Debates of Feb. 20th, 1998

Patent Act

[Walt Lastewka, Liberal, Parliamentary Secretary to Minister of Industry]

Madam Speaker, I am pleased to respond to the private member's bill sponsored by the hon. member for Regina—Lumsden—Lake Centre.

The Canadian drug patent policy has three main objectives, to ensure that consumers have access to patent drugs at reasonable prices, to support the development of the pharmaceutical industry and to ensure that Canada conforms with its international obligations which, for example, require a minimum of 20 years of patent protection.

These objectives are fulfilled by striking a balance between ensuring that generic drugs can hit the market immediately after patent expiry and effective enforcement of patent rights. However, the bill put forward by the hon. member would negate this balance.

In contrast, the package of regulatory reform proposals, which the minister announced on January 24, 1998, would maintain this balance and improve the regulatory framework for drug patents.

Let me explain why the bill is inappropriate. The hon. member wishes to turn back the clock. He wants to restore compulsory licensing of patented drugs. This would allow generic drug companies to manufacture and sell a generic equivalent four years into a patent term. The hon. member also proposes to shorten patent terms.

The hon. member proposes these measures to combat the spectre of increased health care costs. He lays the blame for these costs at the feet of Canada's drug patent policy. However, the facts do not bear him out.

We are making sure drugs are available at reasonable prices through price controls on patented drugs. This regime has been very effective. Canadians paid over 24% less for patented drugs in 1995 than they would have in the absence of the federal price regulation. Total estimated savings to Canadians from limiting price increases over the years 1988 to 1995 were over $3 billion.

When we look at the latest report of the Patented Medicine Prices Review Board, which administers price controls on patented drugs, we find that prices of patented medicines declined by 2.1% in 1996. I remind the House that the consumer price index increased by 1.6% over the same period.

Overall, Canadian prices for patented drugs have declined significantly relative to foreign prices on average by 30%. Canadian prices were 23% above the median of foreign prices in 1987 but dropped to 10% below in 1996.

Of course, even though patented drug prices have fallen, we are concerned about health care costs. Pharmaceutical companies, through their extensive investments in research and development, have come up with new drugs to help improve the health of Canadians. Not only are Canadians reassured because there is an increasing number of ailments that can now be treated with drugs, these new medicines can reduce hospital stays. This helps reduce overall health care costs.

We are also firmly committed to making sure Canadians continue to have the best available drugs at the best possible prices.

We want to strengthen the PMPRB's mandate. The PMPRB released a discussion paper and is concurrently consulting with the public about its mandate. I hope the member opposite has made his presentation.

Also, as announced on January 21, 1998, federal, provincial and territorial ministers of health are working collaboratively on a number of pharmaceutical issues, including drug prices.

The government also acknowledges the importance of the generic industry in keeping drug costs down. We want Canadians to be able to access generic drugs as soon as the patent expires. In fact, we provide early working exceptions to patent infringement which enable generic manufacturers to enter the market as soon as possible upon patent expiry. This has been an integral feature of our patent framework along with the link between the patent status of a brand name drug and the regulatory approval of its generic equivalent.

Recently the EU has challenged Canada's compliance with our international obligations in light of the exceptions I have just referred to. It is Canada's intention to vigorously defend these exceptions. We believe we are in full compliance with our international obligations.

I would also like to point out that the government's proposed changes would further reduce any delays in getting less expensive generic drugs to market while maintaining effective patent protection.

I would like to turn to my second reason for opposing Bill C-248. Patent protection if a prerequisite for innovation, R and D and investment, and Bill C-248 would severely limit this protection, jeopardizing investment and jobs in Canada.

Since 1993 the brand name industry has spent over $2 billion in research and development across the country and that has meant jobs for Canadians. We are speaking here of high paying, knowledge intensive jobs. We are speaking about economic growth in one of the most dynamic sectors in the global economy, where investment in research and development roams the world looking for the best place to make a home.

In Canada the pharmaceutical industry is a major R and D performer. While the pharmaceutical industry accounts for only 1% of manufacturing sector shipments it performs 10% of all industrial R and D. Of the top 100 R and D spenders in Canada 26 are pharmaceutical companies.

I remind the House that when the Patent Act was amended in 1987 the Pharmaceutical Manufacturer's Association of Canada made a public commitment that the brand name pharmaceutical industry would increase its annual R an D expenditure as a percentage of sales to 10%. That is the period on which the PMPRB has now reported.

