Evidence of meeting #36 for Health in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was market.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Jim Keon  President, Canadian Generic Pharmaceutical Association
Russell Williams  President, Canada's Research-Based Pharmaceutical Companies (Rx & D)
David Johnston  President and Chief Executive Officer, Canadian Association for Pharmacy Distribution Management
Kathleen Boyle  Vice-President, Services, HealthPRO Procurement Services Inc.
Michel Robidoux  President, Sandoz Canada, Canadian Generic Pharmaceutical Association
Mark Ferdinand  Senior Director, Health and Economic Policy, Canada's Research-Based Pharmaceutical Companies (Rx & D)
Michael Blanchard  Clinical Director, Pharmacy Services, HealthPRO Procurement Services Inc.
Jeremy Desai  President and Chief Operating Officer, Apotex Inc., Canadian Generic Pharmaceutical Association

8:50 a.m.


The Chair Conservative Joy Smith

Good morning, ladies and gentlemen.

Thank you so much for being here today. I want to welcome you to the session this morning.

Because we have a very full agenda this morning, I'll quickly ask the committee to pass the budget, first off. The motion is that in relation to the study of the role of government and industry in determining drug supply in Canada, the proposed budget in the amount of $18,450 be adopted.

Can I have someone move that, please?

Ms. Block, thank you.

Does someone second it?

8:50 a.m.

A voice

That's fine.

8:50 a.m.


The Chair Conservative Joy Smith


Thank you very much.

So we have the budget passed. Also—

8:50 a.m.

A voice

You have to call for the vote.

8:50 a.m.


The Chair Conservative Joy Smith

All in favour of the motion?

(Motion agreed to)

Thank you.

Sorry; I was rushing too fast. I knew you'd pass it.

I think now we can go directly into our....

We have a couple of other things to finish, but I see that we're missing some members, so I'll wait until the end for that. We'll just take five minutes at the end of committee.

We have a full agenda today. We'll start with the study of the role of government and industry in determining drug supply in Canada.

From the Canadian Generic Pharmaceutical Association, we have Mr. Keon, Dr. Desai, and Mr. Michel Robidoux, who's president of Sandoz Canada.

Welcome. We're very glad that you're here.

We also have, from Canada's Research-Based Pharmaceutical Companies, Mr. Russell Williams, president, and Mr. Mark Ferdinand, senior director.

Welcome. We're so glad you're here as well.

From the Canadian Association for Pharmacy Distribution Management, we have Mr. Johnston and Mr. Reynolds. Mr. Johnston is the president and chief executive officer, and Mr. Reynolds is the vice-president.

We're so glad you're here as well. Thank you.

Our fourth presentation is from HealthPRO Procurement Services. Ms. Kathleen Boyle is vice-president and Mr. Michael Blanchard is the clinical director.

Welcome. We're very glad you're here.

The presentations will be 10 minutes for each presenter.

I will start with the Canadian Generic Pharmaceutical Association.

Mr. Keon, I believe you will be presenting. Would you begin, sir.

March 27th, 2012 / 8:50 a.m.

Jim Keon President, Canadian Generic Pharmaceutical Association

Thank you, Madam Chair, and good morning, honourable members.

We want to thank you for providing Canada's generic pharmaceutical industry with the opportunity to contribute to your study of the domestic drug supply system.

As the chair said, I am Jim Keon, president of the Canadian Generic Pharmaceutical Association, or CGPA. Our member companies research, develop, manufacture, and market generic drugs in Canada and internationally.

I am joined today by Dr. Jeremy Desai, the president and chief operating officer of Apotex. Apotex is a privately held Canadian company based in Toronto. Dr. Desai provides the experience of Canada's largest pharmaceutical R and D investor, manufacturer, and employer. He personally has extensive experience in working with Canadian, U.S., and foreign regulatory agencies.

