Evidence of meeting #19 for Government Operations and Estimates in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was employees.
A recording is available from Parliament.
Conservative
Ernie Philip President, Medline Canada
Thank you.
My name is Ernie Philip. I'm the president of Medline Canada.
I'm actually glad to hear the passion of the committee; I'm also personally passionate about this topic. On behalf of our 500 employees, whom I am so very proud of and want to thank, I really appreciate the time of this committee.
At Medline, our passion for purpose is together improving lives. We know that the items we provide to Canadians have a direct impact on people's health.
For context, Medline Canada is an approximately half-billion dollar company, which makes us one of the largest medical supply companies in Canada. We sell Medline-branded products, as well as other manufactured products, through the entire continuum of care: hospitals, long-term care communities, physician and dental offices, as well as two retail stores, one located in Quebec and one located in Ontario.
We can deliver very quickly through our distribution network of warehouses located in Delta, B.C.; Edmonton; Winnipeg; Halifax; Newfoundland; as well as two in Ontario and two in Quebec. We sell tens of thousands of items, including PPE items like gowns, gloves, masks and sanitizers. We also sell items in a number of other large product categories, like incontinence products, skin and wound care products, and sterile procedure trays, as a few examples.
We source products through our manufacturing and contract manufacturing network throughout the world. For example, in Asia we have approximately 600 contracted factories, and we have approximately 350 employees on the ground doing quality and regulatory functions.
We also have access to the manufacturing capabilities of Medline Industries in the United States and in Mexico, and we have many, many relationships with factories right here in Canada.
We work with, and are so appreciative of the work we have done with, the GPOs, the SSOs, the regional health authorities and numerous other government agencies, including those in the federal government, to source incremental PPE items.
I'm very proud of our company. We have, for example, taken a very long-term view of the market. We are a health care company, and during the beginning of COVID-19, our “together improving lives” morals and values were what guided us. We didn't divert products to higher-margin commercial companies like banks; we took our inventory and allocated it directly to front-line workers in hospitals and long-term care facilities, and we tried to be a strong voice, telling our customers to be very careful of short-term brokers, in some cases lawyers, who were in this for short-term profit, asking for large deposits and potentially not being heard from again. We were that constant voice.
We are not in this for short-term profit. We're here, together, to improve the lives of Canadians.
We're really hoping that through this, all levels of government will have a long memory of those companies and industries that lived these values and morals. I certainly would not proclaim that we are a company that's perfect, but we will continue to be vulnerable; we will continue to be honest and we will continue to learn and get better as a company.
I appreciate everybody's time. Thank you.
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much.
We'll now go to our five-minute rounds of questioning, starting with Mr. Aboultaif.
Conservative
Ziad Aboultaif Conservative Edmonton Manning, AB
Good morning, Mr. Philip and Mr. Gentès. I welcome you to the committee this morning. Congratulations on your successes in your businesses.
Mr. Philip, you have 500 employees and 600 contract factories in Asia. This is a lot of capacity. It's a big company.
Have you looked into starting to produce more in Canada now or in the past? Have you thought about producing more in Canada just to maintain quality control? You mentioned that you have about 300 people on the ground trying to track down the product and make sure the quality control is in place and so forth, which is a normal practice for respectful companies bringing product into Canada, especially in the medical field.
Are you looking into expanding further in manufacturing—basically self-reliance—in Canada, rather than bringing product from outside?
President, Medline Canada
Thank you for the question—great question. It's two-pronged.
We've legitimized and continue to legitimize our supply chain by taking advantage of opportunities around the world where we need capacity, especially when you have the unplanned, huge demand spikes that we have obviously seen over the last 100 days.
However, we are looking at doing some manufacturing in Canada. We have some warehouse space that we're expanding in Ontario as well as in Quebec. We have a formal bid in to make masks in Canada, with the Province of Ontario, so it will be multipronged.
Conservative
Ziad Aboultaif Conservative Edmonton Manning, AB
Where's the difficulty for you to expand on the product lines? With PPE, there are many elements, many items that you can manufacture. Where do you think you're disadvantaged?
I know that labour is one, and government policy like taxation, carbon tax and others can sometimes get in the way of being efficient in producing product at a price. On the other side, you have to move the product. Logistically, there's a cost. Also, the waiting time could be another step you have to overcome.
What do you expect the government to do for your manufacturing sector to be able to produce more product in Canada?
President, Medline Canada
There are a couple of questions in there. You're right, and that's why we use a lot of local manufacturers as well in Canada, for things like sanitizers, etc.
