Bill C-274 (Historical)

An Act to amend the Patent Act

Budget Implementation Act, 2005

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is a pleasure to speak to Bill C-43.

We certainly do not have any western alienation in the House of Commons tonight. We are having a great debate about British Columbia and the different politics there, but I would like to continue the debate on Bill C-43. I want to talk about its importance with regard to moving this country forward in this fiscal year, and also some of the changes that we can make to address some of the significant problems that we face as a country.

Earlier in tonight's debate, I missed the fact that the member for Beaches—East York actually voted in favour of my private member's bill, Bill C-274. I would like to thank her for that. She was one of the few members opposite who joined with us on that very important bill. We are talking about the health care reform issues that are so important.

We are talking about the budget bill right now. The first ministers agreement regarding health care is coming late in the day and there are many problems with it. Hopefully, it will at least provide an avenue to address some of the health care problems. The Supreme Court of Canada has ruled that private insurance coverage can be purchased in the province of Quebec.

My Bill C-274, which the member for Beaches—East York voted for, actually addressed one of the issues, the issue of evergreening. That is one of the regulatory issues that has to be changed.

This budget has significant investments in health care, something that has been well noted. Health care is an important backstop in terms of Canadian culture. The fact is that Tommy Douglas, the greatest Canadian, helped to found this great nation's health care system. Health care has also been a tremendous source of economic investment and prosperity for the country.

General Motors in the United States is undergoing significant layoffs, around 25,000 people, because of some of the problems that GM has. The most notable is the cost of health care for GM's workers. In fact, the cost to General Motors in the United States is about $1,500 per vehicle. The private insurance scheme in the United States has failed miserably. That is why U.S. legislatures have started to address the issue of evergreening. My bill did as well, but it was defeated in the last session of Parliament unfortunately.

There is a need to rein in and control the incredible cost of drugs in the pharmaceutical industry. The costs are spiralling out of control because of patent issues related to evergreening. That is where there is an automatic injunction so that after 20 years, when a generic company is entitled to produce that drug for the Canadian public, the drug company can automatically say that others are infringing upon its patent without any proof whatsoever.

Imagine that. In any court anywhere in this country without any shred of evidence or proof, the company will automatically get a two year extension to its patent. No other industry has that privilege. We are the only country left in the world that has that provision. Even the United States under George Bush changed this policy. It is unbelievable. It is a scandal in itself.

With Bill C-43 and the NDP improvements in Bill C-48, we are putting significant revenues into health care. We want to make sure that we maintain the Canadian identity and cultural tradition of medicare for all people in Canada. We are investing in it significantly, but at the same time we are allowing ourselves to be fleeced. On top of that, when drug companies received the patent extension deal from the Liberals to extend it to 20 years, they were supposed to put 10% back into research and development which had to be done in Canada. They negotiated a deal where it was not compulsory. It was voluntary. Voluntary agreements with the pharmaceutical industry have not worked. They have never met that 10%, even when they include packaging as part of that research and development, and I do not see how packaging and research and development go together. Nonetheless, the companies do not even meet that 10% commitment.

That is why when we are talking about a budget, we are talking about investing in Canadians. It cannot just be about spending money. It is also about regulatory changes.

We did not like the corporate tax cut that was in the budget Bill C-43. We said that from day one. We said it was not acceptable. I did not mind the tax cuts for small and medium size businesses, but the large corporations have had record profits. A Report on Business survey once again had corporate profits surging 21% in the first quarter.

We have heard a number of different people in the corporate sector say that the sky is falling. They are trying to create hysteria that this minuscule amount of money for corporate tax cuts taken out of the system is going to collapse the Canadian economy. We have heard from them on a regular basis how disastrous this is going to be. Despite the $100 billion in total tax cuts over the last 10 years, they say that this little piece of the pie, an insignificant increase in spending at 1.15% of total spending which is what Bill C-48 is going to add, is going to collapse the Canadian economy. They say we are going to lose jobs.

Ironically, what they said after they criticized the NDP amendment was that we need to put the corporate tax cut in. What they are saying is that they need choices. We do not accept their choices, especially when there is a 21% increase in their profits. That is fine. It is okay for profits to be good, but there has to be a balance. Right now in the corporate sector, let us look at the banks and insurance companies and the premiums that Canadians are paying. I do not know many people in my constituency who are calling me to say that the banks are not making enough money and that if we give them a little more of a break they will cut back their service fees, increase staffing and open more branches. That is not happening. That is not what is going on. All I know is that I am constantly meeting with branches that are closing in my community. All I know is that consumers in my constituency are paying record prices for insurance.

I do not believe it is balanced by giving the corporations a break right now. I do not understand the notion that if they are going to get an additional profit it is going to feed the economy automatically. It does not work that way. It has not worked that way for the auto industry. Despite all the tax cuts that we have had, we have had to have government intervention on sectoral strategies and targeted investments. That is what they have asked for in infrastructure improvements in order to procure the few plants that we have over the last 10 years.

It is unfortunate that we are still fighting for an auto policy. We need to get some specifics on the table, so people can see greater accountability. When we invest in an auto facility there should be greater scrutiny in the way it is developed and the way the funding is applied. There is no problem with that, but the corporate tax cuts have not brought the plants here. They have been going to Mississippi, Alabama, Mexico, Brazil and China. It does not matter if we give them another percentile or two, it is not going to make them build another plant here. The companies are going to say that they want some training and infrastructure programs.

It comes back to what we are investing in in this budget, health care. They want health care. General Motors has $1,500 per vehicle added into the actual production costs in the United States. In Canada, it is around $400 for health care costs. That is about a $1,100 savings. It is amazing.

Mr. Speaker, I know I have to wrap up my speech, but I do want to say that working together in Parliament can happen. I was pleased to be part of getting a change made to the last budget. Corporations were able to deduct penalties for pollution and crimes at the end of the taxation year. After being caught polluting our air and water, they would be fined through a criminal process. They were actually able to get some of that money back. The Liberals did not live up to their agreement to fix that. I moved a motion at committee, which was supported by the Conservatives and the Bloc, that installed another amendment to get them to fix that.

We do work together in Parliament at times and we can actually achieve results for Canadians.

Patent Act

[The Speaker]

The House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-274 under private members' business.

The question is on the motion.

(The House divided on the motion, which was negatived on the following division:)

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is a pleasure to rise today to speak to Bill C-274. I would like to thank all members of the House for participating in a good debate about an issue that affects the pocketbooks of many Canadians. It also affects generic companies, pharmaceutical companies and insurance programs because of the cost of drugs which continue to rise. At times it has even threatened labour disputes. Often negotiated benefits and plans revolve around drugs as part of the whole package for financial compensation to workers. That is what is so important about the situation.

In due respect to all members, there is a duty and an obligation to pass the bill and get it to committee. If we do not, we are saying that it is okay for the government bureaucracy and the regulators to continue to do what they right now, which is to ignore this issue and leave it in the dark. Unless there is some type of political pressure to revisit the issue, which has happened by tabling this legislation, nothing will be done.

If we pass this opportunity by, we are saying that members of Parliament have no role in the regulations of our drug and pharmaceutical industry. That is the bottom line. It is cause for much concern. We know there is no parliamentary oversight for the regulations.

I would like to pay tribute to the member for Pickering—Scarborough East. When I first came here in 2002, he was very much a champion of this issue and he still is today. It is a pocketbook issue and he has done a lot of work on it.

We were on the industry committee that studied this issue. We heard delegations from the pharmaceutical industry. We heard delegations from the generic industry. We heard from a lot of lawyers. Evergreening and the improprieties related to patent protection have cost billions of dollars and have been centred around litigation that could have been avoided.

We also heard from activists representing labour, small business and insurance agencies, like Green Shield, about the cost to the system from drugs having their patent extended beyond the 20 year period because of a legal loophole that allowed pharmaceutical companies to extend it for years and years. It was litigation versus innovation.

When we had an opportunity to get some movement on the issue, the government suddenly changed certain members. Members I had not seen on the committee would show up and vote a certain way to ensure the issue did not move forward. It was a shocking and deplorable behaviour from the government of the day. After all the work we did, which cost thousands of dollars to bring in witnesses and hear testimony and the time it took to do that, we had no final recommendation.

We talk about the democratic deficit. Why on earth would the industry committee study such an important issue for so long and still not have a final report? That is the type of subject we are dealing with today.

We want to see the pharmaceutical industry do well in Canada. There is nothing wrong with that. The problem is, it has not lived up to its end of the bargain. The pharmaceutical industry was supposed to put 10% R and D back into the country for getting the 20 year patent protection. Some pharmaceutical companies have been abusing it. Not all pharmaceutical innovators, just certain ones have used these legal loopholes at the expense of Canadian consumers, the Canadian public, and our industry.

I will wrap up by giving a specific example. In the case of Paxo, the notice of compliance originally was supposed to be available on the market in a generic form in 1999. It was extended to 2003. It is estimated it cost $114 million for one drug alone, fleecing the Canadian public.

Members of Parliament have a duty and an obligation to participate in the regulations, because they affect not only the pharmaceutical industry, but other groups and organizations, taxpayers and other industries. Benefit plans have come under greater intensity because of the explosion of the cost of pharmaceuticals, which keeps money in the hands of big pharmaceuticals with little investment back into Canada. It keeps doctors, nurses and capital investment out of our health care system which we need to improve wait times and to ensure Canadians have the proper treatment they deserve.

