[Recorded by Electronic Apparatus]
Tuesday, March 11, 1997
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[English]
The Chairman (Mr. David Walker (Winnipeg North Centre, Lib.)): Pursuant to Standing Order 108(2), the Standing Committee on Industry resumes its review of section 14 of the Patent Act Amendment 1992 (Chapter 2, Statutes of Canada, 1993).
Today we have a round table for the discussion of the review of Bill C-93. The witnesses are, from the Tufts Center for the Study of Drug Development, Sheila Shulman; from the Fraser Institute, Dr. Bill McArthur; from the Canadian Association of Retired Persons, Lillian Morgenthau; from Health Promotion Research, Dr. Robert Coambs, president and chief executive officer; and from Palmer d'Angelo Consulting Inc., Mr. Neil Palmer.
I'd like to welcome everybody. The format is that each of the participants will be asked to give an opening address of about five minutes. The chair will then ask members to follow up points. The questions may be addressed to a particular participant, but feel free, if you have something to add into that point, to get my attention. The chair will recognize you and you will have a chance to comment too.
We have until 5:30. There is a vote at 5:30. There may be a will among the parties at that time to finish up our work. I think we can make arrangements through the whip. It's up to the opposition members, but certainly I think we could continue if you wanted to finish up. We'll see at 5:25 how we feel about it.
Now I'll turn to Sheila Shulman. Ms Shulman, from the Tufts Center for the Study of Drug Development, welcome. Please begin.
Ms Sheila Shulman (Assistant Director, Tufts Center for the Study of Drug Development, Tufts University): Thank you, Mr. Chairman and members of the committee, for the opportunity to appear today. My name is Sheila Shulman and I am the assistant director of the Tufts Center for the Study of Drug Development at Tufts University in Boston, Massachusetts.
A word about the center. It's an academic research group that for over 20 years has monitored and reported on economic, legal, and policy issues relevant to the international pharmaceutical and biotechnology industries. The center's work is supported in part by Tufts University and through grants from the industry and other sources.
As part of our research work, we have followed the implementation of the 1987 and 1993 amendments to the Canadian Patent Act. Although the circumstances of intellectual property rights for pharmaceuticals in Canada have been and continue to be unique in a number of respects, the fundamental issues are increasingly universal.
We're aware that the matter of patent term restoration is among the many subjects that have been placed before the committee during the current hearings. My comments today are directed in large part to that issue.
We have had the opportunity to examine the patent term restoration provisions of 1984 legislation in the United States, more commonly referred to as the Waxman-Hatch Act. Before addressing the results of our study I believe it would be useful if I tried to place that legislation in the broader context.
The Waxman-Hatch Act represented a political compromise between the economic interests of the generic and brand-name industries.
[Technical Difficulty-Editor]
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The Chairman: Continue please.
Ms Shulman: Thank you, Mr. Chairman.
I was addressing the issue of the Waxman-Hatch Act and setting it in its context. Concerns related to drug pricing, industry competitiveness and appropriate incentives and rewards for innovative R and D sustained a congressional debate, and a balancing of those interests is reflected in the final legislative provisions.
The benefit to generic firms was a streamlined statutory procedure for filing an ANDA, which is an abbreviated new drug application. ANDA preparation and submission may occur and tentative FDA approval may be granted prior to expiry of the pioneer patent. Since passage of Waxman-Hatch, it is not an active infringement to ``make, use or sell '' the generic compound, but solely for purposes reasonably related to obtaining regulatory approval. There is not the equivalent of the early working with respect to manufacturing and stockpiling that you have here in Canada.
To balance the obvious advantage to the generic industry in terms of lowering barriers to market access, the act provided two potential benefits for very restrictively defined categories of brand-name drugs: first, a period of non-patent or data exclusivity for approved new drug applications and supplementals; and second, a period of patent term restoration to compensate for a portion of the patent life consumed by the clinical testing and FDA approval phases. The remainder of my remarks will be limited to addressing the second of these benefits: patent term restoration.
Under title II of Waxman-Hatch, the U.S. Patent and Trademark Office may grant patent term restoration for certain patents related to human drug products, including antibiotics and biologics. The eligibility is restrictive, tied to innovation and limited, in the first instance, to a product's first approval and therefore to new chemical entities in the case of traditional pharmaceuticals.
Again, patent term restoration is compensatory in nature. The duration of the extension is determined by the regulatory review period for the drug in question. The actual restoration period represents one-half of the clinical testing phase, plus the entire approval phase reduced by time expended between the start of clinical testing and the issuance of the patent, and by any time during the regulatory review period in which it can be established that the applicant failed to exercise due diligence in pursuing marketing approval.
The maximum allowable extension is five years and the extension may not result in effective patent life of greater than 14 years. Effective patent life is a critical measure; it represents the time from the date of FDA marketing approval to the expiration of the patents that effectively protect the new drug from generic competition.
