INST Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Monday, June 2, 2003

¹

1525

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

¹

1530

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

¹

1535

¹

1540

¹

1545

¹

1550

The Chair

Mr. Andreï Sulzenko

The Chair

¹

1555

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

The Chair

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

º

1600

º

1605

º

1610

º

1615

The Chair

Dr. Robert Peterson

The Chair

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance)

Dr. Robert Peterson

The Chair

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

º

1620

Mr. James Rajotte

Dr. Robert Peterson

Mr. James Rajotte

Mr. David Lee

Mr. James Rajotte

Mr. David Lee

Mr. James Rajotte

Mr. Andreï Sulzenko

º

1625

The Chair

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

The Chair

Mr. David Lee

Mr. Dan McTeague

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

Mr. Dan McTeague

º

1630

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

Mr. Dan McTeague

Mr. Douglas Clark

The Chair

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

Dr. Robert Peterson

Mr. David Lee

Mr. Paul Crête

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1635

Mr. David Lee

Mr. Paul Crête

Mr. Andreï Sulzenko

Mr. Paul Crête

Mr. Andreï Sulzenko

Mr. Paul Crête

Mr. Andreï Sulzenko

Mr. Paul Crête

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

º

1640

Mr. David Lee

The Chair

Mr. David Lee

Mr. Larry Bagnell

Mr. David Lee

Mr. Larry Bagnell

The Chair

Mr. Larry Bagnell

º

1645

Mr. Andreï Sulzenko

Mr. Larry Bagnell

Mr. Andreï Sulzenko

The Chair

Mr. André Bachand (Richmond—Arthabaska, PC)

Mr. Andreï Sulzenko

Mr. Douglas Clark

Mr. André Bachand

Mr. Douglas Clark

º

1650

Mr. André Bachand

Mr. Douglas Clark

Mr. André Bachand

Mr. Douglas Clark

Mr. André Bachand

Mr. Douglas Clark

Mr. André Bachand

Mr. Douglas Clark

Mr. André Bachand

Mr. Douglas Clark

Mr. André Bachand

Mr. Douglas Clark

Mr. André Bachand

Mr. Douglas Clark

Mr. André Bachand

The Chair

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

º

1655

Dr Robert Peterson

Hon. Gilbert Normand

Mr. Douglas Clark

Hon. Gilbert Normand

Dr. Robert Peterson

»

1700

The Chair

Dr. Robert Peterson

The Chair

Mr. Brian Masse (Windsor West, NDP)

Mr. Andreï Sulzenko

Mr. Brian Masse

»

1705

Mr. Andreï Sulzenko

The Chair

Dr. Robert Peterson

Mr. Brian Masse

Mr. Andreï Sulzenko

Dr. Robert Peterson

Mr. Brian Masse

Mr. Douglas Clark

Mr. Brian Masse

Mr. Douglas Clark

Mr. Brian Masse

Mr. Douglas Clark

Mr. Brian Masse

Mr. Douglas Clark

The Chair

Mr. Joseph Volpe

Mr. Andreï Sulzenko

Mr. Joseph Volpe

Mr. Andreï Sulzenko

Mr. Joseph Volpe

Mr. Andreï Sulzenko

The Chair

Mr. Joseph Volpe

»

1710

Mr. Andreï Sulzenko

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

Mr. Andreï Sulzenko

Mr. Éric Dagenais (Acting Director, Patent Policy Directorate, Department of Industry)

Mr. Joseph Volpe

Mr. Éric Dagenais

Mr. Joseph Volpe

Mr. Andreï Sulzenko

»

1715

Dr. Robert Peterson

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

The Chair

Mr. James Rajotte

Mr. Andreï Sulzenko

Mr. James Rajotte

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

The Chair

Ms. Marie-Josée Thivierge

The Chair

Mr. James Rajotte

»

1720

Mr. Andreï Sulzenko

Mr. James Rajotte

Mr. Douglas Clark

Mr. James Rajotte

Dr. Robert Peterson

The Chair

Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.)

Mr. Andreï Sulzenko

Mr. Éric Dagenais

Mrs. Marlene Jennings

Mr. Éric Dagenais

Mrs. Marlene Jennings

The Chair

Mrs. Marlene Jennings

»

1725

Mr. Andreï Sulzenko

Mrs. Marlene Jennings

The Chair

Mr. Andy Savoy (Tobique—Mactaquac, Lib.)

Mr. David Lee

Mr. Douglas Clark

Mr. Andy Savoy

Mr. Douglas Clark

The Chair

Mr. Paul Crête

Mr. Andreï Sulzenko

»

1730

The Chair

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

Mr. Douglas Clark

Mr. Serge Marcil

The Chair

Mr. David Lee

The Chair

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CANADA

Standing Committee on Industry, Science and Technology

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NUMBER 049

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Monday, June 2, 2003

[Recorded by Electronic Apparatus]

¹  (1525)  

[English]

    The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): Pursuant to Standing Order 108(2), we are in consideration of the automatic injunction provisions in the patented medicine (notice of compliance) regulations of the Patent Act, and today we will have witnesses from the Department of Industry and the Department of Health.

    I just remind the committee members that this phase will have three hearings this week: Monday, Tuesday, and Wednesday. Health Canada and Industry Canada will give us a status report on the working of the drug Patent Act, including any positive and negatives in relation to the act and regulations, and any problems they have experienced to date.

    Also, on Tuesday and Wednesday we will have the generic association and the brand association to talk about allegations of strategic litigation, inability to get to market, and the various points of view on the Patent Act and regulations.

    This is phase one. The hearing is not about drug prices. It's about the regulations and the Patent Act itself. As I mentioned, this is the first phase. Basically what will happen, committee members, is after the three days of hearings, the researchers will summarize and make recommendations to us as a committee on what we should do next.

    We will begin. I understand the Department of Industry, Andreï Sulzenko, senior assistant deputy minister, will also introduce his colleagues. Mr. Sulzenko.

¹  (1530)  

    Mr. Andreï Sulzenko (Senior Assistant Deputy Minister, Policy Sector, Department of Industry): Thank you, Mr. Chairman and members of the committee. We welcome this opportunity to brief the committee on your review of the patented medicines notice of compliance regulations.

[Translation]

    With me today are Ms. Marie-Josée Thivierge, Director General of Market Place Framework Policy Branch; Mr. Douglas Clark, Senior Project Leader in the Patent Policy Directorate; Mr. Rob Sutherland-Brown, General Counsel from the Department of Justice; and Mr. Éric Dagenais, Acting Director of the Patent Policy Directorate.

    My understanding is that my presentation will be immediately followed by that of Health Canada. I and my colleagues will be happy to answer any questions you may have following these presentations.

[English]

    Mr. Chairman, we have distributed to the committee members copies of an opening statement as well as a binder of background materials. In the interests of time, Mr. Chairman, my opening remarks will be taken from that statement, but will be somewhat less than is contained in the statement itself.

    Our purpose in speaking to you today is not to elaborate on the legal intricacies of the regulations, a challenge I will gladly leave to other experts who follow me, but rather to shed some light on the policy rationale underlying them, as well as to identify some issues the committee may wish to focus on in the course of its review.

    To assist you in that regard, as I said, we've given you a briefing binder. It is a lot of background material, and during the course of the questions we may have occasion to refer to them.

    Let me remind you again of the broad objectives of our drug patent policy. Because of the unique public health implications of intellectual property in the pharmaceutical industry, most industrialized countries, Canada included, have attempted to craft special rules governing the patenting of brand-name drugs and the market entry of their generic counterparts.

    The rationale behind these rules seeks to reconcile two important and competing policy objectives. One is encouraging advancements in medicine by providing effective patent protection for new drugs, and the second is promoting society's access to affordable drugs.

    The current manner in which Canada realizes this balance was established in 1993 through Bill C-91.

¹  (1535)  

[Translation]

    Bill C-91 modernized Canada's drug patent regime by eliminating compulsory licensing and replacing it with a number of new measures designed to strike a more acceptable balance between innovation policy, health care policy and consumer interests.

[English]

    Foremost among these new measures is the working exception under the NOC regulations. Other important Bill C-91 amendments include a beefing up of the PMPRB's powers to ensure that the price of patented medicines is not excessive.

    For the sake of clarity, I will explain “early working” in the NOC regulations in turn, but I wish to emphasize that from the government's perspective they are two sides of the same policy coin.

    First, with respect to early working, in the pharmaceutical industry, early working allows generic drug companies to use a patented drug for the purpose of seeking approval to market a generic version of a brand-name drug. This is of vital importance to generic companies because unlike brand-name drugs that are approved on the basis of lengthy and costly clinical trial studies, generic drugs are approved simply on the basis of bioequivalence comparisons to the already approved brand drug. Without early working, generics could not make this comparison while a brand drug was still under patent, short of risking patent infringement.

    By allowing generic drugs to undergo Health Canada's regulatory approval process while the brand drug is still under patent ensures that patentees do not enjoy a de facto monopoly beyond the life of the patent by virtue of the length of time a generic requires to prepare and submit its regulatory work-up, a process estimated to take from three to five years.

[Translation]

    Internationally, early-working enables generic drug companies located in Canada to be first on the market in Europe where no such regulatory exception exists.

[English]

    Indeed, it is partly because of this that the European Community challenged Canada's early working exception before the WTO recently. Had that challenge been successful, the consequences for Canada would have been significant indeed. Fortunately, however, working in cooperation with expert legal counsel from the generic industry, the government successfully defended the EC challenge.

    With respect to early working in industries outside of pharma, in my written text, Mr. Chairman, there is an explanation. I won't go into that, and if the committee wants to get into that in detail, we would be pleased to answer specific questions.

    With respect to the purpose of the regulations....

[Translation]

    The purpose of the regulations is perhaps best explained by the "RIAS" — the Regulatory Impact Analysis Statement which accompanied their passage in 1993 and is included in your material.

[English]

    This document indicates that in general, ordinary judicial remedies are sufficient to address questions of patent infringement, but that in creating the working exception, Bill C-91 removed an exclusive right otherwise available to patentees. The RIAS goes on to indicate that the NOC regulations serve:

...to ensure this [regulatory approval] exception is not being abused by generic drug applicants seeking to sell theirproduct in Canada during the term of their competitor’s patent.

    The regulations and early working are thus part and parcel of the same balanced policy, designed to encourage the development of valuable new drugs on the one hand and to ensure the timely entry of lower-priced generic versions of these drugs on the other.