[Alan Tonks, Liberal, York South—Weston, ON]

Mr. Speaker, I am pleased to take part in this debate on Bill C-274. I would like to congratulate the member for Windsor West who, in putting forward the bill, seeks to exclude certain medicines from the scope of the regulation-making power set out in subsection 55.2(4) of the Patent Act and to repeal the patent medicines notice of compliance regulations.

Members on both sides have spoken with great eloquence and a huge amount of insight into the manner in which the whole pharmaceutical industry operates. Many people have criticized the regulations because they are special rules that only exist in the pharmaceutical industry.

I would put forward the opinion that when one considers the amount of risk associated with pharmaceutical research and development, and society's vital need for the best available medicines at a reasonable price there is a compelling rationale to have special rules in place with respect to this industry.

In no other industry are the stakes as high. The quality of life of people not only in this country but throughout the world is dependent on investment in this particular site. This can only be achieved by an architecture of legal and enforceable rules that would ensure a certain degree of predictability in this particular industry. This is precisely why these regulations are in place. They provide an enforcement mechanism that is time limited, effective, and tailored to the particular features of the industry.

It has been pointed out very eloquently and in a very informed manner that there are problems and shortcomings with respect to the present regulations. However, they are predictable and they are what we have in place at this time. Under these regulations, patent disputes are addressed concurrently with the health and safety review process, and the majority of cases are resolved within a reasonable timeframe.

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.

The stay also serves as a convenient clock for judges to render a timely decision. The process under the regulations is less expensive and faster than traditional patent infringement litigation, which I am sure my learned colleague would agree is extremely expensive.

Repealing these regulations could be expected to have a number of detrimental consequences. It would necessitate much more costly and protracted patent enforcement litigation. It would also seriously undermine the ability of these companies to compete with their counterparts in other jurisdictions for research and development capital.

While there have been problems with excessive litigation between innovative and generic companies on certain drugs protected by multiple patents, I do not believe the bill provides an appropriately measured solution.

Industry Canada, with the assistance of Health Canada, has completed an exhaustive review of patent listing behaviour and litigation outcomes, and concluded that while the fundamentals of the regime are sound, a number of recent court decisions have enabled more aggressive patent enforcement practices on the part of generic drug companies.

The amendments in the regulations will reaffirm the strict rules for listing patents on Health Canada's patent register and will clarify when generic companies must address listed patents. This will ease Health Canada's administrative burden, cut down on litigation, and accelerate the market entry of generic versions of patented innovative drugs. As a whole, these amendments will bring greater stability and predictability to the intellectual property environment for pharmaceuticals by introducing firmer lower and upper boundaries to the market exclusivity of innovative drugs.

In contrast, the radical measures that have been proposed in this bill would forsake any semblance of balance, undermine R and D investment, and lead to instability and unpredictability in the marketplace. As I said, while the hon. member for Windsor West may have the best and most well intentioned desire in tabling the bill, its objectives will be counterproductive and would be better served by the government's current regulatory initiative.

[Dan McTeague, Liberal, Parliamentary Secretary to the Minister of Foreign Affairs]

Mr. Speaker, let me begin by suggesting that I will be supporting in principle Bill C-274 in the name of the member of Parliament for Windsor West. I have worked tirelessly with the member over the years, as I have with the member for Scarborough—Rouge River and a number of other members on what has been obviously one of the most neglected areas of our health care policy.

We have heard some very interesting speeches by members of Parliament from all sides of the House on this issue. Most will not support, apparently, the initiative that is being taken here. We certainly need to update our thinking about drug patents in this country and of course, since 1993, what has been the ultimate benefit for Canadians.

We can talk about innovative drugs and how important it is to keep the price of our health care system down. We can look at a number of other initiatives and PR perspectives that have been given. It is important for us to understand that when it comes to the so-called balance that has been discussed, we need to give to the House a reality check that Canadians spent almost $22 billion in drugs last year, up substantially from the year before. Much of that balance, quite apart from the cost to consumers and the cost to various drug plans and other drug insurers, has also meant investments in research and development.

We know that when a drug is qualifying for its approval it must go through a very rigorous test. The test is a requirement that the companies must engage in as part of their research and development. What we have seen recently, and I think this has been made very clear by the Patented Medicine Prices Review Board and others, is that in fact the research and development is often advertising. In fact research and development is what they are required to do to conduct clinical trials, not the vaunted, wonderful R and D that would happen, that we thought would take place many years ago, but instead, what they have to do, the bare bones. Even at that we saw last year that the 11% requirement was not met. It is now down near 9%.

Let us put this into perspective. Several members have talked about the regulations as they relate to new drug submissions, as they relate to the requirement to fulfill certain obligations. We heard from other members concerning certain drugs that were abused. In fact, almost every drug that was nearing or ending its patent was subject to automatic injunctions which allowed the patent holder to basically make a claim of infringement without even having to prove it, because of a bizarre, arcane, draconian system. It basically forced the generic which was lawfully attempting to reproduce the drug at the end of expiry into a legal morass which went on for years.

In the case of Losec, it should have come off in 1999. Losec is an ulcer drug which costs Canadian consumers over $425 million a year. Those are real figures that cannot be simply dismissed. Of course the overall costs to our health care system came in the form of private corporations, provinces and other corporations which had to pay for this ultimately.

I suggested at the time that it was important for us, and we know we had a pitch battle in the industry committee of which I was vice-chair, where members suddenly walked in out of nowhere, knowing it all. Of course we never had the full study that we thought we should have had, but it did click with the industry department. I know that what they proposed here in terms of its recent regulatory package to deal with the retroactive claims or what they call evergreening took place sometime in November or December. To date we have no definitive answer as to where that is going.

My guess is that while it may take out the most egregious forms of automatic injunctions or this draconian system of being able to claim retroactively one's submission for a new drug, it seems to me that it will not do what has been done in the only other jurisdiction which had this system, the United States. There, the President of the United States proactively said, “I will not allow you to frivolously cause another stay or to go and get another patent extension or bring these matters before the courts and tie them up while making tons and tons of money”. Instead, the United States went with one stay .

The United States, of course, receives not only the benefit of having the infrastructure of the drug industry, it also has some of the greatest lobbyists to Congress. If Congress could accept that as a limitation, why is it so difficult for this House of Commons and our industry department to get it right?

I am exasperated as any member of Parliament here. I am glad that members of Parliament raise the issue of cross-border drugs, and that we have this terrible thing that is happening, but that, in many respects, beguiles and, of course in my view, denies the real game that has been played here with prescription drugs to the detriment of Canadians.

I know the position of the Liberal Party in 1993. I campaigned on that position. I defeated a member of Parliament who cheerfully brought this thing through. It hurt seniors and Canadians and today I am true to what I said in 1992 and 1993 when that bill was wrong. It needs a rewrite.

There is no doubt in my mind that section 511 prevents, for example, paclitaxel, which is a very important drug for women as it relates to cancer. It was a drug created by the United States department of health. Officials found it through a little coniferous tree known as a yew. They found the product and were able to extract the serum but could not patent it because they were a government agency. They gave it at the time to Bristol-Myers Squibb. BMS then took the product, patented it, and then released it several years later because it thought it was not effective. A little tiny company in St. Catharines, Ontario, which is saving millions of dollars and a lot of lives, decided to pick this product up only to find that BMS out of nowhere showed up and reclaimed the patent.

There is something terribly wrong with a company being able to not invest a penny in that kind of patent product, to get rid of it, to abandon it only to get it back when some other small innovative company, which happens to also be a very important company, loses the opportunity. In my view, our regulations do not provide any balance. They in fact destroy the balance and unevenly put the burden on consumers against those who want to innovate and those who want to create new products.

I am very pleased to see the Bloc Québécois finally recognizing this issue. I am very pleased to see that there is certainly a change in terms of the approach that people are taking, that people count, and that there has to be a restoration of balance.

However, I want to make it very clear that if we want to make this legislation successful, meaningful, and build on what we are doing in other initiatives, including the Chrétien relief package for Africa which I initiated through my caucus in 2001 working with Médecins Sans Frontières and Oxfam, the last thing we should be doing is giving ourselves, with respect to the drug patents regime, a bum rap.

It is very important that we understand that the fragility of the system, as it relates to the overall cost for drugs and being able to increase innovation while not completely dumping on our generic industry, is the position to which we have to continue to look forward.

As the rest of the world is busying its way to find new opportunities for its generic industries, Canada has had a policy which in my view has been very detrimental to generics. I can only conclude that if it is so important for us to have a drug patents regime, where a company can come in and create all sorts of innovation in another country and not even have the courtesy of packaging those new drugs in this country, we have been sold a bill of goods.

It is extremely important that members of Parliament get their minds around this and speak to the department and industry officials because it is also not true to suggest that there is some kind of a balance between innovation and generics. We should also consider the balance between health care and industrial outcomes. In my view, health care has not been properly treated. If anything, it has been seen only from a commercial end and I do not think Canadians would generally agree with that.

