International Trade Committee on Feb. 13th, 2014

[Dr. Marc-André Gagnon]

Absolutely.

There has been for example, I don't remember which.... It's produced by Apotex, the cost is something like 10 times more in Canada than in New Zealand, but it is Apotex selling the same drug in New Zealand as well.

The way we price generic drugs is politically decided. It should be based on the price of brand-name drugs while there is market competition. This is kind of nonsense. We're paying way too much for generics as well.

The fact that the generic sector and the brand-name sector can live with the agreement, I can absolutely understand. The generics were expecting something much worse in terms of what it would mean for them in terms of being competitive with the brand-name drugs. In the end it wasn't so bad. In the brand-name sector I completely understand that they can live with that as well because basically it is more earnings without anything in compensation.

In terms of Canadian citizens, I think it is basically a bad agreement. I think in the end it increases costs without providing anything back to Canadian citizens.

[The Chair, Conservative, Rob Merrifield]

Thank you, very much.

Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

I want to get some basic things straight.

Do you think that CETA, once it's implemented, will delay the introduction of generic medicines to the Canadian market? Will it have that effect?

[Dr. Marc-André Gagnon]

Yes, absolutely.

We're beefing up the intellectual property regime for brand-name drugs. The effect of an intellectual property regime is to increase the cost we're paying for something in order to provide incentives for innovation. So yes, absolutely this is the nature of it.

[Don Davies, NDP, Vancouver Kingsway, BC]

Do you have an estimate or a range of approximately how long you think the provisions of CETA...? We know that it's the right of appeal and what's the other?

[Dr. Marc-André Gagnon]

Patent term restoration.

[Don Davies, NDP, Vancouver Kingsway, BC]

The patent term restoration provision. Do you have an estimate of on average how long that will delay the introduction of generics to the market?

[Dr. Marc-André Gagnon]

The study I mentioned, and I will be happy to submit the memo to the committee, for—

[Don Davies, NDP, Vancouver Kingsway, BC]

Could you please submit that to the committee?

[Dr. Marc-André Gagnon]

Basically we're thinking between one year and two years, but this is based on a sample of drugs that were going off patent in 2010. Will it be the same thing in 2023? I don't know. It will be a different basket of drugs. To give you an idea, right now, this is what it would mean.

One thing I think is very important when we talk about the cost of drugs, etc., is it's not a question of saving a bit of money; for me, it is also a question of access. When you have these new breakthrough treatments against cancer, for example, fantastic, but then if we pay 25% more than European countries pay, maybe the European country will be able to accept to reimburse this drug and Canada will not be able to do that. We'll not be able to provide the same access to the same treatment because it is just too expensive in Canada.

I have a problem with a lot of patient advocacy groups that are saying, for example, that CETA is a good thing, that it is better for innovation. Many of these groups get funding from the industry itself. If you want to have better access to new treatment you need to reduce the price of the drugs. We need to get value for money. As long as we don't get value for money, for sure there will be health technology assessment in place making sure that not everything will be reimbursed at any price.

[Don Davies, NDP, Vancouver Kingsway, BC]

What is your estimate of how much money per year the delay of generics to the Canadian market will cost the Canadian pharmaceutical...?

[Dr. Marc-André Gagnon]

We're talking about an increase. What is not clear in what was disclosed in terms of principles of the agreement, is we don't know exactly if that protection will be extended as well to non-innovative drugs. If that is the case, the cost will be more important, but we're talking between 6% and 12%, more or less.

[Don Davies, NDP, Vancouver Kingsway, BC]

Can you give me a figure in dollars, a range?

[Dr. Marc-André Gagnon]

In dollars we're talking between $800 million and $1.6 billion today. In 2023 it will be different.

[Don Davies, NDP, Vancouver Kingsway, BC]

Some proponents of CETA make the argument that drug prices are lower in Europe even though they have longer, stronger intellectual property provisions. They point to that as an argument that if we strengthen our intellectual property provisions in pharmaceutical drugs in Canada, therefore there is no relationship to that in cost. What's your comment on that?

[Dr. Marc-André Gagnon]

When we're talking about an intellectual property regime for brand-name drugs, we need to look at the period of market exclusivity, so, yes, in terms of patent protection, exclusivity, etc., but also how much we're paying in terms of prices while it's under market exclusivity.

