Industry Committee on Oct. 21st, 2010

[Richard Elliott]

No.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

So only Canada has done it, albeit only once, to Rwanda. No other advanced country has done it.

Dr. Kilby, if I could explore a little further, you mentioned that today, in 2010, over five million individuals in Africa are receiving HIV/AIDS medication. I think the way you positioned that was that compared to previous years that demonstrates tremendous progress. It's certainly something we all celebrate.

With respect to those 5.2 million people who are currently receiving medications, could you explore a little further exactly where those medications have come from? Through which mechanisms have those medications come, and from which sources and source countries?

[Dr. Don Kilby]

Most of the medication in circulation that people are using is from India. They're the generics.

There's one particular co-formulation of 3TC, d4T, and nevirapine that is very popular. Most of that has been brokered, and the pricing as well has been brokered, by the Clinton Foundation. The Clinton Foundation has worked tirelessly, and it continues to work tirelessly, to ensure the lowest possible price to the greatest number of people. Most countries have benefited from that type of brokerage.

But the virus is not consistent throughout the world, and certainly in west African countries there are certain strains of the virus that do not respond to this fixed-dose combination. They're probably the hardest hit in terms of the cost to procure medications for their population because they need to go to the more expensive second-line therapies. As Richard said, they're going from $150- to $160-a-year regimens to about $1,000-a-year or $2,000-a-year regimens, for the same budget. They can treat only a fraction of the number of people they could have treated if they had a regimen that was affordable.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

The reason the cost is going up is that we're going from first- to second-line therapies.

[Dr. Don Kilby]

It is because we're going to the second-line therapies.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay. When you say that the Clinton Foundation has brokered many of these arrangements, exactly what do you mean by brokered? What has the role been?

[Dr. Don Kilby]

The role has been an arm-twisting role, if nothing else, in terms of showing up at the generic company in India and negotiating markets for the product. It negotiates between the countries that wish to procure and India, which wishes to export. It negotiates between the parties and negotiates on behalf of the countries to get the price reduced. The initial price of this formulation was considerably higher. It was about $600 per year. Now it has dropped considerably.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

One of the concerns and arguments we've heard is that even if we make CAMR work more effectively, at the end of the day, developing countries want to buy their drugs and medications as cost-effectively as they can. It sounds as if that's what's happening now. The main source is India. I know that we've touched on this already, and Mr. McTeague asked this question as well, but just help us understand that a little further. If at the end of the day, India, China, or even the U.S. provide less expensive generic medications than Canada does, how can we compete or be involved in this process?

[Richard Elliott]

Thank you.

I think it's important to remember that in the one instance when, despite the flaws in CAMR, it was actually made possible to get a medicine out the door, the price the generic manufacturer offered Rwanda was competitive. It was 19.5¢ per tablet, which was the same price on offer from the Indian generic manufacturers. We have to remember, as I was saying before, that although India has been an incredibly important source of supply of generic medicines—it's been the pharmacy of the poor—the Indian generic industry does not have the capacity as it is now to supply all of the generic medicines the developing world needs. The Indian generic industry is actually under some significant pressure.

I mentioned earlier, in responding to Mr. Malo, that in 2005, as a condition of being a WTO member, India changed its patent law so that it now grants patents on pharmaceutical products. So those first-line, first-generation antiretroviral drugs that have been key in putting 5.2 million people on treatment are being supplied because they come from a time when there was no patent protection in India on those medicines. The reason the price is now shooting back up for the second-line drugs we're talking about is that those are not available, for the most part, in generic form, and they won't be available easily from Indian manufacturers, because they now have the patent barriers at the Indian end of things.

So the situation for the potential competitors of Canadian generics is changing. Canadian generics can compete, in some instances. If we actually made it simpler and less costly to use this mechanism and let them actually line up multiple contracts with multiple countries at one time under one license, you could actually then achieve economies of scale that would let them bring down the prices of medicines further, because they could get their ingredients more cheaply. Their production lines would be cheaper to run per unit, so you would be more competitive.

All of these factors are in play, and it seems to me that they all point us in one direction, which is to make this thing simple and easy to use, because we'll be able to compete.

[The Chair, Conservative, David Sweet]

Mr. Braid, I'm sorry, but you're well over again. I'm trying to be as fair as I can be and allow the answers to go on and yet have some semblance of order on the time.

We'll go to Mr. Masse now. We'll try for seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and thank you to our guests here today.

We had rather interesting testimony from the departments the other day. In their deck and presentation and in another document that was provided as a briefing, they were saying that on one hand, the proposals in C-393 would enter us into a trade challenge and maybe threaten investment in Canada. There would be a series of other problems. At the same time, it wouldn't work.

It didn't make any sense. They were making both claims.