    With respect to the issue of special rules for pharmaceuticals, as many of you know, whereas innovator companies insist that the regulations are essential to the continued viability of their business, generic drug companies maintain that the regulations have precisely the opposite effect and have lobbied hard for their repeal. “Why special rules for the pharmaceutical industry?” is their recurring complaint. The courts are perfectly capable of dealing with infringement issues involving pharmaceuticals, just as they do for widgets or any other patentable subject matter, through ordinary infringement actions.

    The reality, of course, is that there is nothing unusual about the government regulating differently in different industries, according to the individual characteristics of each. The government routinely passes legislation to override common-law rules or to direct the courts to follow special judicial processes when dealing with certain issues or industries.

¹  (1540)  

[Translation]

    The reality too is that Canada, like every other developed country in the world, has always had, and probably always will have, special rules for pharmaceuticals.

[English]

    In our view, the real question then is not why special rules for pharmaceuticals, but rather what types of special rules, in this case relating to patents, are necessary and appropriate given the unique features of that industry?

    Let me go a bit into the distinct features of pharma. One is the early working exception, which as I mentioned is mainly of benefit to generic drug companies and was in fact conceived with them in mind.

    Another is the striking disparity between the time and investment needed to invent a new drug and the ease with which it can be reverse-engineered and copied, not to mention the disparity in the regulatory approval processes, which, as explained, require innovator companies to provide the safety and efficacy of their drugs from the ground up but only require generics to prove bioequivalence.

    Yet another is the fact that, once approved, generic drugs rapidly displace the equivalent innovator products through the operation of provincial automatic substitution policies. Then there is the fact that these substitution policies exist alongside a particular unwillingness among Canadian courts to grant preliminary injunctions to pharmaceutical patentees in conventional infringement cases, with the result that absent special rules — and I underline for the committee “absent special rules” — even the most manifestly infringing generic drug can remain on the market pending trial.

[Translation]

    Finally, there are the infringement cases themselves, which tend to be unduly protracted owing to the inherent complexity of the subject matter in dispute, and the fact that patentee wins in those cases do not always translate into recoverable damages at the end of the day.

[English]

    Together these attributes provide a compelling rationale for providing pharmaceutical patentees with special patent rules. That conclusion is rendered inescapable when one considers the unparalleled risk associated with pharmaceutical R and D and society's vital need for new and better medical therapies. Clearly, in no other industry are the stakes as high and the need to encourage investment greater. This can only be achieved by effective and meaningful patent enforcement measures, which can be relied on to provide secure, stable, and uninterrupted periods of market exclusivity.

    This is precisely what the regulations do, inasmuch as they provide an enforcement mechanism that is time limited, effective, and tailored to the particular features of the industry. Under the regulations, patent disputes are addressed concurrently with the health and safety review process, and the majority of cases are resolved within that timeframe.

¹  (1545)  

[Translation]

    The enforcement mechanism of the 24-month stay is clear, predictable and minimizes market disruption. It gives patentees the certainty that the generic competitor will not be able to market its product until infringement issues have been addressed, while ensuring that non-infringing generic drugs can enter the market as soon as possible.

[English]

    Overall, the government's balanced approach to drug patent policy appears to be serving Canada well. Innovator companies have responded with appreciable growth in both employment and R and D. Over the last decade, on average, innovator R and D activity has increased 11% annually. This has contributed to a fivefold increase in the volume of exported pharmaceutical products since 1992. For its part, the generic sector of the industry has experienced employment growth of 300% since 1990 and a 240% increase in sales over that same period.

    Together, the two sectors of the industry, along with the biotechnology sector, were the second highest performers of industrial R and D in Canada last year and the second most research intensive. Most importantly, all of this has been achieved while protecting consumer interests. PMPRB figures indicate that the price of patented drugs in Canada has gone from being 23% higher than the median international price in 1998 to 5% below the median and 40% lower than in the United States in 2001.

    All of these considerations notwithstanding, the regulations clearly remain a contentious instrument. As the Minister of Industry himself noted in an appearance before this committee in May of last year, and I quote:

Are we ever going to get agreement between generics and brand names on what the right balance is between patent and competition? Are we ever going to get unanimity on whether the NOC regulations are right or should be adjusted more? I predict not.

[Translation]

    As you know, in 1997, the points of view of both sides of this debate were extensively canvassed over the course of rather animated consultations during the statutorily mandated C-91 parliamentary review process.

[English]

    During that review, the committee heard from over 140 witnesses as well as representatives from all sectors of the pharmaceutical industry. Much of the testimony was devoted to discussing the regulations. In addition, a specific round table was held before the committee, where lawyers from both the innovator and generic sectors had an opportunity to debate the technical details of the NOC regulations.

    I need not tell you that the committee's subsequent report recommended reform, not repeal, of the regulations and cautioned us away from examining or changing any aspect of health or pharmaceutical policy in isolation. In 1998, the government responded to the committee's recommendations for reform by making a number of very substantial amendments to the regulations. As explained in the RIAS, which can be found in the materials we provided to you, these amendments were intended to reinforce the balance between providing a mechanism for the effective enforcement of patent rights and ensuring that generic drug products enter the market in a timely fashion.

    In recent years, however, generic companies have been increasingly vocal in their allegations that innovator companies are abusing the regulations to unfairly delay generic competition. To paraphrase the crux of the debate, as articulated in 2001 around Bill S-17, which was to implement the WTO findings, on the one hand, generics claim that innovator companies are routinely adding new patents to the register in order to delay generic competition on the original product well past expiry of the basic product patent. On the other hand, innovators insist that subsequent patents only serve to protect incremental innovation and that there is nothing they can do to prevent generics from coming to market on the original product once the basic patent expires.

    I'd like now, Mr. Chairman, in the final part of my presentation, to turn to some of the observations we've made on the recent past.

¹  (1550)  

[Translation]

    In looking into these allegations, Industry Canada had to be mindful of the fact that the 1998 amendments have given rise to a substantially changed regulatory regime. We therefore felt that a meaningful number of cases had to accumulate post 1998 before any accurate or reliable observations could be drawn in respect of litigation trends under the new regime.

[English]

    As you may have gathered from my presentation so far, we observed first and foremost that the regulations remain a viable and necessary component of Canada's drug patent regime. One reason for doing so is that generic companies continued to challenge innovator patents early and often. Therefore, absent the protection of the regulations, infringing generic drugs would routinely enter the market soon after the innovator and well before expiry of the original product patents.

    Another important observation is that the fundamentals of the regime are sound. As you will note from the material we've provided to you, litigation resolution times are in keeping with health and safety review periods and confirmed cases of generic delay are relatively few.

    That said, much has been made of recent developments in the United States involving, among other things, the Federal Trade Commission's investigation into alleged anti-competitive behaviour in the pharmaceutical industry.

[Translation]

    As many of you know, the US has a linkage regime similar to ours and the FTC found that several innovator companies had used that regime in a way that resulted in multiple proceedings and automatic stays against the same generic drug submission.

[English]

    In considering these events, it is important to recognize the number of significant differences between the U.S. and Canadian linkage regimes, such that comparisons between the two are not always appropriate. Most significant is the fact that, unlike U.S. law, Canada's regulations specifically and explicitly contemplate the possibility of further patents being added to the register after a generic submission is filed, and provide for the possibility of further litigation and stays being triggered as a result. Also, Health Canada is very proactive in enforcing the criteria innovators must meet in order to list a patent under the regulations, whereas the U.S. FDA has largely taken a laissez-faire approach in this regard.

    These differences notwithstanding, there are certain parallels between the behaviour identified by the FDC and certain events in Canada. These parallels have been facilitated, in our view, by a number of recent court decisions. Thus while innovator companies in Canada have at all times acted in accordance with Canadian law and jurisprudence, these recent court decisions have changed the regulatory landscape in a way that raises legitimate questions for committee consideration as to whether the regulations are consistently operating in keeping with the balanced policy objective.

    As in the U.S., the behaviour observed here relates to the listing of multiple patents over time in a manner that results in successive automatic stays against prospective generic competition. Although this eventuality is contemplated under Canadian law, its recurrence when timed near and after expiry of the original product patents raises questions about the functioning of the regulations.

    The Chair: Mr. Sulzenko, I'm going to have to ask you to conclude because we've gone way over the time.

    Mr. Andreï Sulzenko: Mr. Chairman, I will conclude in a minute, if that's fine with you.

    In the exceptional cases where this has happened, all were realized through the filing by innovator companies of what are called “supplemental new drug submissions”, a practice that is not expressly provided for in the regulations but has recently been sanctioned by the courts.

    Mr. Chairman, in the interests of time, I will conclude. I'm really left only with the conclusion, which committee members can read. Thank you.

    The Chair: Thank you. I'm sure you can share that during the answer period.

    Dr. Peterson, please introduce your — 

¹  (1555)  

    Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): A point of order, Mr. Chairman. I'm just wondering, since we had about 20 minutes of presentation, whether you're going to stay strictly on schedule and terminate at 5:30 or whether you're going to ask our witnesses to stay beyond that time.

    The Chair: We'll check about the room. We've gone 10 minutes over the allotted time.

    Mr. Peterson, if you would introduce your colleagues and begin, we'll make sure we have our time for questioning.

    Dr. Robert Peterson (Director General, Therapeutics Products Directorate, Health Products and Food Branch, Department of Health): I'm Robert Peterson, and I'm the director general of the therapeutics products directorate in the health products and food branch with Health Canada.

    My role includes oversight of the federal drug review for pharmaceuticals under the food and drug regulations and the administration of the patented medicines notice of compliance regulations. I am joined by my colleagues, David Lee, who is the director of the office of patented medicines and liaison, and Anne Bowes, who is the manager of patents and liaison of the same office. They are responsible for the day-to-day administration with the patented medicines notice of compliance regulations. I am also joined by Mr. David Edwards of the Department of Justice, who is liaison with the health products and food branch.

    My colleagues from Industry Canada have given you a policy overview of patent policy and the patented medicines NOC regulations. I have taken you through the various changes made to the regulations over the years and have discussed some present issues. On behalf of Health Canada, I would like to give you an overview of the patented medicines NOC regulations from the point of view of the regulator. I will outline how the regulations operate from an administrative point of view. In doing so, I hope to highlight some of the issues and trends that have arisen recently. I'll conclude by discussing some of the present challenges that we experience under the resolutions.

    Allow me to begin with the observation that it is not always obvious as to why regulations relating to patents are administered by Health Canada. The reason lies in the fact that the patented medicines NOC regulations link patent protection directly with the federal drug review process. They were designed to operate within the existing structure of drug review as conducted within the health products and food branch under the Food and Drugs Act and its regulations.

