Industry Committee on May 8th, 2008

[Colin Carrie, Conservative, Oshawa, ON]

Percentage-wise.

[Jim Keon]

Yes.

[Colin Carrie, Conservative, Oshawa, ON]

Could you let us know what you think about that, Mr. Livingston?

[Rob Livingston]

Sure.

First of all, this has been an ongoing debate, and I think we need to put it into perspective. In Canada we need all the sectors. I think the generics play a very vital role, as do we, and there's another sector that's not here, called biotech. In the continuum as it currently stands, the biotech sector often does the development. We partner with them. We develop; we market. Then when they come off patent, the generics lower the price so that we get a cost savings to the market.

So I don't know that we're directly in competition. I think we're all part of the continuum. The challenge and the reason we always have this debate is the question around intellectual property. When is the right time? When should the patent period end? In Canada, we've had this debate now for some time, and Jim and I will continue to have this debate and continue to stay employed doing it. There will always be lots of dispute.

I guess it's our position that there have been some direct benefits. Prior to the changes back in the late 1980s, there were some famous cases where the Roche manufacturing facility in Vaudreuil and the Ayerst lab in St. Laurent left, and we declined to a very low level. A number of studies were done, and it was identified that one of the reasons was that we didn't have a minimum international standard of IP. With the various international agreements, Canada came into compliance, and we think there's quite good evidence that there has been a benefit. We went from 4.3% in the late 1980s. Our undertaking was to hit 8% by 1991 and 10% by 1996. I think we in fact exceeded that. We hit 10% by 1993. I think we were up around 12%. In addition, we have this whole new sector, the biotech sector, which is quite successful, whose R and D figures are not necessarily captured in these because of the definitions.

We do acknowledge that the figure has now gone below 10%, but as my colleague explained, we think overall the figure has been quite good. We think it could be better, and that's why we're here trying to recommend how to do that.

[Colin Carrie, Conservative, Oshawa, ON]

I think everybody would like to see—

[The Chair, Conservative, James Rajotte]

A very brief question, Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Very briefly, for generics, the whole idea here is to have affordable drugs for Canadians. You mentioned that if we looked at this a little differently, the costs for Canadians would go down. Yet if we look at the OECD averages, I think generic drugs in Canada are the highest amongst all countries. Is that true? And along the same argument, with IP protection, why don't they go down further?

[The Chair, Conservative, James Rajotte]

Mr. Keon.

[Jim Keon]

I think I mentioned briefly in my comments that prices of generics now in both Quebec and Ontario are capped at 50% of the equivalent brand, which is already subject to the Patented Medicine Prices Review Board. So those prices have come down over 25%, and if an up-to-date study were done, Canadian generic prices would now be very competitive. I mentioned that we're also hoping to reach agreements with western and Atlantic governments in the coming months on that.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Carrie.

Ms. Nash.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

Welcome to the witnesses this morning.

My first question is for Mr. Laberge and Mr. Livingston.

Since 1987 we've had 20 years of longer patent protection. Before the 1987 change, the patent was seven or eight years--correct me if I'm wrong--and it is now twenty years of patent protection. The quid pro quo was that the industry would invest more in research. We've heard some concerns about how research is dropping, and it seems as though that part of the bargain is not being lived up to. Others have cited the Patented Medicine Prices Review Board annual reports as documenting these lower investments in basic research in new drugs.

In your statement you are critical of the PMPRB, and you say that “the regulatory burden is increasing and sending a negative signal that Canada may not be a predictable and stable environment for investments”. That's a quote from the document. It seems to me that 20 years of patent protection represents a pretty stable environment. I'm wondering if it is because some of these reports are embarrassing to the industry, or what the rationale is for that statement.

[Rob Livingston]

PMPRB's mandate, when it was originally set up, was to ensure that price increases of patented medicines did not exceed the consumer price index. That was its mandate, and the industry was forced to accept that. What we've seen over the past 20 years is that they have moved to what we feel is beyond their mandate. They're moving now into looking very aggressively at introductory prices and looking at comparing those introductory prices to other lower standards. In other words, we feel they are getting into more or less the provincial jurisdiction, because as we showed you on our chart, once you get your approval after using up 10 years, if you want to get reimbursed publicly, which often you do, especially if it's a chronic therapy, you have to go through the PMPRB. You go through the common drug review. Then you go through the provinces.

The common drug review and the provinces are the ones that are more or less responsible for negotiating, although you don't use that term. They're trying to get the best available price. We think that the PMPRB now is moving into that realm, and it shouldn't. It should just be looking at non-excessiveness. So we are getting this additional regulatory burden up front, and then we're getting it still downstream even once you clear that hurdle.

