Health Committee on March 19th, 2013

[Patrick Brown, Conservative, Barrie, ON]

That's actually a perfect question; it was going to be my follow-up about international collaboration. I've asked this at previous panels, so thank you, Mr. Morgan, for raising that.

I think of juvenile diabetes, where they're building an artificial pancreas both in Canada and in Australia on parallel timelines, but they're sharing information. Do you believe that in Canada we do enough international collaboration with the health sector in terms of technological innovation? Are there examples that you can pick up to prove it?

[The Chair, Conservative, Joy Smith]

Your time is just about up.

Quickly, please, Dr. Gagnon, if you want to answer.

[Dr. Marc-André Gagnon]

One of the main collaborations that I think we need to recognize right now is the sharing of clinical data. The European Medicines Agency is going forward by making full disclosure of all clinical data for drugs and medical devices, starting in 2014. On disclosure of data and on transparency, Canada is still a laggard. It's way behind—

[The Chair, Conservative, Joy Smith]

Thank you, Doctor.

[Dr. Marc-André Gagnon]

—and I think this is maybe the first thing that needs to be done, sir.

[The Chair, Conservative, Joy Smith]

Thank you, Dr. Gagnon.

We'll now go to Mr. Kellway.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you, Madam Chair.

Thanks to our witnesses for coming here today.

Dr. Gagnon, can I start with you, please? I was flipping through the deck you provided us, which is very much appreciated. On page 25, there's something that you term “A Modest Proposal”, which talks about patent restoration and extended data exclusivity. Is that to suggest that the 1987 deal that was implicit in the Patented Medicines Price Review Board makes some sense if enforced and administered properly?

[Dr. Marc-André Gagnon]

The thing is that the deal is kind of dead now.

[Matthew Kellway, NDP, Beaches—East York, ON]

Right.

[Dr. Marc-André Gagnon]

I don't know.... Basically, we're not enforcing it any more. Drug companies say, “Well, you know, things are different now so this is normal, and we're not respecting the deal anymore.” For me, what it would mean, basically, is that if the deal is dead from the side of drug companies, the deal should be dead as well from the side of the government—so maybe not less generous patent protection, but at least transforming the way we price drugs in Canada, the fact that we're always aiming to be the world's fourth most expensive country....

Basically, the idea of “A Modest Proposal” was suggested in the context of the CETA negotiations. The idea is that if you want to go forward with increasing patent protection in order to be more at par with Europe, well, if you want to be at par, decrease patented drug prices by 15%. Scrap the patent linkage system that we have in Canada. Italy tried to implement a patent linkage system, and Europe basically said no, that it could not do that, that it did not have the right to do that, but they're imposing on us to extend even more the patent linkage system.

In these conditions, if then you want to bring in patent restoration, which is something that is also sensible and could make sense, the idea is, well, if you provide any privileges, impose conditions. It is a kind of nonsense to say, okay, let's provide more privileges and magically we'll get some spinoff out of that. This is not how things work. It worked in 1987 because we imposed conditions, and we need to impose conditions now as well.

[Matthew Kellway, NDP, Beaches—East York, ON]

So it's in the CETA context—

[Dr. Marc-André Gagnon]

Yes.

Mr. Matthew Kellway —that this is the kind of bargain. Okay. That's helpful for me to understand.

Dr. Morgan, as I understood your statement, you were suggesting that the way to increase innovation in Canada was to build capacity and that will attract private investment. Could you expand on that notion of building capacity? How does one do that and what does that mean?

[Dr. Steven Morgan]

I certainly can.

In general, I think, the strategies of countries that have been relatively successful in attracting R and D have been to make strategic investments in personnel and in networks and infrastructure for conducting scientific research. It's investment in landing great minds in this country and, in particular, in regions of the country, so that in a sense you develop clusters of innovation based, in a sense, on great scientific research being done, in part funded by government, in part funded by taxpayers, and in part funded by the industry that will be attracted to the capacity that's there.

Using direct investments is preferable over indirect incentives, based on international evidence, in part because at the very least you're getting a dollar-for-dollar return from your investment in research that's conducted within your borders. Of course, typically you do attract private sector investment that wants to leverage those great minds, those databases, and those networks, etc.