    From our point of view, the patented medicines NOC regulations impose a series of extra steps and requirements in the course of carrying out our daily work, which is ensuring that each new drug is safe, efficacious, and of high quality prior to being sold in Canada. On its own, federal drug review is a complicated and detailed process under the food and drug regulations. In our experience, linking patent regulations into such a process engages an even greater level of complexity as well as detail.

    To understand how the patented medicines NOC regulations work and how various challenges have arisen in administering them, it's necessary to understand the basic outlines of drug review. I therefore commence this presentation by briefly summarizing the drug review context under the food and drug regulations and then turn to describe how patent protection fits in.

    As this committee may know, under the Food and Drugs Act and regulations, a drug company cannot develop a product and then just start to sell it directly to Canadians. The food and drug regulations require that prior to selling or advertising a drug, a drug company must file a drug submission with Health Canada. The reason Health Canada reviews a drug submission is to determine from a free-market perspective that the drug is safe, efficacious, and has sufficiently high quality to permit the company to start selling it to Canadians.

    The primary type of drug submission we receive is called a new drug submission. The new drug submission is typically the largest type of drug submission. It will normally contain the data that is gathered over many years by a drug company after the company has isolated a promising compound and studied safety and efficacy of that compound in animals and then in human patients through clinical trials. The new drug submission will include chemistry and manufacturing information that will demonstrate the quality of the drug. If our scientific reviewers are satisfied that the submission meets the requirements under the food and drug regulations, meaning that the drug is safe, efficacious, and of high quality, we will then issue a notice of compliance. Once a notice of compliance is issued, the company can begin selling that drug in Canada.

    Another related form of submission under the food and drug regulations is a supplemental new drug submission. The supplemental new drug submission is for the purpose of making significant changes or change to an approved drug. Just as with the new drug submission, all supplementary new drug submissions also receive a notice of compliance if Health Canada is satisfied that they meet the compliance of the food and drug regulations.

    A third form of drug submission is the abbreviated new drug submission. The abbreviated new drug submission is for generic drug companies who want to copy a brand-name drug. Instead of being required to conduct extensive clinical trials, generic companies can demonstrate that their drug is safe and efficacious on a comparative basis. They compare their drug with a marketed drug, called the Canadian reference product. What the generic company must show is that its drug contains the identical amount of the identical medicinal ingredient as the Canadian reference product. Then the generic company must subsequently show that the formulation of the generic drug achieves the same levels in the blood as the reference drug in what is known as a bioequivalent study. Where bioequivalence is established, and the chemistry and manufacturing information relating to the generic drug is acceptable, a notice of compliance is issued.

º  (1600)  

    The three types of drug submissions I have just mentioned comprise the main structure for the federal review of new drugs under the food and drug regulations. There are many more rules governing drug review, of course, and these would involve far greater levels of detail. However, we would like you to focus on only the essential aspects through which to approach patent protection.

    Before turning to discuss patent protection, I would like to note that this drug submission's structure was designed to support drug review. It was not designed with the aim of safeguarding intellectual property rights. Intellectual property rights were linked into this largely existing and highly complicated structure after the fact. This is, in our view, one reason why the linkage aspects of the patented medicines NOC regulations are so difficult to grapple with, technically speaking.

    I would like to turn to how patent protection has been inserted into the drug review structure I just outlined. The first place to start with the patent register is primarily tied, from a listing point of view, with the first two types of drug submissions: the new drug submission and the supplemental new drug submission. After taking you through the elements of the patent register, I will outline the other main points of linkage on the generic side of the equation having to do with filing of abbreviated new drug submissions and the need for generic companies to address listed patents.

    As the committee will know, the patent register was established in 1993. On a nuts and bolts level, it is really an instrument to identify the patents protecting various brand-name drugs. When a generic company decides to copy a brand drug and a patent is listed for on that patent register, the generic company must address the patent before receiving a notice of compliance. We understand that one of the key issues the committee is looking into concerns the rules about listing patents on the patent register and whether those rules are working in terms of advancing the goals of the patented medicines NOC regulations. It is therefore important to work through the rules about listing patents in some detail.

    Again, just to re-emphasize, the listing rules draw on a fundamental knowledge of the drug review context, particularly the new drug submission and supplemental new drug submission since those are the vehicles through which patents come to be listed.

    If a brand company or a first person, as they are referred to, in the regulations want to list a patent on the drug patent register, there are several requirements that must be observed that govern the timing by which they can file their patent list. First of all, the first person must make sure he or she applies for a patent or patents prior to filing a new drug submission for a notice of compliance. So in the normal course, the first person files an application for a patent with the Canadian Intellectual Property Office. After that, the first person will file a new drug submission with us through which the original approval would be received to start selling the new drug. If the patent has been granted before the first person files a new drug submission, the first person must submit the patent list at the time of the filing of the new drug submission. If the first person is late in filing the patent list, the patent cannot be accepted for listing in connection with the new drug submission. The rule is strict.

    The only exemption in the regulations to this timing rule is where the first person has applied for the patent before filing a new drug submission but the patent has not yet been granted. In that case, the first person goes ahead, files a new drug submission, and then later, when the patent has been granted by the Canadian Intellectual Property Office, the first person has 30 days from the date of the grant to file a patent list. The timing rule for new drug submissions is fairly straightforward.

    Another instance when a first person can list the patent is upon filing a supplemental new drug submission. This opportunity is not overtly stated in the regulations, and this has led to some challenges that I will discuss later.

    The other rule to consider in listing patents relates to the claims of the patent. Not just any patent can be listed on the patent register. The rule is that the patent must contain a claim for the medicine itself or a claim for the use of the medicine. In this respect, we must review the patent claims to ensure that this rule is met.

º  (1605)  

    Last, in terms of listing criteria, the first person must certify that the patent is relevant to the strength, the route of administration, and dosage form of the new drug for which the notice of compliance is issued. Those are the essential criteria for listing a patent on the patent register to protect a drug.

    In terms of how the patent register looks today, there are 390 different medicines identified and 705 patents listed. In terms of distribution, you'll find most of the identified medicines have one or two patents listed to protect them.

    We've included a chart in our materials taken from our annual statistical report. You have in front of you a brief slide deck, and this information would be referred to in slide 6.

    There are 230 medicines that have one patent listed and 84 have two patents listed. However, there is a range beyond that, and on the upper limit one medicine has 11 patents listed to protect it. We've also included in our material some snapshots of the actual electronic patent register, which is available and searchable online, depicting the medicine for which one patent is listed and then another example of the medicine with the 11 patents listed against it.

    In terms of our regulatory activities for listing, the office of patented medicines and liaison conducted a full audit of the patent register in 1999. There were 130 patents removed as a result of that full audit. The office continually audits patent lists and patents as they are filed with us.

    In 2001, 204 patents were filed for listing, and of those, 123 were rejected as ineligible. In 2002, of the 197 patents filed, 48 were rejected. A breakdown of the basis for rejection is included in our materials and is also in the statistical report.

    Our regulatory activities for listings have given rise to a fair amount of litigation either where a first person is contesting our refusal to list a patent or a second person or generic company is attempting to compel us to remove a patent.

    A total of 34 judicial review applications have been filed with the Federal Court on listing issues, most of these since 1999. Of those, 27 have been dismissed or withdrawn in favour of rejecting the patent. Six are ongoing and one case was granted. There have been seven appeals so far in the Federal Court of Appeal, and of those, four have been dismissed in favour of rejecting the patent, two are ongoing, and again one has been granted.

    With that view of the patent register, I would now like to turn to generic drugs.

    Here too the rules for when listed patents must be addressed can be complicated. Initially, prior to 1999, the test for when a second person had to address a listed patent was when the second person was making a comparison or reference to a drug on the patent register.

    Administering this test amounted to determining whether or not such a comparison of reference was made. For the most part, this was straightforward. We looked for bioequivalent studies where the second person was basing an approval on a comparison between the drug and the reference product. This sort of comparison or reference is usually filed through an abbreviated new drug submission, which I previously outlined in some detail.

    However, an amendment was made in 1999 adding another component to the test. The amendment arose when a loophole was identified. A generic company had asserted that it was identical to another generic drug and got its approval that way without any direct comparison to the drug on the patent register.

    A new subsection was added requiring that where the original test did not apply, a second person had to address the patent if a drug was being made with the same medicine in the same route of administration and with a comparable strength and dosage form as the drug for which a patent was listed on the patent register.

    It is worth noting that after this amendment came into force, the Federal Court rendered its decision, which effectively closed the loophole that had triggered the amendment in the first place.

    Another more recent Court of Appeal decision, the first on the application of the new subsection, has resulted in a rather literal reading of the amendment. More drugs are caught by the PMNOC regulations than formally under the old test. Drugs for which companies have conducted their own stand-alone clinical studies now trigger the regulations.

º  (1610)  

    As a result, we are currently faced with a number of situations where the original brand company, with patent listed on the patent register, is being required to address patents listed by another subsequent entry brand company. This is happening when the original brand is making changes to its own drug or licensing another company to sell its drug. We note that this is sometimes threatening supply in Canada where the original brand is introducing manufacturing or supplier changes.

    As to the remainder of the requirements under the regulations, we've included in our materials a flowchart as to what happens when a second person is required to address a patent. The second person has to serve a notice of allegation on the first person. In it, it alleges that it does not infringe the patent, that the patent is not valid, or that the information on the patent register is false. The first person then has 45 days in which to file an application in the Federal Court seeking an order prohibiting us from issuing a notice of compliance to the second person until expiry of the patent. If the first person files such an application, there is a stay of 24 months, which prevents us from issuing the notice of compliance, even if we have finished the review of the second person's drug application under the food and drug regulations. This period can be shorter if the court case is completed earlier.

    With that overview of the patent medicines notice of compliance regulations, I'll finish my remarks by raising some of the current challenges we face administratively. These challenges are occurring on many levels and encompass both brand and generic concerns.

    On the listing side, we're seeing vigorous litigation arising along two general lines. The first relates to the kinds of patents that can be listed on the patent register. The second relates to when patents can be listed. To date, the first line of issues relating to the kinds of patents that can be listed has given rise to the majority of litigation.

    As the committee will recall, the primary eligibility requirement in the regulations is that a patent must contain a claim for the medicine itself or a claim for use of the medicine. The phrase “a claim to the medicine itself”, remains difficult to interpret. While intuitively this phrase might seem only to point just to the medicinal ingredient contained in the drug, it must be noted that the word “medicine” is not used in the food and drug regulations. The courts have given the word a fairly broad interpretation, so that “medicine itself” includes not only the medicinal ingredient but also the medicinal ingredient and formulation or in combination with non-medicinal ingredients of the drug.