[Peggy Nash, NDP, Parkdale—High Park, ON]

It seems to me the data is highlighting that the deal made 20 years ago about extending patents and the requirement for greater investment is not really being lived up to. That is something I appreciate their highlighting for us.

I am concerned about the notion of evergreening, because that is on top of the 20 years of patent protection, and it is something, as my colleague mentioned, that the Supreme Court identified as draconian. These proposed regulation changes with no consultation with the generic industry would reinforce that, and who is going to take the hit? It will be Canadians, through both individual payments and their private drug plans, and through our provincial governments.

This is my question to you, Mr. Keon. The generics seem like a good news story. They are doing double the research. They're providing drugs at half the price of the name brand pharmaceuticals, which, as I understand it, are the fastest-growing cost to our medicare system across the country.

Can you explain to us what consultation and discussion you've had with the health minister or the industry minister or their officials, and what their rationale is for making this change?

[Jim Keon]

Thank you.

As I said earlier with regard to the changes that are now published in the Canada Gazette--and the comments have to be in by Monday--there was no consultation. We were completely surprised. I have some difficulty in understanding the rationale.

Pharmaceuticals have extra patent protection that doesn't exist for any other type of patent. That's through the patent regulations, where if a competitor is seeking to get an approval, a brand company can get an automatic block against that approval. What the Supreme Court said was that if you're going to enjoy that benefit, the patents you put on the list have to be relevant to your submission that Health Canada approved. And the government agreed with that in October 2006.

What is happening now, surprisingly, is that the government is saying they did not support the Supreme Court decision, even though they made that change, and now they're going to go back and let these patents be re-listed, even if they're not relevant to the submission, even if they should not be on the list in terms of the generic product that's coming. The effect is going to be much more litigation, much more delay for generics coming on the market. That's surprising to us. I think again in the discussions I've been able to have this week with some of the provincial ministries of health, they're very surprised and very concerned too. I do not have a good rationale for why the government would want to do that.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Mr. Keon, I know you had no presentation ahead of time. Has there been any discussion since the announcement?

[The Chair, Conservative, James Rajotte]

This is your final question, thank you.

Mr. Keon.

[Jim Keon]

We have forced our way into a few meetings this week, yes.

[The Chair, Conservative, James Rajotte]

Including into my office, although I didn't think you forced your way in. Thank you.

Thank you, Ms. Nash.

We'll go to Mr. Simard, please.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair.

Thank you for being here this afternoon.

My first question would be to Mr. Keon. I think you indicated you do a substantial amount of R and D. I wonder if you could clarify for me what a generic company would be doing in R and D. Are you developing new drugs, or is it mostly to do research and development in developing better processes to produce the generic drugs?

[Jim Keon]

Thank you.

For a generic drug, the research would be to develop your own formulation for the drug. You would either develop or import, define chemicals, develop the formulation. You then do your clinical trials to determine that the product has the same medicinal effect as the brand name company. Those are the types of research you do.

Our companies are also moving into a very important new area. We talk about biologics, and our companies are very excited. There's a process going on now in Canada with Health Canada, and consultations are under way on subsequent entry biologics, where the products are much more complicated. Our companies are anxious to do that.

I should say, just so people understand, that the generic industry has evolved quite a bit in the last five years or so. We now have companies like Sandoz, which is part of Novartis; we have Teva; we have ratiopharm; and we have our own Canadian company, Apotex. These are very large, sophisticated companies selling around the world, fully capable of developing the technology for these biologic products. We're quite proud of that as well.

[Raymond Simard, Liberal, Saint Boniface, MB]

But you do not develop new products, new drugs.

[Jim Keon]

A generic drug by definition is an equivalent product to a brand name product. Our value is in bringing the cost down and increasing the headroom for expenditures to go elsewhere in the health system.

[Raymond Simard, Liberal, Saint Boniface, MB]

That was my next question. What has allowed you to negotiate these huge reductions in cost with Ontario and Quebec?

[Jim Keon]

As I said, our volumes have been increasing. We have had significant growth in Canada for the last number of years. So I think in part the fact that governments are willing to put our products on their formularies faster than in the past, they recognize the value better.... So in return for some improvement in their listing process and the process for reimbursing generic drugs in Ontario and Quebec, we were able to negotiate those prices.

[Raymond Simard, Liberal, Saint Boniface, MB]

Mr. Livingston, you've indicated that your industry invests $120 million in R and D. Am I to understand that's 8% or 9%?