Thank you, Madam Chair.
The other presenters have stated a bit of their mini-CVs, saying how low they've been with their various organizations. I should probably tell you that I've been with the PMPRB for four years as chair. I was appointed chair in the fall of 2005.
We are pleased to appear before this committee. We were here a few months ago, and the only thing that's really different is that the snow is gone. But undoubtedly you have some questions for us relating to these main estimates.
I am here today with our executive director, Barbara Ouellet. We would be happy to answer your questions following our opening statements.
Our board was established by Parliament in 1987 under the Patent Act as a quasi-judicial tribunal. We are part of the health portfolio, but we are independent in an operational way from the health portfolio and act at arm's length from the Minister of Health.
The PMPRB has a dual role. The first, and the one that has the highest profile, is to regulate the prices of all patent medicines sold in Canada. I wish to emphasize the word “patent medicine”, because there are 6,000 medicines sold in Canada, and we only regulate those that are under the Patent Act and currently under patent, which is approximately 20% of those. However, that 20% is a large chunk of the total expenditures for medicines in general.
Our other role is to report to Parliament annually on pharmaceutical trends of all drugs and on research and development spending.
The Board's budget for fiscal year 2009-10 is $11.4 million. We have 76 people on staff.
The evolving nature of the environment in which the board operates has led to a substantial increase in the workload, and consequently, our budget.
The evolving nature of the environment in which the board finds itself is now affecting its work and has led to a substantial increase in our workload and consequentially our budget. Several factors have contributed to this budgetary increase.
The first is decreased compliance, leading to more investigations and hearings. You will read from our annual report, which is due to be published shortly, that in 2004 the rate of compliance with our guidelines was around 95%, and now it's slightly less than 90%. So there's been a trending down towards decreased compliance. This, of course, has increased the number of investigations and to a lesser extent the number of hearings and generally has contributed to our increased workload.
We are also making a major revision of our excessive price guidelines. We hope to complete this exercise by June 2009 and implement it in January 2010. There is an evolution in the pharmaceutical environment in general. There are fewer breakthrough drugs being introduced in the Canadian market now, but there are many that have incremental innovations and that are better in certain relatively minor ways and deserve a premium. Our new guidelines hopefully will reflect this.
As an example of our increased workload—and I think you have these notes before you—in 2008 we had 125 investigations, which means drugs that are triggering our staff to look at their price, and in 2004 there were only 43. So by that percentage we have increased the number of investigations.
The excess revenues that have been paid out by the pharmaceutical manufacturers under voluntary compliance undertakings and board orders has increased significantly also. The figures you have in your notes are based on a fiscal year, but just to put it in context, prior to 2006 approximately $25 million was recovered in excess revenues. Since 2006, that amount has increased to approximately $50 million. I'm rounding out these figures for emphasis' sake here.
The number of notices of hearings has also increased. Between 1987 and 2005 we had eight, and in the few years since then that number has doubled.
The Board is about to complete its in-depth review of the excessive price guidelines and a broad public consultation process on the guidelines.
The guidelines explain, clearly and transparently, how patent medicine prices are reviewed, thus making the results of the review more predictable for patentees. In the past, our guidelines encouraged voluntary compliance by helping patentees set prices for their medicines that were not considered excessive. As I said before, compliance has diminished recently.
The issues raised go to the heart of price determination. For example, categorization no longer adequately recognizes the current type of innovation in the pharmaceutical environment. Prior to our current guidelines review we had three categories of medicines, based on their effectiveness and safety. Now, hopefully, we're going to introduce a fourth category with an associated price test that is going to generally recognize the incremental innovations in new products that are on the market. As the notes say here, the price tests are going to reflect these new four categories.
The new guidelines have been the subject of many consultations with our stakeholders, who include not only the pharmaceutical industry, but also the federal-provincial-territorial governments, the private payers, and patient care groups. These consultations are all done now, and we hope to publish the final product at the end of June.
For practical reasons and at the request of several stakeholders, rather than implement in the middle of a fiscal year we're going to put off the implementation until January 2010. During that six-month period, there will be a lot of outreach, educational sessions, and consultations with the stakeholders on how these new guidelines are going to apply.
The board continues to carry out various activities that affect Canadians' lives, whether through its mandate to regulate and report, specialized analyses for provincial and territorial ministers of health, or major projects, such as the recent review of our excessive price guidelines.
Basically, those in summary are my comments. We are continuing, hopefully committed to carrying out our responsibilities in a manner that is very transparent, effective, and accountable.
We'll be ready to answer your questions whenever you get there.
Thank you.