    It is,therefore not only base patents claiming the actual compound used as the medicine that are eligible for listing, but also patents that claim the medicine was something else, made in a certain way or taken in combination with another medicine.

    A first person can therefore patent a molecule and list that patent. We call that the base or per se patent. The first person can also patent other inventions, such as the medicinal ingredient in a formulation with a special coating or by forming the tablet by direct compression instead of using other means of production. First persons are able to list many of those patents as containing a claim for the medicine itself.

    Until recently we required that patents claiming a specific formulation had to relate to the approved drug for which the patent was being listed. However, the Federal Court of Appeal has recently instructed that formulation patents are eligible regardless of whether or not the formulation claimed in the patent has been issued a notice of compliance and can be sold as a drug. These patents only have to mention the medicinal ingredient that corresponds to the approved drug.

    It is also of some note that in the above case the Court of Appeal split between the majority and the dissent in its view of the fundamental purpose of the patented medicines NOC regulations. The majority appears to have favoured the prevention of infringement as the sole purpose of the regulations. The minority objected and spoke about the balance between patent protection and the timely entry of generic drugs after expiry of the relevant patents. This creates something of a challenge for us when we try to administer the rules, especially in attempting to put many other cases together, which tend to go in the direction of rejecting these sorts of patents.

    Mr. Chairman, I have perhaps one minute left.

º  (1615)  

    The Chair: Both of you have gone way over the time limit, and all my colleagues will be mad at me because we're going to run short of time for questions. I would ask you to finish in one minute.

    Dr. Robert Peterson: Very good.

    Recent jurisprudence, therefore, allows more types of patents to be listed informally. The other concern, however, is not which kinds but when patents can be listed. This issue remains, from my point of view, hotly contested between brand and generic companies. The main point in the argument is that the first persons are able to list patents on the basis of original new drug submissions and then again on the basis of supplemental new drug submissions when the first person is making changes to drugs.

    In several instances we've refused to list the patent where it was out of time for listing on the basis of a new drug submission and the first person had refiled it with a submission for a brand name or a company name change. We took the position that the filing was effectively to protect the drug as defined in the new drug submission since the name change did not alter the drug. The Court of Appeal agreed.

    We asked the Federal Court to look at the issue with respect to this in a reference, but it was dismissed on preliminary grounds. Since then, given recent split jurisprudence, we have left such patents on the patent register that had been listing them. Generic companies are challenging the position. We have not yet reached a sufficient certainty to reject them, and there are now, not surprisingly, a number of judicial review cases arguing this issue before the Federal Court.

    I believe another issue is that generic companies, when faced with a series of patents listed over a period of years, each giving rise to a new statutory stay or prohibition application in the courts, have been arguing that they need only address patents that relate to the version of the drug they copied. They maintain that once they have submitted their abbreviated new drug submission, they should not have to address any patent listed subsequently on the basis of change to the brand name. So far we have rejected this view.

    However, if the position were accepted by the courts, it would necessarily revolutionize how we administer the regulations. There are several cases before the courts now on this issue.

    To conclude, for most drugs where one or two patents have been listed at the time when the first person submitted the original new drug submission, the patented medicine NOC regulations are working in a steady and even unremarkable fashion. However, where listing patents grows more complicated and, conversely, the requirement for second persons who address the patents grows more complex, the interpretative strain has caused difficulties for us to administer the regulations in a particular way.

    I apologize for taking more than the allotted time, Mr. Chairman. That concludes my comments.

    The Chair: It's unfortunate that we've more than doubled the time for the introduction, so I'm going to ask the questioners to ask their questions right to the point. I'm also going to ask whoever is going to answer the questions to be right to the point. If you're dragging out, I apologize in advance, I'm going to stop you, so be right to the point.

    Mr. Rajotte.

    Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Chairman.

    Thank you for coming in today. My first question deals with the issue you finished up on, Dr. Peterson, which is the issue of patents and multiple patents. I know you have just gone through this in great detail, but could you clarify it some more, particularly dealing with the concern that there are patents for minor variations on a product?

    The concern of the generic companies is that they're extending the patent life of one particular drug through minor variations on that one product. Could I just get your response to that? If you could try to be as clear and as easily understood as possible, that would be helpful. I know it's very technical.

    Dr. Robert Peterson: Thank you for your question.

    I have brought individuals with me who are able to provide concise answers to the technical questions. I'll ask Mr. Lee to address them.

    The Chair: Just go right to your answer.

    Mr. David Lee (Director, Office of Patented Medicines and Liaison, Department of Health): In addressing your question, first, we do see patents come in for listing on the patent register for different things. There are many different inventions that can relate to a drug, and we've outlined that there are such patents as per se patents with a base patent, strong patent.

    There are other patents for how you make a drug, what ingredients go into it, and so on. Again, just to draw back to our listing of criteria, when we look at those patents to see if they go on or not and ask ourselves if they are eligible, what we have to consider is whether it is a claim for the medicine itself or for the use of the medicine. There are quite a few court cases from quite a long time ago on how we look at those and interpret the word “medicine” especially.

º  (1620)  

    Mr. James Rajotte: Now the drug approval process, the process you do, is done after it is given a patent by the patent office?

    Dr. Robert Peterson: Yes.

    Mr. James Rajotte: So your process occurs after the patent office process, or is it in conjunction with?

    Dr. Robert Peterson: Again, I think you'll find the answer to that question in the presentation. The patent must be applied for prior to filing the new drug submission for the brand company. If the patent has been granted, then the patent list must accompany the application at the time. If the patent is pending, then at the time the patent is granted, the brand has 30 days in order to submit that to us. That does not hold up the review process.

    Mr. James Rajotte: I guess there is a basic question. The concern is that there's one patent and then there's a 20-year patent period. It's my understanding that the notice of compliance regulations cannot in fact extend that 20-year patent period. The concern of the generics is that then you would have multiple patents, and they've expressed a concern that these multiple patents would not be genuine, or if they're only slight variations, that they would not be genuine inventions as the Patent Act stipulates they must be.

    I guess our perspective is just to ask whether the argument for minor variations or whether patents must be genuine inventions to be listed on the patent registry.

    Mr. David Lee: Again, we've given you some materials and in them we included a graph to show the number of patents going on to protect particular medicines. Where there are one or two patents, I don't know if that's where the generics are pointing. Obviously they're pointing to the upper range here where you're looking at five and up in terms of the complexity of the history. Those patents, when they're listed on, can be staggered from the original approval time, and I think that's where the generic complaints are coming in.

    Again, though, it's a very complicated area because you've got supplemental new drug submissions on the drug review side coming in all the time from brand companies if they want to change and improve their drug. Can you list a patent at that time and what kind of patent can you list, are really the issues we've been seeing. We don't have very clear instructions right now from the jurisprudence, which is what we're spelling out as a challenge.

    The complicated listing history to date, as you can see from this paragraph, has been exceptional. The norm here with 230 is one patent per medicine, and you see less of an example, but it does stand as an example of what the behaviours can be.

    Mr. James Rajotte: You state that to date you don't have very clear direction from jurisprudence, but is that where the direction should come from? Is that where you're waiting for the direction to come from?

    Mr. David Lee: As regulators, we always use the words and like to get up under what the Federal Court tells us — interpretively, of course.

    Mr. James Rajotte: My next series of questions is for Mr. Sulzenko. In your presentation you talked about early working in NOC regulations, and you said they were very much linked together. So it's your contention to this committee that if this committee does decide to amend, in any way, the NOC regulations, that we would have to look at early working in conjunction, because they are, I think you said, flip sides of the same coin.

    Mr. Andreï Sulzenko: Mr. Chairman, I did say it was part of a balanced package. In response to the specific question, I think it would very much depend on the nature of the changes to the regulations. We did amend them in 1998 and again in 1999. It doesn't mean they stand the test of time after jurisprudence. I think the point is made more in terms of requests by some parties that we get rid of the regulations entirely, in which case we would argue that the other balancing feature of the early working couldn't stand alone. So it's really in relation to the regulatory structure as a whole.

º  (1625)  

    The Chair: Thank you, Mr. Rajotte.

    Mr. McTeague.

    Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Mr. Sulzenko, thank you for that comment, because I was a little confused. I think we've heard that the jurisprudence is now saying that the balance has been upset. Given the language that's ambiguous, which was sent both by this committee and by your regulation in 1998 and 1993, in fact we're going to err on the side of intellectual property.

    I have an interest, though, in terms of Mr. Lee's comments. I find it fascinating, the differences between yourself in Industry and yourself at Health Canada. I know how difficult that must be, considering all the case law you have here. We have Brigitte Kiecken here from Biolyse, which is a brand-name manufacturer that has been done in basically by these regulations that the Supreme Court of Canada has deemed to be draconian.

    Mr. Lee, could you give this committee an example of some of the drugs where we've seen last-minute type of patents that have been arrived at and put on the registry at the last moment, particularly for drugs that aren't so trivial?

    I understand the comments that have been made here about the fact that these are on eight- or nine-year patents. If I considered a drug like Losec, which is the second largest in the country, should it come off expiry, a $425 million kick in the head to consumers, or Paxil-Paroxetine, at $227 million? Can you give me an illustration on those two drugs and how we have seen a multiplication, a flurry of new patents that have suddenly appeared out of thin air such that it has been able to keep the products off the market?

    Mr. Lee, I think that question is for you.

    The Chair: Before you answer the question, there is a vote in the House about orders of the day. If the opposition sees fit, we'll pair off and I would have equal people here so we can carry on with the meeting. Is that okay?

    I would ask that myself, McTeague, Bagnell, Normand, and Volpe stay behind, since they're in line for questioning. The rest can go and vote and come right back.

    Thank you very much for your cooperation. We'll proceed now to the answer to the question.

    Mr. David Lee: Thank you.

    Just to point back to the materials we offered, it may not surprise you that the drugs I've mentioned are in the upper range on this chart and probably comprised the top four in terms of the numbers up there.

    If you're asking about the listing histories on particular drugs, I can walk through specific examples. I've been instructed to keep answers short, so I'll take the committee's view on that.

    We certainly can identify that subsequent to expiry of base patents, we have seen more listings after that time, in some cases over a range of years, while progressive cases are going on between the generic and the brand company in those instances. So you see multiple court cases and multiple listings.

    Mr. Dan McTeague: On the two cases of the second largest and the sixth largest drugs being sold in Canada, both effectively should have been off expiry in other jurisdictions by 1999. You've effectively seen the opportunity for competition somewhat eclipsed.

    Mr. Clark, because of shortness of time I want to go to you because this will lead into some of the other comments I have made.