I'm also joined by Monsieur Michel Robidoux, president of Sandoz Canada, a company that develops, produces, markets, and distributes a wide range of generic products. They are headquartered in Canada, in Boucherville, Quebec. Sandoz is the second-largest producer of generic drugs in the world.

CGPA member companies take the responsibility of providing high-quality, lower-cost generic drugs to Canadian patients very seriously. Millions of Canadians rely on these products daily to maintain or improve their quality of life. Generic drugs are dispensed to fill 60% of all prescriptions in Canada, and they provide significant value to Canadians. Retail generic drug prices are internationally competitive. Today, three to four generic prescriptions in Canada can be filled for the price of one patented brand-name prescription.

The generic pharmaceutical industry is devoted to working with all stakeholders to minimize the current shortages and to mitigate factors that could contribute to future shortages. We are aware of the distress caused to patients, families, and clinicians by disruptions in the drug supply, particularly with respect to drugs identified as medically necessary.

Most of the pharmaceutical manufacturing capacity that exists in Canada is operated by generic drug companies. We have two of the largest Canadian manufacturers here with us today, Sandoz in Quebec and Apotex in Ontario. Canada is fortunate to be home to an internationally significant cluster of generic manufacturers, which contributes positively to the Canadian drug supply.

In addition to supplying the domestic market with high-quality pharmaceuticals, we export about half of our domestic production to more than 115 countries around the globe, with the United States forming the single largest market for our products.

The generic drug industry is a highly competitive, low-margin industry that operates in a highly regulated environment.

Before bringing a new generic drug to the Canadian market, a company must carefully weigh several business considerations. These include the cost of development, the cost of production and market prospects. It also needs to navigate Canada's complex and costly legal environment, which creates a great deal of business uncertainty for a generic manufacturer seeking to make a new generic product available to Canadians.

It takes several years to bring a new generic product to market. Once Health Canada has reviewed and approved a new generic drug as being safe, efficacious and bioequivalent to a reference brand name drug, it can be sold anywhere in Canada. All pharmaceutical manufacturers are subject to ongoing reporting requirements and inspections aimed at ensuring the product meets current and evolving regulatory standards in Canada and other countries in which a Canadian-made product is sold.

To be reimbursed under the provincial drug programs and obtain significant sales volumes, the generic drug must be listed on provincial drug benefit plans. The manufacturer must submit a separate application to each province and await a response. It can take up to one full year to have the new generic listed in all provinces.

The generic manufacturer negotiates with pharmacy customers and other purchasers to sell its products. For the hospital market, group purchasing organizations conduct a tendering system where pricing is the main consideration. This has led to a number of sole-source contracts in the hospital market.

The generic manufacturer typically distributes the medicine to pharmacy customers through a wholesaler, although companies also have some in-house direct distribution to pharmacy.

Despite the best efforts of all parties in the pharmaceutical supply chain, shortages of prescription medicines can and do occur in Canada and other countries. There are various reasons why a brand or generic manufacturer cannot temporarily supply a drug. The specific reasons may vary and can be complex.

The most common causes for drug shortages are: issues around the active ingredient quality or the availability of the active ingredient; manufacturing issues; the evolving regulatory environment and, in the view of our members, an increasingly inflexible approach to enforcement by the U.S. Food and Drug agency; and marketplace issues.

When shortages of prescription medicines occur in Canada, generic pharmaceutical manufacturers aggressively pursue remedies, including finding alternative sources of products. Canada's generic pharmaceutical manufacturers recognize the importance of providing transparent information to help patients, health care professionals, and provinces and territories prepare and deal with current and anticipated shortages of prescription medicines.

CGPA has been a leader in the activities of the multi-stakeholder group on drug shortages, which includes representatives of several organizations that will appear before this committee, including Rx&D and CAPDM, which are here today, as well as the Canadian Pharmacists Association and the Canadian Medical Association, which you will hear from later this week. Health Canada has also participated in that multi-stakeholder group.