In the 14 years prior to Waxman-Hatch, average effective patent life declined over time from a high of approximately 14.5 years in 1970 to approximately 9.5 years in 1984, with a drop to 8.1 years for the 5-year period 1980-84. For the 11-year post-Waxman-Hatch period, we have calculated the effective patent life for new chemical entities approved for marketing in the United States between October 1984 and December 1995.
For this purpose, we relied on patent data obtained from the U.S. Food and Drug Administration and on drug development data compiled in the Tufts Center's in-house database of approved NCEs. Figure 1 in my submission shows the average annual effective patent life, with and without Waxman-Hatch extensions, for 157 new chemical entities approved during that period. In the absence of patent term restoration, the average effective patent life over the 11-year period was 8.3 years. With the extension, that increased to 10.6 years.
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A better view of the benefit available under the act can be seen in figure 2, showing average patent extensions for NCEs grouped in four three-year intervals. The average extension increased in each successive interval to a maximum of 3.2 years from 1993-95. For this interval, the average effective patent life, with patent restoration, is 10.9 years, and without restoration 7.7 years. This interval is more representative, other things being equal, of NCEs currently entering the marketplace, since it includes a greater number of NCEs eligible for the maximum five-year patent extension.
Our data show that a substantial lengthening of effective patent life can be attributed to Waxman-Hatch. It should be noted - and I think this is significant - that on average, despite the extensions, only 35% of the time lost between patent issuance and NDA approval, and only 41% of the time between IND filing and NDA approval, has been restored for that most recent interval of 1993-95.
Historically, substantive patent protection has served as an incentive to investments in costly pharmaceutical R and D. Waxman-Hatch has resulted in a meaningful additional protection for new drugs approved in recent years. However, I think it's important, when assessing the impact of strengthening intellectual property protection for innovative new drugs, that one must also weigh the impact of other powerful demand-side factors at work in the marketplace of the 1990s.
Interventions by public and private third-party payers have tightened markets for pharmaceuticals considerably through the adoption of increasingly restrictive formularies, generic and therapeutic substitution programs, reimbursement caps on prescription drug benefits, and varying levels of pricing oversight. More recently, a new level of competition has been introduced through pharmacy benefit management companies capable of negotiating substantial price discounts and rebates in return for guarantees of market share.
In addition, the streamlined ANDA process under Waxman-Hatch has facilitated market entry for generic drugs, significantly intensifying generic competition. One consequence has been a rapid rate of decline in pioneer drug sales after patent expiration, with some major pioneer products losing more than half their market share within the first year after patent expiry.
In conclusion, many factors contribute to a climate that fosters expansion of biomedical research. For example, the FDA recently has made a significant reduction in NDA approval times, a change attributable in part to incentives and resources associated with the Prescription Drug User Fee Act and to other FDA initiatives aimed at expediting the marketing approval of new drugs.
In a rapidly changing environment, these measures, in combination with patent term restoration provisions of Waxman-Hatch, have helped to maintain a sensitive balance between the interests of the innovative pharmaceutical industry and those of the broader health care system, while simultaneously improving access to important therapeutic options.
Mr. Chairman, members of the committee, I thank you once again for this opportunity to appear. I would ask that my entire written submission be introduced into the record.
The Chairman: Thank you very much, Ms Shulman. Thank you for your very concise report. I'm sure members will be back to you with several questions, because you're touching some points that are germane to our work.
Dr. McArthur of the Fraser Institute, please.
Dr. Bill McArthur (Fraser Institute Visiting Fellow in Health Policy): Thank you, Mr. Chairman. I want to express my appreciation for having the opportunity to appear before you today. I have the privilege of representing the Fraser Institute, where a major part of our work is directed toward understanding how competitive markets improve the well-being of Canadians. I would point out that I am also a practising physician, so I come into contact with pharmaceuticals at that level as well.
A written submission is being prepared and will be delivered to the committee within the required time. That will cover my comments much more extensively than what I'm going to say in the next five minutes.
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The main thrust of my remarks will be directed to our belief that theft is an undesirable human activity and one that should be discouraged by all available practical means. In particular we believe the people of Canada hold to the concept that stealing property is unacceptable at any time or place, and they expect the Government of Canada to be vigorous in attempting to prevent theft wherever it occurs.
As you know, patents are an internationally recognized means whereby the property rights of inventors are protected. These intellectual property rights are designed to protect the interests of inventors for a specified period so they have an opportunity to obtain compensation for the time, money, and thought they have invested in creating their invention.
It is universally recognized that guaranteeing this right to reasonable compensation is fair and just to the inventor, but experience also tells us that protection of the inventor's intellectual property rights is much to the benefit of the society that provides the protection.
The provision of such protection creates an environment that encourages an ever-increasing number of individuals to exercise their creative genius, thereby stimulating spin-off benefits for society as a whole. New jobs are created, investment is promoted, and the way in which we go about our daily lives and work becomes more efficient and more productive.
