal: But when the estimates come for the year 1999-2000, the same—

Mr. Guy D'Aloisio: The same thing will happen.

Mr. Gurmant Grewal: —thing continues. Will it stop anywhere? Will this figure continue—

Mr. Guy D'Aloisio: The only way it will stop is if the annual budgets of MRC or any organization do not change in the interim from when the main estimates are tabled until the end of the year. So every time there are supplementary estimates, every time there are new initiatives announced by government that's how they get folded in during the year.

I agree with you, it is confusing, and even some of our own people sometimes don't get it, but that's the way it works.

Mr. Gurmant Grewal: Similarly, in table 4, page 21, the gross voted amount is $275 million, and then looking at the figures in table 3 and table 5 the figures are $302.5 million. Do they represent the same figures? Are we comparing apples to apples, or is it apples and oranges? The planned estimates as well as the gross voted amount—shouldn't they be the same?

• 1130

Mr. Guy D'Aloisio: The last column of table 4, you mean?

Mr. Gurmant Grewal: Yes. Table 4, the gross voted amount or the net planned spending, let's use that one. The net planned spending is $275 million.

Mr. Guy D'Aloisio: Yes.

Mr. Gurmant Grewal: Okay. And then on table 3 and table 5, say table 3 for example—

Mr. Guy D'Aloisio: Yes.

Mr. Gurmant Grewal: —the planned spending or planned expenditure for 1999-2000 is $302.5 million. So what is the difference between net planned spending and planned amount to be used?

Mr. Guy D'Aloisio: It's the $27.5 million again. And the terminology is the same. You'll see these tables in all part IIIs of all departments and agencies. This is the way we have to disclose them, the way they're shown here. So from a logical point of view, yes, when you see net planned spending on one column and planned spending on another, you would tend to think that they should be the same figures. They're not. The difference is the $27.5 million; and the reason for the $27.5 million is the budget announcement, which isn't in the estimates, and so on.

Mr. Gurmant Grewal: Okay.

The Chair: Madame Picard.

[Translation]

Mrs. Pauline Picard: From page 12 to page 15 of the Estimates, Report on Plans and Priorities, there is general information and the reader's impression is that you only invest in infrastructure. Could you provide us with some details about how much will be spent in support of the special initiatives mentioned in the budget relating to breast cancer, AIDS, diabetes and other research initiatives?

When one looks at Mr. Martin's last budget, one has the impression that you invest solely in infrastructure. Is there money at the present time for research?

[English]

Dr. Henry Friesen: There are two aspects to the answer to try to clarify the point you've made. In the February budget there was an allocation of resources for research through the MRC and Canadian institutes for health research. Additionally, as part of the health budget, there were a whole range of separate initiatives announced, for diabetes, for toxicology, and for investment in infrastructure. Those last three are all budgets that are allocated to Health Canada, outside of the portfolio of MRC and CIHR.

Some element of those budgets undoubtedly will include a research component, but they're beyond the purview of MRC. However, MRC is in a partnership with Health Canada on the AIDS initiative and on breast cancer. Of the roughly $42 million for the AIDS initiative, there are $10 million, $14 million—

Dr. Mark Bisby (Programs Director, Medical Research Council of Canada): Yes, about $10 million to $11 million.

Dr. Henry Friesen: —that is allocated through MRC for the support of basic research. For the breast cancer initiative the MRC is contributing $2 million a year for five years, along with Health Canada, which is contributing $4 million for each of the next five years, along with the National Cancer Institute in a partnership, which also then includes the contribution by the Breast Cancer Foundation of Canada and Avon, as a joint initiative exceeding $50 million over a five-year period.

So there are some programs where MRC is a partner, and there are some programs where Health Canada still is developing its own approach to the initiatives. As an example I cite the diabetes initiative, where discussions are under way as to exactly what the nature of that initiative will be.

• 1135

[Translation]

The Chairman: Madam Picard.

Mrs. Pauline Picard: Dr. Friesen, you mentioned that all investments in medical research don't come under the Medical Research Council. I would like to know what your jurisdiction is and what type of cooperation you have or will have with the Canadian Foundation for Innovation and the Canadian Foundation for Health Services Research. What are your ties with these two foundations? What is your area of jurisdiction? I am having difficulty defining your role. My impression was that your organization was the one that subsidized medical research. I am asking you these questions because you are telling me that that is not the case.

[English]

Dr. Henry Friesen: I may have confused you by the response to the latest budget announcement. That's a separate initiative.

MRC is the principal federal agency supporting research by scientists across the country based in universities and hospitals. There are some 4,000 scientists who, subject to applications after peer review, receive support from us. There are 10,000 people across the country who depend on us. We pay the direct costs of research carried out in the universities, the teaching hospitals, and the research institutes. We are, in fact, the principal funder through the federal government of health and medical research in this country.