The work of the multi-stakeholder group led to an interim solution for the reporting of current and anticipated drug shortages on public websites operated by the University of Saskatchewan's Saskatchewan Drug Information Services and Sainte-Justine Hospital in Montreal. CGPA member companies have been reporting to these websites. The information has also been available on our own CGPA website. The availability of these websites has been promoted to health care professionals.

Recently, CGPA and Rx&D have been working very closely to accelerate the development of a national bilingual reporting website for Canadian drug supply stakeholders. Our associations have each committed up to $100,000 to accelerate the development of this website. Earlier this week, the website www.drugshortages.ca went live. The French website is available at www.penuriesdemedicaments.ca.

We consider this an important milestone. We are now focused on continuing our communications efforts with the goal of providing robust, timely, and transparent information to all drug supply stakeholders.

Cooperation and joint action between the generic and brand-name industry is not particularly common in Canada or any other jurisdiction. The fact that we have set aside our differences and come together to combat drug shortages in Canada we believe demonstrates how critically important both sides of our industries view this issue and how committed we are to finding workable solutions.

While the reporting of backlogs and shortages to all drug supply stakeholders is important, reducing the potential for backlogs and shortages is a high priority for the generic pharmaceutical industry. To mitigate the potential for disruptions in our domestic drug supply, our member companies have invested more than $100 million over the next three years in new systems, personnel, equipment, and facilities. They have heavily allocated additional resources, both human and financial, to quality control and quality assurance operations to ensure continued compliance with the evolving regulatory environment. They have improved forecasting capability and prioritized production to better adapt to shifting market demand. They are working with Health Canada on an ongoing basis to prioritize product reviews and approvals based on shortages or potential shortages. They are implementing industry best practices guidelines for the prevention, notification, and management of drug shortages. A copy of the CGPA “Best Practices Guidelines for the Notification and Management of Drug Shortages” has been provided to committee members.

CGPA and its members remain committed to working with Health Canada and all our partners in the prescription drug supply chain to develop solutions to help mitigate the impact of prescription drug shortages in Canada.

Dr. Desai, Mr. Robidoux, and I would be pleased to answer any questions you may have. Thank you.

9 a.m.


The Chair Conservative Joy Smith

Thank you so much. We will continue with the presentations and then have the questions following that.

We will now go to Rx&D. Mr. Williams, I believe you are going to make the presentation. Thank you.

9 a.m.

Russell Williams President, Canada's Research-Based Pharmaceutical Companies (Rx & D)

Merci beaucoup. Thank you, Madam Chair.

Thank you, committee members, for the opportunity to appear before you today.

As you mentioned, seated with me is Mark Ferdinand, our senior director of health and economic policy. He has been a key worker in terms of the working group that Jim Keon just mentioned. If there are other questions, he will certainly add to them.

Rx&D, as you know, is a national association that represents 50 companies that represent the innovative pharmaceutical industry.

Our members research, discover, develop and deliver life-saving and life-changing medicines and vaccines.

To start, let me state that patient access to the widest array of effective medicines and vaccines is of paramount importance to Rx&D and its members. Simply put, we are in the business of improving health outcomes. This is best achieved by maximizing the choice of therapies to which patients and physicians have immediate and consistent access.

I want to assure this committee that our members appreciate the anxiety and frustration that drug shortages cause Canadian patients, their families, and health care professionals.

Indeed, the drug shortages issue demands attention and collaboration from everyone—we as innovators, generics, governments, health care professionals, and all others who play a role in providing medicines to Canadians.

I believe that Canadians want and deserve answers to three very simple, specific and straightforward questions.

First, why do drug shortages sometimes occur? Second, what is our industry, along with others, doing to address this issue? Third, and most importantly, what can we do, using public policy tools and expertise of industry, to ensure that drug shortages do not occur in the future?

Turning to the first question of why and how shortages occur, let me provide some context. Each and every day, Rx&D members adhere to the highest standards of management and manufacturing practices. They are constantly refining their business continuity plans to supply, in a reliable fashion, Canadians with the medicines they need. These practices include: actively managing supply chains to ensure regional balance and access; securing backup suppliers for base components and raw materials and active ingredients; and monitoring stock throughout the wholesaler community. Nonetheless, it has long been recognized that shortages can occur, and no country is immune from this reality.

