Health Committee on Feb. 23rd, 2017

[The Chair, Liberal, Bill Casey]

I call the meeting to order.

Welcome to our February 23 meeting. Today we're to hear two witnesses on constitutional issues, followed by about half an hour of committee business.

Today our witnesses are Dr. Amir Attaran, professor in the faculty of law, University of Ottawa; and Mr. Bruce Ryder, associate professor at Osgoode Hall Law School, York University.

We're going to ask Mr. Ryder to go first. You have 10 minutes. That will be followed by a seven-minute question period. You're on.

[Professor Bruce Ryder, Associate Professor, Osgoode Hall Law School, York University, As an Individual]

Thank you very much, Mr. Chair. It's an honour and a privilege to have the opportunity to participate in your extensive study of a national pharmacare program.

My area of expertise is constitutional law, including the division of legislative powers. I will be confining my remarks today to that subject. I'm hoping I can be of some assistance to the committee in thinking about the constitutional pathways that are open to the federal Parliament if you were to decide to move ahead with a national pharmacare program.

I'll talk about several of the most important constitutional powers that are relevant to this discussion. I'll speak about both the opportunities they provide and the limits of proceeding pursuant to particular federal powers.

Let me begin by saying a few words about the federal spending power, which I think is central to this topic. From reviewing some of the transcripts of previous testimony and briefs that have been received by the committee, my sense is that many who have appeared before you to support a national pharmacare program are essentially assuming that the federal spending power and the mechanism of the Canada Health Act will be the route that Parliament would choose to move forward on a national pharmacare program.

The federal spending power is not set out anywhere explicitly in the Constitution, but it has been recognized by the courts as implicit in Parliament's power to levy taxes, which is class 3 of section 91 of the Constitution Act, 1867, put together with Parliament's power to legislate in relation to public property in class 1A, and to appropriate federal funds, which is section 106 of the 1867 act.

In Prof. Hogg's words:

...the federal Parliament may spend or lend its funds to any government or institution or individual it chooses, for any purpose it chooses; and that it may attach to any grant or loan [of federal funds] any conditions it chooses...including conditions it could not directly legislate.

The spending power has been the subject of quite a lot of controversy over the years, including in academic circles. There are many scholars who deny its existence or who question its validity, particularly when it comes to conditional spending in areas of exclusive provincial jurisdiction.

However, the courts have not shared the doubts of the scholars who question the existence of the power. On the few occasions in which the courts have been called upon to discuss the spending power, they have recognized its existence, have stated that Parliament is not constrained, when spending funds, to acting only within areas of federal jurisdiction. In other words, spending can take place in areas of exclusive provincial jurisdiction, and it's possible for Parliament to attach conditions to funds that it makes available to provinces.

I go into some of the case law in more detail in a brief I have provided to the committee, but the essence of it is that in a number of rulings, as I've said, the courts have recognized the spending power, recognized that federal governments can spend in areas of provincial jurisdiction and attach conditions to it.

It's not an unlimited power, and the precise nature of the limits on the federal spending power haven't really been spelled out in the case law, apart from the general principle that any federal legislation that is in pith and substance—meaning it has as its dominant characteristic—the regulation of a matter that falls within exclusive provincial jurisdiction is ultra vires the federal Parliament.

That's the fate, for example, that befell the unemployment insurance act when it was first put forward or proposed by the federal government back at the time of the Depression in a bundle of cases that we refer to as the New Deal cases, released in early 1937. The Privy Council struck down a number of federal legislative proposals, one of which was an unemployment insurance act.

Lord Atkin wrote in that opinion that the law that the government sought to defend as an exercise of the federal spending power was, in fact, in pith and substance the regulation of a provincial matter—employment contracts—and therefore was ultra vires Parliament.

More recent decisions from the Supreme Court of Canada have confirmed the existence of the spending power but have reiterated that limit: that at some point, federal spending can be too great an intrusion into provincial legislative jurisdiction and amount to the regulation of a provincial matter.

It's hard to know exactly where that limit is, but I would summarize the case by suggesting that while attaching general conditions like those set out in the Canada Health Act to federal spending in areas of exclusive provincial jurisdiction is acceptable—that's just a law that is in relation to the spending of federal funds, and general conditions can be attached to the receipt of those funds—at some point, if the conditions become too detailed, too precise an interference with or a dictation, if you like, of how the provinces should deal with matters that fall within their exclusive jurisdiction, like health care, then it will be ultra vires the federal Parliament.

