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.