Reasons for the drug shortages, as Mr. Keon has just mentioned, can include a number of factors: unprecedented and unusual demand for product is one factor; unforeseen manufacturing, safety, and quality problems; procurement policies; interruptions in distribution networks or factors beyond anybody's control, such as accidents or natural disasters. These are all magnified due to the practice of single-source purchasing in the post-patent market.

Turning to question number two, Rx&D has worked with the pharmaceutical supply chain community, including wholesalers, distributors, physicians, pharmacists, chain drugstores, and Health Canada officials on this issue since last summer. In fact, last October Rx&D members created a public and bilingual web-based platform to inform Canadians of shortages. Our site includes key information, such as the name of the drug in shortage; strength and dosage form; its drug information number, DIN; name of the member company; the reason for the shortage; and expected duration and resupply date.

Three weeks ago, we expanded our site's capability and opened it so that any manufacturer in Canada—innovators, generics, Rx&D members or the Canadian Generic Pharmaceutical Association—could use our platform to report on shortages.

We strongly encourage them to do so, and many companies have accepted this offer. As suggested by the last speaker, this information can be found at www.drugshortages.ca

or www.penuriesdemedicaments.ca.

Two weeks ago, both Rx&D and the generic association came together to commit up to $100,000 each toward a comprehensive national and bilingual platform and plan that will do two important things: permit real-time reporting of drug shortages, and recommend potential solutions when medications are not available.

I am proud of our leadership on this joint initiative. However, while better reporting on shortages helps health care professionals deal with the immediate challenge, it does not address the root causes of drug shortages and will not mitigate by itself the risk of future drug shortages.

That brings me to the fundamental question posed at the outset of my remarks: what can we do, in terms of public policy, to better assure Canadians the medicines they need will be there for them, day in and day out? I will be unequivocal in the answer. The present Canadian policy environment does not favour better access to prescription medicines. If this environment does not change, based on what we have learned from the current situation, the potential for problems caused by future drug shortages will not diminish.

Federal, provincial, and territorial policy makers must clearly understand that procurement approaches, such as sole-source contracts or bulk purchasing of medicines in the generic, post-patented sphere, which limits competition and patient access to medicines, have real and lasting consequences, like the scarcity of supply to all Canadians.

Mike de Jong, the Minister of Health for British Columbia, recognized this fact last week when he said:

If you become overly reliant on a single source for any product, there are risks. I have to say, one of the things we are discussing, amongst provincial health ministers, in our zest to drive the cost down on behalf of taxpayers...have we inadvertently created a condition where competition has been compromised?

That is a powerful statement.

Moreover, the unintended consequences of short-term, cost-containment strategies that compromise health outcomes have been witnessed over the past few years in areas such as surgical supplies and vaccines, and now we see it in medicines too.

To protect against future shortages we recommend that a system of competitive diversity for post-patented medicines must exist to ensure there are enough companies in the market that can increase production immediately if needed. We need to guard against procurement models that run afoul of the old adage, “Don't put all your eggs in one basket.” It's a simple concept, but one that I think we have to look back on.

Our members sincerely appreciate the very serious fiscal challenges facing all levels of government across this country. We are working with governments on what we call value-demonstrating initiatives—those projects that take health care challenges and, through an evidence-based approach, identify ways to improve patient outcomes and cost-effectiveness.

Yes, government has a responsibility to manage taxpayer dollars, but we have now seen only too clearly what can happen when Canadians rely on one supplier for the medicines they need. It is not in the best interests of patients, does not account for the essential role pharmaceuticals play in our health care today, and runs contrary to the values and intent of our health care system.

