Industry Committee on April 16th, 2007

[Douglas Clark]

As far as remuneration is concerned, it is difficult to determine what is adequate. What may be adequate in certain circumstances may not be in others. Here in Canada, we have adopted a formula that calculates the royalties payable by licensees to patentees based on the level of development of the importing country. When a licensee must calculate the royalties owing to the patentee, he consults the United Nations' list of developing countries and does his calculations on the basis of the country's ranking on the list.

For example, Sierra Leone is the least developed country on the list. It ranks 176th among the 176 countries listed. According to the formula established under the regulations, royalties of .02% would be payable in this case. If the country ranked first on the same list, the amount would be around 4%, which would be the highest rate.

Canada is not alone is using this formula. Although we developed it, Switzerland has adopted it as well. I believe other European nations have set royalty levels at 4%. As you can see, the rate falls somewhere between .02% and 4%. Our rates are in the same ballpark. Admittedly, from 1969 to 1992, Canada had a mandatory pharmaceutical licensing regime in place which provided for royalties of 4% to be paid in a business context.

In terms of using the waiver for non- commercial purposes, Canada has endeavoured to maintain the obligation set out in sections 21.16 and 21.17. Pursuant to these provisions, a patentee may challenge the granting of a licence to a generic drug manufacturer if the price of the product is equal to or greater than 25% of the average price of the equivalent product sold in Canada by the patentee. This is how Canada applies this provision. Of the eight countries that have implemented the decision, Canada is the only one to have brought in a specific provision for upholding this obligation.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Are you saying then that these provisions would prevent pharmaceuticals from being exported to these countries?

[Douglas Clark]

I don't think so. As I explained, royalties can easily be calculated. They are quite reasonable, between .02% and 4%. I don't see this as an insurmountable obstacle.

Regarding the obligation that the product not be used for commercial purposes, the 25% threshold is in fact viewed as a disincentive by generic drug manufacturers. They made this clear to us in their submissions following the release of our discussion paper. The risk of litigation discourages them from participating n the regime. At least, that's the position they have taken.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Mr. Lee, you stated that pharmaceuticals are ready to be shipped. Why haven't they already been shipped?

[David Lee]

That's a matter for the generics. They have to approach, next, the patentees and make arrangements with the Commissioner of Patents. So there's work to be done on the patent side.

On the food and drug side, they're ready to go in the sense that we think it's safe, efficacious, and of high quality. The differentiating features are there. The labels are all set. So our part is complete.

It's really up to the negotiating part to find the country to provide to and to have those licensing discussions. Those would be the next steps.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Lee.

We'll go now to Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I'd like to continue with the line of questioning of my Liberal colleague. Is CAMR broken, or is there something else not being done?

I've heard the criticism that it's all good that we're going to provide drugs, maybe, to a country in Africa, but what if the drugs need to be taken with water and they have a poor water supply, or they need to be taken with food and the guy hasn't eaten in days, or the government where we're sending these pharmaceuticals is corrupt and they're willing to sell them on the black market? I was wondering if you could describe for us what the Government of Canada does to address issues like clean water, roads, bridges, and the recruitment of doctors and nurses. And how do these efforts fit in with CAMR?

[Christopher Armstrong]

Thank you for that question. We do a huge number of things in those areas. I was here to speak to you specifically on the health sector area, about which I am better versed, so I may have to get you further information in terms of the other sectors, like environment, transport, and infrastructure. Some of those are areas that CIDA is not as invested in as we are particularly in the health sector. The health sector is our largest single sector.

That said, all those things do relate, as I mentioned, in terms of the challenges for developing countries. I was just outlining a few of them. But the important message to take home is that these are things that are being overcome. It was just a few years ago that if someone came before your committee and talked about HIV and AIDS treatment, you'd hear challenges that there's almost nobody receiving HIV and AIDS treatment in Africa. The numbers were really quite small. Now we're seeing in Africa well over a million people receiving HIV/AIDS treatment. That's due to innovative ways of delivering medicine, to strengthening health systems, to donors putting in more money, and to developing countries themselves putting in more money and investing in health systems and ensuring nutrition and safe water.