There is nowhere this is more true than in the pharmaceutical industry. With the passage of Bill C-91, Canada recognized the internationally accepted standard that patents should have a lifespan of 20 years. This 20-year period is recognized as the accepted minimum period for patent protection in all technologically advanced countries, and any decrease in this would put Canada in the position of being an international renegade in the matter of protection of intellectual property rights. Such a move would also contravene WTO and NAFTA regulations and could have devastating effects on the economy.
Inventors are not tied to any particular country and tend to pursue their activities in those jurisdictions that provide them with the best opportunity to gain compensation for their inventive genius. Any decrease in the 20-year period would in effect constitute theft of inventors' property rights and would encourage many to leave the country, causing substantial job losses and a significant downturn in investment, which would extend far beyond the pharmaceutical industry.
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Any restriction of property rights by any country would cause all investors, regardless of their industry or product, to think hard and long about investing in that country.
Extensive studies conducted at the Fraser Institute reveal that diminished protection of intellectual and other property rights is associated with slow economic growth. Another important point revealed is that countries that do not protect the property rights of their citizens vigorously are also less diligent in protecting the individual liberty and freedom of their citizens. The degree to which a country protects the property rights of its citizens is an important measure of liberty, justice, and freedom in that country.
It is clear that Canada must not consider reducing the 20-year patent protection. Instead we must look to ensure that our patent protection is equal to and competitive with other advanced countries that are competing to attract innovators and inventors in many fields. In this connection, five areas deserve greater consideration.
The first is the role and even the existence of the Patent Medicine Prices Review Board. That requires examination.
Second, as my colleague has pointed out, patent term restoration needs to be reviewed in view of international developments in that area.
Third, the establishment of a level playing field between the various manufacturers of pharmaceuticals needs attention.
Fourth, the introduction or modification of legislation providing for vigorous application of interlocutory injunctions to prevent patent piracy needs to be considered.
Fifth, the legality and appropriateness of early working requires examination.
These matters will be discussed in greater detail in the written brief, which will be submitted. In the meantime I would be happy to answer questions on these or other topics.
Thank you.
The Chairman: Thank you, Dr. McArthur. I'm sure, again, there will be lots of questions.
Ms Morgenthau, welcome to this committee. I've seen you in other committees.
Ms Lillian Morgenthau (President, Canadian Association of Retired Persons): First of all, may I thank you all for having me here. I and our 275,000 members thank you.
I would like to say something about our organization so you'll realize from whence I come. My name is Lillian Morgenthau and I'm president of the Canadian Association of Retired Persons, CARP. CARP is a national, non-profit organization with 275,000 members. Your brief will say 250,000. We've grown since then.
You only have to be 50 years old - you do not have to be retired - and we receive no funding from any government. We are therefore ensuring our independence and our neutrality.
Our mandate is to foster, promote, and advance the interests of mature Canadians and indeed all Canadians, regardless of age.
Through CARP News, which is published bimonthly and mailed to our members, we provide a national forum for the reporting of key issues of interest to mature Canadians. We also provide facilities for the interchange of opinions and information, with the goal of achieving a better understanding and appreciation of the maturing process and its implications to all Canadians.
We provide information, we provide savings, and we also ensure that mature Canadians' interests and viewpoints are clearly articulated. They will be brought out today.
In 1994 CARP made a submission to the Senate committee hearings regarding Bill C-91. At that time we presented a very strong message that existing and new medicines should be affordable and available and that the Patented Medicine Prices Review Board should keep drugs reasonably priced.
While we supported intellectual property protection, we also expressed support for the new powers granted to PMPRB, such as roll-back provisions for introductory prices of new medicines the board feels are excessive and the proposed fines and provisions contained in the legislation.
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We noted the additional cost to the health care system associated with the restoration of patent production in Canada but expressed the view that this cost would be far outweighed by the additional research investment, job creation, and most importantly, potential discovery and availability of new medicines generated by additional patent protection. We were right.
CARP fully supported the coexistence of the generic and brand-name pharmaceutical industries in Canada. We expressed the belief that each plays an important role in the provision of medication for Canadians. We also noted that a healthy generic industry requires the discovery of new medicines by the brand-name industry. Since the generic industry piggybacks on the brand-name industry, it benefits both to make sure that research in medication is encouraged in Canada.
As in 1994, CARP's primary concern continues to be that medications in Canada be affordable and available, and that the PMPRB ensures they are reasonably priced. We have expressed our concern at the provincial level regarding the erosion of the health care system and the restrictions to access of drugs for seniors. Across Canada, governments have continued to restrict access to new medicines by not listing them on the provincial formularies, or delaying listing. They've also forced seniors to bear additional costs to gain access to current and new medicines.
We believe these policies are short-sighted when you consider that medication is often the most cost-effective medical intervention and can help seniors maintain their independence, reduce or eliminate hospital stays, and improve and lengthen life. This is not only for seniors; it's really for everyone. We believe it is critical that Canadians have access to all medications and that researchers continue to strive for the discovery of drugs that will reduce or eliminate illness and disease.