Our preference is for increased choice domestically, but we have also repeated at both the provincial and national levels that more work must be done to expedite Canadian approvals for medications from jurisdictions such as Europe and the United States. We've also encouraged better fast-tracking of alternate sources of supply when shortages occur. I know that is being worked on as we speak.

On behalf of Rx&D, you have my commitment that we will continue to work in partnership with governments and our supply chain partners to report on drug shortages on an ongoing basis.

We believe that our joint efforts on a joint reporting site with all the interveners of the chain is an important first step; however, we need all policy-makers to work with us towards a long-term solution to ensure that we have a system that can respond quickly when drug shortages do occur.

Thank you very much, Madam Chair and committee members, for your attention. I look forward to your questions and a discussion following the other presentations.

9:10 a.m.


The Chair Conservative Joy Smith

Thank you very much, Mr. Williams.

Now we'll go to the Canadian Association for Pharmacy Distribution Management.

Mr. David Johnston, I believe you're going to give the presentation. Thank you.

9:10 a.m.

David Johnston President and Chief Executive Officer, Canadian Association for Pharmacy Distribution Management

Good morning. As mentioned, I'm David Johnston, president and CEO of the Canadian Association for Pharmacy Distribution Management, or CAPDM, as we are known.

On behalf of CAPDM, I thank the members of the House of Commons Standing Committee on Health for the opportunity to outline the role of the pharmaceutical wholesalers with respect to drug shortages. This is an issue that our industry is very concerned about and is working closely to address with other health care organizations in Canada, including those organizations presenting this morning.

First, I would like to offer you a brief overview of CAPDM so you see how we fit into the health care system generally and the drug shortages situation specifically.

Established in 1964, CAPDM is the voice of the Canadian pharmacy supply chain. Members consist of pharmaceutical wholesalers, self-distributing pharmacy chains, prescription and non-prescription drug manufacturers, both brand and generic, as well as goods and services providers to the pharmacy supply chain sector. We are a significant contributor to the efficiency of the Canadian health care system. Over 95% of pharmaceuticals across Canada are distributed to community and hospital pharmacies as well as long-term and specialized facilities by pharmaceutical wholesalers and self-distributing chains, with an order accuracy greater than 99%. Distribution of pharmaceutical products by pharmaceutical wholesalers is the system of choice for pharmacies and manufacturers.

By offering same day and next day delivery five days a week to all parts of Canada, through thousands of employees working in distribution centres in nearly every province, pharmaceutical wholesalers help to ensure timely patient access to vital pharmaceuticals and over-the-counter medicines. CAPDM pharmaceutical wholesalers, working with Health Canada regulators, are proud to be part of a pharmaceutical supply chain that has come to be admired at home and abroad as one of the best systems in the world.

The role of pharmaceutical wholesalers is to obtain available products from pharmaceutical manufacturers and distribute them under highly regulated pricing regimes in a safe, secure, timely, and economical manner to pharmacies. On the surface this may seem like a simple process. However, behind the scenes there are highly complex skills and technologies used by wholesalers to consolidate shipments from hundreds of manufacturers and deliver them to thousands of pharmacies.

This is crucial in sustaining the safety and viability of Canada's pharmaceutical distribution system, which in turn means the viability of the health care system itself. In today's world of growing demands and service, just-in-time storage and delivery are crucial to pharmacies, wholesalers, and manufacturers alike.

Before I describe our role when a product shortage occurs, I'd like to quickly define what the notion of shortage means to our industry. Shortage represents a reduced availability of one or several products from one or several manufacturers. Typically when a manufacturer experiences a supply issue, it will create an allocation for the impacted product or products to ensure fair distribution of available inventory to the market. This allocation may be at the geographic level or wholesaler distribution level, or even at the customer level, based on historical trends.

Pharmaceutical wholesalers do not cause drug shortages, nor do they have the information to predict a shortage. They do not determine the adjusted supply levels to each customer in the event of a shortage.