One of the points I wanted you to maybe comment on is that they say here:

There is no evidence that changing CAMR will result in more developing countries using the regime to import drugs from Canada rather than continuing to purchase low-cost drugs from other sources.

We were just talking a little bit about that with Mr. Braid. I'd like you to talk a little bit about the Apotex situation. The reality is that we have generic companies in this country that are world-class successful and would increase jobs if production actually increased. Can you comment on that, please?

[Richard Elliott]

I can, and I actually think there are two experts who have also made a written submission to the committee, addressing some of these very specific points, two economists who have studied the pharmaceutical sector quite intensively.

One thing to say in response to this claim that there's no evidence that changing CAMR would actually make a difference is I think it's fair enough to say that we won't know until we try. If we never try, then certainly it will never make a difference. So why don't we give it a try? What's to lose? The worst possible scenario is that nothing changes, it makes no difference. That would be terribly disappointing, but at least we tried.

The best possible scenario would be that in fact our predictions are right. By making this simpler we would see it used again. We have a company that's already committed to using it to do a pediatric version of a drug. So that's a positive outcome.

To me that doesn't seem to be a reason not to try. There seems to be every good reason to try. It does seem odd to say it's not going to work and yet somehow it's going to have all of these negative consequences of exposing us to a risk of a trade challenge or undermining incentives for research and development.

I think the experts who have given you submissions, who have studied the pharmaceutical sector, are quite clear that there's really no correlation here. I think Dr. Kilby even alluded to the fact that making it easier for us to supply generic medicines to developing countries where these are not significant markets for the brand-name companies in the first place is somehow going to undermine their decisions about investing in research and development.

Those are not the markets that are driving their research and development decisions now. That's why we have what's called a 10/90 gap. That's why we have neglected diseases in the world, because these are poor people in poor countries. They're not the ones that a pharma wants to spend money researching and developing medicines for.

To say, then, that making it easier for those countries to get lower-cost generics is going to undermine the R and D decisions of the brand-name companies.... The two are not really connected. I think anyone who looks at the economics of the industry will tell you that.

What would happen, if we get a good outcome from this, is that you would in fact have a certain sector of the industry lining up contracts to supply medicines that are not being supplied to anybody now, which would, yes, lead to jobs. It would lead to royalty payments to the brand-name companies on those contracts.

It seems to me that it's actually a win-win situation all around.

[Brian Masse, NDP, Windsor West, ON]

Dr. Kilby, do you have anything to add?

[Dr. Don Kilby]

I agree completely with what Richard is saying.

[Brian Masse, NDP, Windsor West, ON]

One of the other interesting aspects that has been proposed is that there would be this conspiracy theory that we're undermining the transparency, the policing mechanisms, and the accountability.

You have to come up with some scenario where there would be a generic producer that would illegally act and then provide medicines to people with another country, and then a pharmaceutical company would oppose that, and then take us all away to a WTO challenge. So they would be protesting the treatment of people, I suppose, with these drugs, which would be an interesting public relations issue.

I asked the department for the evidence that a generic company would be out there to basically produce these drugs and then have them back into the commercial market, creating some type of scheme.

Can you maybe provide some highlight about how when the dispersement takes place what properties are in place to make sure the medicines actually get to their intended targets--the children, the men and women--and how difficult the scheme would have to be to basically produce these drugs and then reroute them through commercial means away from people, which once again for the generics would be quite a significant public relations scandal?

This is a theory that's been proposed to us by the departments.

[Richard Elliott]

There's the on-the-ground part and then there's the legal part about CAMR. Maybe we could split it up.

[Dr. Don Kilby]

I always find it amusing to have this discussion, even with my colleagues and friends from the pharmaceutical industry, that a product that's a generic product, produced in this country, that's labelled differently, that looks different, that's totally, for all intents and purposes, different, first of all, is going to make its way back to a market of people—we're talking HIV/AIDS in this case—who really have.... We don't have an access issue in this country. We've put in place everything that needs to be in place to ensure that people are either covered privately or through public plans.

So what we're saying is that these drugs would then somehow come into our provincial formulary programs and be dispersed somehow through our pharmacies at a cost of nothing because our patients don't pay. I don't know where this is going to come back into Canada. And the same thing holds true for Europe, where many of the programs are similar to those in Canada.

But more importantly, access to drugs for HIV/AIDS in the United States, where we keep saying that there'd be a real potential for abuse in that market, when we're talking HIV/AIDS, really, every single person with HIV/AIDS in the United States of America has access to free antiretroviral drugs. I have a patient who just moved this week, who is so happy he's going to get his free meds there, because as a businessman up here in Canada he had a co-payment with his insurance company of 20%.

I think that's a bit of smoke and mirrors, in terms of having these drugs come back. I think there's real potential for these drugs to travel across borders in resource-limited settings. I think that's a true possibility that could exist, but not back to northern markets.