It is important for us to understand the intentions of the bill. If we cannot change forcefully these regulations, then there is no other option but to rewrite them. I believe that is the right approach and it is an approach whose time unfortunately has come. I would ask that all parties who are involved with this, who may be lobbied on this question, take into consideration the overall impacts on our economy and on the bottom line for Canadians, particularly Canadians between the ages of 18 and 64 who often have no drug plans.

I am not asking the drug industry to not be given something that it clearly deserves, but it is important for us to understand that when it comes to sustaining economic outcomes for Canadians, it is important that Canadians have an opportunity to understand that these regulations must also serve the general and common interests of this country. I believe that they do not. I believe they need to be reformulated and if they cannot be reformulated, this member's bill must be allowed to pass.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I am thankful for the opportunity to enter into the debate on Bill C-274. I would like to begin by paying tribute to my colleague from Windsor West, who is the sponsor of this important piece of legislation, and to recognize the contribution he has made to this debate. It is safe to say that among those of us here he has become known as somewhat of a champion on this issue of providing accessible, affordable, necessary pharmaceutical products to the Canadian public within the confines and parameters of a fair system, but one that provides access to necessary drugs without bankrupting the system.

I should point out that Bill C-274 relates to access to less costly pharmaceutical products. What could be more poignant, timely or topical as we all wrestle with the problem of our health care system and the difficulty in providing these basic needs to Canadians. We know that the quickest growing aspect of our health care system is the exorbitant prices that we are paying for necessary life-saving drugs.

I begin by simply recognizing how important the job is that my colleague from Windsor West has done in bringing this important issue to the House of Commons today.

This bill has been stripped down to its most lean form. One could sum it up by simply saying that the bill seeks to repeal the patented medicines notice of compliance regulations. We argue that Canada's notice of compliance regulations regime fosters an anti-competitive behaviour among drug manufacturers. It is antithetical to what needs to be done in our pharmaceutical industry, in that it does not encourage research and development and innovation. It means that Canadians, governments, hospitals and benefit providers are paying more for drugs than would be necessary if a fair system were in place.

After careful consideration of this issue, my colleague from Windsor West has arrived at the conclusion that the single most effective thing he could do to enable more Canadians to get the drugs they need at affordable prices is to repeal the regime known now as the patented medicines notice of compliance regulations.

It would be helpful to look at a bit of the history. From the 1920s to the 1980s our government played a key role in limiting market monopolies on pharmaceutical products. In the interests of access and competition, our government played an interventionist role to limit and restrict the possibility of monopolies. The regulations that we talk about took their first form relatively recently, in 1993, in a bill which I think we can all remember, the infamous Bill C-91, billed as the biggest corporate giveaway. The biggest corporate sellout in Canadian history was Bill C-91. We remember it with great regret as a turning point in the health of our health care system.

Compulsory licensing, I should explain, allowed a non-patent holder to compete with lower priced versions. The compulsory licence issue was done away with in Bill C-91. This is one of the most dangerous elements. People sounded the alarm. I remember the NDP passionately fighting against Bill C-91 at the time. The debates were very public and high profile.

It seemed that pressure from the Canada-U.S. Free Trade Agreement in 1988 and then subsequently NAFTA in 1994 exerted enormous pressures that radically altered the way Canada dealt with pharmaceutical patents.

The compulsory licensing aspect was one of the changes. In fact a federal commission of inquiry in 1985 concluded that the use of compulsory licensing had saved hundreds of millions of dollars in the health care system at the time, had no adverse impact on the research and development of pharmaceutical products, or on the multinational drug companies regarding investment in research and development. It was found and held to be true in 1985 that government intervention in the form of compulsory licensing of real competition was saving money.

That reason and logic was thrown out the window in those days in the rush to implement the free trade agreement. Whoever negotiated these things on behalf of Canada I have always maintained should be dragged into the streets and shot because they really did sell us down the road. The names of the chief negotiators of the free trade agreement and NAFTA should live in infamy in Canadian history for what they did to us. We remember now the impact of NAFTA and the free trade agreement radically altering the way Canada deals with pharmaceutical patents.

If another federal commission of inquiry were held today, it would likely find the exact inverse of the 1985 findings. This radical shift in government policy that my colleague from Windsor West is trying to address has undermined the possibility of government to retain some element of control over pharmaceutical pricing to ensure that Canadians have access to affordable pharmaceuticals at the pharmacy counter and in our public health care system.

There is a contradiction in that there is a gap we cannot even span between the stated purpose of these notice of compliance regulations and the actual results of them. In actual fact the purpose of the NOC regulations was to protect patent rights, et cetera. Rather than protecting legitimate patent rights, these NOC regulations have actually incorporated and caused an abuse of litigation options and in fact of people extending, artificially some would add, the patent protection for a period longer than the 20 years, which we argue is already very generous.

I see I am running out time, so I will simply cite some of the key issues that others may not have touched on. One is evergreening, which implies the perpetual renewal of patents with small or insignificant changes or modifications to an existing drug. This is a bastardization of the patent protection that was agreed to under international guidelines and in our bilateral trade agreement with the United States. It is being abused widely. I will give an example.

In 2003, 103 patents were added to the patent registry by brand name companies but there were only 16 actual new substances approved. In other words, these patents were being listed based on a change in the colour of the pill, based on a change in the recommended dosage. The tiniest, most insignificant excuses are being used to provide a monopoly on these drugs, where companies can charge the highest possible amount without worrying about generic competition. This is what is killing us, figuratively and literally in some cases, because Canadians cannot afford the drugs they need because we are shackled by these monopolistic biases built into the system.

My colleague has tried to address this by eliminating the notice of compliance regulations within the drug patent review mechanism. I commend my colleague from Windsor West for being bold enough to bring this initiative before the House of Commons on behalf of Canadians who deserve access to life-saving drugs. If that means standing up to big pharma now and then, we are not afraid to do it. We are not going to sit and listen to apologists for big pharma justify the rip-off of the system in the form of billions of dollars. We are being fleeced by big pharma. My colleague from Windsor West and the NDP caucus are trying to address that. We should all stand up and support my colleague's bill today.

[Rob Merrifield, Conservative, Yellowhead, AB]

Mr. Speaker, it is a pleasure to add my voice to the debate on this important legislation. I commend my hon. colleague for bringing Bill C-274 forward.

I believe he has good intentions with regard to why this legislation is important and why he is bringing it forward to this House. I believe he is looking at the cost of pharmaceuticals in this country. We know pharmaceuticals are the number one driver of costs in our health care system. If we look out into the 21st century as far as we can determine it will continue to be that way. Perhaps it will even expand as we move forward.

Pharmaceuticals do a tremendous job for Canadians. They are well received and well used. In fact, we actually have to change the paradigm around pharmaceuticals in this country. Instead of understanding or thinking that there is a pill for every problem, we have to start understanding that every pill does have a problem because of what we are seeing with the adverse events with some of the pharmaceuticals on our marketplace today.

How do the pharmaceuticals get on to the market and are the proper rules in place to allow them there? This is part of the debate that has to go on in Canada. However the legislation actually talks about the evergreening or the battle between the generics and the brand name pharmaceuticals.

I think it is fair to have this debate and to actually raise the awareness of the people of Canada about this issue and what is happening. Bill C-274 would repeal the patent medicine notice of compliance regulations and reduce the patent protection of 20 years down some. As my colleague mentioned, the regulation was enacted in 1993. It was called Bill C-91 and it was introduced by the Conservative government.

I would like to read into the record the Conservative Party policy as it was adopted in March in Montreal.

The Conservative Party believes that Canada's pharmaceuticals legislation must strike a balance between encouraging the development of new drugs, and ensuring that those drugs are available to Canadians at affordable prices. We believe that part of this balance is achieved through adhering to the international standard of 20 years patent protection for pharmaceuticals.

To reduce that would not strike the balance. I believe it would disrupt the balance. It would actually drive investment out of Canada and not be in the best interest of the Canadian population, the pharmaceutical industrial or Canadian health care as a whole.

We support the laws and regulations that respect property rights. We encourage research and development into new drugs by brand name companies. We also support regulations that would allow generic manufacturers to offer similar medications through lower prices in a reasonable time.

What I think we are talking about is the balance between what the brand name pharmaceuticals are doing with regard to research and development, and then the generics that come along after the 20 year patent has expired capitalizing on the drug by duplicating it at a cheaper price and selling it to Canadians at a lower price. The generic manufacturers can realize their profits at that time.

It is a balance between encouraging development and investment into new technologies, as well as at the lowest price possible.We want to strike that balance and hold that balance.

Therefore we support the regulation of drug prices through the Patented Medicines Prices Review Board. This is unique to Canada. It is much different than in the United States. The prices review board sets our prices for brand name pharmaceuticals at a balance between seven other international countries so that we are not high or low but we make sure that the top price does not go above the median of those seven countries.

Because of that we have actually quite reasonable prices for pharmaceuticals in Canada. It has caused some problems because those prices are quite a bit lower than our nearest trading partner which is the United States. Consequently, Internet pharmacies are popping up which is causing considerable concern on both sides of the border.

Our prices are artificially set low, going into a marketplace that does not have a regulated pricing regime and therefore the brand name pharmaceuticals are being pumped in. It is not really comparing apples to apples from that perspective. It is a long complex issue, but it is an issue that I do not have time to address here. However, I want to bring it forward because it has implications with regard to the pricing of pharmaceuticals in Canada.