Those are challenges that have not gone away, but we have seen, really, some good successes, and Canada has certainly been quite involved in them. In that timeframe, the global fund, which I mentioned before, has put huge amounts of resources into HIV/AIDS health, malaria, and tuberculosis.

All of those, absolutely, relate specifically to CAMR in terms of creating the conditions within which developing countries can deliver the medicines. CAMR is a very specific initiative in terms of, hopefully, creating greater availability and more options for developing countries to access medicines and making Canadian suppliers, through compulsory licensing, able to do that. So there are many options, and greater options, through which developing countries can access the medicines.

That's very specific to the purchase and availability of affordable medicines. But you're right. There's a much bigger picture around all that in which Canada is very heavily invested and where it has had some very good successes. We continue to invest in those, and we'll continue to do more.

[Colin Carrie, Conservative, Oshawa, ON]

My colleague also asked if there is any champion. I'm just curious. It seems that even with other countries, nobody has really come up...no pill has been delivered, say, to Africa. Are there coordinated efforts between the different ministries? How is the communication between your ministries? Which generic companies have attempted to use CAMR so far? What have been the results, and what has happened with that? What's been your experience?

[David Lee]

In terms of the generic companies, one has been made public, and that's Apotex. It's at least made an attempt to submit its drug submission. We have it on hold. That's been publicly announced.

There is another company. I've actually sought permission from it to talk about its submission, but I haven't received that back yet. I don't know, Mr. Chair, if you could direct me on that. Usually the matter of whether there's a drug submission is held in confidence. I've sought permission from the company to reveal that, but I haven't quite got that permission. I'd be hesitant to identify the drug. It's another drug company that manufactures generics.

[The Chair, Conservative, James Rajotte]

Keep it confidential.

[Colin Carrie, Conservative, Oshawa, ON]

I'm wondering how the process is actually going. When we talk about a champion or somebody bringing this forward, is it up to the individual companies to track it through each ministry to see how things are following along, or is there some type of coordinated effort? In your experience, is the communication going well? You've only had two experiences with it. How has it been going?

[David Lee]

There has been an interdepartmental team reflected here in this departmental group. It actually features many more officials who have worked both inside Canada and outside at numerous opportunities. So we have tried, and there's a whole history of attempts to educate colleague regulators.

We've done a lot of speaking with the WHO, with the USFDA, with other regulators, including regulators in Africa and in other countries, trying to promote knowledge about the system. It is very detailed to do that, so communication itself can be challenging, but this group has actually tried to coordinate a lot of that messaging, and we keep in, I would say, fairly regular contact departmentally. The lead shifts, depending on which part of the system you're in.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

We'll go to Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and thank you to our panel for appearing here today.

Whether this is a political or a practical problem with the bill, we have to sort out both of those issues. Does the bill work in its current context? I'd like to hear from every department. Does it work right now?

[Douglas Clark]

If you're asking whether it is working, then I think the answer is fairly straightforward. The purpose of the legislation is to produce cheaper generic versions of patented drugs for export to developing countries. No drugs have been exported, so I think that's your answer. If your question is whether it works, I think it can. I think operationally it's sound. But the fact remains that to date no drugs have been exported.

[Brian Masse, NDP, Windsor West, ON]

There were a lot of problems brought up this time at the hearings, regarding former Bill C-56 and then Bill C-9. I was here at those hearings. We made over a hundred different amendments to the bill. At that time there were a lot of warnings that internationally this country would be embarrassed. And I, quite frankly, believe that we're participating practically with a blind will to not actually help people. I would like to know if the CIDA minister, either past or present--maybe you can't speak to the past, and I understand that--actually approached a colleague from another country about accessing this regime, what the result of that conversation was, and where it went from there.

[Christopher Armstrong]

To be honest, I'd have to get back to you on that. I don't know specifically whether or not there has been direct contact between the CIDA minister and a colleague. That is something I can follow up and get back to you on.

I know that certainly at the official level, we have on numerous occasions raised this issue with our developing country colleagues. We've made presentations in numerous settings, including AIDS conferences, direct interaction, and direct bilateral interaction with our developing country counterparts. Those efforts have been made. Perhaps some of my colleagues would like to speak to some of the other outreach efforts that the Government of Canada has made.

