International Trade Committee on April 23rd, 2021

[Mark Warner]

I do agree with that assertion. I think it is a real problem in the early stages of where we are, as I said before. At this stage of where we are with the vaccines that are working, which are completely state of the art, and given the real difficulties we've seen these companies have in scaling up, I think quality control would be a massive issue if we were to start using that kind of waiver of intellectual property.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay. Thank you.

We've heard that some international trade experts have stated that WTO members could bring a complaint against Canada if they believe we are not respecting TRIPS. Do you share this concern, and what would be some potential consequences that could arise from that WTO scenario?

[Mark Warner]

Thank you for asking that question. It was one of the things I wanted to address and I had forgotten to.

I read the remarks of Mr. Lipkus. He made a comment about how if we were to exercise the waiver, we would potentially face problems under other existing trade agreements like the USMCA or the CPTPP or CETA. I don't think that's true.

If you look at all of those agreements, they basically acknowledge and cross-reference the WTO TRIPS agreement and article 31, so that I'm not worried about. Under the USMCA, we would talk to the Americans and Mexico about it, not necessarily beforehand but maybe after. Maybe they would ask for some concession, which might be complicated, but I can see no formal reason under any of those agreements that we would face difficulty if we were to use the waiver.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay. Thank you.

Of course, we don't want to risk anything that could discourage investments for biomanufacturing in Canada. Do you have any thoughts on how a TRIPS waiver could affect such investments in Canada?

[Mark Warner]

Look, the issue—the 100-pound gorilla or whatever the expression is—for Canada and the pharmaceutical industry is the perception that we don't respect intellectual property rights. You could dance around it a million ways, but if you start with compulsory licensing, especially a state-of-the-art vaccine, you're only going to reinforce those concerns that people already have about Canada. I think it would be a problem. I really do.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you. I have time for one more quick question.

We know that Canada is not on the EU exemption list for vaccine exports. We have heard some verbal assurances. Would you consider our not being on that exemption list a concern?

[Mark Warner]

Not really. I think the reality for a country like Canada is that it's very hard to put Canada on an exemption list like that if you're the European Union. Once you put Canada on it, you have to do the same for a lot of other countries, so I can understand why they would want to make formal commitments to the extent that they'd make them at all.

I'm not surprised by it. It's not great from our point of view, but I don't think it's surprising.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Ms. Gray.

We go to Mr. Sarai for five minutes, please.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you, Chair.

Thank you to the witnesses. You've been very enlightening on some of the nuances of TRIPS and other waiver-type applications.

Mr. Medhora, CIGI has advocated a modernized TRIPS waiver. Could you please share what you think should be included in that?

[Rohinton Medhora]

Our advocacy has not been on just a modernized TRIPS waiver. What we've said is that the way we create intellectual property and the way we protect it has to be modernized. At the time that TRIPS came into being, this kind of activity was centred in a very few countries, as you've heard from others. Now you find that many more countries—in fact, I find it interesting that we keep coming back to India, South Africa and indeed China—are actually net creators of IP and net exporters of IP.

We have to understand that what TRIPS does is it provides a monopoly rent to holders of IP. The reason we provide that monopoly rent is so that, as we hear so often from the industry and from other experts, they can then reinvest in really risky activities like big pharma. Here's the reality in pharma, which Jesse, of course, would know: Pharmaceutical companies spend more on marketing and government relations and lobbying than they do on R and D. That is not what the monopoly rent that comes from IP is supposed to be doing. Now that we've had a couple of decades of experience with how we create monopoly rents and what they're used for, I think it's incumbent on us to think about how we regulate IP and how we create its dissemination.

I would also say something about the presence of technologies that have spillover effects, and I'll stop on this point. Think of a groundbreaking technology that might address, say, solar cell storage issues in climate change, or inoculations. If I do it, other people around me benefit. Having a market price, which is effectively what TRIPS advocates, is overpricing something. We have to understand that in the presence of externalities, in the presence of the way monopoly rents are being used, we have to revisit the fact that technologies are created for a purpose: They're created to increase global welfare. I'm all for incentive structures, but the incentive structures that we currently have are actually skewed.

[Randeep Sarai, Liberal, Surrey Centre, BC]

Thank you.

Your organization has called for a balance between supporting developing countries and fostering innovation. Where do you think the balance should lie in the context of a potential TRIPS waiver?

[Rohinton Medhora]

I'd go back to the points I made earlier. My list would be a well-funded COVAX; transparency in vaccine pricing; properly negotiated subsidy contracts, so that when governments subsidize research there is some give-and-take, which did not happen this time; opacity in contracting, vaccine hoarding and vaccine diplomacy; and finally, like the CGIAR, an international system that creates IP. If we had all of these things, we wouldn't need the IP waiver. We don't have any of them, so let's move on some of them.

I do find it interesting that on the one hand we're saying with reference to the IP waiver that IP isn't that important and it wouldn't make a lot of difference, but we're still fighting tooth and nail against it. The fact that so many people who actually know this are also for the IP waiver, and these are some very eminent global leaders who actually dealt with the industry, leads me to think that there might be something here. I'm not the expert on this, but it strikes me that there are six or seven things that we should be doing here, and we're not getting any of them right. The IP waiver is one of them.

