moved that Bill S-17, an act to amend the Patent Act, be read the second time and referred to a committee.
Mr. Speaker, I am pleased to rise in my place to begin second reading of Bill S-17, an act to amend the Patent Act. The amendments contained in the bill are simple. They are straightforward. They have one purpose and one purpose only, and that is to bring Canada's Patent Act into compliance with two separate rulings of the World Trade Organization, the WTO. They maintain the balance that has been struck in Canada's patent regime.
One of the rulings dealt with a dispute with the United States. The U.S. argued that certain old act patents, that is, pre-1989 patents, do not benefit from a minimum 20 year term of protection from the date they were filed as required by the agreement on trade related aspects of intellectual property rights, known as the TRIPS agreement. In September 2000, the WTO body sided with the U.S. interpretation of the dispute and ruled that Canada's patent terms for certain old act patents were inconsistent with obligations under the TRIPS agreement.
Bill S-17 complies with the ruling by establishing the term of protection for outstanding old act patents as the greater of 17 years from the date the application was granted or a minimum of 20 years from the date the application was filed in Canada as defined by the patent rules.
Canada already provides a TRIPS compliant term of 20 years from the date of filing for patents granted under the new act regime. The new act regime has been in effect in Canada since October 1, 1989.
The second WTO ruling addressed by Bill S-17 is a dispute with the European Union. In the second dispute the WTO ruled in March 2000 that Canada's stockpiling exception was inconsistent with the TRIPS agreement. This exception allowed generic drug manufacturers to make and to stockpile their version of a patented product during the last six months of the patent term.
It is important to recall that as part of the same ruling, the WTO confirmed the consistency of our early working exception, a fundamental component of our patent regime. The early working exception allows third parties to use a patent invention during its term of protection for purposes of regulatory approval.
The government has already complied with the WTO ruling on stockpiling, by way of regulation. The repeal of the stockpiling provisions simply ensures that the Patent Act itself conforms with our TRIPS obligations.
The bill before us today deals exclusively with the issues of patent term and stockpiling. It does not attempt to go into the broader aspects of patent protection in Canada.
As I said when I appeared before the Standing Committee on Industry, there will be other opportunities to have a broader consideration of our intellectual property laws, but it is very important that we proceed expeditiously with the amendments before us because the WTO has imposed a deadline for compliance with the patent term ruling. Canada has until August 12, 2001 to comply. Otherwise we could face retaliatory trade action.
The amendments contained in Bill S-17 would provide extensions to certain old act patents that are still in force and that do not benefit from a minimum patent term of 20 years from the date the patent application was filed. I should point out that there are, relatively speaking, a small number of patents that will be affected by this amendment.
As of January 1, 2001, there were 138,800 outstanding old act patents. Of these, 53,500 had patent terms of less than 20 years from the date of filing. It is important to note that not all of these patents have commercial value. The vast majority do not. To date, only the pharmaceutical industry has identified commercially significant patents that would be affected by this ruling.
I would also emphasize that not all the old act patents are affected by the WTO ruling on patent term. Of the 138,800 outstanding old act patents to which I referred, 85,300 of them have terms of greater than 20 years from the date of filing. These patents are unaffected by the present amendments, as are all patents currently being granted.
Because some have expressed concern about how a change in the term of patent protection will affect drug costs, let me go into this issue in greater detail. We estimate that the number of commercially significant drugs that would benefit from a patent term extension is 30. Of the tens of thousands out there, 30 would benefit. The number of affected drugs is relatively insignificant when compared to the 5,200 patented and non-patented prescription drugs available to Canadians. The average term extension for the patents on the 30 drugs is about 6 months. The maximum amount of lost savings resulting from these patent term extensions has been estimated at less than one-tenth of 1% of drug sales over the eight year period during which the affected old act patents expire.
These foregone savings can be this great only if two things actually happen, the first being that every one of them is copied by a generic manufacturer. This is not likely to happen because not every drug has enough of a market to warrant a generic copy. However, let us assume for the sake of argument that a generic copy is in fact produced. Second, let us assume that the generic copy would capture the entire market for this product immediately after its entry. Again, this is very unlikely.
However, let us make our estimate based on these two extreme scenarios. It gives us the worst case scenario. This is the absolute maximum that these amendments would cost our health care system: less than one-tenth of 1%. The amendments contained in Bill S-17 will have no sustained impact on drug prices. In fact, the impacts will be barely noticeable.
I am sure that members on the other side of the House will remind you, that I was once among those who were concerned about the impact of our patent regime on drug prices. I remain concerned. When I sat on the opposition benches I feared that changes to the Patent Act might tilt the balance between supporting innovation and providing drugs at reasonable prices. I was concerned that changes would lead to rapid increases in drug prices but that quite simply did not happen.
I am sure all members of the House, although there may be some exceptions opposite, will share my satisfaction that drug prices have not risen dramatically in Canada since the Patent Act was first modernized in 1989. This year the Canadian Institute for Health Information has stated:
Given that the drug price index(es) have remained relatively stable since the early 1990s, it appears that increased utilization and the entry of new drugs are the main factors behind the increase in drug expenditures.
Members should quote from authoritative impartial sources when engaging in the debate and not quote in a partisan manner the views of members on either side of the House. There are many reasons drug expenditures are climbing, but I want to emphasize that drug prices are being kept in check.
Our current patent regime serves Canadians well. According to the latest report from the Patented Medicine Prices Review Board prices in Canada are 11% below the median foreign prices. Canadians currently pay 40% less for their patented drugs than Americans do. Americans continue to come to Canada to take advantage of our lower drug prices.
As we sit in the House debating the issue, busloads of Americans continue to cross the border to buy brand name drugs in Canada at up to 40% less than the cost of the same drugs available to them in the United States. I recall that our early working exception, which was successfully defended before the WTO, would continue to provide Canadians with access to lower priced alternatives as soon as possible after expiry.
I would like to point out the simple and straightforward nature and purpose of the amendments to Bill S-17. They bring the Patent Act into compliance with our intentional obligations.
Members opposite may say what they will, but unless Canada does as is suggested by members of the New Democratic Party, which is to withdraw from international trade rules to establish a fence around Canada and say that we will trade only with ourselves, we have to comply with WTO rules.
Is it any wonder that in the province of British Columbia the New Democratic Party is about to suffer a humiliating defeat when its members live with their heads in the sand and do not respond to the needs of ordinary working Canadians? Is it any wonder that people currently working in the auto manufacturing plants in southern Ontario and in the province of Quebec have overwhelmingly turned away from the New Democratic Party? Is it any wonder they have turned away when all of these people rely on exports for their jobs, and when all these people have been described by the leader of the NDP as being rich Canadians not paying enough taxes because they work an overtime shift at an auto plant?
No wonder the party is going the way of the dodo bird. It is no surprise the member opposite lost his pants recently when he was out in the middle of a melee in the protest of Quebec City. However, I digress.
In short, now is not the time for a protracted debate about whether Canada's patent laws need to be changed. Once the bill is passed we will have other opportunities to engage in a broader dialogue on the role of intellectual property, building an innovative economy and sustaining an attractive environment for investment.
The government's objective is to build a world leading economy, one that is driven by innovation, ideas and talent, an economy that produces goods and services which compete in terms of quality and price with the best in the world. We need a strong and moderate intellectual property framework, one that protects creativity and innovation, one that helps us attract talent and investment from around the world. The amendments to Bill S-17 would help maintain Canada's leadership in the global knowledge based society.
I would urge members on all sides of the House to work together to ensure responsible and quick passage of the bill in keeping with Canada's obligations under the WTO. I thank members for their consideration of the bill.