[Douglas Clark]

We've all had occasion, each one of us here at this table, to interact with those countries. We've actually prepared a list, in addition to the website that we established, and the online users guide and the CD-ROM that we've distributed, of all the outreach activities we've engaged in. It's quite a lengthy one.

At least from my part, from what I've heard.... It's threefold, basically. I've given presentations on the regime to the African group at the TRIPS Council in Geneva and to various African delegations. Initially what I heard was that they're more interested in technology transfer--understandably so. They want to be able to take care of their public health issues themselves in time. That's one thing.

The other is that they lack the administrative infrastructure to actually avail themselves of this. As I mentioned at the outset, there a number of strict terms and conditions under the waiver that importing countries have to abide by. That includes figuring out whether the drug is patented in that country and indicating, if it is patented, whether they've issued or can issue a compulsory licence. If they're not a least developed country, they have to indicate that they have insufficient or no manufacturing capacity to produce the drug.

It sounds fairly simple to people in developed countries, but to them it does seem to pose a barrier to use.

And then the last thing is financial resources, and that's obvious.

[Brian Masse, NDP, Windsor West, ON]

I understand some of those things, but here's a good example. This Perspectives magazine is the African journal on HIV/AIDS. It's a pretty sophisticated African publication on the whole issue and how they're dealing with the situation. So it's not whether we're dealing with individuals and organizations that don't understand how these things move.

What is wrong? Is it on this side here, or is it over there? I mean, we've had this argument before, when we actually went through this bill. There were a lot of different individuals who liked to paint that the problem was actually on the other side. I think it's on our side here.

So what I want to know is does this legislation need amendments to make it work? Does it need amendments like in other countries, where they're removing some of the pre-approved lists--lists that we created that we didn't have to? Does it need amendments like waiving the duration of time, for example, for two years, so it can go for a longer period of time? People who are taking medications for HIV and AIDS need it for more than two years.

If we do those things, will it actually work? Will Canada become a player in the field? We're not a player. Other people are. I want to know why.

[Douglas Clark]

As I said, there are many different ways to skin a cat. The way Canada implemented the waiver is not the only way to implement. That's clear. Other countries have waived certain things. They've waived the voluntary licence requirement in instances of national emergency or extreme emergency. We haven't done that. Other countries don't have pre-approved lists of drugs in eligible importing countries. In my mind, speaking as an expert in the patent field, that's an advantage to our regime, not a disadvantage. Having a pre-approved list makes it a lot easier for the patent authority to figure out whether they can grant a licence or not, and it minimizes the opportunity to litigate that decision.

Obviously, one of the options before us at this point is to consider harmonizing ourselves more closely with these other countries that have implemented in a somewhat different way. But the fact remains that those regimes haven't given rise to any exports either.

So whatever the problem is, it's a shared problem among all the implementing countries. I don't think Canada has singled itself out or stigmatized itself in the way that you suggest.

[The Chair, Conservative, James Rajotte]

Thank you.

[Brian Masse, NDP, Windsor West, ON]

We told the world we would be the ones to do this and be the leaders.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Masse. Your time is up.

We'll go to Mr. Boshcoff.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you very much, Mr. Chair.

It seems this issue of why there hasn't been any popular response to applications for something we feel is going to be addressing an international crisis.... Our perception is this is going to help. All these countries need this desperately, so you would think there would be one, two, or three.... Actually, you'd think there'd be 35 or 50 who would take advantage of this if there were some kind of practical or easy way to access this. We know there's some generosity on behalf of the companies. Still, the bottom line is that it doesn't seem to be happening.

With that in mind, I just want to ask a question about Canada always seeming to be first for many of these WTO decisions. I'll use agriculture as an example, in terms of our complying and doing the Doha thing. In your list of the nations that have jumped onboard here, it still seems this issue is not there. You mentioned Sweden, Norway, and the Netherlands, but aren't they part of the European Union? And then you mentioned the European Union. So that would only give us South Korea, India, China, the European Union, and Canada in this. Perhaps you could just start with that.

I appreciate that Canada likes to be a leader and needs to be a leader, and that it demonstrates this because we have compassion and care and a skilled public service that wants to carry this out, but it doesn't seem that anyone is coming, although we've made everything ready and it's built.