Have these companies lived up to their commitments? Indeed they have. In 1996 their R and D to sales ratio was not just 10%. It was 12.3%. For patentees as a whole the ratio was 11.4%.

Spending on basic research was $136.6 million or 21.7% of the total in 1996. Applied research accounted for 62.9% of the total. This includes clinical and preclinical trials and manufacturing process R and D.

It is clear that the Canadian pharmaceutical industry has been making a significant contribution to the Canadian economy under modern effective patent protection. The hon. member seems to acknowledge somewhat the importance of research and development performed by the drug industry in Canada.

Under the compulsory licensing system in Bill C-248 the royalty rate would take into account the amount of medical research carried out in Canada by the applicant and the patentee. Perhaps the hon. member believes these provisions would be sufficient to encourage companies to continue research in Canada. Perhaps he thinks Canada would continue to attract the same level of R and D investment under these terms. Perhaps he thinks that these measures would be suitable in today's knowledge based economy.

This brings me to my third reason for opposing Bill C-248. The measures proposed by the hon. member would contravene Canada's international obligations.

Let me conclude by saying the proposed improvements underline the government's commitment to encourage investment through modern competitive framework laws that are consistent with the international obligations and support innovative growth and development of new improved drugs.

These frameworks provide a stable investment climate for the pharmaceutical industry, which would further encourage R and D which, as I mentioned earlier, plays a vital role in the Canadian economy. The regulations have been gazetted. There is a 30 day time spell which will be completed next week.

In short, our proposed package of changes improves the system and gets the job done.

[Roy H. Bailey, Reform, Souris—Moose Mountain, SK]

Madam Speaker, what a delight it is on the last half hour on a Friday with everybody just brimming for his speech to come. I am sure that you will find it very exciting, probably one that you would rather forget.

I want to commend the hon. member who introduced this bill. I appreciate this bill's coming forward. I do not entirely agree with everything in the bill but it has merit.

It also gives me the opportunity to inform the hon. member for Regina—Lumsden—Lake Centre that I was not part of a government in Saskatchewan in 1982, as he said the other day. I was part of a local government which was perhaps as important.

It is with ease that I talk about this because the pharmaceutical industry has been very much a part of our family. I had an older brother who made his career in this area. He was a Canadian. He took his Canadian experience and travelled around this world. That was a Canadian influence. I suppose we might say he was multinational, but he was Canadian born, Canadian trained and for the most part represented Canadian pharmaceutical people.

I have a doctor who is still practising, so drugs are very much part of the repertoire when I visit with him.

I wonder if anyone here has ever visited one of our large pharmaceutical research stations. The one I was at has hundreds of acres, thousands of employees. I would not want to guess—

[An hon. member]

It was probably a generic firm.

[Roy H. Bailey, Reform, Souris—Moose Mountain, SK]

No, it was not. It was in Michigan, so the member can guess from that.

We have a tendency to take these important issues and make them too simplistic. Most of us will have to go to the history books for this, although a few might remember. Around the turn of the century, in 1918, a terrible flu hit this country.

I remember visiting a small village in northern B.C.. The flu of 1918 wiped out the whole village. This winter a new strain of flu, the Sydney A, has already claimed 10 Canadian lives. I mention this because to this end Canadians have learned to depend on medicine to protect us. Even more so Canadians rely on an industry that produces and makes available the prescription drugs that maintain their health. With that neither member who has spoken would interfere.

In this respect the pharmaceutical industry is one of the most important and most lucrative industries worldwide. In any country with a major pharmaceutical interest, the health of the industry as well as the health of its citizens must be considered a factor.

Because the industry is so lucrative and a significant portion of the economy relies on the industry's success, namely employment and investment in research and development, governments around the world are presented with a difficult task of balancing economic interests with very important social interests.

We are here today debating my colleague's bill because many Canadians feel that the balance has shifted. The hon. member who introduced the bill will say that it has shifted too far in one direction. He will say that it has shifted toward the interests of the industry and no longer considers the interests of Canadians. That is basically what he is saying in his bill.

I repeat that there is some truth to this. But whether it is good for the economy or meets our social objectives, we must remember that first and foremost the pharmaceutical industry exists to provide prescription drugs to Canadians. Huge profits, jobs, research and development are important spinoffs, as the Liberal member mentioned.

In Canada people say that they take pride in our health care system. We believe it is the best in the world and we want to keep it that way. Canadians find great solace in the fact that barring everything else which concerns them, an affordable medical system must be kept in place.