That's the federal spending power. It's recognized. It exists. It has uncertain limits. I think the conclusion we can draw from the case law regarding it is that the least controversial route, I would say, to the implementation of a national pharmacare program is to amend the Canada Health Act so that it includes drugs that are provided outside of hospitals in the definition of insured services that have to be provided by the provinces. Currently, as you know, it's only when drugs are administered in the hospitals that they're covered under the Canada Health Act.

The scope and the details with regard to the funding and protection of drugs would be left primarily to processes of federal, provincial, and territorial negotiations if that amendment were put in place.

I'm not saying that it's uncontroversial in the sense that there wouldn't be any political resistance to taking that step, but from a legal point of view, there would be...I hesitate to say zero risk, but a very low risk of any uncertainty about the constitutional validity of proceeding in that manner.

What about other alternatives? The criminal law power is relevant in this context. Again, in my brief I go through the parameters of the criminal law power and some of the case law on it. There are several cases that have upheld provisions of the Food and Drugs Act and the regulations that have been passed pursuant to it, which, as you know, amount to very a extensive regulation of various aspects of the production and marketing of food and drugs. The courts have not doubted the validity of the Food and Drugs Act and its regulations from the point of view of the federal criminal law power.

The limits of the federal criminal law power are that it authorizes laws that are in pith and substance—that is, in their dominant characteristic—putting in place prohibitions, coupled with penalties, for a typically criminal public purpose, such as the protection of health or safety.

The Food and Drugs Act and its regulations meet that test, but any legislative response that seeks to go beyond a criminal law form—prohibitions coupled with penalties, or a criminal law purpose like protecting health or safety—would not be capable of being upheld under the criminal law power.

Parliament's power to pass laws in relation to patents is also relevant to the discussion of drugs. That's class 22 in section 91 of the Constitution Act, 1867. It's pursuant to that power that the Patent Act has been enacted. The Patented Medicine Prices Review Board is established pursuant to provisions of the act, and is tasked with regulating the prices of patented medicines sold in Canada to ensure that they are not excessive.

These are valid exercises of Parliament's jurisdiction pursuant to class 22 of section 91, but that power cannot enable Parliament to regulate the prices of unpatented drugs, so a comprehensive approach to the pricing of drugs can't be sustained pursuant to that part of section 91 alone.

More ambitious proposals to establish a new national agency that would regulate drugs, including the prices of both patented and unpatented medicines—and you've heard some ambitious proposals along those lines—could not be upheld under the spending power, the criminal law power, or the patents power.

One possibility that could be entertained by Parliament is the “peace, order, and good government” power, which is in the opening words of section 91, which can sustain legislation that is addressing a matter of national concern and also one that is not too diffuse or too broad. That seems counterintuitive, but the courts have been concerned that if we allocate to the POGG power matters such as health, pollution, or inflation, those subject matters are so broad and diffuse that to allocate them to Parliament's jurisdiction would upset the division of powers and would unduly interfere with the autonomy of the provinces.

A subject matter, to qualify under the national concern branch of POGG, has to be quite focused, narrow, and specific, and it's possible the national pharmacare program could meet that definition. It's highly debatable, I think, but it's possible that it's sufficiently discrete and focused to fall within the national concern branch of POGG.

Can I have one more minute, Mr. Chair?

[The Chair, Liberal, Bill Casey]

You're about two minutes over now.

[Prof. Bruce Ryder]

I've gone over; forgive me.

[The Chair, Liberal, Bill Casey]

Wind it up.

[Prof. Bruce Ryder]

There are other reasons to doubt whether the POGG power can sustain legislation in this area that I won't go into, but they are set out in my brief.

The final possibility that I'll just mention super-briefly is, of course, pursuing the establishment of a national agency with comprehensive regulatory powers through interlocking legislation that would give it plenary jurisdiction over the subject matter. The agency would receive powers in both Parliament and provincial legislatures, like the negotiations that are going on regarding the establishment of a national securities regulator.

Thank you very much.

[The Chair, Liberal, Bill Casey]

Thank you very much, and I'm sorry to have to cut you off, because you brought some new information that we hadn't heard before; we appreciate it very much. We'll have a chance to bring out more in question period.