Research and the ultimate discovery of drugs to alleviate disease is of critical importance to all Canadians. In 1994 the brand-name pharmaceutical industry had already achieved the goal they had promised in Bill C-22 - 10% of sales invested in R and D - a full two years ahead of schedule. With the passage of Bill C-91, we look to the industry to increase that commitment. According to the PMPRB, we understand the industry currently spends 12.5% of sales on R and D, a full 2.5% more than was promised.
We also are encouraged that basic research has been the strongest-growing component, with growth of 340% since 1988. In 1995, according to the price committee's annual report, basic research represented 22.2% of the total spending, an increase of 12.6% from the previous year.
In addition to research and development, CARP is concerned that Canada retain its best and brightest researchers. We understand a significant portion of R and D spending supports researchers in Canadian hospitals and universities. In 1995 expenditures on R and D performed by universities and hospitals increased by 2.4% to $131.5 million. Since 1988 a total of $720 million has been spent by the research-based pharmaceutical industry in Canadian universities and hospitals, as well as the money that has come from government.
Our final concern is that drug prices be affordable for Canadians, especially for seniors who require medications to maintain their health. With the passage of Bill C-91, the brand-name industry made a commitment to ensure reasonable increases in the price of existing and new drugs. The industry has met this commitment, according to PMPRB, with price increases below the rate of inflation.
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We also note the success of new powers to the PMPRB to monitor and roll back prices when required. We see that this has been done in the last year.
We believe that it is important to have choices of drug therapy and that this therapy be tailored to meet individual needs. This means ensuring a healthy generic and brand-name industry and the free choice of physicians and patients to choose the appropriate therapy.
We also feel seniors should be fully informed about the medication they are taking, including whether it's a generic or brand-name product. Under current legislation in Ontario, drug plan beneficiaries are not required to be informed when they receive a generic instead of a brand name.
CARP believes Canadians must have the opportunity to choose whichever they wish. The doctor should be the decision-maker, not a bureaucrat who puts lower costs before the health of a patient.
Canadians need timely access to new drug therapy and cannot afford unnecessary delays caused by duplicate review processes at both federal and provincial levels. Once a drug is approved federally, it is should be available immediately in the provinces, thereby eliminating years for accessibility and unnecessary additional costs. The elimination of duplicate provincial regulatory review and harmonization of federal reviews with other countries will assist in bringing medicines more quickly to people who need them.
In conclusion, CARP believes the Government of Canada must ensure that current and future generations have access to the most sophisticated and effective medical technology in a timely and affordable manner. This can be achieved by encouraging industries and researchers to stay in Canada, and at the same time ensuring that prices and costs are reasonable and fair.
We feel that Bill C-91 was effective in achieving these objectives and look to the federal government to maintain a fair environment into the next century. Generics are a competitive area to encourage and thus keep affordable drug prices.
To reiterate, CARP's position in the past and also today is that prescription drugs should be available, affordable and reasonably priced because of the power given to the PMPRB. Review of this issue again should not occur for another 10 years unless there is a problem or a concern.
Thank you very much.
The Chairman: Thank you very much, Mrs. Morgenthau.
Dr. Coambs, please.
Dr. Robert Coambs (President and Chief Executive Officer, Health Promotion Research): Thank you.
That's a very difficult presentation to follow up, it's so compelling.
Ms Morgenthau: You'll do it.
Voices: Oh, oh.
Dr. Coambs: I'm presenting now from notes based on this report, which you should now have.
I am an associate at the Centre for Health Promotion at the University of Toronto. I am also the president of a consulting company called Health Promotion Research. Professionally, I guess you would call me a behavioural epidemiologist. If you find me referring to smoking in this talk, that's because I also do a great deal of smoking research and tobacco control.
I'm best known in this area for publications I have done in the area of prescription non-compliance. This particular report is part of a new book about inappropriate prescribing.
Now, why is inappropriate prescribing of interest, I think, to the committee? Because they are inextricably linked. That is to say, the behaviour of brand-name pharmaceutical companies, the behaviour of generic pharmaceutical companies and inappropriate prescribing are all quite bound up with each other, as I think you'll see in this very brief presentation.
The first point is that inappropriate prescribing is very widespread. It's a much more serious problem than we'd realized. This report we're presenting here makes new estimates of the economic costs of inappropriate prescribing.
Up to 50% of antibiotic prescriptions are inappropriate. This is based on a great deal of research. It's a serious concern for everyone in the medical community.
The benzodiazepines - this is the Valium group of drugs - are also very seriously over-prescribed. A great deal of inappropriate prescribing goes on with that group.
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The point is, this occurs with both brand-name and generic drugs. That is to say, inappropriate prescribing occurs within both. The Valium group of drugs, the benzodiazepines, are now mainly generics, and they're still a serious concern.