We know it matters not whether we are rich or poor, illness is illness and the requirement for medication should know no bounds. We also know that the chronically ill, seniors or children are vulnerable and therefore must have access to affordable medical assistance. This is particularly true for seniors and the chronically ill. They cannot afford to live in a country where the cost of medicine is too high. I commend my colleague for recognizing this and for putting forth his efforts to improve the situation.

However in debating this bill I would like to make certain recommendations which I feel would accomplish our goal more efficiently and more effectively. In saying this I am indicating that I have certain problems with my colleague's bill and I will lay these out for the consideration of the House.

My colleague says that the 20% patent protection for brand name pharmaceuticals is the cause of the cost of drugs being too high. I would suggest that is being a bit too simplistic. There are clear benefits to patent protection, not the least of which is the contribution made to research and development both in the performance of it and in the generation of it that goes into this country. It is precisely this kind of research which brings Canadians the breakthrough they need to counter the effects of the flus we are seeing right now, such as the Sydney A.

Important commitments have been made by the brand name pharmaceutical companies. A program between the PMAC and the Medical Research Council was initiated for research and development with a budget of around $250 million. That is a huge sum of money. Such agreements among sectors make an important contribution by fostering basic research in the pharmaceutical and biotechnical fields in Canada's universities and research industry.

PMAC member companies have also made commitments toward an R and D to sales ratio. As a result they have made a contribution to applied research, an important tool in achieving Canada's economic well-being.

However these commitments have not produced a perfect system. My colleagues are seriously concerned that the commitments made by the brand name pharmaceutical companies to invest in research and development are in no way assured. The Liberal government has not ensured that these agreements are binding. That is a problem for the people of Canada. It is certainly a problem for the Reform Party.

We believe that the generous patent protection given to the brand name companies must be incumbent upon the willingness of the PMAC to make binding commitments to the research and development of new drugs in Canada. Not only do pharmaceuticals gain from a competitive patent protection, they also gain from the most generous R and D tax write-offs in the world.

Based on this we believe the government should be seeking a binding commitment from this sector. We do not have that. That to me is the real guts of this bill. I agree with the hon. member on that point. The participation of the pharmaceutical industry in Canada is so important in building a strong knowledge based economy, but we must have some proof that this is happening. I would like to see the member's bill emphasize this.

Maintaining the 20 year patent protection is in keeping with the patent protection of our global competitors. By ensuring this applies in Canada we can compete in the investment made by the pharmaceutical industry which enhances our economy. But in entering into this relationship we must ensure the integrity within this agreement by seeking binding commitments. Today we do not have that.

I would suggest to the originator of this bill that rather than tinker with the number of years on the patent protection that exists now, accept the 20 year patent protection to ensure Canada's competitiveness, but also ensure that the promises are binding. The government has the responsibility to see that they produce real benefits as a result of the initiatives of this industry.

[The Acting Speaker (Ms. Thibeault)]

The hon. member's time has expired.

[Hélène Alarie, Bloc, Louis-Hébert, QC]

Madam Speaker, in a speech on October 2, I said “Research and development is a key component for any society wishing to be fully prepared for the 21st century. Economic prosperity is increasingly the result of research and technological development, rather than the development of natural resources”. That quote fits in well with the very basis of today's debate on drug patents.

Private Member's Bill C-248, an act to amend the Patent Act, introduced by the hon. member for Regina—Lumsden—Lake Centre, is not votable, but it is very timely. The hon. member certainly had good intentions in introducing this bill to reduce the cost of health insurance and drugs for consumers, but the arguments, and the amendments my hon. colleague wants to make to the Patent Act, are weak and open to dispute.

I am, of course, opposed to the way this bill greatly weakens the present regulations as far as a 20-year drug patent protection is concerned. The Bloc Quebecois has always stressed the importance of maintaining that twenty years of protection, and I will defend that position in my speech. I will take this opportunity to counter the arguments advanced by the sponsor of the bill.

First of all, a study published on February 27, 1997 by the Patented Medicine Prices Review Board shows that federal regulation of the price of patented medicines saved Canadians and Quebecers between $2.9 billion and $4.2 billion between 1988 and 1995. In 1995 alone, the savings were between $846 million and $1.1 billion. I would point out that the board was created in 1987 under Bill C-91, which enacted amendments to the Patent Act, increasing the protection for drug patents.