Dr. Attaran, you're up for 10 minutes.

[Professor Amir Attaran, Professor, Faculty of Law, University of Ottawa, As an Individual]

Thank you, Mr. Chair.

I agree with very nearly everything that Professor Ryder just said, so I don't want to be repetitive. He did a great job.

You are putting both of us, however, in a somewhat difficult position, because we're asked to say whether pharmacare would be constitutional without real certainty as to what pharmacare is, which makes any opinion tough, right? You don't know what you're giving an opinion on.

If pharmacare means cheaper medicines for all, then it's motherhood and apple pie, and nobody could possibly say that's a bad goal or it's one that the constitutional scholars of the courts would be unsympathetic with. We're all sympathetic with it. The difficulty comes when you start asking how to achieve this.

Roughly speaking, in policy, there are three different ways. Option one is to amend the Canada Health Act, as Professor Ryder said, to make it include drugs given outside of hospital. Those currently are excluded from the Canada Health Act. Option two is for the federal, provincial, and territorial governments to co-operate in some way on drug pricing. Option three is for the federal government to legislate a national drug price regulatory system.

In brief, I think options one and two would be constitutional; option three is almost certainly not constitutional. The reason is that if one were to legislate a national drug price regulatory system, that's obviously a very complex regulatory scheme, and it would be looked at by the courts under the trade and commerce power of the Constitution, which is class 2 of section 91. We've had some adverse experience lately with that power in the Supreme Court. The reference re the proposed securities act, that case of about five or six years ago, determined that a national securities regulator, as was proposed in greater detail than pharmacare now is being proposed, was not going to withstand a constitutional challenge under class 2, section 91, the trade and commerce power. The reasons are that for something to survive under that power, to be valid as federal law, it shouldn't focus on a single industry—of course, pharmacare would focus on a single industry—and it should be a matter in which there's some demonstrated provincial incapability to act.

Of course, you already have the provinces, through the Council of the Federation, acting on drug price rather energetically. As an aside, I'll say they're not doing a very good job. Being a professor, I'm allowed to hand out marks. I will give them a D. However, they are being energetic and they're trying in such a way that you can't really say there's provincial incapability.

The other case from the Supreme Court that gives me pause is the reference on assisted human reproduction, which was again about five or six years ago, in 2011. That concerned a regulatory scheme for such things as in vitro fertilization. It too didn't survive constitutional challenge at the Supreme Court. It dealt with an aspect of the health care system that advocates wanted regulated for reasons of safety, quality, and appropriate clinical practice. Well, that's exactly the set of reasons offered for a pharmacare system.

What the Supreme Court said was that aside from the few criminal law sections of the Assisted Human Reproduction Act, most of the rest was unconstitutional. This echoes Professor Ryder's point that if something is in pith and substance purely criminal and takes the criminal law form, it will survive, but the regulatory scheme attached to it for human reproduction, and potentially for pharmacare, would be very constitutionally vulnerable.

In my final two minutes here, how would you do this? If you wanted a national pharmacare program, how would you do it? The spending power, as Professor Ryder said, matters, and you could do it by expanding the spending as well as the scope of provincial obligations under the Canada Health Act. That said, the Canada Health Act is very poorly policed by the federal government. If this were the approach taken, there is no doubt in my mind that provinces would flout whatever new mandate was put in place and the money would not be used in the best possible way.

Another way to go about this is perhaps through a series of contracts, because while legislation is constitutionally vulnerable, contracts are not, or very much less so. You could have the federal government and the provincial governments enter into a contract for how they would purchase medicines and agree on the modalities to do it, and perhaps designate a common buying agent. By doing this contractually through private law rather than legislatively through public law, you have certainly more latitude than you would otherwise. In fact, you would have so much more latitude, I think, that it would be foolhardy to attempt this under public law where that option exists.

Let me say one final thing, and it's an afterthought. I apologize, because it doesn't really fit with the rest of this.

My students and I have published research on the prices of drugs in Canada. The findings are scandalous. Particularly for generic drugs, we pay way too much. As a terse illustration of that, some drugs made by Apotex, a Canadian company, after the intervention of the provinces, cost more in Canada than they do in other countries. How can the product of a Canadian company cost more in Canada than, say, in New Zealand? And yet, that's happening in some instances with Apotex products, so there is a very serious problem here. In the Q and A, I would explain to you, if you wish, why I think there's a need for the Competition Bureau to look at some of the practices in this industry sector.