The Canada Foundation for Innovation supports infrastructure, equipment, and construction. We don't have a formal relationship with the Canada Foundation for Innovation, but through their programs our research community benefits. As an example, we fund part of the salary support for young scientists seeing their first careers as faculty members. We pay for their research programs.

The Canada Foundation for Innovation has a program called first opportunities, where they pay for major equipment, renovating the labs, and setting up the labs of these young scientists. That's the infrastructure cost, which they pay. We come along and then pay the ongoing operating costs, including salaries.

The Canadian Health Services Research Foundation is an initiative funded by the federal government that we—I would think it's fair to say—helped create. We saw the need in this country to ensure that MRC and the Canadian Health Services Research Foundation looked at research more broadly. What works, and what actually is effective in the health care system? Which policies that affect the use of certain kinds of diagnostic tools are valid and appropriate? That's the domain of the Canadian Health Services Research Foundation.

To help establish the Canadian Health Services Research Foundation, MRC provided $2 million a year for each of five years as a start-up grant to the foundation. The federal government came along and provided $50 million new dollars. Health Canada put in $1 million. Then in the last budget, that was topped up by an additional $35 million.

So the Canadian Health Services Research Foundation now has an endowment of $100 million. They support some of the more practical applications to find out what works and what doesn't work in the health care system through research.

[Translation]

Mrs. Pauline Picard: Thank you.

[English]

The Chair: Ms. Minna.

Ms. Maria Minna: Thank you. Actually, I was just going to follow up on what Dr. Friesen just started discussing.

Firstly, welcome, Dr. Friesen. It's been great working with you the last several years, and I'm glad we are where we are at this stage of research budgets.

• 1140

In the new CIHI that's been set up, I know they're looking at a broader aspect of health. We're not looking at basic research. As you were just mentioning, as I understand it, we're primarily looking at what works and what doesn't work in health care, and to some degree the efficiencies in the delivery of health care.

Are we looking also at preventive health care in terms of healthy living, and some things like cultural differences, the way people respond to certain health treatments or relate to the medical profession or relate to hospitals? That also goes to being healthy or not being healthy, depending on the cultural or religious group. I know that in some cultural or religious groups women may not want to do breast self-examination, for instance, which could go to a problem of health, or other types of things. Is it that broad or am I being too...? Those are the things that would go towards a healthy society.

Dr. Henry Friesen: I think when we as a council looked at what is possible, what is desirable, given our current understanding of health, we recognized some time ago that there are many determinants of health—social, cultural, environmental, lifestyle choices that determine health. It was therefore logical that in a modern context of health research we should embrace all of those aspects as legitimate subjects of inquiry through research. So in the Canadian institutes of health research we see opportunity and will very likely be funding substantial new levels of activity in those areas, the social sciences that explore those dimensions of health—lifestyle choices, prevention.

One very specific is of course in the area of smoking. We know it has a profound negative effect on many aspects of health—the cardiovascular system, lung cancer. We know that it's particularly young women, young girls, who choose to take up smoking, and yet we know that many of the interventions that are currently attempted really have been largely unsuccessful. We need to understand better how to influence wise choices, particularly in target populations.

Another example is Pap smears. Certain women, because of cultural influences, choose not to use them. What is the appropriate information provided to these populations to either encourage them to use appropriate methods or means as compared to others?

So there are many new opportunities, I believe, in the Canadian institutes of health research environment where important research that will fundamentally improve the health of the population should be the subject of inquiry.

Perhaps Dr. Bisby might want to elaborate on the answer from his perspective.

Dr. Mark Bisby: I just wanted to point out that we are already funding some research in this area.

Ms. Maria Minna: I'd be glad to get it.

Dr. Mark Bisby: I'm aware of projects in Vancouver and Montreal, at least, that come to the top of my mind in looking at how different cultural communities access health care.

Within the CIHR environment, we believe that each institute should have a responsibility in however the institutes are constituted, along what lines, to cover every single part of the health research continuum, all the way from the basic, fundamental biological discovery through to the clinical application, through to health services and health systems research, and through to the influences of environments and society on the health of populations. The model we see has each institute with a mandate to address each one of those areas in its portfolio of research.

Ms. Maria Minna: Mr. Chairman, I have just one last question.

In your broader context of research, which you and Dr. Friesen have just elaborated on, I presume you would be developing contacts or partnerships with the health deliverers of our country, provincial administrators and hospitals, because in the end that's where the health care system hits the bricks, if you like, or the front line, and that's where it's going to make a difference. What do you find will make a difference in how the institutions or the administration of health will change or not change to improve our health care system?

• 1145

Dr. Henry Friesen: Yes indeed. We have very good working relationships with a number of the provincial health research agencies, like FRSQ and Alberta Heritage Fund, for medical research, and with the provincial ministries of health, for example. The deputy minister of Ontario is part of the interim governing council that is offering advice to the government on how Canadian institutes of health research might be organized.