The bill does not seek to strike a balance. It seeks to tip the balance on to the generic side. Generic companies also are doing a very good job in Canada. They do great work, and some wonderful companies are adding to the prosperity of Canadians with jobs. We want to appreciate what they do at the same time.

This is a complex issue. I had an opportunity to sit in the industry committee when it was debating this issue last year. The debate becomes very complex. As one goes through the debate, one has to appreciate both sides, understand them and get a handle on it. The debate was would evergreening happen, or would the generics take advantage of laws of the land and try to capitalize on what happened in patent law or would the brand names try to capitalize and hold off generics unjustifiably to try to steal an extra two, three or four years under patent law.

My question to the industry officials who were there at the time was this. Did generic firms ever try to compromise the 20 years and bring their products on to the marketplace ahead of the 20 year window of patent protection? The response I received astounded me. In fact, it was not did they ever. It was they could not remember one product ever developed in Canada that was not attempted by the generic firms.

When we see this happening, we have to ask ourselves, in light of what the mover of this bill is trying to do in getting rid of evergreening, if this is legitimate. If a product is allowed on the market ahead of the 20 year period, if it is challenged in litigation and law to recoup of the costs and if the brand names win in court, they would never be able to recoup the costs of what they lost because of market share from the court case.

Therefore, we have a serious situation if the bill goes through the way it is. I believe it would drive the brand name pharmaceuticals out of the country. What do they do for the country? It is roughly $1 billion per year in research and development in Canada. They hire well educated Canadians and they provide well paying, stimulating employment for those Canadians. They produce some amazing drugs. That is probably the best benefit we can get from the pharmaceutical industry in Canada. I believe they will continue to do that.

The Conservative Party wants more than that from them. We want more investment because I believe they are falling behind on some of their investment. We want more well paying jobs. We want more knowledge based jobs. We want more new drugs developed in Canada. Therefore, we have to set up an environment that ensures they have assurance from governments that they will respect their 20 year patent law.

Therefore, I would like to read again another piece of our policy from the March convention which talks about research and development and innovation. It states:

The Conservative Party recognizes the importance of health sciences research in enhancing the health of Canadians and as a dynamic economic sector in its own right.

Research and development in Canada has done that. It is important for us to continue to protect that and to ensure a stable situation for our pharmaceuticals so we not only have very good products, but we have them at a very cheap rate as well, and Canadians can be proud.

Incidentally, our brand name pharmaceuticals in Canada are 50% to 80% cheaper than they are in the United States. On the generic side, that is not true. The generics are cheaper in the United States than they are in Canada.

I am please to have contributed to the debate on this issue, but I cannot support the bill.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

Mr. Speaker, I am pleased to engage in debate on this private member's initiative. We always congratulate each other for our private members' initiatives and I applaud the member on this one. In the end, I find that I am not able to support it and I will try to explain why in the few minutes that are available to me.

As has been stated a number of times, Canada's drug patent policy seeks to benefit effective patent enforcement for new and innovative drugs on the one hand, with the timely market entry of their lower priced generic alternatives on the other.

The current manner in which that balance was realized was established in 1993 with the enactment of Bill C-91. That bill introduced into the Patent Act what is commonly called the early working exception as well as the enabling authority for the NOC regulations, which sounds a little technical but that is what they are called, and which Bill C-274, which we are looking at here today, proposes to repeal.

I should confirm as well for the record that I conspicuously voted against Bill C-91 when it was proposed at the time. Since then there has been a massage of the provisions in the regulations and the balance, which I referred to earlier, has been created, although in my view that balance is still not effective. However to remove the whole regulations without putting something else back into place would not achieve the public interest purposes that I seek.

In the pharmaceutical industry the early working exception does allow generic companies to work or develop a patented product while in the process of applying for Health Canada approval to sell that product on the market. Generic drug companies are therefore able to complete the regulatory approval process during the lifetime of the patent and be in a position to enter the market as soon as the patent expires.

The NOC regulations were conceived in order to prevent generic copies of patented drugs from going to market in breach of the patent. They do so by linking Health Canada's ability to approve generic drugs to the patent status of the brand name drug that the generic is seeking to copy. If passed, as I said, Bill C-274 would undermine our attempt to provide balance and would strip the patent holder from what they argue is the most effective means of protecting their patent.

There has been a significant debate over the last while in intellectual property circles about how we regulate pharmaceuticals in this way. Rising concern has been expressed about the balance between fostering innovation and the availability of generic drugs. Many countries have made adjustments to their laws in order to optimize that balance between innovation and access to affordable medicines. For instance, in 2003 the United States introduced reforms to its so-called Hatch-Waxman rules which are similar in many respects to the NOC regulations we maintain here.

Here in Canada, recent court decisions have enabled patent holder drug companies to list new patents on Health Canada's patent register on the basis of just inconsequential changes to the original drug product. The listing of these additional patents, which in the industry is sometimes called evergreening, has resulted in repeat litigation between innovative and generic companies and, in some instances, the unwarranted delay of generic market entry, and I regret that evergreening.

The process appears costly and not in the public interest. Some observers have suggested that we put in place a once only procedure whereby the patent holder could not evergreen after an NOC application began. There would only be one 24 month stay triggered by the generic company's NOC application.

To address these problems, the government recently proposed some regulatory amendments designed to readjust that balance between the enforcement of the intellectual property rights of the patent holder and encouraging the generic entry. The amendments are directed to both the NOC regulations and other intellectual property instruments, including what is called data protection under the food and drug regulations.

These amendments were pre-published in part I of the Canada Gazette on December 11 last and pre-publication was followed by a 75 day consultation period, during which the pharmaceutical industry and other interested parties could submit their comments. The government is currently reviewing those comments.

In my view, the government should include in the new regulation package, however it wishes to put it in, the new “once only” 24 month stay so generic companies will know where they stand and they will not have to face this repeated evergreening, this artificial device now apparently relied on by the patent holding companies.

By restoring the balance to the NOC regulations and shoring up the data provisions in the food and drug regulations, the government's proposed regulatory amendments, and the one I have just proposed here and which other members may propose, would provide greater overall stability and predictability to our intellectual property environment for pharmaceuticals.

These new changes would attract new medical therapies to Canada, encourage real improvements to existing drugs and ensure more timely competition in the marketplace.

While I salute the hon. member's interest in this issue, I am confident that the amendments that have been described in my remarks will better address the concerns that motivated the tabling of the bill in the first place and avoid the wild west scenario that might evolve in the event there were a complete revocation of these regulations as the bill proposes.

Federal-Provincial Fiscal Arrangements Act

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Madam Speaker, I rise today to speak in favour of Bill C-39, but with some reservation.

We are pleased that after 10 years of cuts to the provinces for social spending, the Liberal government finally realizes that tax dollars should be spent on more than artificial debt targets and that Canadians want a balanced approach to financial management in Canada, an approach that protects and enhances the social safety net that helps define us as Canadian.

This funding formula will close the gap in funding identified in the Romanow report on health care. We welcome the end of reduced federal funding for health care and support the move to funding 25% of health care spending by government. It is about time. We cheer the Liberals' realization that costs increase over time and that base funding must increase, or in real dollars the amount of money available goes down.

The addition of an escalator clause in this agreement is very welcome; however, this agreement is missing an important element. Our system of governance in Canada is based on a series of checks and balances, but this legislation provides no check on how health care funding dollars are spent. Again and again, Canadians are telling us that they want to know where their tax dollars are paying for public health care and where those dollars are increasing the profits of private health care corporations.

Immediately after being sworn into office, the federal health minister said:

--what we need to do is stem the tide of privatization in Canada and expand public delivery of health care so we have a stronger health care system for all Canadians.

Since this agreement was signed in September 2004, health care advocates have been asking the health minister to affirm that the enabling legislation, when it comes forward, would include provisions to protect publicly funded and publicly delivered health care in Canada. There is nothing in this legislation to protect small communities and Canadians from for profit health care.

Since the actual agreement was made, I have been reading an analysis on the 10 year health plan. Again and again, I read how Canadians want governments to be accountable for the health dollars spent by Canadians, but they rarely get that accountability. This accountability discussion has been an ongoing issue. In 2000 the first ministers made a commitment to regular reporting and they indicated that it would be a process that allowed for third party verification, yet there are huge gaps in the data.

The last annual report from the Minister of Health could not indicate where money was being spent on the for profit delivery system, and in the report from September 2002, the Auditor General indicated that Health Canada is unable to tell Parliament the extent to which health care delivery in each province and territory complies with the criteria and conditions of the Canada Health Act. This is a serious shortcoming in this current piece of legislation before the House.

I want to quote from a paper written by Cindy Wiggins, a senior researcher from the Canadian Labour Congress. It is important that this is read into the record because this is how working Canadians see this agreement. It states:

The unified front maintained by the provinces during federal-provincial/territorial negotiations also has a significant downside for national social programs. Democratic deficits and provincial-territorial unity come at a cost. Dissent is muffled. Issues on which there is no consensus simply do not make it to the federal-provincial/territorial negotiating table, regardless whether such an issue is a key priority of the public.