[Richard Elliott]

I would differ slightly with Dr. Kilby about the perhaps overly rosy picture regarding access here to medicines being perfect. In the U.S. there are barriers to access, but not necessarily the patent barriers.

I did want to specifically speak to the legal aspect of preventing this kind of diversion from happening. And while most of our brief is focused on this question of compliance with WTO rules, there's actually a section toward the end that talks about this misconception, that somehow Bill C-393 is going to remove all the safeguards against this sort of diversion of medicines. It actually preserves safeguards that would require different labelling, different packaging, colour, shape, and so on of medicines that are being exported. And if that's not clear to you in the bill now, then let's work on making that clear, because we want those safeguards to be in place.

The other thing I want to say is that under Bill C-393, provisions that are in the current law are preserved that require generic manufacturers to disclose the quantities of medicines that they're shipping and to which countries. That information has to be disclosed to the patent holders; it has to be posted on a publicly available website. You have to disclose that not only to prevent the diversion of medicines but also so you can calculate the royalties that you have to pay to the brand-name companies.

So those things are all in there as important parts of the mechanism. They're preserved.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Elliott.

Thank you, Mr. Masse.

We're going to move on to our second round now, and back to the Liberal Party.

Mr. Rota, for five minutes.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Thank you, Mr. Chair.

Thank you for being here today.

If we can go back to the first-line and second-line medication, we're actually increasing costs, and one of the keys here is to keep the expenses down. Can you explain to me, and I'm not quite clear on this, how the one licence system will actually help in a developing country?

If it's too expensive at one level, even if it's cheaper than what you're paying in developed countries, how do we get it to the people who need it? You mentioned I think it was $150 versus $1,000, if I'm not mistaken. All of a sudden $1,000, you mentioned bringing it down to $650. It's still more than they can afford.

What worries me, and I'm trying to figure out where the benefit is, is if we come up with something that says okay, we'll allow the drugs to go in, they're still too expensive. There's no use on the ground. How do we get around that? I'm not quite clear on the benefit at the tail end if it's still too expensive.

[Dr. Don Kilby]

Right now, a lot of the arrangements that are made for some of these second-line therapies are that they are being acquired from northern markets and not from generic markets. Many of them are being offered at reduced prices within an environment that protects the patent of those drugs.

What we're looking for in terms of having these being able to be offered and genericized, and mixed and matched as well, is to create ease of therapy, because many of the molecules available today are not co-formulated. You don't have three drugs in one pill.

When you are able to make something generic, make it available, you can then take something from one company that's patented in one company and take something from another company that's patented with the other company and put them together in one pill and make it a lot easier for patients to take.

The other piece is now you are in a more competitive environment as well, because if this formula is repeated through different markets where these compulsory licensing agreements are in place, then we can actually have these components of therapies produced generically and be much cheaper for the end users, to the purchasers.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

One of the issues that's come up quite often with people I've spoken to who are quite familiar with the area is that it's nice to say we're going to provide inexpensive medication, which is important, but the infrastructure in certain countries isn't developed. You're bringing it over there or you're allowing it to get there and it sits stagnant. How do you deal with something like that?

[Dr. Don Kilby]

I think, again, that's in my mind another.... I'm not saying it's not challenging and more challenging to go into a market where you don't have the same types of processes and systems in place as we have in developed countries, but as I said earlier, it's not short of a miracle to think of what people said could not be done. They said that 400,000 was about the max that we could get people onto therapy, because of all of these things that were not in place. The reality is we have 5.2 million people, and we have clinics all over, all across the map.

If you look in Tanzania, where there were two sites available, one in Dar es Salaam and one in Moshi, where you could be treated for HIV in 2002, you now have over 60 sites by 2010. We could not have done that in our own country. By being able to get the drugs to people, to get drugs into the country and to transport those medications to all those sites, some of which are in rural isolated areas, we have been able to show and demonstrate that it's possible to get drugs to people and to get people on drugs.

We may have a model of care in this country that says a prescription needs to be done by a physician, but treatment algorithms have been developed for developing countries that allow all kinds of health care providers to be able to follow simple algorithms of treatment so that we have the necessary people who have been trained throughout and over the last eight years to be able to do that. So it's not an argument for me.

[Richard Elliott]

I would just add that if we have all of that infrastructure in place, but that infrastructure can't actually purchase medicines at an affordable price, what is it giving to patients? The two actually are not mutually exclusive; they need to go hand in hand. So this is about dealing with the pricing issue, and then we need complementary action to build up the infrastructure where it doesn't exist. But as Dr. Kilby was saying, there have been tremendous strides made in building up infrastructure, although we still need more.

[The Chair, Conservative, David Sweet]

Sorry, Mr. Rota, the time is up.

We'll go to Mr. Braid again for five minutes.