Ms. Karen Redman: Thank you very much.

The Chair: Ms. Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Thank you, Mr. Chair.

Let me start with three questions. First, if you recall our discussion at health committee back in December 1998, the idea you expressed then was to eventually see the end of the MRC and have it totally subsumed under the CIHR. I just want a clarification that the transition money in this budget is to help set up the new sort of infrastructure for this research approach, and eventually we'll see that as the method of delivery.

The second question is a concern that still bugs me that I raised with Dr. Bisby back when we were discussing organs, around the connection between the MRC and the Canadian Medical Discoveries Fund. The reason I raised it then, and I still raise it today, is the indication I had received from someone about being asked to donate money to the Medical Discoveries Fund, only to find out that some of that money was going to the HRG, the private for-profit hospital in Alberta. This person, being an Alberta resident, was very concerned about money going in that direction.

I know Dr. Bisby mentioned at the time that the decisions are peer-reviewed and criteria are met. Is there not a criterion for ensuring that money doesn't go into the private for-profit sector—I was going to say generally, but at least to the medical delivery side of the health sector?

During the organ transplant hearings we held, we talked a bit about xenotransplantation and research in that area. If I recall, our officials in the Department of Health could not tell us where research was happening on xenotransplantations. Can you tell us about that?

Dr. Henry Friesen: First, on the question of the transition of MRC into CIHR, you have it exactly right. The legislation needs to be tabled. Through an act of Parliament, the structure that will be the Canadian institutes of health research will be established. We hope legislation will be tabled this fall. If there is speedy passage and a board is appointed, the new structure that is CIHR will incorporate MRC. The target date we foresee is April 1, 2000.

The relationship between the MRC and the Canadian Medical Discoveries Fund raises a larger issue. I'll address your question very specifically. Canada has a proud record of achievement in discovery, but we unfortunately altogether too often found that Canadian discoveries were being developed with American capital. Some of the very best Canadians would find their homes in the U.S., where their discoveries that were often in their early stages, financed by taxpayers, were being developed and exploited, and Canadians bought those very products back at inflated prices. That seemed to us to be an entirely inappropriate, unsatisfactory outcome for Canada.

As part of that evaluation, we were advised, through a firm called the Boston Consulting Group, that venture capital was in short supply in Canada. Those discoveries needed market capital for a prototype development, to develop to a stage where there was an opportunity for the larger public, through markets, to invest and see the development of these products.

As part of that exercise or effort, we encouraged the creation of the Canadian Medical Discoveries Fund, a labour-sponsored venture capital fund. It has its own board. It's an entirely independent entity from MRC. They, along with whoever else from the private sector wishes to mine the portfolio of research we fund, which is in the public domain, are encouraged to do so. In fact, we welcome it when they find that some of the discoveries we have financed have potential application.

• 1150

Whenever the Canadian Medical Discoveries Fund has chosen to invest in those discoveries, many times they have brought two or three partner dollars along. All of those investments are made voluntarily by individual Canadians. Some 70,000, I understand, have chosen to invest in that fund. It makes its decisions on its own. It's like any other private sector firm. So there's no linkage between their decision-making and MRC's. They are entirely independent.

Xenotransplantation is part of an ongoing activity in research that seeks to evaluate what it is about transplantation of organs from other species into another. What are the immunological reactions that are generated in the host? What is the nature of those? MRC funds any of a number of research activities to try to better understand the problems that are associated with transplantation. I can't tell you specifically about any one individual project, but perhaps Dr. Bisby can. If we can't, we'll be happy to review our portfolio and provide that information to you.

Dr. Mark Bisby: Can I just continue with the answer? I prepared briefing notes when I met this committee about what MRC was funding in that area, and I'd be happy to revise them and bring them up to date for you.

In addition to xenotransplantation, which I think we all recognize is a technology that has some risks as yet uncertain, an area MRC has invested in very considerably is tissue engineering and artificial organs. I'm aware of a group at Laval University, including Dr. François Angers, that is working on the development of artificial skin very successfully. Groups at the University of Alberta and the University of Toronto are working on an artificial pancreas for the treatment of diabetes. A group at the University of Calgary is working on artificial joint materials for the replacement of joints.

So those are technologies that take us to the next step beyond xenotransplantation. They are areas in which we have invested. I'll provide you with specific information about xenotransplantation.

The Chair: Thank you very much, Dr. Friesen, Dr. Bisby, and Mr. D'Aloisio.

Just before I let you go, I know that Dr. Friesen has received a letter from me putting in a plug for vision care and setting up a peer review committee. I think Dr. Bisby responded, but I just want to put that on the record again as a reminder. I know these things are helpful.

On behalf of all committee members, thank you to the three of you for coming and sharing with us some insights that will help us better understand the estimates, as they're presented to us. I'm sure I speak for everybody else around here when I say we wish you continued good work.

Thanks again.

[Proceedings continue in camera]