We know provinces and territories have different opinions on the issue of for-profit care. Some provinces are ideologically committed to creating a role for the commercial health care sector. Some already have pursued this path. Others believe that a tier of commercial health care situated within the public system will do irreparable harm to the public, non-profit system and produce poor health care outcomes.

She goes on to say:

This issue has been at the centre of public debate around health care. Canadians are clearly opposed to for-profit health care and view it as a threat to Medicare. This issue was central to the conclusions of the Romanow Commission report. Because of the lack of consensus among the premiers, commercial health care and the threat it poses to Medicare was nowhere on the agenda of the September First Ministers' meeting. We can assume that this will be the same for other national issues, such as child care

As an example of the drive to use public dollars for private delivery, this morning CBC Radio was saying that provinces, especially Alberta, are already saying no to any child care program that directs money to not for profit centres, even though research has proven they provide better care than for profit centres. This is just an example of the public dollars going into for profit delivery.

Ms. Wiggins' paper continues:

The federal government played a role in the silence on commercial health care. For several years now, it has refused to enforce the Canada Health Act with respect to for-profit initiatives which violate the Act. As a result, Medicare has been left without a guardian and remains at grave risk.

I want to emphasize again that we welcome the closing of the Romanow gap, but throwing money at a problem and then refusing to be accountable for how that money is spent is absolutely wrong. While first ministers claim that this funding formula will put the health care system back on sustainable footing, the fact is there is no protection from for profit care and no accountability for how funds are being spent.

Again, from the Canadian Labour Congress paper:

The accountability measures in the agreement do not address this important sustainability issue. Accountability is in the form of reports on progress in areas covered by the agreement, such as wait times and home care.

Those are important initiatives.

Provincial jurisdictions supposedly must meet these reporting requirements as a condition for receipt of federal funds attached to the agreement. Report cards do not solve problems: they identify them. Provinces and territories are only responsible for reporting to citizens in their own jurisdictions - a provincialization of accountability for a national social program. Should provincial jurisdictions fail to meet the reporting requirements in the agreement, there are no consequences for such failure, making true accountability an illusion at best.

Canadians truly want to know where their health care dollars are being spent. Another area that the federal government needs to be accountable to Canadians for is protecting our public health care system from trade regulations. Canadians do not see our health care system purely as a business transaction, however.

Canadians see health care as an essential part of our identity, but when given the chance, the government did not negotiate an exemption for our public health insurance system. It did not exempt health care from World Trade Organization agreements.

Now, because it also refused to enforce accountability and to stem privatization in health care, the government leaves the door open to our health care system being decimated by multinational corporations moving in to provide for profit health care. This is just another example of big box credit card medicine and it is not a route that Canadians want us to go.

One area not mentioned when the Liberals talk about health and human resources is the leeching away of good talent to the private sector. Every private MRI that opens increases wait lists because it must take qualified people away from the public sector. There are simply not enough health care workers out there to staff a public system and a private one, and certainly not health care professionals. We need a pan-Canadian health and human resources strategy that truly identifies the serious shortages that are coming up in the health care professions and we need to act on that now.

Furthermore, the government is moving far too slowly on a pharmacare plan. The cost of drugs is now second only to hospital costs and slightly higher than the amounts we pay to doctors.

Last night in the House we had the first hour of debate on private member's Bill C-274 presented by my colleague, the member for Windsor West. It has a real plan to ease some of the spending crunches that provinces are currently facing with drug costs by reforming the system of patents and allowing generic drugs to enter the marketplace sooner. This is a critical issue as well. The Liberals could have made these changes already, but they have introduced regulations that maintain the status quo and will not help Canadian families access cheaper drugs to keep themselves healthy.

In closing, in view of the lack of accountability from this particular bill and the creeping privatization, we need to have an open and public debate to shine the light on the decisions that were made behind closed doors at the first ministers meeting in September. It is absolutely critical that we have a full review at the committee level on the issue of accountability.

Patent Act

[Roger Valley, Liberal, Kenora, ON]

Mr. Speaker, I thank the member for Windsor West for bringing this issue forward and giving us all a chance to make some comments on it.

In order to foster growth and create high quality, well paying jobs, the government has set, as one of its core priorities, the building of a 21st century economy. In furtherance of this, the government must continue its work to support sound marketplace framework laws.

A fair, efficient and competitive marketplace, combined with an effective regulatory framework, creates a business environment that is supportive of innovation, investment and economic growth.

To foster an efficient and competitive marketplace in the pharmaceutical sector, it is necessary that the government's drug patent laws strike an appropriate balance between encouraging pharmaceutical investment and innovation by providing effective patent protection for innovative medical therapies while, at the same time, facilitating the earliest possible entry of non-infringing, lower cost generic pharmaceutical products.

The patented medicines, notice of compliance) regulations, or the PMNOC regulations, and the “early working exception” under the Patent Act are both integral to the maintenance of this balance, a balance Bill C-274 will most certainly undermine, if passed, given that it calls for the outright repeal of the PMNOC regulations.

In the pharmaceutical industry, the early working exception allows generic drug manufacturers to use a patented innovative drug for the purpose of seeking approval to market a competing version of that drug.

Normally, conduct of this kind would constitute patent infringement but an exception has been made so that the generic drug companies can compete with Health Canada's regulatory approval process while the equivalent innovative drug is still under patent. This is done so the generic can be in a position to enter the market as soon as possible after the patent expiry. This ensures that the patentees do not enjoy a de facto monopoly beyond the life of the patent by virtue of the time it takes for a generic drug company to complete Health Canada's regulatory review process.

While early working is intended to promote the timely market entry of generic drugs, the PMNOC regulations are necessary to ensure that this exception to patent infringement is not used improperly by generic drug companies that might seek to sell their products during the term of the competitor's patent.

Patent protection is an important incentive in encouraging investment and promoting research and development and giving the difficulties traditionally associated with protecting pharmaceutical patent rights by way of conventional infringement litigation, and the PMNOC regulations are intended to operate as a potent patent enforcement mechanism.

In this way, the regulations and the early working exception work in concert to maintain a balance in Canada's drug patent policy. It is important that neither instrument be considered in isolation as the intended policy can only be achieved when the two operate in a balanced fashion.

Overall, the government's drug patent policy appears to be achieving its objectives of encouraging investment and fostering competition. Since the introduction of the early working and the PMNOC regulations in 1993, total R and D spending in Canada by innovative companies has more than doubled.

Over that same period, the Patented Medicine Prices Review Board reports that manufacturers' prices of patented drugs in Canada have followed a consistent pattern of decline or near negligible increases and the price of patented drugs in Canada has gone from being 23% higher than the medium international price to 5% below the median and 40% lower than the price in the United States. In fact, the price of patented drugs in Canada has risen by less than the consumer price index in almost every year since 1988.

Despite these positive outcomes, the PMNOC regulations remain a contentious policy instrument. In recent years, representatives of the generic pharmaceutical industry have become increasingly vocal in their allegations that brand name companies are abusing the regulations to unfairly delay generic competition.

Industry Canada, with the assistance of Health Canada, has completed a comprehensive assessment of these allegations and found that while the fundamentals of the regime are sound, there have been instances of behaviour complained of by the generic industry involving some top selling drugs.

While the behaviour in question is exceptional, it has been facilitated by a number of recent court decisions and could potentially grow in the years to come. To prevent this occurrence, a package of regulatory amendments has been developed and will restore the original balanced policy intent underlying the early working exception and the PMNOC regulations. These amendments were re-published in the Canada Gazette , part I, on December 11, 2004.

Repealing the PMNOC regulations would be an extreme measure which would completely undermine the government's attempt to maintain its balanced drug patent policy. It would allow generic manufacturers to continue to use the early working exception while stripping pharmaceutical manufacturers of the most effective patent enforcement mechanism at their disposal. This would tip the policy balance between intellectual property protection and the generic entry wholly in favour of the generic industry.

Bill C-274 would also have a number of negative consequences for Canadians. In the absence of strong and effective patent protection, innovator companies would drastically curtail their domestic R and D, which would result in a corresponding loss in research intensive employment.

Canadians' access to the latest medical therapies may also be compromised as innovator companies would be less inclined, absent effective patent protection, to bring their latest products to the Canadian market.

It is my hope that the member for Windsor West will instead support the government's recently proposed amendments to the PMNOC regulations and, in so doing, support this government's effort to foster a fair and competitive marketplace for pharmaceutical products.

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Mr. Speaker, I too want to commend my colleague from Windsor West for bringing this issue forward. I know it is an issue very near and dear to him.

I am pleased to speak to Bill C-274, an act to amend the Patent Act. This bill would seek to repeal the notice of compliance regulations and reduce the extent of patent protection. It was actually a former Conservative government that introduced these regulations in the first place that this bill seeks to amend. The Conservative Party today continues to believe that the intent of a pharmaceutical policy should be to achieve a balance that encourages the development of new drugs and treatments for Canadians, and at the same time provide those drugs to Canadians at an affordable price.

What this means is that the Conservative Party supports regulations that respect property rights and encourages research and development into new drugs by brand name companies. At the same time we support regulations that allow generic manufacturers to offer similar medicines at a lower price after a reasonable period of time. We also support the existing system now where the Patented Medicine Prices Review Board regulates the prices of brand name drugs here in Canada, which actually does not happen with the generics, and that is an important point we should make here.