[Matthew Kellway, NDP, Beaches—East York, ON]

So with regard to the institutional context for this capacity, are you talking about the post-secondary facilities such as universities, or do you have something else in mind?

[Dr. Steven Morgan]

In the Canadian context it's a combination of a variety of actors. Most notably you have your university systems, you have your hospital systems, and you have your national agencies that might be related to health innovation strategy.

I would consider targeting investments to areas where we have done fairly well, for instance, in areas of biotech. Canada might actually be a reasonably important player in the era of personalized medicines. In areas like that you'd be leveraging the reality that Canada has a universal publicly funded health care system that allows us to run reasonable clinical trials and collect data on a very large population if trials are run in our country.

[The Chair, Conservative, Joy Smith]

Thank you, Dr. Morgan. I'm sorry, our time is up. Sorry about that.

We'll now go to Mr. Lizon.

[Wladyslaw Lizon, Conservative, Mississauga East—Cooksville, ON]

Thank you very much, Madam Chair.

Thank you, gentlemen, for coming to the committee this afternoon.

The first question I have is for Dr. Gagnon. On page 5 of your presentation you show the R and D-to-sales ratio. I need some clarification. If you are listing countries, in Switzerland it looks like they reinvest 35% more than total sales. Can you maybe explain how this works? Where does the money come from?

[Dr. Marc-André Gagnon]

The R and D-to-sales ratio is basically a ratio comparing the amount invested in R and D in the country to the amount of total sales at the ex-factory price of patented pharmaceutical products.

Switzerland is basically the exception. It is clear on the graph that there are two major drug companies, Hoffman-La Roche or Roche, and Novartis, located in Switzerland. They have massive investment in R and D in the country, and it's a very small country so the sales are very low. That's the reason you have an R and D-to-sales ratio that is over 100%.

[Wladyslaw Lizon, Conservative, Mississauga East—Cooksville, ON]

Are you comparing sales in the country? Therefore, for Canada it would be sales in the country because Swiss companies would sell all over the world.

[Dr. Marc-André Gagnon]

Absolutely, but this is a comparison of national R and D investment in the pharmaceutical sector versus national sales of the products.

[Wladyslaw Lizon, Conservative, Mississauga East—Cooksville, ON]

Okay, because if we look at Canada, it's currently under 7.5%, and that includes only Canadian sales. As you very well know, the major market of Canadian-based companies is actually not Canada but the United States of America. Therefore, if I were looking at a clearer picture of the total sales, how much is reinvested?

[Dr. Marc-André Gagnon]

Okay, I can understand your confusion here.

The idea is that it's only national R and D inside the country versus all the sales of all the companies around the world inside that country as well. So basically in Canada we spent something like $18 billion to buy patented pharmaceutical products in 2011, but what we got in terms of R and D investment in the pharmaceutical sector in the country was $960 million.

So the comparison is based on all investment nationally, but also all the sales of all pharmaceutical companies around the world in that specific country as well. This is what is used here as the main comparator for R and D intensity in different countries.

[Wladyslaw Lizon, Conservative, Mississauga East—Cooksville, ON]

Okay, thank you. That's a bit clearer.

The second question is for all the gentlemen and goes back to our topic of technological innovation. Can you give an example from your field of the technological innovations that you are aware of or familiar with that would move the treatment or patient care to the next level?

[The Chair, Conservative, Joy Smith]

Mr. Morgan, would you like to—

[Dr. Steven Morgan]

I'll take a step up and in part get back to the question of generic drugs.

The innovations that occurred in the pharmaceutical sector in the eighties and the nineties were profound and important for the health of a large number of people in Canada. It's unfortunate that many people can't afford to fill their prescriptions, but one policy innovation would be to give away those drugs that are now generic to all Canadians for free, and to acquire those drugs using a tendering process that drives the prices down to the point where it would actually cost the government less to give these away than it does today to basically subsidize the purchases of the poor and the elderly.

I really think we need to think about managing health care innovation as a whole, not just one-off technologies. Generic acquisition is one way to manage the technologies of the past and actually secure some savings so that we can better afford the technologies of the future.