International Trade Committee on May 31st, 2016

[Mark Fleming]

Thank you very much for the question.

First of all, Canada operates in a very highly controlled price environment for pharmaceuticals. There are multiple layers of bureaucracy between an innovation and that medicine's getting to a patient through a payer. Included in those layers are the Patented Medicine Prices Review Board, which sets the non-excessive price for medicines. A medicine then moves through a health technology assessment agency, for example the common drug review here in Ottawa, where price and value are considered. From there, it moves on to the pan-Canadian Pharmaceutical Alliance or pan-Canadian Pricing Alliance, where a reimbursable or an affordable price is negotiated, and finally makes its way to the payers at the provincial level, before an agreement is signed. Before any of our medicines reach Canadians, the value and the price of that medicine.... They have been proven to be valuable and effective for Canadians and at an affordable price.

Second, what I would say on research and development.... I would just add a caution about making policy decisions based on the Patented Medicine Prices Review Board report that comes out annually. It is a relatively blunt tool based on SR and ED, scientific research and experimental development, which was very valid back in the 1990s when it was set up. It is not valid in measuring full R and D investment today. Regarding my company, specifically, in the last two years, the PMPRB reports us investing $120 million in Canada, but the reality is that we have invested $1 billion in Canada. There is an $880-million gap in life sciences investment. I think it is very important to look at all the facts before we make policy decisions on access to medicines in Canada.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

Could this result in research and development being conducted in Asian TPP countries? Do you think it would come to that?

[Mark Fleming]

I think the decisions around life sciences and research and development investment are multifactorial. They do not involve just intellectual property; they involve a number of other components. Perhaps the biggest and most important is the quality of science and scientists. Canada has a leading edge on that front. Many of our investments coming into Canada have been based on the wonderful science and scientists that exist in the country, the people who are on the front lines making discoveries and changing people's lives, as opposed to the critics who find the best opportunities to criticize.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Fleming.

There are only 15 seconds, and Mr. Prouse wanted to jump in there. You can make a quick comment, and then we can move on.

[Dennis Prouse]

I will be very quick, Mr. Chair.

Our large members are global. They will tell you that the most competitive aspect of their business is the internal debates about where investment will go, whether it is to Canada, to the U.S., to Europe, or to Southeast Asia. That is incredibly competitive. I can't imagine how difficult their job would become for Canada if Canada was excluded from the TPP, yet the United States was in. I think that is where that investment would then go.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

We are now going to move over to the Conservatives for five minutes.

Mr. Van Kesteren, you have the floor.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Good morning, everybody. Thank you for coming here.

I want to get some perspective here. I am going to direct my questions, and they are very short questions, to both drug organizations.

First of all, correct me if I don't have this right. The pharmaceuticals, in essence, develop drugs that haven't been developed and that cause relief or sometimes cure diseases that plague humankind. That is the main thrust of your research. The generics, in essence.... Once the patent is up, you can break down that drug and create a drug that is similar—it can't be the same—to the pharmaceutical, and then you can sell that drug. Do I have that right? Is that pretty much the gist of both industries? Is that right, Mr. Keon?

[Jim Keon]

The generics develop competing products that Health Canada declares to be bioequivalent, so they are actually equivalent to the brand-name product. The value we bring is what we call headroom. You can now buy and pay for medications at a much lower cost and spend the money elsewhere in the health care system.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

In essence, you have the right to copy—not to copy, but to take their research—

[Jim Keon]

Develop our own products....

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

—and apply it, and the end result is a cheaper product.

[Jim Keon]

That is correct, after patents expire or are found to be invalid, yes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Yes.

I suffer from migraines. Years ago, there wasn't much relief for that. I was thankful when Tylenol and companies like that first started coming in with drugs. I'm also thankful that today I can go to the drugstore and buy those generic ones.

In essence, what we experience as we move forward in the drug industry is that new drugs are created. You're going to get your investment back, but after a period of time, you can jump in and you can offer. I simply wanted to make sure that we have that perspective in order.

Do you ever get sued, Mr. Keon? I know the pharmaceuticals have had some experiences with drugs in the past that haven't worked out very well. Is that as big a concern as for the pharmaceuticals?

[Jim Keon]

Our member companies are in litigation all the time over patent issues.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Right. But not so much.... I'm thinking of—

[Jim Keon]

Do you mean consumer concerns?

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Yes. If you watch American television, you can always jump on the bandwagon of some drug that has caused issues.

[Jim Keon]

Typically, what happens is generic products are coming on the market 10, 15, or more years after a new medication. Typically, if there have been problems with the medication, that generally has been brought out.

I'm not aware of any case where someone has been sued for getting a generic as opposed to a brand, or anything like that.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

And the pharmaceuticals, have you ever been sued for some drugs that didn't work out as well as people had hoped?

[Mark Fleming]

It certainly is part of life. It's part of the dialogue between the generic industry and the innovator industry. Generally, there are resolutions that are reached over time.

It's quite clear that the generic industry brings tremendous value to the health care system. They help long-term affordability. Our focus is really on the innovations. For example, in the past 20 years, 40% of the increase of Canadians' life expectancy has been based on innovative medicines. In—

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

I'm sorry, I don't have much time.

Would it be safe to say that agreements like the TPP and any other free trade agreement give you a further ability to do more research and make more discoveries to prolong our life expectancy and to cure some now incurable diseases? Is that a pretty safe assumption?

[Mark Fleming]

Certainly, the agreements that have helped to level the playing field on intellectual property on a global perspective allow Canada to compete for global research and development dollars. Our company, J&J, invests $8 billion globally. On the heels of CETA, we have been successful in attracting significant investment to this country.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

I have a really quick question, Ms. Pullen.

What is the major cost increase in health care? Is it drugs or is it physician costs, nursing costs, or maybe bricks and mortar? What's the major cost?

[Dr. Carolyn Pullen]

If you look at the most recent report, the 2015 report from CIHI, the top three costs that are increasing steadily year over year are hospitals, physicians, and drugs.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

In that order?