    It is my understanding, and it is the understanding of this committee, that a report, an analysis, was done by your department such that it gave a pretty good breakdown, a fairer breakdown, of all these court cases. Could you give us the details of that report here and now? We have made it very clear, through our chair, that we'd like to see that report. I don't see it in any of the many volumes I have here. Could you also give us a few points about its highlights? Thank you.

    Mr. Douglas Clark (Acting Senior Project Leader, Patent Policy Directorate, Department of Industry): Actually, we did provide a binder. Some of that information you're requesting should be in there.

    It's under tab (d), and there are subnumbers beneath (d). Tab 3, under tab (d), contains some of what you're talking about. I take you back in particular to the question you just put to Mr. Lee on the listing history for the two drugs you mentioned. That information is contained in there, at tab 3, number 7.

    Mr. Dan McTeague: Mr. Clark, I haven't seen this, and of course my colleagues and I will look at all of these in time. I am, however, interested in the number of cases at the end of the day that wind up being dismissed because they are frivolous or vexatious. Can you comment to this committee on the ratio?

    We have cited, through Mr. Sulzenko, the numbers that exist in the United States. Canada and the United States are the only two countries that have this proposal. We know that President Bush is moving ahead to change the similarities in terms of automatic injunctions. Can you give us a percentage of the number of cases that have been won in favour of generic versus those that have been listed at the last second by brand names?

º  (1630)  

    Mr. Douglas Clark: Each side has its own view of the breakdowns of wins and losses. We've tried to provide you with some information on that. Again in the same tab, tab 3 under (d), is an explanation of litigation and breakdown and a flowchart of litigation and breakdown.

    We spend most of our time focusing on litigation under the regulations between March 1998, when the 1998 amendments came into force, and a four-year period, simply because when this committee looked at the regulations in 1997, they focused on litigation that took place between 1993 and 1996, and we wanted to have an easy comparator.

    What we found between 1993 and 1996 was in terms of decided cases, where the court actually looked at the substance of the issues, brands were winning approximately 66% of those cases. That ratio appears to have reversed itself by 1998.

    Mr. Dan McTeague: Reversed itself since 1998 to what?

    Mr. Douglas Clark: For decided cases, where the court actually made a decision that was final to the outcome of the case.

    Mr. Dan McTeague: Mr. Clark, the committee, I think, in 1998, was trying to abate and lessen the number of cases that would find their way before courts in this country, which ultimately would cost consumers. Of the percentage you have since 1998 — you've cited a percentage prior to 1998 — could you hazard a guess, is it the majority for generics or the majority for brand names?

    Mr. Douglas Clark: The trend is reversed, so it used to be — 

    Mr. Dan McTeague: To 66%?

    Mr. Douglas Clark: It used to be 66% for the brands in post-1998. Between March 1998 and March 2002, in terms of decided cases, it has reversed itself.

    The Chair: Thank you, Mr. McTeague

    Monsieur Crête.

[Translation]

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

    I'd like to understand certain facts and hear your reaction in this regard.

    When a drug is developed — earlier we heard the example of Losec — someone can later request a new patent after having improved the drug, for instance a process that allows easier ingestion or greater effectiveness of the drug.

    In the case of Losec or other cases, was it possible for you to evaluate the quality and relevance of additional patents that were requested by the companies and by the research industry? In your opinion, are some of them phony or overall, do they result in product improvement?

[English]

    Dr. Robert Peterson: I think I'll ask Mr. Lee to respond to that, as he administers the list.

    Mr. David Lee: In response to that, we see a wide range of patents that get filed by brand companies. Not all patents that are for something other than the medicine are frivolous, by any stretch of the imagination. There are patents, for example, for new clinical uses. Those are valuable things for Canadian patients, we believe. But it's important to know that when we're administering the regulations, we don't judge the quality of a patent.

    It's a complicated question. It's usually left for the courts under the Patent Act. So things like validity, whether the patent is okay under the patent rules, are for the courts, not for us. We only see in the claims if the medicine or claim for the medicine or its use is there. So we're very limited in our ability to look at the value of the patent.

    It's a very challenging question. On the outer range there can be patents that we see for processes — how you make it, at what temperature, and so on, and how much you compress a pill — but we don't tend to look at those under the rules we have.

[Translation]

    Mr. Paul Crête: But when a drug is created and patented, that patent has an expiry date. After the expiry, any generic manufacturer can improve and produce that drug.

    So when the generic drug manufacturers say they want to have access to the most improved drugs, aren't they trying to obtain a benefit that should accrue to the research sector? For example, the patent on Losec expired in 1999. It's my understanding that there is nothing to prevent the generic manufacturer from reproducing this model. The problem lies in the fact that the company that conducted the research improved its product to such an extent that the first version of the drug would no longer be marketable.

º  (1635)  

[English]

    Mr. David Lee: Again, on the evidence in terms of comparing how a drug is improved, under the food and drug regulations, that side of Health Canada, certainly we look at the changes as they come in and we give them NOCs or not. We tend not to go through an analysis as to how much a drug has improved or whether the generic catches all the improvements. This is where, as we emphasized, the way the patent listings have been plugged into the food and drug context, into that environment, can get very tricky.

[Translation]

    Mr. Paul Crête: Mr. Sulzenko, as I read page 10 of the French version of your document, in the part entitled “Impact of C-91 Policy Balance”, it is my understanding that the government is in fact quite satisfied with the economic impact of the current policy, both in terms of the additional research that it has led to and in terms of consumer prices. Am I wrong about that? I'd like you to elaborate on that point.

    Mr. Andreï Sulzenko: Yes, it's true. Of course, research and development is an industry of over one billion dollars a year. It is ranked second in Canada for industrial research, after the telecommunications sector. It's an extremely important industry in terms of Canada's efforts to enhance R&D. As you know, the government's objective is to rise from 15th to 5th in the world in research. There must therefore be significant improvement in all areas.

    Mr. Paul Crête: Is it true that change in general, announcement of changes or new projects has a major impact on potential investment in this sector? We know that this is a very sensitive market internationally. In Canada, for instance, we get the impression that there will be significant amendments to the regulations.

    Mr. Andreï Sulzenko: Yes, and that's the view of the industry itself.

    Mr. Paul Crête: Is it also the view of the department?

    Mr. Andreï Sulzenko: All the companies in Canada are multinationals. They always draw comparisons between Canada and other countries and they tell us that in their opinion, Canada's intellectual property regime is inferior to that of other countries.

    Mr. Paul Crête: What is your view on the subject?

[English]

    The Chair: Monsieur Crête, thank you very much. I appreciate it.

    Mr. Bagnell.

    Mr. Larry Bagnell (Yukon, Lib.): In my very brief discussion with generics and brands, it just seems that the brand names don't want anyone to interfere with selling their drugs in the first twenty years and the generics thereafter, and they don't disagree with each other. So if everyone agrees, we should just fix our regulations to reflect what everyone wants.

    Nevertheless, my question is for Mr. Lee. There have been a number of recent cases in which the minister has been directly involved in these cases held against persons taken by Health Canada — Eli Lilly, Ferring, and Biolyse. Could you outline the nature of these cases, the findings of the court, and how these rulings affect your functioning as regulators and administrators of these regulations? Are they still working after these decisions?

º  (1640)  

    Mr. David Lee: How much time do I have, Mr. Chairman?

    The Chair: As long as you're right to the point, you've got four minutes.

    Mr. David Lee: If I may start with the Lilly case, that was Court of Appeal, and on Trial Division it had been overturned. What Lilly was about was we had a patent that came in. One of these patents was not just for the medicine in the drug, which is ceftazidime pentahydrate. It was for that and something else, and the something else was amorphous lactose. The patent was, and the invention was, those together along with a base.

    In looking at whether we could put that kind of patent on the patent register, we asked ourselves, do they have approval for that formulation? In other words, did they get a notice of compliance? Can they sell that in Canada? The answer was no, the company couldn't sell that formulation, so we said “We're not going to allow that listing”.

    That went to judicial review. It went to Trial Division. Trial Division upheld the refusal. Then it went to appeal. The Court of Appeal then came down and pointed out that we were actually in error in making that decision.

    The court's view was that the patent mentioned the medicine and that was enough. From the point of view of the court, that fit within the definition. We're taking that instruction. That's the first case. That's Lilly.

    If you're talking about the Ferring case, and I think that's desmopressin you're raising, that too is on a listing issue. The issue is we had a drug for which there was no patent on the register. There was a name change, actually the introduction of a new name. There was DDAVP and Minirin; the drug is called by the two. The company did not list the patent against the new drug submission when it originally got its approval. The patent came on later through a supplement through the name change for DDAVP. The generic company contested that. They said “We don't like that as a listing”. We took a look at that representation and ended up agreeing.

    There's another court case under Bristol-Myers Squibb on the same issue that went to the Federal Court of Appeal, with a different result than the current desmopressin case on Trial Division. The court came to the conclusion that the patent was eligible for a listing, that again we were mistaken.

    Those are the two decisions I note that so far the court has told us we were incorrect in our conclusions about rejecting.

    The last case is Biolyse. That's on the other side of the equation and has to do with whether generics list or not. In that case there was contention that there was a patent protecting the drug paclitaxel owned by the brand. There was a question of whether amendments in 1999 to section 5, the addition of new subsection 5(1.1), actually caught another company that hadn't used the traditional generic route to get its approval but had done its own clinical studies. The question was, did 5(1.1) catch that other submission? The court answered yes at both levels, at Trial Division and again at appeal.

    In that case again we saw that the amendment in 1999 caught a submission that we had thought wasn't triggered under the regulations.

    Mr. Larry Bagnell: Doesn't that hurt your effectiveness? Are you going to change to adopt it?

    Mr. David Lee: There has certainly been some impact on Lilly. We do acknowledge a number of patents have gone on following the date of that decision, I think around 20. Sorry, there's an instance of a drug that used to be on for one. The patent was on for one drug; now it's on for 20. We're also seeing patent lists go on as a result of the court cases.

    I don't want you to imagine that there is some kind of panic going on. Again, most of the listings we plod along on in that one patent, one medicine category, but we do have these complicated cases, and in applying them to particular problems, it is becoming more challenging. Certainly we recognize that.

    Mr. Larry Bagnell: Did I use all my time?

    The Chair: You still have time.

    Mr. Larry Bagnell: Mr. Sulzenko, my understanding is if we change these, and this reflects what I said earlier, what everyone agreed to, that after 20 years plus one day the generics would have no problem entering and we'd be like the rest of the world, with the possible exception of the United States, which is trying to change it. How would that have an effect on research or our competitiveness in the international world for attracting research?