The idea, or the wisdom, is that in Europe they have longer protection and lower prices. It's just longer protection. They don't have a patent linkage system in Europe. We do have it in Canada.

What it means is that for all the blockbuster drugs this patent linkage system is being used in order to introduce further delays. We're talking usually about a year, a year and a half of further delays.

In the end, when you look especially at the blockbuster drugs, they benefit from the same market exclusivity, be it in Europe or be it in Canada.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Hoback, the floor is yours.

[Randy Hoback, Conservative, Prince Albert, SK]

This is actually a very interesting debate, and my friend from BlackBerry, just so you know, I'm staying with the team here. I just highlight that for you. If I didn't mention MP Peter Braid then Harold Albrecht would have my hide. I wanted to make sure they're okay with what we're doing.

It's really interesting talking about your slide, when you talked about that, it acknowledges the base sector is in decline. When I look at the writing on your slide here, sir, it talks about the loss of jobs just in Quebec alone from 2003 to 2012 by some 50%. That tells me obviously what's in play right now in that sector and what we're doing in Canada isn't as attractive as other parts of the world, because the R and D going on in the pharmaceutical sector is going on, it's just going on somewhere else. Obviously there is something that's a disincentive in Canada, or a better incentive somewhere else maybe is a better way to put it, so they look at it.

Then I go to your R and D-to-sales ratio based on 2011 and look at Canada and it's 5.6% and in Switzerland it's 126.2%. That makes me very curious about a couple of things.

First of all, R and D-to-sales ratios by country, is that the right way to look at it? R and D sales based on sales in total per company would be something I would have looked at when I was with Flexi-Coil and Case New Holland. I'm curious about that.

The other concern I have is you talk about wanting to see standardized pricing and basically drugs free for everybody. In a futuristic world that may be something, but the reality is...at least I believe that if somebody is going to spend billions of dollars developing a new drug that's going to save my kid's life or takes all that risk on to find out it doesn't work, they have to have the ability to reap the reward and the benefit from that. How do we do that? What is a fair way of doing that so that we still see that innovation happen here in Canada?

That's the goal here. We want to see this innovation happen here in Canada. We want to see our kids working in these high tech companies because they're great jobs and they're great for our kids. Not only that, we want the benefits to be here in Canada from the new drugs. We don't want to create a disincentive. That's what concerns me when you say that we just ignore the research side of things and we go to a cheap drug policy. How would you react to that?

[Dr. Marc-André Gagnon]

I absolutely agree with you on this. In terms of R and D-to-sales ratio this is the standard that is being used in order to measure the R and D intensity in different countries. You're absolutely right. We could look at other ratios, but normally this is the one that is established in terms of a standard.

[Randy Hoback, Conservative, Prince Albert, SK]

That is a benchmark that's global. It's not just one that you're using yourself.

[Dr. Marc-André Gagnon]

No, no. This is the one used by PMPRB, but this is what is used in other countries as well.

In terms of drugs for free, oh my God, for fiscal conservatives it sounds like absolute nonsense. We have a medicare system in Canada. We're the only country in the world with a medicare system that excludes prescription drugs, as if prescription drugs were a health care service that was not part of medicare, as if it was not a health care service, as if it was a commodity that should be regulated in a different way.

[Randy Hoback, Conservative, Prince Albert, SK]

I think that reflects the costs. I'm looking at the cost of not only the service of the doctor, but actually the service of the medication at the time.

[Dr. Marc-André Gagnon]

The fact that we have a medicare system excluding pharmacare is an anomaly in this world.

Right now we have this pan-Canadian purchasing alliance. We are doing these PLAs, product listing agreements. The official price for selling drugs sometimes is much higher than the real price we're paying based on these PLAs. The PLAs are what the public pharmacare programs can afford in terms of negotiations, but then you have the people with private coverage or people with no coverage at all. In the system we have in Canada, they are still stuck with paying the artificially inflated prices having no negotiation capacity.

The fact that we're asking people to pay.... If you have a drug, you can negotiate, for example, on the specific drug, let's say a rebate of 75%. Your co-payment is 32% if you're part of the public plan, so in the end you're paying out of your pocket something higher than the real price of the drug being paid by the pharmacare plan.

[Randy Hoback, Conservative, Prince Albert, SK]

That's because of the insurance aspect of that.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Our time is gone. We could go round and round on this for a long time and probably not solve it.