I'll leave it there, and thank you for hearing me out.

[The Chair, Liberal, Bill Casey]

Thank you for your presentation. On behalf of the committee, I'd like to ask if we could have a copy of that study you did. It would be very interesting for us if you could provide that.

[Prof. Amir Attaran]

Sure. I'll send it to the clerk by email.

[The Chair, Liberal, Bill Casey]

Thanks very much.

Now we're going to go to our seven-minute round of questions with Mr. Ayoub.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

I'm very pleased to see another aspect of our study of the development of a national pharmacare program. The legal side is noteworthy. The study can go many ways, obviously, which explains the interest.

I'll try to ask specific questions to get some answers.

While listening to your presentations, I drew a parallel with Quebec's pharmacare and medicare programs. One of the goals of our study of the development of a national pharmacare program is to establish equitable coverage across the country. Currently, the situation doesn't seem to be equitable across the country, or even within the same province. Take Quebec, for example. Can we draw a parallel between medicare, which covers all citizens regardless of income or medical situation, and pharmacare, where income and the source of the insurance come into play when people are privately insured?

Isn't there inequality across Canada that should be addressed? Quebec is one example, but the issue should be examined across Canada.

[Prof. Amir Attaran]

You're right. There are many difference between the Quebec system and the Ontario system. For example, in Quebec, drugs are covered by public insurance, but not in Ontario.

That is the clearest difference between the two systems. However, it is not a safe assumption—I'm not saying you made it; I'm saying this for the benefit of others—that the rest of the country should adopt a Quebec-style system.

One interesting reality is that as the pan-Canadian Pharmaceutical Alliance has done its work—that's a project of the premiers, The Council of the Federation—Quebec has not been a participant in that, and it appears that in some instances the pCPA is getting cheaper prices than RAMQ is getting.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

I specifically made the distinction between medical coverage and drug coverage. I also spoke about equality of treatment, as opposed to inequality with regard to life in general and people's origins, social class or economic means.

[Prof. Bruce Ryder]

I appreciate the question very much. It does seem to me that the distinction between the coverage we have of physician services and hospital services, in accordance with the principles set out in the Canada Health Act of universality, comprehensiveness, accessibility, and so on, and the failure to include drugs administered outside of hospital, are very troubling. That's one of the reasons it's so important that the committee is undertaking such an extensive and thorough study of this topic. The distinction between the two and the different treatment of the two have been challenged by a number of commissions and reports over the years. This goes all the way back to Mr. Hall's commission report in 1964, in which he didn't suggest different treatment of the two, and the Romanow report also recommended remedying that gap in the coverage.

My sense is that the exclusion of drugs administered outside of hospital was not a matter of principle, but rather a sense that we had to take incremental steps. The surprising thing is that we haven't taken this step yet, and here we are half a century or more later. I think Canadians are increasingly troubled by that and the burdens that it places on people in different parts of the country and in different situations within provinces. This is very troubling and has serious consequences for their lives and their health.

We need to explore this very seriously. We need to consider the best route to fix it, the most feasible and practical way of fixing it. That is certainly why I'm happy to be here today. The constitutional pathways and the need to explore them are important to discover how to fix this problem.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

What do you think about the federal role, as opposed to the different provinces' role, in providing the required services? Should regulations be imposed or should the legislation be better enforced? Should the federal government have more power? Should there be broader federal legislation that enables the federal government to intervene despite the potential reluctance of certain provinces?

[Prof. Bruce Ryder]

I suppose one model, of course, is the Canada Health Act. The idea is that the Parliament of Canada takes the lead in establishing national standards, reflects values on which I believe there is great consensus in Canadian society, and then leaves the details to the provinces, in negotiation with the federal government.

Of course, there is an argument for a stronger federal role than the one that exists through the federal spending power. The argument relates to the kinds of considerations that Professor Attaran was exploring earlier, such as whether or not we're dealing with subject matter that is really beyond the capacity of the provinces to deal with effectively.

That's an idea that informs both the interpretation of the general regulation of trade branch of Parliament's trade and commerce power under section 91, class 2, as well as the interpretation of the national concern branch of the POGG power.