In the elderly, for example, it's extremely common for especially elderly women to receive inappropriate prescriptions for these drugs, which winds up costing a great deal of money for the Canadian economy, because people wind up being institutionalized when they needn't be. When they fall, they wind up having hip injuries when they needn't, and so on. So this occurs in generics.
It's also the case that anti-infectives are seriously over-prescribed, including the antibiotics. Most of those are generics.
I'm suggesting that this occurs with both brand-name and generic drugs.
With the work of our collaborating health economist we've actually derived estimates of the cost of inappropriate prescribing. In one of the tables we've provided you'll see a breakdown of these costs. You can see that hospital costs are substantial. In our estimation, 1% to 4% of all hospitalizations are related to inappropriate prescribing. Ambulatory care seems to consume similar amounts of physician time and also consumes a substantial amount of money.
All direct costs are costing the Canadian economy $420 million to $1.28 billion a year - and these are extremely conservative estimates. That is to say, we're working with very preliminary data. When you work with such preliminary data one must be very conservative.
Indirect costs amount to about the equivalent, which brings us to a total of about $0.84 billion to $2.56 billion a year in Canada attributable to inappropriate prescribing. That's only the tip of the iceberg. We're not doing anything sufficient about it right now. We're not stopping it. In a decade it will be $8.4 billion and $25.6 billion, because it will just go on and on. In a decade it will roll up to those numbers.
Of course, the other alarming part of this story is that underlying those costs there is substantial unnecessary illness, unnecessary disability and unnecessary death. In other words, they don't go to hospital for ignominious reasons; they go there because they have in fact serious health problems.
Again, we are very preliminary in our data, but it's clear there are deaths attributable to inappropriate prescribing, and these are rolling on, increasing and accumulating every year.
We suggest that there are three ways to reduce the problem. One of them is physician education. That can occur before and after graduation. Most of this actually goes on after graduation. That's what we call ``continuing medical education''. It's a very critical part of the whole educational process. This is because new pharmaceuticals are being introduced at such a rapid rate, and in such numerous quantities, that it's impossible for a physician to keep up unless they're continually being renewed.
So after graduation it's important. The critically important thing there is that because of the cost structure built into generics, it's not possible for generic manufacturers to underwrite CME, continuing medical education. In other words, CME mostly rests on the shoulders of brand-name pharmaceutical companies, which I regard as regrettable.
The second way we can improve this problem is through better prescription monitoring. Saskatchewan, for example, already has an excellent system - although more is needed - to provide feedback to physicians and other clinicians, especially pharmacists, about the nature of inappropriate prescribing to help them change their behaviour. This has been recommended by the health forum, the recent parliamentary committee. It certainly does show good promise in alleviating the problem, but it will not by itself solve it. We also need lots of continuing medical education.
The third point is that we must do more to educate patients. Patients can and should be educated. There are already some patient education programs in existence, but much more needs to be done.
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Essentially, what's happening is that hospitals and ambulatory care environments are being unnecessarily overburdened by inappropriate prescribing. It's causing unnecessary costs and it can be corrected. Furthermore, these methods can be done in a cost-effective way. Continuing medical education on this topic can be structured in a way that will be cost-effective.
The Chairman: Dr. Coambs, thank you for a very fascinating presentation. You address an issue that at least one member raised before when we talked about the proper prescription of drugs. I think there will be lots of questions coming back to you from the members because you add a very nice piece of research to this.
Now our last panellist, Mr. Palmer, please.
Mr. W. Neil Palmer (Principal Consultant, Palmer d'Angelo Consulting Inc.): Thank you, Mr. Chairman and members of the committee. I welcome this opportunity to present the findings of this important study on the costs and benefits of pharmaceuticals in Canada.
I have some overheads that Mr. Morawski is kindly going to put up on the screen.
Leading up to this parliamentary review, there's been considerable discussion in the media, as well as in federal and provincial legislatures, concerning drug prices and drug costs. It's commonly held that drug prices and costs are exploding or out of control. As you will see, this is not the case.
While there has been considerable discussion of costs, there's been very little discussion on the benefits of pharmaceuticals. To assess value, we must consider both costs and benefits.
The purpose of my presentation today is to report on the study I've just completed. A copy is included in the folder that was distributed to members of the committee and is available to others on request.
The report itself examines costs and prices in relation to the amendments to the Patent Act. We have also developed a macro-economic model examining the factors that contribute to increases in drug costs and we have looked at the value of pharmaceuticals.
This is briefly a background on where the numbers and the data come from. We've relied primarily on the publication from Health Canada entitled Health Expenditures, 1975-1994. However, we've had to subtract out or remove the personal health supplies figures because those are expenditures on such items as bandages and deodorants. We've also had to add in the hospital drug costs, which are figures we got from Statistics Canada. That way we have a complete picture of drug expenditures in Canada.