I think you've hit on the two big issues. The last one would be raw materials. For example, with regard to something like melt-blown, which is used for the middle layer to filtrate in medical-grade masks, there are no manufacturers here in Canada. They're in Asia, and there are seven in the United States. So just making sure we have the raw materials available to make them is extremely important—or at least to be able to stockpile them. That would change some strategy going forward.
I feel that there's a third question, or something else you might have said that I missed.
Conservative
Ziad Aboultaif Conservative Edmonton Manning, AB
The question is on economy of scale. That is an important factor in determining the final price of the product, and that is known in the manufacturing sector. If you have the volume, you can produce more product, and the economy of scale works to your advantage, as well as to that of the end-user at the end of the day.
Have you looked at that model to see how you're going to produce in the future? As I said, reliance on the local market and local production is very important.
President, Medline Canada
We have, and we've dialled in on masks. Medical-grade masks are where we see an opportunity in Canada, for sure.
Conservative
Ziad Aboultaif Conservative Edmonton Manning, AB
Okay.
Mr. Gentès, you mentioned a low-grade product, what you call “technical-grade alcohol”, that is coming this way, and that it may have a long-term effect, not so much short-term. While we can produce the alcohol product, the hand sanitizers, locally in Canada, how much of a price difference are we looking at? Cost-wise, how much of a difference are we looking at between the imported product and producing it here?
President, Galenova Inc.
There are multiple sources. If we want to buy locally, we have prices ranging from $3.50 to $9 a litre for ethanol. If we buy from China, we can buy the same kind of ethanol for $3 and maybe a bit lower. If we source for technical-grade alcohol, we have a price of around $1.50 per litre.
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much.
We'll now go to Mr. Jowhari, for five minutes, please.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Mr. Chair, I will be yielding my time to Mr. McCauley. Sorry, I meant Mr. MacKinnon.
My apologies.
Conservative
The Chair Conservative Tom Lukiwski
I was going to say, that would certainly be a surprise.
Mr. MacKinnon, please.
Conservative
Liberal
Steven MacKinnon Liberal Gatineau, QC
That's not likely, Mr. McCauley, as intelligent as your questioning usually is.
Good morning, everyone.
Hello, Mr. Gentès. I want to say bravo for your entrepreneurship!
Mr. Philip has identified the opportunities he sees in the future. How do you view the future for your personal protective equipment or chemical formulations?
How do you see the opportunities for domestic growth for you or the industry you are a part of?
President, Galenova Inc.
It is interesting to note the open-mindedness that the COVID-19 pandemic has brought about in the population. The crisis has also changed the government's view of the security of supply, including the supply of drugs and protective equipment. I think we've taken a big step forward.
As a company, we can choose to focus on our local manufacturers and rely on the security of our drug supply. We will then have to be aware that we will pay more for these products. If that is the societal choice we make as Canadians today, I see a very bright future for these kinds of companies in this country, many of which have been relocated to Asia because of the costs.
In my company's case, the crisis has created opportunities. So we started to produce hydroalcoholic gel, a vein that we had never thought of exploiting in recent years. This new production allowed us to avoid layoffs and remain self-sufficient, since we did not need government assistance programs. This production also allowed us to offset losses in other sectors caused by the COVID-19 pandemic, including the drop in activity in the hospital sector due to the cancellation of many surgical procedures. Like any good entrepreneur, we saw a good opportunity and made a good decision.
President, Galenova Inc.
That's exactly right.
There are fewer shortages when everything's local. If products are manufactured locally, we control supply chains and are less likely to experience stock-outs, whether of medical protective equipment or drugs. Over the last 10 years, the number of drug stock-outs has increased and become catastrophic.
Liberal
Steven MacKinnon Liberal Gatineau, QC
You're right to say that it's disturbing and we definitely need to rectify this.
What makes us uncompetitive? Why have we lost market share of these products to foreign, especially Asian, manufacturers?
Beyond subsidies, since subsidies raise problems in the application of trade agreements, how could the government help the sector? What conditions could it provide to promote growth in the markets you're talking about?
President, Galenova Inc.
I've already spoken about it briefly. It is important to focus on quality when it comes to tendering strategies. Of course, this should not be done entirely at the expense of cost, but I believe that the weighting of local origin and the quality of a product must be sufficiently important to reduce the consequences that the difference in costs could have. We have to make societal choices: if security of supply is important to us, these tenders are one way of showing it.
In terms of market share, I think there are several reasons why we lost it. In 2008, Québec and Canada were leaders in the biopharmaceutical field. Unfortunately, we lost many of these companies during the economic crisis. They are extremely expensive to start up and you have to be able to support them after their products are commercialized because, unfortunately, Canadian innovation...