As well, the price of patented medicines has risen an average of 1.6% since 1988, compared to a 3.1% increase in the consumer price index. In 1995, the average price of patented medicines in Canada dropped to a level 7% lower than the mean in other countries. In 1994, the cost of patented drugs represented 2.5% of the total expenditure of the Canadian health system, while generic ones and other non patented medicines accounted for 3.7%.

It is therefore totally wrong to say that the regulations passed under Bill C-91 caused a catastrophic increase in the cost of drugs when the bill became law, as the NDP member would have us believe.

Following the introduction of Bill C-91, drug manufacturers, especially those with their head offices abroad, invested substantially in research programs in both Canada and Quebec. This support helped Canada and primarily Quebec to narrow the ever widening gap between us and our competitors, such as those in the G-7 countries, in the levels of investment in basic research.

In 1988, investments in the health sector by pharmaceutical companies producing patented drugs represented 18% of the total. In 1995, the figure reached 37%. There is no doubt that, if Canada does an abrupt about face and once again offers less patent protection than other developed countries, the growth in the pharmaceutical industry in recent years will be reduced to nil.

Bill C-91 was intended to protect intellectual property, and any amendment that would limit its application could well harm the industry in Canada, and thus the pharmaceutical industry in Quebec. Because this is my responsibility, my concern is and must be to consolidate one of the largest industrial clusters.

Our economy is becoming a knowledge-based economy, particularly technological knowledge, which is the main force behind growth in the economy and improvement in quality of life. Technology and increasing productivity are therefore now at the very heart of the job debate.

Unlike the generic drug industry, the patent drug industry funds basic research, which, by the way, has been underfunded since the Liberals came to power. Cutting funding further would dry up the source for the development of new drugs, which help us improve our quality of life.

The question that arises is this: Would the generic drug industry be thriving if this basic research were not being done? Would there be anything for it to copy?

It is therefore wrong to say that the regulations that came into effect as a result of passage of Bill C-91 have resulted in a catastrophic increase in the cost of drugs.

Once again, this bill is an attempt to use the cost of drugs as an excuse for weakening the 20-year protection. This bill is becoming less important because, just under a month ago, the Minister of Industry introduced proposals to amend the regulations. Consultations are presently under way and anyone wishing to intervene on this subject may do so.

Therefore, because we have not forgotten the poor and the ill, because we want a better quality of life for our fellow citizens, and for all the other reasons given, the members of the Bloc Quebecois will be voting against Bill C-248.

[Bob Speller, Liberal, Haldimand—Norfolk—Brant, ON]

Madam Speaker, I wanted to take a few minutes before the hon. member finished his five minutes to talk about Bill C-248. I have been in the House 10 years now and as a result have been through this debate on a number of occasions.

I chair the subcommittee on foreign affairs and trade disputes. One of the issues we look is issues like this bill. It worries me that the intent of the bill would contravene some of the international agreements under the World Trade Organization.

Agreements such as those under the WTO, I think all members would agree, contribute to Canada's economic growth and help Canada in terms of its exports around the world. Certainly in terms of our policy we would not want to support legislation that contravened very important trade agreements that have been very beneficial to Canada.

Being part of the global marketplace brings significant benefits to Canadians. There is investment in Canada in new plants and in research and development which is critical for creating direct new jobs. We also have good access around the world.

The WTO requires a 20 year patent protection. A pre-1993 compulsory licensing regime and a 17 year patent term would not be in line with the WTO—

[An hon. member]

You missed my point.

[Bob Speller, Liberal, Haldimand—Norfolk—Brant, ON]

Mr. Speaker, the hon. member will be given an opportunity to speak to this later.

For these reasons I know that most members on this side of the House would be in disagreement with this bill. Bill C-248 as a whole would upset the balance in our system between the benefits of having generic drugs reach the market as soon as possible after patent expiry and the need for effective enforcement of patent rights.

As other hon. members from this side of the House have stated, we are committed to this principle. When we responded to the industry committee's report on Bill C-91 we reaffirmed our commitment to the principle of the proposed changes to the drug patent regulations announced January 21, 1998 and which were published on January 24 in the Canada Gazette .

The government's proposed changes will continue to provide effective enforcement of patent rights while reducing delays in getting generic drugs to market. The length of the regulatory stay on insurance of a health and safety approval for a generic drug would be reduced from 30 months to 24 months. Members on this side of the House believe that the improvements we proposed will also discourage litigation and make the system fair.