º  (1645)  

    Mr. Andreï Sulzenko: Mr. Chairman, as I understand the question, as you've heard from the lengthy introductions from the two of us here, this is much more complicated than as you've laid it out. We wish it were as simple as you've put it.

    I think I'd just go back to my earlier point that the regulations were reviewed and amended substantively in 1998. We've now had five years of jurisprudence since then. We're presenting to you today some of the jurisprudence that has taken place. We're raising the issue with the committee whether there should be further--

    Mr. Larry Bagnell: You're not answering the question on the international competitiveness.

    Mr. Andreï Sulzenko: On the competitiveness, I think tinkering is one thing. Wholesale, fundamental change would certainly raise that as a question. Certainly, from the brand-name side, their view, frankly, and they will testify before you, is that the Canadian regime does not have some features that other regimes around the world have, including the United States and the European Union, that make it disadvantageous in relative terms for investment in this country. That is their view. I'm sure you will hear from them at some length on that point.

    The Chair: Thank you, Mr. Bagnell.

    Monsieur Bachand.

[Translation]

    Mr. André Bachand (Richmond—Arthabaska, PC): Don't worry, Mr. Chairman: all week long we will hear about the same exceptions and hear the same arguments from both sides. However, we're going to try to proceed step by step and settle this.

    We're told that the Americans are changing everything. We're also told that with the changes proposed in the US, the regulations we have in Canada will become illusory and no longer necessary because the Americans are more advanced than we are with regard to legislative change. We all remember Senator McCain's candidacy for the American presidency.

    In order for this committee's work to advance a little, tell us what's going on in the US with regard to Senator McCain. The Americans are changing things and we don't want to change them. This is the spin people are hearing.

    You already discussed it in your presentation and I'd like to know exactly what's happening with regard to Senator McCain.

    Mr. Andreï Sulzenko: I will ask Mr. Clark to answer that question.

    Mr. Douglas Clark: In the past three or four years, Senators McCain and Schumer have introduced three bills aimed primarily at limiting to one the number of 24-month stays for brand names drugs. So far, none of these bills has been adopted. So much for legislation.

    From a regulatory standpoint, President Bush recently proposed changes to the FDA rules to attempt more or less the same thing as these federal legislative initiatives. This proposal was made public last October. There was a 60-day consultation period and we've seen nothing since. We often hear that this will be done and that it will soon be published. That's where things stand for the time being. Therefore, there have been no changes to date.

    Mr. André Bachand: The American legislative process is probably more unwieldy than Canada's. If the changes were applied, what would be the differences between the American regulations and the current Canadian regulations?

    Mr. Douglas Clark: It differs depending on whether we're talking about legislative or regulatory changes. Given that three bills have been introduced and that things seem to be changing a bit, it might be better to discuss regulatory change.

    There are three main amendments in the regulatory change proposal. In our opinion, there are two that would make the American system more similar to our own. They would set out criteria for the addition of patents to the registry, the Orange Book as it is called in the US, criteria that look very much like those we already have. However, if the third proposed amendment, which would limit the number of stays to one per new generic product, was put in place, the American system would be more rigid than ours in terms of the opportunity innovator companies have to add patents to the register.

º  (1650)  

    Mr. André Bachand: That's all?

    Mr. Douglas Clark: That's all.

    Mr. André Bachand: Therefore the US is not starting a quiet revolution in its pharmaceutical patent legislation. They will be no American revolution for patents.

    Mr. Douglas Clark: They're not thinking of repealing their system. These are proposed amendments and we'll see what happens.

    Mr. André Bachand: These are changes similar to those Canada made. We're prepared to make some and we have made some. As a matter of fact, you were saying that the results of these changes had benefited generic drug manufacturers particularly with regard to appeals proceedings. Since that time, the generic industry does not seem to be suffering from dire poverty. Both industries seem to be surviving very well in Canada. Am I correct? For the past few years, Canada's generic industry seems to be doing very well.

    Mr. Douglas Clark: That's what our figures indicate, but I think the industry may see things differently. You should put that question to the industry.

    Mr. André Bachand: Now let's talk about Europe. We're trying to look at all aspects of this. This week, we will have time to examine the situation in Canada with other witnesses. Earlier, in reference to Europe, you raised a point about the WTO. If memory serves me, the European Union appealed to the WTO regarding all of our regulations. Is that correct? Could you give us more details on what happened and about the fact that Canada finally won?

    Mr. Douglas Clark: We discussed this briefly at the beginning. My colleague Mr. Sulzenko talked a little about the early-working exception. This is something that exists in Canada, the United States and a few other G-8 countries. Australia has this in a way. In Japan, it's not legislative, but...

    Mr. André Bachand: Let's be clear here. We fought at the WTO to maintain these regulations.

    Mr. Douglas Clark: Not the linkage regulations, but the early-working exception and we won. We recently heard that Europe was examining the possibility of implementing something similar to our own system in this regard.

    Mr. André Bachand: Therefore Canada and other countries are more advanced than the European community in this regard.

    Mr. Douglas Clark: Except that Canada is the only industrialized country to have adopted an early-working exception system without also having adopted a patent extension system for pharmaceutical innovators. To my knowledge, we're the only ones in the world to have done that.

    Mr. André Bachand: Therefore, that's an advantage for generic drug manufacturers.

    Mr. Douglas Clark: Yes I think the generic drug manufacturers see it that way.

    Mr. André Bachand: Thank you.

[English]

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

    Monsieur Normand.

[Translation]

    The Honourable Gilbert Normand (Bellechasse—Etchemins—Montmagny—L'Islet, Lib.): The reason we're meeting here today is that the generic drug manufacturers are complaining that the patent drug companies are abusing the linkage regulations. What was explained to us earlier shows that most drugs are currently under patent and some of them even have two.

    Here in Canada, the premature licence to produce gives generic drug manufacturers an absolutely extraordinary advantage. In fact, Canada defended this before the WTO, if memory serves me and it won, which gives them a three to six-year advantage compared to manufacturers in other countries. In my opinion, the NOC regulations and the premature permission to produce are indivisible.

    I'd like to know what percentage of cases end up before the courts. Secondly, what is the name of the company or its subsidiary? I'm almost sure that it's always the same company or one of its subsidiaries that's in litigation. That company is called Apotex, and in fact it has used highly dubious and mercenary methods that have put us in a very difficult situation with Cipro. I would like to know the names of the companies involved.

    I'd also like to discuss the issue of bio-equivalence. My question is for Mr. Peterson. You say that the bio-equivalence of a drug is established by measuring the rate at which it enters the blood stream. For instance, when a patent drug used to treat a duodenal ulcer dissolves too rapidly in the stomach, even if you find the drug in question in the blood stream, it has had absolutely no effect where it should and it goes directly into the toilet. The patient paid for nothing and put his or her life in danger.

    First I'd like to hear Mr. Clark's answer. Which companies are currently in litigation?

º  (1655)  

    Dr Robert Peterson: Well, you can take a look at the entire generic industry. There may be a few exceptions, but I think all of them are in litigation at the moment. It would be difficult for me to estimate the number of court cases initiated by Apotex, but I would say that this company may not have initiated the majority of them, but certainly a significant number of them. I can provide you with this information if you wish.

    Hon. Gilbert Normand: I'd like to have that.

[English]

    Mr. Douglas Clark: Thank you. I'll try to be brief.

    Again, this is a rather technical area. We not only look at a few blood levels, but in fact a very specifically designed bioequivalency trial. It will talk to both equivalence with regard to total amount of drug that is delivered to the systemic circulation that needs to be comparable between the brand company and its generic copy, as well as the time to the maximum concentration in the blood, and in fact the maximum concentration. We compare that and that profile very carefully. There are published limits within which a product cannot either be above or below in the instance that I think you are querying.

    We will also look at drugs that have special properties or a very narrow therapeutic index, which means there could be additional safety concerns that need to be addressed with respect to the bioequivalency study. In some instances, we will require a food effects study, and that will cause the generic company to replicate the numbers of studies that take place.

[Translation]

    Hon. Gilbert Normand: Right now, the patent drug companies must prove the 100 per cent safety and effectiveness of their medications, which can take many years. Eight to twelve years can pass between the time a patent is registered and the time a drug is put on the market.

    When a generic drug manufacturer decides to copy or counterfeit... Canada is the only country in the world where counterfeiting is legalized in the pharmaceutical industry. When it comes to watches, jackets, communications on computer equipment, for instance, counterfeiting or pirating is not permitted. It's not permitted in any industry other than the pharmaceutical industry. There can be legal counterfeiting — it is covered under our legislation. Right now, the generic drug manufacturers have the advantage of having the right to early production as well as having to prove only one bio-equivalence for their drug in order to put it on the market.

    If the generic drug manufacturers had to conduct clinical trials as is the case for patent drug companies, do you think their drugs would be put on the market as quickly?

[English]

    Dr. Robert Peterson: What you pose is a very difficult dilemma both with respect to the ethics of clinical trials as well as what the consequences of that would be.

    A clinical trial is authorized by Health Canada when its purpose is to clearly define a new understanding where we answer a research question. In fact, if that question has been posed and answered already by the brand name, to expose an additional cohort of patients to the full clinical trials that may involve thousands of patients a brand-name company must do, there would be some difficulties in the ethics of that requirement. That is one of the potential issues that one would have to address.

    A bioequivalency study is typically done on less than 100 individuals, 50 individuals perhaps, in order to define that bioequivalence. The requirements are rigorous. This is not a casual comparison. We look very carefully at those results when they are submitted to us.

    The issues you had raised with regard to safety and counterfeit drugs — I am not confident I understand the question completely.

    Let me address the safety issue first. In the drug approval process, the pre-market assessment does have very stringent requirements for evidence of safety of the product both in animals, and many species of animals, as well as in clinical trials. However, the experience has been over the past 10 years in North America that approximately 2.9% to 3% of the drugs, one in approximately 33 or 34 drugs, will demonstrate some surprises in the early post-market launch and experience on that drug.

    Clinical trials by themselves, and you are correct, cannot provide all of the safety issues. In fact, we have a very extensive post-marketing surveillance system in place that on an ongoing basis continues to re-assess the safety of the product. The larger the patient population, the greater the potential for an individual who may be susceptible to an adverse event of the drug appearing that would not have been detected even in thousands of patients studied in clinical trials.

»  (1700)  

    The Chair: Thank you very much.

    Dr. Robert Peterson: I didn't understand the counterfeit question.

    The Chair: No, no, you took an three extra minutes.

    Mr. Masse.