My view is that there is a case, and I'm not sure I'm quite as pessimistic as Professor Attaran is. I don't think it's—and I'm not quite sure how you put it—almost doomed to failure. I think there is an argument, and it may be a strong argument, under the national concern branch of POGG. This is not so much under the general regulation of trade branch of trade and commerce, because it doesn't allow regulation of a specific industry, and that's what we're dealing with here.

The national concern branch of POGG, as I discussed earlier, just asked if this is a question of national importance. I don't think there is any doubt about that. Is it a subject matter that's defined with sufficient focus and specificity? I think there is an argument that it is.

In thinking about that, is this something that the provinces can deal with effectively, acting on their own? There are arguments, of course, that while they have dealt with this subject for some time, there are serious problems in accessibility and in achieving affordable prices of drugs as a whole that can only be addressed through a national program.

If you accept that argument, then I think there is a powerful basis for using the POGG national concern branch, but it would mean going out on a limb that Parliament rarely climbs out on, and it's not completely sturdy.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

I see.

Mr. Attaran, maybe you have a different opinion.

[Prof. Amir Attaran]

Professor Ryder is right: this is the one point on which I think we do disagree.

I am more pessimistic about using POGG for pharmacare legislation federally. I do not think it would work. “Doomed” is not the word that I would use, but “Hail Mary, faint hope” would be.

I would not encourage Parliament to try to solve this problem in such a way that—because it does need to be solved—would be hinging on a legislative basis of tenuous or very tenuous reliability.

[The Chair, Liberal, Bill Casey]

Your time is up.

Go ahead, Dr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I want to thank both professors for being here today. I found your testimony incredibly enlightening, a real eye-opener.

Professor Attaran, when you commented that we're putting you in a difficult position, we love doing that.

[Voices]

Oh, oh!

[Prof. Amir Attaran]

Thank you.

[Colin Carrie, Conservative, Oshawa, ON]

We're parliamentarians who love to put lawyers in difficult positions to see the different opinions because, really, it's essential.

You talked about defining what pharmacare is. I think it would be prudent for us, as a committee, maybe, to get the minister here, just to see how she sees that, because we have a huge scope here, which could go a number of different ways.

I think it was Professor Ryder who said that constitutionality is an important aspect, but I think it's an essential aspect.

I remember dealing with some of these issues years ago. I think it was a witness who said that to get agreement on how to amend the Canada Health Act, it might be easier just to get rid of the provinces and territories and have one central government do it.

Right now things are clearly defined, in terms of what is provincial jurisdiction and what is federal jurisdiction. I think we have some challenges because of the modern expectations that Canadians have—in other words, “a Canadian is a Canadian is a Canadian.” We hear that a lot. Maybe in Ontario you should be treated the same as in Alberta, but there are certain realities out there that mean that Canadians aren't quite equivalent, depending on which provinces they're in.

I would like to follow up, Dr. Attaran, on some of the comments you made.

You mentioned that it might be best to follow through with a series of contracts. How would you see this? Could you expand a little bit on the idea of common buying agents, or private law versus public law? I was wondering if there are even any precedents for that. Do we have precedents?

[Prof. Amir Attaran]

An interesting precedent is in a place with far better weather than our own, the Caribbean. The Caribbean nations buy a lot of their drugs together because each of them is tiny. They pool their purchasing power and negotiate for the best possible price. What our provinces have done is not negotiate. There are about 15 medicines for which the pCPA has sought a lower price, but rather than negotiate for the best possible price, they adopted a rule, and the rule says that they will pay for the generic version of a drug 18% of the price of the brand version. Therefore, if the brand version of the drug cost $1, the provinces have said, for these roughly 15 medicines, they will pay 18¢. Not 19¢, not 17¢, but 18¢. That's an arbitrary price mechanism. If I offered you a lump of coal for $100, and you said, “You're robbing me blind. I'll only pay you $18”, and I sold it to you for $18, I'd still be rather happy selling you a lump of coal for $18. I would have made a considerable profit. This is the foolhardiness of the system that now exists. The pricing between the provinces is set by fiat at the arbitrary 18% price point, not through negotiation.

You could do contracts that would create a negotiation structure. I think that's the best way to solve this.