In times of shortage, the role of the pharmaceutical wholesaler is to support the allocation process by fulfilling and delivering orders according to the defined allocation instructions and stock replenishment received from the manufacturer. With their available inventory, pharmaceutical wholesalers will then implement order limits to ensure that as many customers as possible have access to the product experiencing a shortage and that no one region or organization will have a disproportionate amount of product.

CAPDM recognizes that drug shortages are a major issue, and we have developed a committee that is actively participating in a cross-industry initiative with Health Canada, known as the drug shortage working group, along with other health stakeholders, on proactively reporting on shortages. There's still much to be done by all stakeholders, and we look forward to continuing the progress made to date in creating a system to help Canadians better manage their medication needs within shortage situations.

In summary, during times of drug shortages, pharmaceutical wholesalers will continue their essential role of distributing all available products through the safe, secure, and efficient system they have developed.

Pharmaceutical wholesalers do not influence the cause of drug shortages but do manage the flow of available products in the market during shortages, and they are working with manufacturers, health care providers, and government to help find a solution to this situation. We look forward to continuing this important collaborative initiative.

Thank you for your time and attention. We'd be delighted to answer any questions.

9:15 a.m.


The Chair Conservative Joy Smith

Thank you. There will be time to do that following the last presentation.

Ms. Boyle.

9:15 a.m.

Kathleen Boyle Vice-President, Services, HealthPRO Procurement Services Inc.

Thank you for inviting HealthPRO Procurement Services to present at today's meeting. My name is Kathy Boyle, vice-president of pharmacy services at HealthPRO. I would like to introduce my colleague, Michael Blanchard, clinical director at HealthPRO.

HealthPRO is Canada's national group purchasing organization for health care, representing the purchasing interests of hospitals, provincial health authorities, and shared services organizations from coast to coast. We recognize the critical impact that drug shortages can have on delivering quality patient care. We are doing everything possible to help our members find alternative solutions to drugs that are in short supply, and we are actively collaborating with industry stakeholders to find solutions. To that end, we are pleased to be invited to participate in today's important event.

Although the problem is not new, the number of drug shortages has significantly increased in the last few years. This is a complex problem, with no easy solutions. It is important to first understand the following key factors that contribute to the global problem. It is also important to consider that every situation is different, and that each product on back order and each shortage is driven by unique contributing factors.

The global supply chain is complex. A trend by manufacturers to outsource active pharmaceutical ingredients and raw materials has created intricate and increasingly less stable global supply chains. Manufacturers are susceptible to shortages or delays at any of their global facilities.

The move to consolidate production overseas warrants consideration. The health care sector's ability to respond to Canadian shortages is further hampered by suppliers' attempts to consolidate production overseas, generally in one plant, which increases vulnerability to production interruptions.

There is increased demand without increased production. As the need for medications grows, manufacturers are struggling to keep up with demand. Contributing factors can include rigid regulatory control over manufacturers' active pharmaceutical ingredients, raw material shortages, and delays caused by line production increases of drugs in greatest demand.

We now have stricter drug regulations and improved quality. In response to several tainted drug and food incidents over the past several years and the increasing challenge of counterfeit drug production, the U.S. Food and Drug Administration has increased the frequency and intensity of audits with a focus on complete traceability of all compounds. In several cases, strict FDA audits have impeded production of high-demand drugs at manufacturing facilities, contributing to temporary shortages.

Public policy directives on health care costs have affected drug supplies. The drive to control health care costs in Canada has led to a leaner supply chain and tighter hospital, distributor, and manufacturer inventory across the country. Shrinking margins for manufacturers and distributors affects inventory and product availability. Shrinking margins can also negatively reshape the market, leading manufacturers to focus on the most profitable products.

Canada's market share is limited. Canada represents 3% of the global drug market. Of that 3%, Canadian hospitals represent just 10%, a small business market opportunity for global manufacturers.

There is no stakeholder in the Canadian supply chain that has not contributed to, or been complicit in, the problem of drug shortages, including global parent companies, local manufacturers and distributors, Health Canada, provincial authorities, group purchasing associations, and hospitals. Nevertheless, there is room for each of these key stakeholders to consider how they might contribute to a solution.