[Randeep Sarai, Liberal, Surrey Centre, BC]

My next question is for Mr. DiCarlo.

Could you enlighten us about how much capital and resources are needed to design, develop and test new vaccines?

[Renzo G. DiCarlo]

Obviously, in pre-COVID times that would have taken a lot longer and been a lot more expensive. Right now, due to COVID, a lot of the research that occurred was expedited, especially given Operation Warp Speed in the U.S.

For example, the RNA technology has been around for 10 years. That technology was leapfrogged forward because of the increased demand due to the COVID crisis. Many pharma companies already had a basic technology there that they could draw onto, which is exciting, because in the future we can use that RNA technology for HIV, cancers and other things like that. It's a great stepping stone.

On the financial side, there's typically an early-phase study that occurs. There are pre-clinical studies that occur, and there are also late-stage studies that occur. The range of spending, depending on the size of the company, can be significant, but you probably already heard in the marketplace that our Canadian company, Providence, had asked for $4 to $20 million to take its product from concept all the way to commercialization. That's how much it budgeted or forecast in the marketplace to bring a product to market.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Savard-Tremblay, you are next. You have two and a half minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

My question is for Mr. Medhora from the Centre for International Governance Innovation.

As we know, the Canadian government hasn't made a decision on a waiver that would allow for increased vaccine production worldwide. In terms of the idea of waiving intellectual property rights for vaccines, this seems to be a matter of debate today. The stakeholders have very different positions. It's good to hear all the points of view, of course. We've been talking about this since October 2020. However, the government still hasn't said whether it supports the idea. The idea is reportedly still in the assessment phase.

In your opinion, why is the government taking so long to clearly state its opinion on this idea?

[Rohinton Medhora]

I don't have any particular insights on what the inside thinking might be. I would only be doing informed speculation.

To be fair, the original proposal from India and South Africa was flawed. One could make the case that it was self-serving, that it would have benefited firms in India and South Africa, so there were some issues to be sorted out.

I suspect we are waiting because the issue might simply go away, or there might be important players who come onside, such as the Biden administration, which actually matters for Canadian foreign policy. There's prudence involved, which involves political risk as well as the technical nuances of the proposal.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Madam Chair, I can see that you turned on your microphone. Does this mean that my time is up?

[The Chair, Liberal, Judy Sgro]

Mr. Savard-Tremblay, you have 40 seconds,

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I think that I'll give those 40 seconds to my colleague, who is next in line to speak.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Blaikie, please go ahead for two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Mr. Savard-Tremblay, thank you for the 40 seconds.

Mr. Medhora, I'd like to continue this conversation with you.

I think part of the dilemma right now for the parts of the world that are underserved in respect of vaccines is that we're being told that other places aren't really going to be able to manufacture anyway, so there's no point in giving them access to the intellectual property. It seems to come back to saying that industry has this well in hand. Industry doesn't want to give us any information about what they're doing, so we're just going to have to trust them.

If there were a justification for not granting access to IP and people not having more access to information about what is actually happening, like the prices that current producers are charging so that people.... People should be able to expect the same level of openness and transparency here that they would expect from a well-functioning government, given that it's of such vital public interest. This isn't your normal market for various kinds of drugs; this is a global public health and economic emergency.

I am wondering, at the risk of asking you to repeat yourself a bit, if you could clarify. What are some of the concrete things that could be done not only to increase the world supply of vaccines, but also to give people a degree of comfort that things are really being managed in the public interest, as opposed to the private interest of certain well-established corporations?

[Rohinton Medhora]

Is that for me, Mr. Blaikie?

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Yes, please.

[Rohinton Medhora]

I think that's exactly right. Markets have underpinning them certain presuppositions: full and free information, rational behaviour, and competition. However, when it comes to many markets, and certainly in pharmaceuticals, that is not the case. There tend to be oligopolies and there tends to be a high risk for those who invest, and as a result, different forms of trade secrets matter. I completely get the point that some things have to be secret, but the few things that do leak out don't make the system look good.

We make the point in our brief that African countries, whose citizens have a fraction of the per capita income of European Union citizens, might be paying two, three or four times more per dose for the vaccines than Europeans are. That can't be justified by any kind of market rationale, be it transparency or a humanitarian argument. I wish this was a case in which we had....

If we talk about full and free markets, let's be consistent about that. I wish we had a global clearing house in which these contracts were put up for inspection. I wish there was even more transparency in negotiations so that developing countries themselves, just as the European Union did, could band together and create the economies of scale and power structure that they need to negotiate prices and so on.

I have a final point on COVAX. I still very much support it. My views have evolved, in the sense that initially I thought it was absolutely the right thing to do to create a clearing house in which the world contributes vaccines and then gives them away to developing countries. The problem is that COVAX is in some ways perpetuating the problem. It's perpetuating the problem because it's purchasing vaccines at pretty much these untransparent, non-market market prices, and we're then giving them away. We have to link COVAX with a previous step that ensures the pricing structures are clear. On the structural commission, we did some back-of-the-hand calculations on rates of return, given the public subsidies the pharmaceutical companies have had. Our sense was that they had made their rates of return. If you then add subsequent doses, for which our marginal cost is lower, and more and more volume, you're very much into red territory.

There's a package of things we should be doing here.