We've also provided estimates for 1995 and 1996 because we feel that if we're going to look at expenditures post-Bill C-91, it's important to have the most complete data available. We've relied on Stats Canada and IMS data for that. For the drug prices I'll be presenting, we're relying on the industrial product price index pharmaceutical component, which is published monthly by Statistics Canada.
This first graph depicts the increases in costs, which are the bar on the left, and prices, which are the bar on the right, in each of the three periods, the first one being the pre-Bill C-22, when there was full compulsory licensing. Those are average annual increases in costs and prices.
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We can see that costs were averaging between 12% and 14% before Bill C-22 and prices were increasing about 8%. After Bill C-22, both these started to decline. Since Bill C-91, we're now looking at average increases in cost that are below 4% and prices that are below 1%. Clearly there's been a significant shift in costs and price increases.
I don't mean to suggest the reason for this is that eliminating compulsory licensing has resulted in lower price increases and lower cost increases. But it does go to show that compulsory licensing was not effective at limiting increases in drug costs or in drug prices.
The reason the compulsory licensing is not effective at cost containment is there's no direct mechanism to control prices or costs. The assumption was that having generic copies would create price competition. In fact, the market adjusted. The players in the game, the brands and the generics, adjusted their behaviour in the marketplace and tried to recoup any revenues they may have lost through loss of market share.
I think it's also important to note that the Patent Act and compulsory licensing was primarily an industrial policy, not a health policy. When you use an industrial policy tool for health policy reasons, you can have these unwanted effects.
What has limited cost and price increases, since Bill C-91 and Bill C-22, has been direct cost containment measures. You've already heard from the Patented Medicine Prices Review Board and the success they've had in limiting prices, not only price increases but the introductory prices in new medicines.
The provincial drug plans have all introduced cost containment measures. We have pharmaco-economics now that came into the fore during that time period. We've also heard about initiatives to reduce inappropriate use of pharmaceuticals, as Dr. Coambs has just testified.
What are the factors that contribute to increases in drug costs? An obvious one is population and demographics. As our population increases, the total amount we spend on drugs is going to increase as well. Moreover, the population is aging. As the population ages, there's greater reliance on medication.
We have already discussed price increases.
Then there's utilization. The two most important parts of the utilization component are in the introduction of new medicines. The introductory prices and the volume of sales of these medicines can have a significant impact on the utilization component of the increase in drug costs or expenditures.
Cost containment initiatives can limit some of those increases. We've already discussed some of those. There are also, of course, others. At the micro level, when we look at individual drug plans, things like the quantity and size of prescriptions can be important. There are other issues, like the inappropriate use of pharmaceuticals, continuing medical education, practice guidelines, etc, which can all affect utilization.
This graph is a depiction of that model I've just described. The total bar represents the total increase in drug expenditures for each year. The bottom part of that bar, the bottom segment, is the price component. You can see that from 1987 up to about 1994, that was fairly significant. By the time you reach 1996, price has almost disappeared off the graph. Price increases are very low. As you heard from the PMPRB, prices of patented medicines actually declined in 1994 and 1995.
The population demographic component is very consistent or very constant over time. It contributes about 2% each year to total drug expenditures. That's the additional population, plus the aging component of the demographics.
Finally, on top, calculated as a residual, is the utilization. You can see that's jumping up and down. In part, it's determined a bit by whether or not new medicines were introduced, or whether there were major cost containment initiatives in the provinces.
Overall, we can see at the end that cost increases since Bill C-91 average about 3.6% and that the price component again is very low.
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Briefly, on the impact of new medicines to drug expenditures, the introduction of a new medicine may increase or decrease overall expenditures. They will increase expenditures where they're first to treat a particular disease. For example, AZT was the first drug to treat AIDS and clearly would add overall to total drug expenditures. Add on therapies, drugs that are added on to existing therapy, or if you get an expanded patient population because your drug can treat more patients because of fewer adverse reactions.
New drugs may reduce overall expenditures if they're the second or later in a particular therapeutic class because they have to start competing on price in that particular therapeutic class. An example would be the ACE inhibitors, where there are now nine or ten of these drugs, and clearly the later entries are all competing on price.
But it's not just market forces. The PMPRB guidelines require that the medicines in the same therapeutic class cannot be priced higher than the first entrant. These guidelines apply despite incremental improvements in these drugs. The ninth or tenth or the third or fourth drug in a particular therapeutic class may be quite a bit better than the first entry, but it can't be priced any higher than that first drug in a class.
It's important to consider the value of these new medicines. Not only are they giving improved outcomes in morbidity survival quality of life, but they're cost-effective. The provinces as well as private drug plans are insisting more and more that these products are cost-effective before they're listed or before they're prescribed.
In some cases these drugs offer significant cost savings to the health care system. An example might be some of the newer anti-schizophrenia drugs, which get patients out of hospital. While the drugs themselves may seem expensive, the savings they offer by keeping schizophrenia patients out of hospital are significant.
