Industry Committee on Oct. 4th, 2012

[Dan Harris, NDP, Scarborough Southwest, ON]

You're saying that we need strong intellectual property in order get that investment happening here, but currently the investment is going to countries that don't have strong protection in IP, such as Brazil, Russia, India, and China.

How do you square that circle?

[Gail Garland]

I would ask for clarification about what kind of investment you're referring to.

[Dan Harris, NDP, Scarborough Southwest, ON]

The brand name pharmaceuticals are putting investments into those countries to develop their drugs.

[Gail Garland]

I'm not here on behalf of the multinational pharmaceutical industry, but Canada is a small market.

We want to have access to the latest technologies. If our patent regime delivers the right qualities of being predictable, stable, flexible, and consistent, then companies will be able to commercialize their technologies here and have a market here. They'll want to file their patents here so that they have access to the market.

There are many markets in the world that will always have tremendous attractiveness because they're just larger markets.

[Dan Harris, NDP, Scarborough Southwest, ON]

I don't think I'll be able to ask the follow-up question, unfortunately, with only one minute.

I did want to ask a question to Mr. Keon and Mr. Gray, perhaps.

You might have a different approach on the Canada-Europe trade agreement. What impact do you think it's going to have on your industries if it goes through as envisioned?

[Jim Keon]

The first thing I would say is that we are a trading industry. We absolutely depend on trade. We want free trade. We support free trade.

Some of the proposals on the table on pharmaceutical IP are going to restrict trade and restrict our access to foreign markets that are absolutely critical for our companies to continue to invest here.

We are concerned about some of the pharmaceutical IP provisions. We support a Canada-European trade agreement strongly, but we would like to see those provisions amended or taken out.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much.

Now on to Mr. McColeman, for five minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you to the witnesses for being here.

I'd like to direct my first question to Ms. Garland and Mr. Siebrasse to expand a bit further. Both of you have mentioned being in favour of patent term extensions. Can you fill in a little of the background as to how you see that as beneficial to a patent regime?

I'll start with you, Ms. Garland.

[Gail Garland]

Sure. My lens is always what is going to create the greatest commercial opportunity for companies that are inventing, developing, and patenting their technologies here. An indigenous company developing a therapeutic here needs to have the longest period of market exclusivity they can possibly have in order to recoup their costs.

The justification for requests for patent term extension lies in their ability to reap the commercial rewards of that period of market exclusivity. Time that's spent in the regulatory process eats away at that period of market exclusivity and puts companies at a competitive disadvantage if they're looking to market in Canada, if they're trying to partner or license a technology. A potential partner is looking at the market potential of that technology and calculating how many years of market exclusivity they'll have in Canada for that technology. If that technology spends a lot of time in the regulatory process, then the number of years available to recoup those costs is reduced. With market term extension, that time is recaptured.

[Phil McColeman, Conservative, Brant, ON]

Professor Siebrasse.

[Prof. Norman Siebrasse]

Yes. The argument in favour of patent term extension is fairly straightforward. The patent term runs from the time the patent application is filed. There's a certain amount of time, about three years maybe, until the patent is actually granted. In many industries, by that time the product can be commercialized and on the market, and you end up with 17 years of effective patent term.

In the pharmaceutical industry, the patenting always happens far before the clinical trials and before marketing approval, which can take many years. Therefore, the effective patent term in the pharmaceutical industry is much less than the 17 years. I don't have stats at hand, but it's eight years or sometimes five years, depending on the particular patent.

The argument is to compensate for this regulatory delay, the pharmaceutical industry needs term extension to give it the same effective patent life as every industry has. That's the basic argument in favour. The basic argument against it, what I call the principled argument against it, is how much time is really needed. The fact is that the term of 20 years from filing, and the 17 years from grant before that, all goes back to England and the time it took to train two apprentices.

We don't know that 17 years is optimal. Maybe five years is optimal. I don't think one year is optimal. Maybe 30 years is optimal, for all we know. It's a very difficult empirical question. We don't have good answers. We can say that one patent gets a less effective term than another, but nobody needs seventeen years, and five years is good enough. That's the principled objection.

The pragmatic objection to patent term extension is to say that we're going to get the benefits anyway. The U.S. and Europe are the big markets. The innovation is going to happen to serve those markets, and if they give patent term extensions, they'll get more innovation, and we'll get the benefits. The counter-argument to that is that we're free-riding, and that's likely to set off a trade war.

The very principled objection is if everybody thinks the same way, everybody says they shouldn't have patents and that everybody else should, then nobody will have patents and we'll be worse off. Apart from that, we might get into a trade war if other countries simply think we're free-riding.

More fundamentally from my perspective, I don't think we should free-ride. I have to say as a moral proposition that free riding on the investment of others for pharmaceuticals is a perfectly defensible position for a third world country, but we're not a third world country, and I don't see any reason that we shouldn't bear our fair share of the costs.