We have the following suggestions related to each of the stakeholders.

Health Canada may consider guarding against standards of other countries overriding the high-quality standards in Canada, ensuring there are multiple suppliers of medically necessary drugs in Canada, mandating early warnings of anticipated supply disruptions, mandating early warnings of manufacturers' plans to exit the market, regulating the exit of the market for medically necessary drugs, easing the process for access of secondary suppliers of single-source critical drugs not already in Canada, and overseeing the establishment and sustained funding of a national drug shortage reporting system.

Global drug manufacturers must shoulder greater moral accountability for health care in Canada. A licence to make profits on Canadian health care should go hand in hand with a commitment to patient care in the form of a stable supply. We must ensure that any required remediation plans do not negatively affect to a significant degree the production of supply available in Canada.

Manufacturers and distributors must be more transparent with respect to potential supply disruptions and take responsibility for ensuring there is fair share distribution in place to prevent product hoarding, and have appropriate technology in place to handle an allotment approach effectively.

Provincial authorities should establish and monitor a fair share mandate and ensure that hospitals do not stockpile supplies of drugs and continue sharing information regarding clinical alternatives with their fellow provinces.

Group purchasing organizations must take a national perspective that ensures that everyone is not relying on a single supplier, create multi-award contracts that improve the security of supply for medically necessary products, and try to create a more attractive business environment to encourage multiple suppliers in Canada to stay in Canada and to encourage new suppliers to enter Canada.

HealthPRO noted the increasing instances of shortages and supply disruptions and a year ago proactively began working on a revised contracting strategy to better protect HealthPRO's pharmacy members. Our revitalized strategy was developed with direct input from suppliers and HealthPRO members, and it addresses many of the concerns being discussed here today.

The new contracting strategy strives to strike the right balance between competition, purchasing power, and a more reliable supply chain, while ensuring full compliance with regulatory requirements and contracting guidelines. It aims to fortify relationships with suppliers to better manage emerging shortages.

As part of the new strategy, HealthPRO has set more specific guidelines, and HealthPRO suppliers will now be contractually accountable for providing notification about critical inventory levels for hospital-specific items, notifications and action plans for anticipated drug shortages, correction plans for drug shortages lasting more than 60 days for hospital-specific items, and notification regarding an intention to discontinue drugs.

In addition, HealthPRO fully supports the establishment of a national drug reporting system. We have been providing just that service to our members for the last 10 years. Now more than ever it is imperative that we work together to improve transparency and communications surrounding drug shortages. We, as Canada's health care GPO, must adjust our procurement strategies to encourage additional and stable sources of supply. Security of supply is as important as safety, efficacy, and value to the health care of Canadians. We at HealthPRO are committed to making this happen.

Thank you.

9:25 a.m.


The Chair Conservative Joy Smith

Thank you very much. I hope you got everything in that you wanted.

We'll now go to our Qs and As, and we'll begin with Ms. Davies.

9:25 a.m.


Libby Davies NDP Vancouver East, BC

Thank you very much, Chairperson.

Thank you to the witnesses for coming here today.

This is obviously a very urgent and important issue we're discussing today. It's an issue that has concerned many Canadians across the country. As you know, we had an emergency debate in Parliament on March 14, which is not a regular thing. It's not easy to get an emergency debate. That was followed by a motion that was passed unanimously by the House, which I'm sure you're aware of, on March 14. It called for a number of things, which I'll go into.

It's interesting to hear your presentations today. I think all of you have said, from varying perspectives, that this is a very complex situation. In fact, you've all gone to great lengths to describe what you believe are some of the factors involved in the drug shortages. What I take from that is that yes, there are complexities, but it's something that actually requires an intervention.