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

    I am here today because the patented medicine notice of compliance issue is a significant part of a larger issue that's literally killing the Canadian publicly funded medicare system. It's leaving thousands of Canadians out there without the proper medicines they need. We're watching unions, businesses, and organizations fight because of the cost of rising drug benefit costs that are affecting not only our current economic development but also our future by attracting new business. It is also leaving a number of different people in very tenable economic situations.

    Given your presentations today, and I've noticed your conclusions in going through them, I believe people watching here and participating would say this is a complete dog's breakfast. What do we need to do to get something going here? Are you completely satisfied with informing Canadians about the current status of affairs and basically leaving this to legal decisions? What do we specifically need to do to get some sense of balance to go forward?

    Mr. Andreï Sulzenko: Mr. Chair, as I tried to explain in my opening remarks, since the last significant review of the regulations, we've had a period of litigation in the courts, and we tried to present that to you in as clear terms as possible as to what the courts have decided. We thought the purpose of this committee hearing was to review the regulations in light of recent court experiences. So we brought that to the committee, and we will assist the committee in any way we can in terms of the committee receiving the required evidence to make any recommendations to the government.

    We understood that to be the specific purpose of the hearings, not a broader purpose of the prices, price review, and so on. If the committee were to broaden its scope, then we would certainly be prepared to brief it more fulsomely than we have.

    Mr. Brian Masse: Are you satisfied with the current situation after your review?

»  (1705)  

    Mr. Andreï Sulzenko: Again, we will at some point have advice to our minister and through him to the cabinet, but before we provide that advice we look forward to the committee. That's what we had understood to be the order of process. So our views on this will clearly be presented to the committee.

    The Chair: Dr. Peterson.

    Dr. Robert Peterson: I would just comment briefly that we see a change in environment as we get jurisprudence that is developed in this area, and as regulators we respond to that. Clearly, we have concerns with regard to dissenting opinions and the potential for that to disrupt the balance that has been working in the past.

    Mr. Brian Masse: Two of those dissenting opinions were the Kirby report and the Romanow commission. They requested some type of action on this. Are those two types of scenarios that could be plausible for this committee to explore in order to move forward into Parliament? Do they work?

    Mr. Andreï Sulzenko: Mr. Chair, as I recall, in our reading of the Romanow report, yes, there was a recommendation to that effect. However, try as we might, we could not find any analytical base supporting that recommendation, so we weren't helped, frankly, by the report in coming to that recommendation.

    Dr. Robert Peterson: The dissenting views I was referring to were within the appellate Federal Court.

    Mr. Brian Masse: I didn't unintentionally imply that those were the dissenting views that you referred to, but they weren't.

    I wish to move to Mr. Clark and to the issues he raised about the reverse of decisions since 1998 in favour of generics. Are all of those currently completed right now or are they still in the court process? My understanding is that some of those decisions are still there and that they're not binding when they're done within the context of the 24-month stay. And then, when the product goes to market, there could be another launch of a lawsuit. Can that happen?

    Mr. Douglas Clark: As soon as the decision is rendered it's binding and the NOC can issue, provided Health Canada is ready to issue it. Some of those decisions may be under appeal. I can get a number to you if you would like, but it's not a significant one.

    Mr. Brian Masse: Okay. I would appreciate getting that information back if the appeals were done there.

    What is the purpose of the separate and new use patents and the logic that has been used behind that?

    Mr. Douglas Clark: On occasion you do see instances where years after a molecule, an active ingredient, has been discovered, a new use will be developed. An easy example is the case of Proscar, which was a drug to treat prostate problems, prostate inflammation, and a side effect was found that it grew hair on men's heads. So that was an interesting invention and discovery. It was patented and a new product came out under a different name and dosage form to treat that particular indication.

    Mr. Brian Masse: And how much was the drug significantly altered?

    Mr. Douglas Clark: I think the strength was cut by 75%, by four. That was about the extent of it. It wasn't a complicated delivery mechanism with the drug.

    Mr. Brian Masse: So basically an unintended side effect led to the repatenting of the drug and extending the use?

    Mr. Douglas Clark: The use, exclusively the use, not the drug per se.

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

    Mr. Volpe.

    Mr. Joseph Volpe: Mr. Chairman, I wonder if I could go back what Mr. Sulzenko says was the main purpose here: to get the advice of committee on what to do with the abuses of the regulations, if in fact abuses did exist.

    Do you have all of the information the committee could have, or do you have some other information in your department? You wanted to brief us, right?

    Mr. Andreï Sulzenko: Mr. Chairman, we provided the committee with a lot of documentation. We realize it will take some time to go through it.

    Mr. Joseph Volpe: You brought it to the committee today.

    Mr. Andreï Sulzenko: We brought it to the committee today.

    Mr. Joseph Volpe: Did you expect committee members to do this while you were giving your 20-minute address?

    Mr. Andreï Sulzenko: We are available to the committee to return at any time the committee would like us to return.

    The Chair: You might want to get to your question, Mr. Volpe.

    Mr. Joseph Volpe: Well, that was the first question, because I think if we're going to talk about regulations and whether they work or they don't work, Mr. Chair, then we have to have some forthright responses and information available. As a point of order, I asked in the committee last week whether we were going to get all the information to do our job.

    I looked at one of the items here. Mr. Clark pointed to the cases commenced between 1993 and 2002, and he wanted to put aside the first 130 cases between 1993 and 1997 because you wanted to build up a body of understanding through jurisprudence that addresses regulations that you put in place — not that Parliament put in place, but that you designed and fashioned to address the issue of, as you said in your introduction, encouraging innovation in the country.

    Now we have a series of other cases that have gone to court on the mere allegation of infringement because your job is to make sure you protect innovation. I would like to know whether in your calculations of the costs or the benefits, how much if any has it cost the Canadian public to allow these court cases to go on or to allow an environment where these court cases were going on. Keep in mind, Mr. Sulzenko, that I'm not talking about infringements; I'm talking about the allegations of infringement that have had to be decided by the courts.

»  (1710)  

    Mr. Andreï Sulzenko: I'll ask Mr. Clark or Mr. Dagenais to answer your specific question on delays.

    But just to clarify, the standing committee reviewed at some length in 1997-98 the functioning of the regs, and the committee was — 

    Mr. Joseph Volpe: I was in that committee. I know what we reviewed. It reviewed Bill C-91, not the regulations. Would you just answer the question then, please? Maybe Mr. Sutherland, who designed these — 

    The Chair: I think you might want to wait. Mr. Volpe, let Mr. Sulzenko answer your question.

    Mr. Joseph Volpe: I just want an answer. I don't want an explanation.

    Mr. Andreï Sulzenko: My main point, Mr. Chair, was that when we revised the regulations it was in close cooperation with advice from this committee, and we are seemingly going through that same process yet again.

    I will now turn the specific question to one of my colleagues.

    Mr. Éric Dagenais (Acting Director, Patent Policy Directorate, Department of Industry): On the issue of costs, if you turn in your material to tab d(3), the fifth document, we have confirmed cases of delayed market entry of generic drugs, and we've listed here six drugs where there's a confirmed case of delay. That means Health Canada had approved the generic NOC and could not issue the NOC because of ongoing litigation, and ultimately the litigation was found in favour of the generic. You see the period of delays on average of 11.6 months. We've calculated the costs of this delay at $16 million over the last four years.

    Mr. Joseph Volpe: That one item?

    Mr. Éric Dagenais: No, on all six items over the last four years. That's .03% of drug expenditures during the same period.

    Mr. Joseph Volpe: It seems to me that in the introduction you gave us, Mr. Sulzenko, there is a fundamental disagreement with — I don't want to go as far as Mr. Masse in talking about a dog's breakfast — or a difference of direction between you and Health Canada.

    I imagine that you must confer frequently on issues. What would have led to the problems associated with the collapse in the case for Biolyse? I mean, here's a Canadian company doing all of its research in Canada, doing lab research in Canada, producing in Canada, reducing cost in Canada, and as a result of the judge's interpretation of your regulations, it's out of business. But it's not out of business because Health Canada thought it was wrong.

    Mr. Andreï Sulzenko: To clarify the relationship between the two departments, Mr. Chair, we do not in any way get involved in the day-to-day administration of the regulations by Health Canada. We monitor after the fact the court cases as they come up and we review our regulations against the jurisprudence.

    I'll turn it over to my colleagues to amplify on that.

»  (1715)  

    Dr. Robert Peterson: Once again, the regulations, as they are administered on a day-to-day basis, have been relatively stable in the recent past. We are seeking, I believe, our principal challenges coming from jurisprudence that is being developed in this area.

    A number of those cases — the honourable member I think has outlined perhaps the most significant ones — have been recent. They have had an effect on the way in which we administer the regulations. We have taken direction from the court. We have altered decisions with regard to listing or not as a consequence of that.

    Those are our present challenges, and those, I believe, are what we need to look at into the future, as to what their consequences might be and the balance that has been achieved in the past using these regulations.

    Mr. Joseph Volpe: The concerns are basically efficacy and safety. That's Health Canada's mandate, and to make sure the product is a good-quality product. Mr. Sulzenko's department is interested in something else, not necessarily in the health issue. That's fair. I don't have too much of a problem with that.

    The Chair: I apologize, Mr. Volpe, but your time is up and I must move on.

    Mr. Joseph Volpe: I'll go on another round.

    The Chair: If possible.

    Mr. Rajotte.

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

    Mr. Sulzenko, I want to touch upon something you said in your presentation and then a remark you made in answer to a question.

    You talked about the rationale behind these rules. You talked about reconciling two important and competing policy objectives: encouraging advancements in medicine by providing effective patent protection for new drugs, and secondly, promoting society's access to affordable drugs. I think you've done a good job there of outlining the two objectives, which, as you mentioned, may compete. I think our challenge here is to try to find the correct line between those.

    Along those lines, can you just give us an identification of where Canada fits in, in terms of if you had a spectrum of generics and brand names or research-based pharmaceutical companies? How would Canada compare with Europe and the United States?

    You mentioned in answer to a question that the IP regime in Canada is inferior to other countries. So can you, or any other witnesses here, tell us where Canada fits in here if we had a spectrum between those regimes that are most favourable to generics and those regimes that are most favourable to research-based pharmaceutical companies?

    Mr. Andreï Sulzenko: Mr. Chairman, I think if we compared Canada to our main competitors, the United States, the European Union, Japan, our regime is overall more pro-generic than theirs. Some of the features that those regimes have incorporated into their drug patent systems don't exist in Canada, for example, patent term restoration, which has been mentioned before. But that is — and I'll just go back — the balance this government has tried to strike in terms of those competing interests. We took a different view than other countries.