We have concerns. We have worked on them for the last number of years since this bill was brought in by the Tories under the Mulroney government years ago. We believe we have made significant changes. We believe the system now in place is fair to all sides.

[John Solomon, NDP, Regina—Lumsden—Lake Centre, SK]

Madam Speaker, I wish to respond to my colleagues who made some comments with respect to Bill C-248. The parliamentary secretary read that speech exactly like Judy Erola and the Ministry of Industry wrote it. So congratulations. There is nothing new in that speech. The people of Canada know that and they will make their judgments come the next election.

With respect to my Bloc colleague, I am absolutely shocked at what the Bloc member said with regard to the pharmaceutical industry. This member said: “They don't care about the poor and the sick. It is a matter of the welfare of the wealthy and the other corporations that produce those pharmaceuticals in Quebec”. This is going to be a real surprise and wake-up call for all those poor and sick Quebeckers come the next referendum. If the Bloc and the PQ do not want to support them on an issue like this, why should they support Quebec on a referendum issue? We will see what happens when that comes along. I thank them for that comment.

With respect to the member for Haldimand—Norfolk—Brant, I am glad he stood in this House and indicated there are some concerns about it, but he did not catch the words I said earlier with respect to the World Trade Organization.

During the review in the industry committee, witness after witness, including international economists and lawyers, came before us and said there is a public interest clause in the WTO that if the government deems it in the public interest to contravene one of the WTO regulations because it is abusing that country, it can make amendments with respect to Bill C-91 or drug patents.

I ask the member to please consider those representations by the lawyers and economists, who are internationally renowned and who all share the same view that the WTO in the public interest can be changed in respect to issues pertinent to their country.

I thank my colleague from Souris—Moose Mountain for his constructive comments. He did say he would like to have some binding commitments with respect to Bill C-91.

I like my colleague's recommendation and I do support it, but I remind him that we did have commitments from the industry under Bill C-22 in 1997 and under Bill C-91. They were going to increase the number of jobs. Wrong. There are fewer jobs. They were going lower prices on prescription drugs. Wrong. Drug prices are higher. They made a commitment to increase R and D. Guess what? They are increasing a lot of their expenses in terms of marketing, going to doctors and hospitals, giving them computers and trips to Barbados and all these places for using their prescription drugs and they call that R and D, research and development.

I guess they research the doctor and develop him or her into selling their prescription drugs and in return they spend R and D money by giving them new computers, trips to the Bahamas or trips to Australia or wherever they want to go. That is not R and D, that is marketing. That should not be in any kind of regulations, whether it is under the Bill C-91 regulations or any other commitments.

I admire and thank the member for his constructive criticism. I will pursue that.

I want to make one other comment with respect to what happened in Argentina and Chile. I had a visit from an Argentinian politician who came here because of the work I was doing on Bill C-91. His name was Ernesto Algaba.

He told me that the people in Argentina were very concerned. They are all fanning out around the various countries of the world that are WTO co-signatories on Bill C-91. They are being forced by the American ambassador who is being told by the American Pharmaceutical Association to get the 20 year patent monopoly pricing in Argentina or else they would do something economic like maybe even pull out their ambassador from Argentina.

Ernesto Algaba told me he went to Chile, which had the same commitments that we had in Canada. After Chile passed the 20 year patent protection it lost jobs, closed plants, drug prices skyrocketed and health care costs skyrocketed.

We have international examples. There may have been a misunderstanding when the member for St. Catharines said we need this because of competitive pricing requirements. Bill C-91 is not competitive. It is a monopoly to charge whatever they want for prescription drugs for 20 years. That is not competition.

[The Acting Speaker (Ms. Thibeault)]

The time provided for the consideration of Private Members' Business has now expired and this item is dropped from the Order Paper.

[John Solomon, NDP, Regina—Lumsden—Lake Centre, SK]

Madam Speaker, I request unanimous consent to refer this bill to committee for further study.

[The Acting Speaker (Ms. Thibeault)]

Does the member have unanimous consent?

[Some hon. members]

No.

[John Solomon, NDP, Regina—Lumsden—Lake Centre, SK]

Madam Speaker, I would request unanimous consent, even though the Liberals declined the previous request, for this bill to be votable today.

[The Acting Speaker (Ms. Thibeault)]

Does the member have unanimous consent.

[Some hon. members]

No.

[The Acting Speaker (Ms. Thibeault)]

It being 2.25 p.m., this House stands adjourned until next Monday at 11 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 2.24 p.m.)