I want to identify two types of pharmaceutical manufacturers. It is important, especially for viewers watching this, to be aware of this.

The first is what is called the brand name or the research-based pharmaceutical company like Pfizer, GlaxoSmithKline, AstraZeneca, Merck Frosst, et cetera. These companies do the basic research and create drugs from scratch. These drugs are certainly expensive to research and develop, and they are one side of the pharmaceutical industry.

The second type of manufacturer is the generic manufacturer. In Canada, basically the two largest are Apotex and Novopharm. The generic companies copy a brand name drug after its patent expires, although as the question I asked the member earlier indicates, through the early working provisions they actually research that so that they are able to go to market as soon as the 20 year patent expires. It is important to note though that they copy certain drugs. The generic industry copies the drugs which are generally the most lucrative, and that obviously makes economic sense to them, but they do not copy all the drugs, especially the ones that do not in fact raise a lot of revenues.

As written, Bill C-274 in our view would seriously harm the brand name pharmaceutical industry in Canada by removing all the protection regulations currently provided to the brand name companies. The stated objective of the bill is to exclude drugs from the scope of the regulation-making power provided for in subsection 55.2(4) of the Patent Act, while making other amendments to reduce the extent of patent protection for medicines. The bill would achieve its objective in part through appeals in the notice of compliance regulations.

In our view, the bill would ignore our obligation under the TRIPS agreement, under these multilateral agreements, to provide 20-year patent protection for brand name pharmaceutical companies. The fact is that no other country treats pharmaceutical patent issues the same way it treats patents for cars, telescopes or other industries. For example, and I know the member in his speech mentioned this, the pharmaceutical industry does have patent rules that are particular for that industry, but that is the same as in other countries.

The fact is that if a generic manufacturer ignored a patent and put its product on the market before the patent had expired, it would take years for a brand name pharmaceutical company to go through the regular court system and a full infringement action. If the brand name won, it would likely never gain back the market it lost to the generic company because that is how quickly people would switch because of difference in price. It would take more time to recoup damage costs.

Our concern is that if this bill were passed companies like Merck Frosst and GlaxoSmithKline would likely remove themselves as much as possible from Canada. I know some people do not see this as a concern. Speaking personally as a member from Edmonton, I know that these companies invest a lot into R and D of infectious diseases, for instance, Dr. Lorne Tyrrell, the former dean of medicine at the U of A, is researching into hepatitis B and hepatitis C at the U of A.

These are the companies that are investing the money into trying to research and create new drugs to lengthen or to certainly improve human life. Canada's brand name industry spends roughly $1 billion on R and D. It hires extremely well educated Canadians, most obviously with post-secondary degrees, and it produces some truly amazing drugs such as the asthma drug Singulair in Montreal.

I acknowledge that there are problems with litigation on certain drugs which have multiple patents. I support efforts to reduce the litigation, at which I know the government is currently looking. I support the member for Windsor West in making an effort to bring those regulatory changes open, whether it is before a committee or before the House.

However, we want to seek to preserve that balance. It is important on the patent issue to make this known. In the hearings we have had, both Health Canada and Industry Canada pointed out that most drugs had either one or two patents. It is the big, blockbuster drugs like Paxil or Losec that have eight patents, which is the big cause of most of the litigation between the generic and the brand names in Canada. That is an important point to make. In our view the bill shifts the balance away from that precious balance to entirely in favour of the generic manufacturers.

In our view the generation and development of new scientific knowledge is pivotal to the growth and the prosperity of the Canadian economy. The Conservative Party would like to see the brand name manufacturers invest more money in R and D. We have asked them to do that and we will push them to do that, and to hire even more well-educated Canadians.

If the bill were passed, it would have quite the opposite effect on the industry, and it would have a negative effect on the Canadian economy.

I understand fully that the pharmaceutical industry is litigious, but even as former industry ministers from the government side have pointed out, will this ever stop? I think the changes in the regulations that the government is looking at now will certainly reduce that. The fact is with the amount of money around the industry, it is likely to be litigious long into the future.

I would like to explain some of the issues relating to patents and how the automatic injunction and early working provisions work. Normally a patent is exclusive. A patent cannot be broken before it expires. However, the notice of compliance regulations allows generics to copy and conduct clinical trials of drugs still under patent as part of a system called “early working”.

To use plain English and to use a specific example, before its 20 year patent expires, the generics can create a copy of the asthma drug, Singulair, for mass production. They can conduct their human trials on the copy and they can get Health Canada to review and approve their copy before the original patent on Singulair, which is owned by Merck Frosst, has expired.

The problem is that once this copy has been approved, the generics do not want to wait until the patent expires, especially if it is a blockbuster drug like the ones I mentioned, the anti-depressant Paxil or the ulcer drug Losec. Generics, according to the testimony from Health Canada, challenge patents to get on the market earlier. They will take the brand name companies to court and argue that the patent does not apply to their specific copy of the drug.

As members before me mentioned, the Standing Committee on Industry in June 2003 conducted hearings on this matter. We asked Industry Canada if it was common for generics to attempt to break brand name patents before the patent has expired.

To quote the question my colleague from Yellowhead asked at the time of Industry officials, “Have the generics challenged the 20 years? Have they tried to put a product on [the market] before the 20 year period [has expired]?” The resounding answer from officials was yes. To quote them, “Yes, I'm not aware of a drug where they haven't”.

Make no mistake, early working provides the generic companies with a distinct competitive advantage over the patent holders and over other countries where early working does not exist, such as the United States. Thus, there is a counterbalancing measure in the notice of compliance regulations which is called an automatic injunction. It is also known as linkage regulations by the brands.

When a generic wants to copy a brand name drug, it must inform the brand. The brand has 45 days to advise the generic company as to whether or not the brand believes the generic is infringing on its patent rights. If the patent holder agrees that patent has expired, then the generic is given permission to go to market. This happens repeatedly once the patent is not contested.

However, if the brand believes their patent would be infringed by the introduction of a generic product, the brand is granted an automatic injunction. The brand goes to the federal court and is granted 24 months for the case to proceed.

The generics call this practice evergreening. Their argument is that the brand gets its 20 years plus the 24 months, so at least 22 years. However, what this fails to disclose is the fact that the generics can actually introduce in year 17, 18 or 19 and the 24 month period can actually be within the 20 year patent. If the generic tries to get on the market in the 20th year of the patent and the brand is granted an automatic injunction, in that case it extends the life of the patent.

We, in this party do not support the bill because we believe it upsets the balance between the research companies and the generic companies.

[Jerry Pickard, Liberal, Parliamentary Secretary to the Minister of Industry]

Mr. Speaker, I want to congratulate the member for Windsor West for bringing the issue forward and colleagues who have spoken in the House who are very concerned about the balance that we are trying to create in Canada.

This is a unique balance in public interest. When we look at the implications of intellectual property in the pharmaceutical industry, the government must maintain a delicate balance between two important and competing policy objectives. On the one hand, we must encourage advancements in medicine by providing effective patent protection for new drugs on all fronts, and on the other hand, we must ensure that versions of drugs are able to move forward.

Bill C-274, introduced by the member for Windsor West, seeks to disrupt this balance by repealing the patented medicines notice of compliance regulations. The regulations together with the early working exemption under the Patent Act are two pillars of the government's balanced drug patent policy. The early working exception allows generic companies to use a patent drug for the purpose of seeking approval to market a generic version of a brand name drug.

Normally, the conduct of this would constitute patent infringement, but the early working exception allows a generic drug company to compete with Canada's health regulatory and approval process while the equivalent brand name drug is still under patent.

It is then possible for a brand name drug company to be in a position to enter the market as soon as possible after patent expiry. The generic pharmaceutical industry estimates that early working can accelerate the market entry of its products in Canada by three to five years.

While early working is intended to promote the timely market entry of generic drugs, the regulations are necessary to ensure that this exception to the patent infringement is not abused by generic companies who are seeking early product approval.

Patent protection is an important incentive in encouraging investment and promoting research and development of new and better medical therapies. The regulations provide incentives by ensuring that brand name drugs enjoy secure, stable, uninterrupted periods of market exclusivity prior to the eventual and irreversible arrival of generic competition.

If passed, the bill would seriously undermine Canada's balanced drug patent policy by effectively stripping brand name drug companies of the most effective patent enforcement mechanism that presently exists at their disposal.

Repealing the regulations would prompt the brand name pharmaceutical industry to withdraw its considerable R and D investments from Canada with a corresponding loss in research-intensive employment here. It would also compromise Canada's access to the latest medical therapies as brand name drug companies would no longer have any incentive to seek the Canadian market promptly.

Industry Canada and Health Canada are aware of the concerns of the member for Windsor West regarding the regulations and his reasons for advancing Bill C-274. In recent years representatives of the generic pharmaceutical industry have been increasingly vocal in allegations that brand name companies are abusing the regulations to unfairly delay generic competition, a practice they refer to as evergreening.

The government remains convinced however, that regulations are a vital part of this industry and Canada's balanced drug patent policy is important. Generic drug companies continue to challenge brand name patents early and often. And so, without the protection of regulations, infringing generic drugs could enter the market soon after the innovator and well before the expiry of the original product's patent.