In summary, Mr. Chairman, drug costs and prices increased faster before Bill C-91 than after. They increased since Bill C-91 at less than 1% annually and costs less than 4% annually. Population and aging of the population have added approximately 2% per year to overall expenditures.
New medicines add value and they can either increase or decrease total drug costs. Compulsory licensing was not effective at cost containment. It's an industrial policy, not a health policy. What has been effective are the direct cost-containing initiatives, such as the PMPRB, the drug plans and pharmaco-economics.
I would be pleased to entertain any questions you may have. Thank you very much.
The Chairman: Thank you very much, Mr. Palmer.
I'd like to thank all the witnesses for your cooperation. You've covered a tremendous amount in a very brief time. I very much appreciate it.
[Translation]
Mr. Brien will ask the first series of questions.
Mr. Pierre Brien (Témiscamingue, BQ): My first question is directed to Ms. Shulman. In your document, you talk about the effective life of patents in the United States. In 1995, the effective life was approximately 11 years. However, in other presentations, we were told that in the American system the effective patent life was 14 years. I would like to know which figure is correct and why other people state it is 14 years.
[English]
The Chairman: Go ahead.
Ms Shulman: I'll just take a moment to clarify something. I think all these figures are somewhat confusing. The 14-year figure refers to the maximum allowable effective patent life. That's what is sitting out there waiting to be had.
What a firm actually qualifies for and is eligible for is quite different, and that is unique to every drug. It must be determined by the clinical and the FDA approval time for the individual drug. One drug might qualify for only two and a half years added on to its nominal effective life of possibly seven years, ending up with an actual effective life of nine years. Because a portion of its patent life was expended earlier on, it ends up having access to only that limited period, but the potential benefit is 14 years. The actual benefit can differ quite considerably.
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[Translation]
Mr. Pierre Brien: Did you do an analysis or international comparison of the effective life of patents, as compared to the U.S. system? If so, how does the U.S. system rate?
[English]
Ms Shulman: That stage of our study has not been completed. The next step we're about to undertake is to look at the effect of the supplementary protection certificates available in the European Community. They've been available there since 1992, so their experience is relatively recent, but a timely review of that would be appropriate at this stage. We have not completed that portion of the project.
[Translation]
Mr. Pierre Brien: Will it be finished soon? It might be useful to us.
[English]
Ms Shulman: That's a tall order. I wouldn't like to make a promise in that regard. We could make some inquiries about how quickly we could get the data available to you.
[Translation]
Mr. Pierre Brien: I now have questions for the people from the Fraser Institute. In the last page of your presentation, you say there are five areas to consider. I will start on these and I am sure other questioners will deal with each of these areas, which you will discuss further in the detailed brief that you will submit later.
You say the role and even the existence of the Patent Medicine Prices Review Board need to be reviewed. I would like you to elaborate on what you mean by reviewing its role and even its existence.
[English]
Dr. McArthur: Certainly. This is a difficult and complicated issue, but I think we all know from examination of activities of regulatory bodies, whether they be in price control on grain or wherever, that often the effects we aspire to by creating price control regulations have rather perverse effects at times.
A very substantive European study, which I have here, was done by the Imperial College of Science, Technology, and Medicine at the University of London. They studied extensively the situation in all the European countries. At the conclusion of their study they found that in actual fact, over a period of three to five years, countries that had regulatory bodies designed to control prices had higher prices than the countries that did not have such regulatory bodies.
In the time of fiscal constraint we face in this country, one at least has to look at that argument and ask, does the Patented Medicine Prices Review Board really achieve what it was set out to do, or would it be better to leave the market forces to play their role and possibly, as in some of those other European countries, produce a less costly result?
There's one very sensitive addendum to that. I'm not recommending this; I'm putting it for your consideration. If you were to just eliminate the Patented Medicine Prices Review Board, you would in effect be back in the pre-Bill C-91 situation, where it's not extreme to say patent piracy was rampant. We believe if you are to take that measure, you must have very forceful legislation that introduces interlocutory injunctions to protect the innovative companies for the term of the patent.
I understand in this country it's been difficult. Interlocutory injunctions do exist, but it is very difficult, I understand, to get the courts to make them effective. There would need to be hand-in-glove legislation doing those two things.
Have I answered your question, sir?
[Translation]
Mr. Pierre Brien: Yes, but if possible I would like to hear the comments of Mr. Palmer on what the representative of the Fraser Institute just said.
[English]
Mr. Palmer: Are you asking about the PMPRB in particular?
Mr. Pierre Brien: Yes.
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Mr. Palmer: The PMPRB recently reported that they saved I think between $2.9 billion and $4 billion since their inception. I haven't had a close look at their study, but that would seem to suggest that costs overall have come down as a result of the PMPRB.
As for the issue the doctor brought up about prices being higher, there is, in a sense, some truth to that. When you regulate prices, there's a tendency for these prices rather than being price ceilings to end up being price floors. That's because companies are concerned about their abilities to raise prices at a later time. So there may be a tendency to take the maximum price you can now for fear of not being able to get it later.