    Mr. James Rajotte: How many nations would have early working, for instance, the system we have in Canada?

    Ms. Marie-Josée Thivierge (Director General, Marketplace Framework Policy Branch, Department of Industry): May I suggest that you turn to tab c(3). What we've tried to do for this committee, Mr. Chair, is to summarize some of the key features. It's an international comparison of intellectual property regimes for pharmaceuticals, so it does show Canada, the U.S., and the EU in terms of some of the major features. So as you will see there, in terms of the early working, in Canada and in the U.S., early working is provided for but not in the EU. So we have tried to summarize for this committee some of the main IP features.

    The Chair: Could you clarify that last tab? We don't have c(3).

    Ms. Marie-Josée Thivierge: It's under c, and it's the third document after the second green leaf, I would suspect, and it's entitled “International Comparison of Intellectual Property Regimes for Pharmaceuticals”.

    The Chair: Thank you.

    Mr. Rajotte.

    Mr. James Rajotte: The second question I have, then, relates to the regulatory structure governing this. I understand why it's both Health Canada and Industry Canada that deal with this, because you have the drug approval process within Health Canada and obviously the Patent Act within Industry Canada. In your dealings with this — I realize you're giving advice to the minister, but asking advice as a committee member, is there a better governance structure that you've thought of?

    It seems to me that perhaps there is a linkage there, because you do have the Patent Act and the drug approval process in two different departments. Should they be linked less, should they be linked more, in terms of the governance structure, so that the drug approval process is directly tied to whether a drug is considered...? Is the same time a drug is considered a genuine copy the same time it's realized that it does not infringe on a patent? Is there a way to better link that so we don't end up in court so often?

»  (1720)  

    Mr. Andreï Sulzenko: Mr. Chairman, I'm only able to explain the regime as it exists, not to speculate on whether the government should look at options to fundamentally alter the administration of it. So I really don't have a comment on that part.

    Mr. James Rajotte: Does anyone have a comment on whether they...? Surely there are policy people in both departments who analyze whether they think this is a good regulatory governance structure or not and whether there is a better governance structure.

    Mr. Douglas Clark: We did look at options.

    Mr. James Rajotte: So nobody is doing any thinking about whether this is — 

    Dr. Robert Peterson: I'm afraid that from the Health Canada side I'm here as a very simple regulator, and I do not become involved in those policy questions you're asking. I am confident there are people within the department who are giving consideration to those and to a number of the other policy issues that have been raised here today.

    Silence from the contingent from Health Canada I don't believe should be interpreted as absence of interest or intent in this area. You simply do not have those people here.

    The Chair: Thank you, Mr. Rajotte.

    I must move on. I'm going to split some time here. Ms. Jennings for three minutes, and then Mr. Savoy. We're getting close to the end.

[Translation]

    Mrs. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Chairman. I would like to thank our witnesses for their presentations.

    The large binder contains studies that show the number of years of exclusivity for the sale of new drugs; it shows the average and the median. I also noticed that a comparative study had been done on the marketing of generic drugs in Canada and the United States.

    If I understand correctly, in Canada generics are marketed 22 months earlier than their American counterparts, on average. If that is really the case, what is the explanation for this phenomenon?

    Mr. Andreï Sulzenko: I will ask Mr. Dagenais to answer this question.

    Mr. Éric Dagenais: I will answer at least the first part of the question. At tab C, the fourth document concerns the first generic drug that was marketed. A comparison was done between the United States and Canada, and your interpretation was correct, 40 of the 51 generic drugs studied were marketed in Canada before they were available in the United States. And you are correct when you say that the average difference was 22 months.

    Mrs. Marlene Jennings: Can you explain this phenomenon?

    Mr. Éric Dagenais: I think that the entire intellectual property regime in Canada is relatively favourable to generic drugs, and that is reflected here in quicker marketing in Canada than in the United States. Americans have the PTR, which we do not have. That may explain the 22-month difference.

    Mrs. Marlene Jennings: Do I have any time left?

[English]

    Do I still have some time?

    The Chair: Yes.

    Mrs. Marlene Jennings: Thank you.

    I was actually asked to attend as many of the committee meetings as I could by a generic company, Kerbapharm, that is located on the island of Montreal. Given how I've been portrayed in the media recently, as bought out by big pharma, etc., I asked them why. They said, “Because we think you're fair. We've watched you all of the time you sat on the industry committee, and we think you're fair. You look at the actual facts before you make up your mind.”

    I heard my colleagues asking you, is the system here in Canada more favourable to generics than it is in most of our competing companies in western Europe, other European countries, the United States? You weren't in a position or you didn't feel comfortable in answering clearly, to my mind, so I'm going to ask you again.

    Do you think our system of regulations, the legislative system, protects the innovative research-based pharmaceuticals sufficiently, but at the same time is sufficiently open to give our generic companies a competitive advantage as compared to their generic competitors in other countries?

»  (1725)  

    Mr. Andreï Sulzenko: Mr. Chair, there was an earlier question from the other side, and I think a reciprocal answer works in this case, namely that we are, relative to our competitors, more favourable to the generic companies and less favourable to the brand-name companies in terms of our regime.

    Mrs. Marlene Jennings: Fine. Why are the generics continually saying they're being disadvantaged?

    The Chair: Thank you very much, Mrs. Jennings.

    Mr. Savoy.

    Mr. Andy Savoy (Tobique—Mactaquac, Lib.): I'd like to speak to the issue of strategic litigation and determining whether it's a profitable business strategy. Of course, to determine that, we have to look at the penalities or what situation arises during the assessing damages portion of the case. If we're looking at a situation where damages are assessed basically on lost sales, then it may be a very profitable business strategy, but there is some interpretation around section 8 of the regulations that says you may make such order for relief by way of damages or profits, as the circumstances require.

    What I would put forth would be that if they're based strictly on lost sales, then yes, litigation may be a profitable business strategy. If they're based on lost sales plus forgone profits where a company is required to disgorge its profits, then strategic litigation would probably not be feasible or viable on behalf of the brand.

    To date, have there been any judicial decisions interpreting section 8? Mr. Lee, you may be the best to answer this question. In terms of whose profits are being referred to in section 8, is it the brand names or the generics?

    Mr. David Lee: If I may, I will refer that over to my colleague. Mr. Clark has been doing a study on section 8 and he's up on the details of it more than I am.

    Mr. Douglas Clark: Well, I can tell you that approximately eight cases have commenced under the section 8 damages provision since it was amended in 1998, and all those cases began in 2001 or later. We haven't had a decision interpreting those words yet.

    Any time we add new language to the regulations, we're going to get litigation on it. Given that this issue is exactly the issue that's being litigated between a number of different parties, we're a little reluctant to speak to it.

    I can say in general that when you see language like “damages” or “lost profits”, it simply tracks the language of what takes place under the common law, or you can get damage or elect profits as an equitable remedy under the proper circumstances. Whether that was meant to reflect that or not, I can't comment further.

    Mr. Andy Savoy: Would you not agree that for both generics and brand names to have some definition to the damages, it would be valuable for them to know going into this whole equation or into litigation whether they'll be looking at profits or lost sales? Would you not agree that it would be beneficial to both sides of the equation?

    Mr. Douglas Clark: That would depend on the language and which side of the industry you were on.

    The Chair: Mr. Crête, a very short question and a short answer.

[Translation]

    Mr. Paul Crête: The regulations were reviewed four years ago, Mr. Sulzenko, and another such review is under way at the moment. Could you give us some idea how much time we might reasonably wait before undertaking the next review? Would 10 years be reasonable, in light of the industry and the case law?

    Mr. Andreï Sulzenko: The last review took place four or five years ago, Mr. Chairman. After four or five court cases, it might be decided that a review would be a good idea. However, it would not necessarily be appropriate to conduct a review every 10 years.

»  (1730)  

[English]

    The Chair: Mr. Marcil.

[Translation]

    Mr. Serge Marcil (Beauharnois—Salaberry, Lib.): Mr. Chairman, is the first patent on a drug more contested than the second?

    Mr. Douglas Clark: Theoretically, it is impossible to get a second patent on the same drug. I am not sure I understand your question correctly.

    Mr. Serge Marcil: I will rephrase it.

    Some people say that the regulations are abused when people make minor changes to a drug and get a new patent for it. It becomes a new product. People challenge the way the regulations are applied, because the drug industry can make minor changes to the same drug every year and because the generic industry can copy the first drug, but not the second, because it is still under 20-year patent protection.

    What is at issue here: the regulations or the way patents are granted? We always come back to the case law. Judges interpret regulations and legislation, but the executive branch makes the regulations.

    I'm speaking mainly to the representatives from Health Canada. When a company submits a change involving a new molecule, Health Canada decides whether or not it is relevant and meets the criteria. When you grant a patent, you are the people who assume the responsibility of saying that it is a new molecule. That would mean that there should be no court challenges, because the generic industry cannot copy new drugs. The act is clear on that. Once you agree to issue a patent for a new molecule, it is crystal clear to you that this really is a new molecule or a new drug, and not simply new packaging? If that is clear, there is no problem with the regulations. However, if the definition is not clear, I can understand why companies invoke the regulations so often.

[English]

    The Chair: I wonder if you could make a short answer out of that.

    Mr. David Lee: The very general and short answer is that there are two very different regimes at play and the terminology can link from one world to the other. In the patent world, you don't have to have something declared as a medicine by Health Canada to go off and patent it or other subsequent inventions. Those applications all take place with the commissioner, which is not in Health Canada; it's in a different department, Industry Canada. On the side where it's a drug, Health Canada does look at that.

    The link between those two worlds is the PMNOC regulations. That's where the terminology, as we've pointed out, doesn't always align and fit easily because both worlds are fairly complicated. While what you can claim in a patent roughly matches what you're doing on the drug side, it doesn't need to by the regulations. In terms of whether that gets exploited or not, there are many different questions and answers surrounding all of that, and we've seen a number of court cases arise especially since 1999.

    We seem to get a different issue every certain number of months on eligibility, which we have to look at and answer. That comes from the complexity of patents and it comes from the complexity of the drug approval side. I hope that answers your question.

    The Chair: Thank you very much. It's unfortunate that we've run out of time. We have many more questions to ask the witnesses. We're going to go through the generic association tomorrow and then the brand on Wednesday. You've given us a lot of reading material. There are many unanswered questions among the group. I would ask if we could make arrangements to come back to this table next Monday at 3:30 to finish asking the questions we wanted to ask. Maybe some new questions will have come from the two sessions that we will be having this week. We'll have some more discussion with the committee and we'll get back to you.

    The meeting is adjourned.