That said, the government recognizes that there have been instances of behaviour compliance by the generic pharmaceutical industry. We have therefore developed a package of regulatory amendments intended to restore the original balanced policy intent behind the regulations.

The amendments, which were pre-published in the Canada Gazette Part I, on December 12, 2004 will facilitate the market entry of generic versions of brand name drugs immediately following expiry of relevant patents as the bill originally intended, while at the same time allowing brand name companies to duly promote improvements to the original form of the drug that are genuinely accepted.

If passed, this package of amendments would approve Canada's competitiveness as an investment location and would establish more predictable and stable rules relating to the intellectual property of pharmaceuticals. It is my hope that the member for Windsor West will support these amendments and, in so doing, support Canada's efforts to ensure that we continue to have a balanced drug patent policy regime that will continue to be the leading choice of investment for our pharmaceutical industry.

[Brian Masse, NDP, Windsor West, ON]

moved that Bill C-274, an act to amend the Patent Act, be read the second time and referred to a committee.

Mr. Speaker,it is a pleasure today to rise and speak about the very important private member's bill that I first introduced in the House in November 2004. The bill is quite simple. The beginning of the bill provides certain definitional changes that are necessary for purposes of clarification, but the real essence of the bill is a small paragraph in bold at the very end, which states:

The Patented Medicines (Notice of Compliance) Regulations are repealed.

I hope that the spirit of cooperation on moving bills forward to committee will be extended to this very important initiative. I think Canadians deserve to know that the politicians they elect take issues seriously, especially when those issues hit them right in the pocketbook.

The cost of pharmaceutical products has been on the rise in recent years. The current regulatory regime puts an upward push on prices, which results in average Canadians not only paying more through their benefit plans or at the pharmacy counter, but also through their tax dollars that support our public, universal health care system.

Before going too far, I want to talk about what this bill is not about. The bill is not about reducing patent protection for innovative pharmaceutical companies. The bill is also not about taking sides in the ongoing war of words and actions between brand name and generic pharmaceutical industries and producers in this country.

This bill is about making sure that the pharmaceutical industry is treated like all other industries before the law. That is what will benefit Canadians most. Currently there are loopholes, which means that both industries can use a variety of tactics which keep lower cost generic drugs off the market longer than the patent period and encourage litigation and waste of money and time.

The amount of legal machinations that are employed as a result of these regulations is sickening because of the money that is wasted, money that could be better spent on development and innovation, on getting generic versions to the market, and lastly, on getting people the medications they need to treat their illnesses.

Ensuring fair competition is an important public policy of this country. However, our drug regulation regime fosters anti-competitive behaviour. The end result is that Canadians suffer en masse.

Drugs are the fastest rising cost component in our health care system. I believe that we all have a duty in this Parliament to try to address this in the larger context of improving the affordability of our public medicare system. In fact, I believe it is part of saving it in order to ensure that we pass on this national treasure and heritage to our children and our children's children.

Consumers pay more for their drugs than they should have to, particularly for some of the drugs most needed by Canadians. When drug monopolies are extended past the 20 year patent period, consumers, patients, governments and our health care system pay more for drugs, because generic drugs are priced on average 40% to 55% lower for the same brand version of a drug. It has been estimated that the various legal techniques used have cost close to $1.5 billion since the regulations came into effect just over 10 years ago.

No other Canadian industry has similar regulations. This is isolated and alone and exceptional, so how does this happen? Why has the Liberal government allowed $1.5 billion of Canadians' money to go into the pockets of the mostly multinational pharmaceutical companies?

It happens because the regulations, known as the patented medicine notice of compliance regulations, or PM(NOC) regulations, allow it. Even though they legally are abusive and generally damaging, these regulations have been in place in their existing form for over seven years. To date the government has not changed those regulations.

The purpose of the regulations was and continues to be to develop a balance between the competing interests of the brand and generic industries. Unfortunately, they have the ability to do the exact opposite. Successive Liberal and Conservative governments have chosen to sweep this important public policy issue under the carpet and also keep Parliament in the dark.

Let me give members a little bit of history. The regulations we are talking about now are relatively new in a Canadian context. They took their first form in 1993 with Bill C-91 and have been the subject of several regulatory changes since that time.

In the past, the Canadian government saw a key role for itself in limiting market monopolies in pharmaceutical products. Compulsory licensing was used, which meant that a generic could compete with the lower priced versions. In 1985, a federal commission of inquiry known as the Eastman commission, set up by Trudeau's government, concluded that: the use of compulsory licensing had saved hundreds of millions of dollars, no adverse impact on the research of the pharmaceutical industry happened, and nor were the decisions of multinational drug companies regarding investment in research and development affected by this regime.

But with pressure from the U.S. around the 1988 and the Canada-U.S. Free Trade Agreement and NAFTA in 1994, Bill C-22 and Bill C-91 radically altered the way Canada deals with pharmaceutical patents. The 17 year patent protection became 20 years. Products, not just processes, could be patented, and compulsory licensing was completely removed with Bill C-91.

A federal commission of inquiry today would likely find the opposite of the 1985 findings to be true. The radical shift in government policy, largely the result of pressure from the United States in negotiating free trade deals, has undermined the possibility for our government to retain some element of real control over pharmaceutical prices to ensure Canadians have access to affordable pharmaceuticals at the pharmacy counter and in our public health care system.

What do the regulations do? The easiest way to describe the regulations from a consumer's perspective is that through a variety of legal techniques which even the government itself has tried to stop but has failed in the courts, brand companies are able, if they choose, to delay generic drugs entering the market. How does this happen?

The Liberals would like us to believe it is a very complicated system that is best left to the bureaucrats. I would say it is only complicated if we believe that the bureaucrats are the best people situated to make decisions on behalf of the country. The truth of the matter is that the industry that regularly ranks first among all Canadian industries in terms of profitability, whose main operation is to repackage drugs that are actually researched, developed and manufactured in other countries, continues to get its cake and eat it too.

The regulations got off to a very bad start in the dying days of the Mulroney government when Bill C-91 was rammed through Parliament when the PM(NOC) regulations were instituted without any public consultation through the normal gazetting period. All of the changes since have been regulatory. This means that the representatives of the people in the House had no opportunity to debate them in a binding way. As a result, generic manufacturers have been kept off the market in a couple of different ways through what is known as evergreening and automatic injunctions.

Automatic injunctions allow brand companies to allege patent infringement when a generic applies for a notice of allegation. This process in and of itself would be relatively harmless if the real problem of determining what kinds of patents are allowed to be listed on the patent register were clear, but they are not.

A brand name can list many different patents for the same product by claiming different uses, patenting different forms, such as capsules or tablets, changing the name of the drug, or in the past, the name of the drug company. There sometimes are numerous patents that can hold up a generic from entering the market. In addition, the courts have interpreted that the regulations allow brands to list all of these multiple patents even though in one case the judge reported that it was “opposite to logic”.

Although the generics eventually win in 75% of these cases, they are on average kept off the markets between 15 and 21 months when the automatic stay is applied for. However, when we look at a few blockbuster drugs, we can see that when it is more profitable, brands have been able to maintain their monopoly for up to four years on average by applying for automatic injunctions on patents that it is fairly obvious have been strategically registered to maintain their monopoly and maximize profits, at the expense of consumers and our drug industry.

Is rewarding an innovative manufacturer with strong patent protection such a bad thing? No it is not, but that is not what we have with the PM(NOC) regulations. Instead we have a system that continues to add virtual patent extensions without accompanying results in research and development or domestic manufacturing.

It is important to note that not all brand companies employ such abusive tactics and are not actually in keeping with good business principles and the spirit of the regulations. The problem, however, is that it does not stop all those and a certain amount of patent infringements or claims have delayed generic versions in some of the worst situations costing hundreds of millions of dollars.

In 2003 the Patented Medicine Prices Review Board, the primary independent policy tool available to Canadians to examine how brand companies operate, reported that of 103 patents added to the patent register, only 16 were new active substances. Patents are being registered for uses not approved by Health Canada, for new coatings, and changes to active ingredients. This is not innovation; this is just delay.

The brand companies promised us innovation when the PM(NOC) regulations were first introduced. They continue to maintain that they are the only way to allow them to do innovative R and D in this country. Even with the favourable regulations today, which the brands actually do support, they have been failing to meet the commitment they made to Canadians of a ratio of 10% R and D to sales for the last three years.

In 2003 brand spending on research and development fell to its lowest level since 1989. Spending on basic research continues to be the smallest portion of R and D. In 2003 it actually fell by over 9%. Over half of the R and D spending was on clinical trials. Meanwhile they spend tons of money and an exorbitant amount of resources on marketing and advertising to people.

In a 2003 study by Research Infosource a generic company placed high, ranking at number 13 of Canada's top 100 corporate R and D spenders. This is the first time a generic company has ranked higher than a brand company. This clearly indicates it is not just the brand companies that can make exclusive claims to R and D expenditures as a justification for the system.

The president and COO of that highly ranked generic company made a presentation at the June 2003 industry committee hearings. That person in favour of a review, in favour of eliminating the automatic injunctions and the need for stronger regulations to prevent evergreening and argued that more R and D would happen on the generic side if the situation resolved.