I don't know how anybody could argue that the status quo is acceptable and that these shortages will be kind of up and down and ongoing, on and off. To me, the immediate response is that there has to be a much stronger intervention in the public interest. I just want to put that out there. The motion we passed on March 14 clearly outlines that we need a national strategy that anticipates, identifies, and manages this drug shortage question—this is what was passed through the House of Commons—and ensures that there's required reporting.

In trying to sort through all these causes of the shortages, I noticed that it was only Mr. Keon, from the Generic Pharmaceutical Association, who, when you listed the most common causes, used the phrase “marketplace issues”. I'd like to know what those are.

I don't know if you're aware that the Canadian Medical Association surveyed their members—basically the doctors who are facing these shortages. One doctor put it very bluntly:

I find it interesting that the ones I have trouble accessing are always the lowest cost alternative and always need a more expensive substitution. It fuels my paranoid suspicions about Big Pharma only wanting to produce drugs with a higher profit margin.

I'm very curious to know what these marketplace issues are in terms of mergers and in terms of pricing. Apparently, many of the shortages apply to the generics, which may be taken off the market. Suddenly they're not available. It does cause enormous suspicion. I think this whole issue of marketplace issues is very important for us to pursue.

Second, I know that in New Zealand, smaller buyers come together. They have a contractual arrangement whereby the suppliers themselves must develop other sources. It's part of the contract, and there are heavy penalties if they don't follow that.

I'd like to ask HealthPRO, specifically, if that's something they've considered here in Canada. There's a way to actually ensure in the contract that there are alternatives, which the suppliers themselves follow through on.

I'll ask those two questions.

9:30 a.m.


The Chair Conservative Joy Smith

Who wants to begin?

Mr. Keon can begin.

9:30 a.m.

President, Canadian Generic Pharmaceutical Association

Jim Keon

With regard to marketplace issues, I think we were referring to marketplace issues in Canada and internationally. Some of the speakers have mentioned that for some of these older products, there's a diminishing number of suppliers, and that is true. There has been rationalization internationally, and the reality is as—

9:30 a.m.


Libby Davies NDP Vancouver East, BC

Excuse me. What do you mean by rationalization internationally?

9:30 a.m.

President, Canadian Generic Pharmaceutical Association

Jim Keon

There are fewer.

9:30 a.m.


Libby Davies NDP Vancouver East, BC

Could you just answer us sort of straightforwardly?

9:30 a.m.

President, Canadian Generic Pharmaceutical Association

Jim Keon

Prices have been going down worldwide for some of these products, and therefore there are fewer companies that can commercially exist making those products.

9:30 a.m.


Libby Davies NDP Vancouver East, BC

Is there a change, then, into production of higher-priced products, and how much has that happened?

9:30 a.m.

President, Canadian Generic Pharmaceutical Association

Jim Keon

The reality is that if prices go down too low, and we're relying on suppliers internationally and they go out of business, we will have fewer suppliers available to us. That has been happening. Canadian prices have been declining. Prices have been declining in the U.S. and Europe. Around the world, generic drug prices have gone down, and that has caused supply issues internationally. It has led to shortages. It was mentioned by HealthPRO. This is not a brand-new issue. There have been some shortages over the past couple of years. So that is a factor.

We rely on international sources for our active pharmaceutical ingredients. There is some manufacturing of that in Canada. Apotex does that. But by and large we are reliant on an international supply, and that has been increasingly difficult to source.

9:30 a.m.


The Chair Conservative Joy Smith

Ms. Boyle, do you want to make a comment?

9:30 a.m.

Vice-President, Services, HealthPRO Procurement Services Inc.

Kathleen Boyle


Part of our new strategy—and we are putting this strategy in place in the contracts we are going to award in September 2012—is to take a multi-supplier award and not a single-supplier award for what we call hospital-specific items, which are primarily injectable products used mostly in hospitals. So wherever possible we will be looking at awarding contracts to more than one supplier, and where there is only one supplier we will be actively pursuing other suppliers to bring a product into market.

9:30 a.m.


The Chair Conservative Joy Smith

Thank you.

Ms. Block.