My view on this is that the best way to look at the issues is to ask—

[The Chair, Conservative, David Sweet]

Thank you very much, but that's all the time we have for that round.

Now on to Mr. Stewart, for five minutes.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thanks to all the witnesses for coming today.

I have two questions on which I want to get comments from all of you.

One of the reasons we hear that we need patent term extensions, from a government perspective, is that we'll get more research and development out of the companies, more investments, essentially, in that area.

We had extended patents in the past. In the Mulroney government, we had quite an extension of patents, but our business enterprise investment, BERD, has been dropping. It's been pointed out in numerous reports that one of the biggest problems we have in innovation in Canada is the lack of investment by private companies in the R and D field. It does seem to be asking for more patents. Longer patent life may not accomplish the promise of increased research and development funding from the business sector.

I'm wondering if you can comment on that. Am I totally off base, or do you have something you can suggest?

[Jim Keon]

I can start.

Before I do, there has been a slight implication that Canada is free-riding in the pharmaceutical sector. Nothing could be further from the truth.

We have a very strong patent regime, a very strong data exclusivity regime. We provide eight years of data protection in Canada, far more than they do in the United States. We don't incent generics to come to market and challenge patents the way they do in the United States. In the United States if you're the first generic to challenge a patent, you get six months of exclusivity. They build it into their law that generics should challenge patents and make sure that only valid patents protect competition and keep prices high.

The last point I'd make is that patents are geographic neutral, but because of the nature of national treatment you will get the same protection in Canada whether you do the research in Mumbai, Munich, New York, or New Jersey. It doesn't incent you to come to Montreal, Toronto, or Vancouver to do the research. In Canada we've seen a decline in research and development. There are things Canada could do to attract more research and development. Simply increasing patent protection is going to increase profits of companies that are doing research out of Canada. That is going to be the primary impact.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Are there any other comments?

Mr. Gray.

[C. Benjamin Gray]

If you added on patent term extensions to the whole system today for the pharmaceutical industry, you would do real damage to our industry and the 12,000 jobs that we have across the country. You would damage the manufacturing sector, in particular, within our industry if you extended patents.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Professor Siebrasse.

[Prof. Norman Siebrasse]

We're talking about patent term extension in the pharmaceutical context here so I'm not sure if your remarks before about extension not leading to R and D.... That wouldn't surprise me at all in most other industries where patents don't play as big a role. That could be part of the answer. If patent term extension isn't a good idea across the board, it's really pharmaceuticals where the issue is.

To clarify on the free-riding issue, I agree in many respects that we have a very strong system. I take the point that we have to look at it as a whole. I would be worried that the patent term extension debate shouldn't turn on the idea that we'll get the benefits anyway. If we have a principled objection that says that we don't have patent term extension but we have all these other protections that are just as good as a package and we're doing our bit, that's a fair point. I'm not sure it's correct, but it's a reasonable argument.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Okay, thank you.

I have a second question.

Ms. Garland suggested that we move more towards the U.S. patent model. However, we've been hearing through testimony a bit of contradictory evidence. One of your colleagues, Mr. Scott Inwood from Waterloo, mentioned that there's quite a few murmurings in the U.S. about whether the Bayh-Dole act has outlived its purpose and about perhaps looking at moving towards more of a Canadian system.

Sylvain Laporte, the CEO of the Canadian Intellectual Property Office, said here that Canada has a number of aspects in our current patent system that they're aspiring to.

They're perhaps moving the changes in the American investment act more to a Canadian model of investing. It seems to be a bizarre situation if we're moving closer to the U.S. model and they're moving closer to ours, and we just switch positions.

Maybe you could help me understand that a bit more.

[The Chair, Conservative, David Sweet]

You're actually over time.

Perhaps somebody has something they can say very quickly for me to be fair. Does somebody have a quick comment?

[George Dixon]

I have no comment.

[The Chair, Conservative, David Sweet]

All right.

Thank you very much.

I'm sorry, Mr. Stewart, but we are well over time.

We'll move to Madam Gallant for five minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman.

Mr. Keon, in your remarks you alluded to the fact that brand name pharmaceuticals are taking on a larger share of ownership of the generic companies. To what extent are these companies controlling the generic companies as well?

[Jim Keon]

I'm not sure I made that specific point, but there is some overlap. One of our member companies, Sandoz, is part of the Novartis family, which is a brand name pharmaceutical company. Some of our companies have arms that also do research into new products, so there is some overlap between the two sectors. When the system is operating properly, brand name companies produce new, innovative medicines that improve therapies. When patents expire, generics come on the market at much lower prices. In Ontario and Quebec, for example, generic prices are capped at 25% of the brand name price. We provide head room for the health care system. We can fill four prescriptions for the price of one when a generic is available on the market. We each have a role to play. What we need are fair, equitable patent laws that allow that.