Why should automatic injunctions and evergreening concern us here?

Drug prices are the fastest rising component of our health care system. The average price of a drug produced by a brand company increased by 75% in the decade between 1993 and 2003. In the same time period generic drug prices only increased by 42%. Generic drugs are part of the solution to keeping drug prices under control.

The system and the regime needs to change. Recently there have been many calls from a variety of sources not only for a review of the regulations but also to make sure that regulations allow for accelerated access to non-patented drugs.

We must make a real effort to improve this situation. Those who can least afford it are suffering the most because of the abusive strategies that are legally used under the PM(NOC) regulations.

Canadians, benefit plan workers, benefit plans themselves, employers and all levels of government that purchase pharmaceutical products for delivering public health care are hurt the most under the current regulatory regime. In fact, it often leads to labour disputes because benefit packages are one of the most contentious issues among organized workforces and their employers. Generic companies which may be prevented from entering markets and thus are losing potential revenue at least have an opportunity to sue for damages when they are put off in the market, but the Canadian public does not.

Brand drug companies can be investigated by the Patented Medicine Prices Review Board and if they are found to be selling at excessive prices, they are asked if they will voluntarily pay back the money. This is called a voluntary compliance undertaking, known as VCU. There is, however, no mechanism for this money to be reimbursed to consumers, drug benefit plans, or even provincial governments. All the money simply goes back into the Liberals' general coffers. There is not even a guarantee that the money will be spent on health care.

The consumers at the most vulnerable state overpay for drugs; the companies pay that money back and it goes to the government, not back to them. That is unconscionable and it should be corrected.

The PM(NOC) regulations are above and beyond what we is required in terms of patent protection for the pharmaceutical industry.

Public policy objectives must be more important than pressure from multinational companies. Any changes to the regulations must address the most important public policy objective when it comes to pharmaceuticals: making sure that Canadians and our publicly funded health care system have access to affordable drugs.

Just last September the Liberals promised to work with the provinces. The first ministers task force on developing a pharmaceutical strategy has as one of its nine key components to accelerate access to non-patented drugs. In order for that to happen the PM(NOC) regulations in their current form have to be eliminated.

Some independent sources have reviewed this issue over the last several years. One of the more interesting ones came from stock analyst Hemant Shah from the Wall Street Journal :

The anti-generic strategy by pharmaceutical companies has probably the highest rate of return of any business activity they do right now.

That shows the demonstrated awareness of Wall Street on what the practices of the industry have been through these regulations to maximize their profits at the expense of people.

I will conclude with the following quote from Dr. Marcia Angell, who is former editor-in-chief of the New England Journal of Medicine :

Nothing drug companies do is as profitable as stretching out monopoly rights on their blockbusters. Extending that privileged time by a variety of stratagems is the most innovative activity of big pharma. For blockbuster drugs, it is certainly the most lucrative.

The health and welfare of Canadian citizens, and with an aging population, the requirement of access to drugs and medicines to treat their illnesses is a paramount issue not only for our generation but also for the future of Canada and saving its medicare system. Let us stop the abuse and make sure that we innovate and do not litigate.

Food and Drugs Act

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Madam Speaker, I am pleased to rise today to comment on Bill C-282.

As I mentioned earlier in the House, I congratulate the hon. member for having raised the question of drug prices, even though I believe the bill he proposes does not address the real problems.

As I said, the real issue is Bill C-91, which was adopted by the Mulroney government some time ago, and which extended drug patent protection. This extension, unfortunately, has added immeasurably to the drug prices paid by ordinary Canadians and our governments.

It is unfortunate because we must now act to control this increase in prices. In fact, the most significant aspect of the health care system at present is the increase in the cost of drugs, which puts even more pressure on our health care system.

Companies do need to make profits, as was mentioned earlier. When we talk about Bill C-91 and attacking the real causes of why our pharmaceutical products cost Canadians more and more, it has to do with reasonable profit making.

We know that pharmaceutical companies regularly rank number one in Canada in profits as a percentage of the revenues, as a percentage of their assets and as a percentage of their equity. As they are ranked number one in the country, the profits made in the pharmaceutical industry are actually higher than in any other industry in the country.

There have been claims that the cost of research and development are enormous. In fact, according to one American industry study, it costs up to $1.3 billion to develop an average new medicine.

A 2001 study by the Patented Medicine Prices Review Board states that of the 82 new patented drugs for human use developed at that time, total expenditures for all those 82 products were $1.06 billion. That averages out to about $13 million per new drug. We are talking about a factor of 1% compared to what is normally trotted out as a figure for actual research and development costs.

The question of drug prices is an important one. When we are talking about Canadians having to pay more for pharmaceutical products than they should, while at the same time we hear about record profits for the pharmaceutical industry, there obviously is a problem.

My colleague from Windsor West has actually proposed with his bill, Bill C-274, a way of resolving some of these problems. I will quote briefly a release put out by the member for Windsor West concerning Bill C-274. He mentions that brand name drug companies now list several patents on the same drug so that they can start the automatic injunction against competition again and again. This is ever greening. This keeps lower cost generic drugs that are not infringing patents off the market and forces Canadians to pay monopoly prices for their medicines longer than they should.

Canada's prescription drug costs are increasing by 15% each year, which is faster than any part of our health care system. Bill C-274 would help control prescription drug costs by making lower cost generic drugs available more quickly.

It is important to mention that from 1993 to 2003 the price of brand name drugs increased by 75% while generic drugs increased by 42% over that same period.

The Romanow commission and the Competition Bureau have called for a review of the drug patent legislation. The Supreme Court has described the regulations as a draconian regime. Obviously it is time to provide Canadians with clear rules to ensure access to prescription medicines is fair for everyone.

This brings me back to the issue of Bill C-282. Very clearly we have a problem. Canadians are paying far too much for pharmaceutical products, which is as a result of Conservative policies that were first opposed and then continued by the Liberal government.

Does Bill C-282 in any way address those serious problems? I believe that it does not. In a sense it would allow multinational drug companies, which are mostly American based, to then dictate, in a way, what conditions should be attached to our drug exports to the U.S. retail market.

It is clear that pharmaceutical companies would love to level the price playing field between Canada and the U.S., not by lowering prices to the Canadian level but by jacking them up to the U.S. level. I think this would be a mistake.

The American drug insurance system does not cover 60 million American citizens. If we look at the course of any one year, 40 million Americans at any particular point in the year are uninsured. As the hon. member for Hochelaga mentioned earlier, 2 million of those 40 million to 60 million Americans in any one year are trying to escape the fact that they do not have access to medical insurance by purchasing through Canada.

When we talk about health care costs, 14% or more of GDP in the United States is devoted to health care, even though those 40 million to 60 million Americans are not covered by medical insurance.

The United States has outrageously high drug prices because its drug pharmaceutical companies resort to massive and very costly advertising for their products and the cost of advertising is built into the price of their products. This, as we know, is banned in Canada.

We now have a situation where American pharmaceutical companies would like us to cut off access to Americans who are uninsured and Americans who are paying too much for their pharmaceutical products.

I believe we should be seeking some sort of legislation that would provide relief and would address the issue of an importing country, such as the United States, using its laws to evoke either public policy safety or health safety technical standards with the primary goal of frustrating or eliminating Canadian exports. We certainly have seen that with softwood lumber and with BSE where laws were put into place as basically fences for Canadian exports.

We need to ensure that our exports from legitimate industries in Canada are protected but at the same time we need to ensure that Americans, who are desperate because of the lack of full medical coverage, have access to our medical products when it does not affect the Canadian national interest.

We know that a number of speakers in the United States have cast doubt on our pharmaceutical products by questioning our safety standards, but we all know that is ridiculous. Canadian safety standards are some of the strongest in the world.

We do need to deal with this issue but we need to deal with it in the Canadian context. I will come back to my initial comments that the real issue is the question of pharmaceutical costs and how much Canadians are paying now because of extended patent protection. We should be looking at a regime that provides for recouping research and development costs but which does not cost an arm and a leg for the Canadian taxpayer just to fuel industry profits in the pharmaceutical sector that are without parallel elsewhere in the country.

Supply

[Bill Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Chair, we have had some discussion tonight about the cost of drugs in Canada. It came up in earlier questions. I have a couple of questions related to drug policy.

The first has to do with the practice of evergreening. I do not know if the minister is aware there is a private member's bill, Bill C-274 in the name of my colleague from Windsor West, which, if it were to come to a vote and then be passed, would eliminate this practice that has the effect of increasing the price of drugs, unnecessarily in our view. I know it is a private member's bill, but does the minister look favourably upon this proposed legislation or not?

Patent Act

[Brian Masse, NDP, Windsor West, ON]

moved for leave to introduce Bill C-274, an act to amend the Patent Act.

Mr. Speaker, it is a pleasure to rise today to introduce a bill to amend the Patent Act to protect Canadian consumers and our health care system. It would effectively provide stable ground rules so that generic drugs could enter the market in a reasonable time. It would end a practice that has cost Canadians millions of dollars and has prevented drugs from getting to people who need them, whether they be seniors or sick Canadians.

I am proud to introduce this bill because it will keep our health care system a publicly funded structured.

(Motions deemed adopted, bill read the first time and printed)