Mr. Chair, on behalf of the Canadian Generic Pharmaceutical Association and our member companies, I'd like to thank you and the other honourable members for this opportunity to participate in the study of the TPP.
As you mentioned, I'm joined today by Jody Cox. She's our vice-president of federal and international affairs. Jody was very active in attending TPP rounds and representing the views of our industry in Canada and internationally.
Our generic pharmaceutical companies directly employ more than 10,000 Canadians in highly skilled research, development, and manufacturing positions. We operate the largest life sciences companies in both Ontario and Quebec. We are Canada's primary drug manufacturers and exporters, and are among the top R and D spenders across all industrial sectors.
The generic pharmaceutical industry is a strong supporter of free and open trade. We export high-quality made-in-Canada generic medicines to more than 115 countries. We also procure raw materials and other inputs from around the world.
Our industry provides tremendous value to the Canadian health care system. Generic medicines are dispensed to fill 69% of prescriptions—basically seven out of 10 prescriptions in Canada are filled by generics—but account for only 22% of the $25 billion Canadians spend annually on prescription drugs.
I want to say a few words about pharmaceutical IP and trade before talking specifically about the TPP. We know your committee is studying the TPP. The pharmaceutical IP provisions need to be considered, however, in a broader context.
First, it is important to recognize that Canada had strong intellectual property protection for pharmaceuticals before either the CETA or the TPP negotiations. When the CETA negotiations were under way, the average length of market monopoly protection for brand-name drugs in Canada was estimated to be six months longer than in the U.S.
The second context point I'd like to make is that the pharmaceutical outcomes in CETA were concessions made by the Government of Canada to get the deal done. These were demands made by the Europeans on behalf of brand-name pharmaceutical companies that have their headquarters in Europe. They were not done to spur innovation in Canada. They were done to get the CETA deal finished. Research into new drugs is done as part of global development programs. Decisions about where to site R and D have little or nothing to do with intellectual property, as a large number of originator R and D investments in India and China help to underscore. An educated workforce, low business costs, and other factors drive these decisions.
The third context point I'd like to make is that major changes to Canada's IP system for pharmaceuticals are going to be required to ratify the trade agreements. The changes will have significant cost implications for the Canadian health care system. I'm not going to get into the numbers today, but the specific costs will depend on the way it's implemented.
I would note as well that you had before you an assistant deputy minister at Health Canada who spoke to the question of increased costs. Actually, it was not this committee; it was the health committee. She spoke to the impact of CETA on health care costs. The PMPRB controls the price of patented medicines, but if you can't buy a generic medicine at a fifth of the price, clearly costs are going to go up. As we extend patents, costs will go up.
New IP measures will also have an impact on Canadian generic pharmaceutical companies. Our companies are part of global supply chains and are active in competition to bring investments and jobs to Canada. In order to operate in this environment, companies need to be able to access export markets for new generic medicine as soon as they open up to competition. Being late to the game generally means a permanent lost potential market share that can never be recovered.
Generic pharmaceutical companies must navigate the domestic pharmaceutical intellectual property system in order to manufacture both its domestic and its export markets. We will lose out on investment in Canada if the legislation is not kept at a competitive pro-trade level.
I will say a couple of words on the TPP outcomes. Overall, the TPP text for pharmaceuticals is about increasing intellectual property beyond the existing levels in the TRIPS agreement administered by the World Trade Organization. Despite that, the final TPP outcome that was negotiated by Canadian officials on pharmaceutical IP is intended to be consistent with the extra commitments that Canada had already made under CETA.
Under CETA and the TPP, Canada has agreed for the first time to extend the term of pharmaceutical patents, ostensibly to take into account the time brand-name drugs spend in the regulatory approval process. It is important to note that the extension is to be capped at two years.