Mr. Chair, I rise this evening to add my voice to the many who are speaking out on the issue of cross-border drug sales. From 2001 to 2004, Internet pharmacy sales grew by 1,100%, rising from annual sales of $70 million in 2001 to $840 million in 2004. Combined with cross-border foot traffic, the total industry accounted for approximately $1.35 billion Canadian in sales in 2004. Internet pharmacy sales growth has stabilized since mid-2004 and actually began to decline in early 2005 due to enhanced manufacturer restrictions to participant Internet pharmacy operations.
I note that the Government of Canada is fully aware of the economic significance of this industry. The minister has been clear that it has never been his intention to shut down the industry. However, the responsibility to ensure that 32 million Canadians have continued access to safe and affordable prescription drugs is paramount.
The appeal of Canadian prescription drugs is driven by the price differential for patented drugs between Canada and the United States. The latest Patented Medicine Prices Review Board annual report identified the fact that Canadian drugs are, on average, 40% less expensive than those in the U.S. It should be noted that such price differentials with the United States are echoed in other OECD countries.
It is a fact that the United States has the highest prices for pharmaceuticals in the world and its citizens are looking to Canada for some relief. Recent estimates indicate that one million to two million Americans are now filling their prescriptions through Canadian pharmacies each year.
A combination of factors has kept drug prices lower in Canada, one of which is the key role played by the Patented Medicine Prices Review Board in regulating the prices of patented drugs.
I applaud the government for its unwavering and continuing commitment to our regime of price controls. Furthermore, it is worth noting that our belief in the necessity of such regulations is in line with all other industrial countries, except the U.S.
The mandate of the PMPRB was developed in 1987 to balance increased patent protection for innovative medicines with affordable domestic prices. Under PMPRB guidelines, Canadian prices for patented drugs cannot exceed the median international price of a basket of comparator countries.
It s crucial to note that our price regulatory regime was implemented by the Government of Canada for the benefit of Canadians and our health care system.
Last year the American market for prescription drugs was worth about $300 billion. Last year sales of pharmaceuticals in the U.S. were equivalent to one-third of Canada's total GDP.
We have been fortunate thus far that the cross-border drug trade has not caused systematic drug shortages in Canada, but we should not take this to mean that shortages will not occur. At present, half of Manitoba's drug supply goes to the United States. The Government of Canada has a legitimate concern that any significant expansion of this trade could be at the expense of Canadian patients.
If Canadian drug policies were forced to the U.S. level, annual prescription drug expenditures in Canada would increase by more than $14 billion. The effect of such an increase on our drug programs and potentially on the finances of Canadians would be tremendous. It is also worth mentioning that if prices in Canada are forced to rise to U.S. levels, the price differential driving cross-border drug sales would vanish, as would the industry.
There are currently nine bills, four in the House of Representatives and five in the U.S. Senate, before the 109th U.S. Congress to legalize the bulk importation of prescription drugs from Canada. Import legislation currently has majority support in both the House of Representatives and the U.S. Senate and has a strong potential for passage.
In addition, while illegal under U.S. federal law, the cross-border drug trade is receiving broad support from state and municipal governments. At last count, there were some 30 American states, representing over half the U.S. population and more than five times the Canadian population, at various stages of implementing state operated drug import programs.
Import programs adopted by state and municipal governments are intended to control the escalating costs of prescription drug programs and to support drug affordability for individual residents. However, the motivation behind at least some of the current proposed federal import legislation is to weaken, if not remove, foreign price controls.
At the 2004 OECD health ministers meeting in Paris, then U.S. Secretary Thompson implied that OECD members should lift their drug price controls to generate greater corporate revenues to fund innovation. More recently, U.S. Senator David Vitter, sponsor of a leading drug import bill, has indicated his intention of using drug importation as an indirect instrument to undermine foreign price controls. These are not incidental or innocuous developments.
We are not unsympathetic to the plight of millions of uninsured or under-insured Americans, numbering some 70 million at latest count. I do believe, however, that the Government of Canada's focal concern must continue to be the continuity and adequacy of supply of safe and affordable drugs for Canadian needs.
To that end, the Government of Canada is proposing a strategy to help ensure a safe and adequate supply of affordable drugs for Canadians. This strategy includes three elements.
First is a pan-Canadian drug supply network to provide Health Canada with a more comprehensive understanding of our drug supply.
Second is an export restriction scheme. This means that if the domestic supply of an essential drug were dangerously low, we would have the authority to introduce appropriate export controls to help preserve the supply for Canadian patients when necessary to protect human health. These export restrictions would remain in place only as long as the threat to domestic supply makes them necessary.
The third piece of this strategy involves the strengthening of existing federal regulations under the Food and Drugs Act governing the sales of prescription drugs in Canada, strengthening patient safety.
Although the threat to Canada's domestic drug supply may not be imminent, responsible government requires that we monitor potential threats and be prepared to take the steps necessary to mitigate those risks.