So regulation can cause that effect. I think we see that not only with brand companies but with the generics as well with deregulation in Ontario in terms of the rules for what level the generic price can come in at. They typically come in at the maximum they're allowed for fear of not getting that price back later.
[Translation]
Mr. Pierre Brien: On another subject, Mr. McArthur, in your fourth recommendation you talk about vigorous application of interlocutory injunctions. At the present time, the bridging regulations are a rather complex instrument that is strongly opposed by the generic drug industry.
Do you suggest that we replace the present system of bridging regulations and early working by a mechanism of interlocutory injunctions through the ordinary justice system when somebody wants to prevent a generic manufacturer from marketing a product, as is being done for all other patented products, or would you prefer the present system with its specific regulations for the pharmaceutical industry?
[English]
Dr. McArthur: My understanding - I'm not a lawyer - is that it is difficult in this country to persuade the judiciary to enforce interlocutory injunctions. What has happened in the past is that inventors, when their patent was breached by other parties, went to the courts and asked for interlocutory injunctions.
In effect, the courts have tended to say yes, the patent is breached, so you now have the right to go and commence legal action to bring the breaking party into line. The average drug costs about $600 million to develop. So you now have the right to spend whatever it is, another $30 million or $40 million, to pursue legal action to stop it from happening. Of course, that takes a period of three or four or more years, and meanwhile, the production carries on.
So in this country it has not been a very effective means of protecting the inventors from the interlopers, whereas in other countries, as I think it is in the United States, such injunctions have been more effective in preventing that. Clearly, to go that route, you have to design legislation in some fashion that would make it effective.
Ms Shulman: The evidentiary burden in the United States, the test, is less burdensome in order to obtain the interlocutory injunctions. An interlocutory is effective between the start of the legal action and the actual trial of the action. So the alleged infringer is allowed to stay on the market in the absence of an injunction.
So the tests in Canada and the United States differ. The courts are, I believe, somewhat more willing to entertain the applications for interlocutory injunctions, and they're more readily granted.
[Translation]
Mr. Pierre Brien: Would it be that penalties are much higher in the United States, resulting in much higher awards for damages?
[English]
Ms Shulman: No, I don't believe the sanctions differ that significantly. In fact, the damages payable are not that significant, but the injunction is imposed.
The Chairman: Mr. Mayfield.
Mr. Philip Mayfield (Cariboo - Chilcotin, Ref.): Thank you very much, Mr. Chairman.
I want to thank the witnesses for coming. I personally thank Dr. McArthur, an old friend, on behalf of myself, Mr. Abbott, and other Reformers who are not here.
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I appreciate the submissions you've all made, and look forward to participating in this discussion with you today.
As I go through the information, it seems as though the competing interests of this industry are probably as heightened in their competition as are politics in British Columbia, where I come from. It's not an easy task to sort through the statistics and the numbers that people bring forward to prove their case.
There are two areas that particularly interest me, and my colleague has been touching on one of them. The other is at the other end, and that's the beginning period - when the patent begins.
Before I do that, I'd like to ask each of the witnesses if they would like to make a comment on where they feel Canada stands with regard to our international competitors on the patent life of drugs and the true patent life of the period of actual marketability of the product.
Ms Shulman: With regard to the United States, as of June 8, 1995, we had the implementing legislation put into place for GATT, and that set the 20-year-from-filing period for the patent, which is consistent to what you had here in Canada, as I understand.
Where the differences arise are not in the actual patent term but in the effective patent life, which is really the time during which the manufacturer of the innovative product can recoup its investment in R and D - and only during that time. As I described in my submission, that time can vary. The patent term extension allows that to be a maximum 14 years. My understanding is that in Canada the effective patent life in the early 1990s has been somewhere in the area of 8.5 years. That's an approximate figure. If we're to look at the same period in the United States - 1993 to 1995 - we're looking at an effective patent life of 10.9 years, so we're getting close to a two-year difference in effective patent life.
I think it's important to distinguish between the patent term of 20 years and effective patent life.
The Chairman: Dr. Coambs would like to intervene. Dr. McArthur, did you also want to on this point, or not?
Dr. McArthur: We were all going to -
Mr. Philip Mayfield: I would be very interested in comments from each of the witnesses, please.
The Chairman: Okay.
Dr. McArthur: I agree with what Ms Shulman said - that there is something like a two-year greater advantage in the United States in effective patent life. It's important to understand. I'm sure you've heard this many times, but 20 years is not the time the patent exists; that's the time from filing. It takes approximately 10 years with most drugs to get them ready for market.
We have several bizarre examples in this country where drugs have been developed in Canada, and the time to develop to get them to market has been so long that it has surpassed the patent life, and those drugs are being marketed worldwide. For anyone who wants, one drug is calcitonin. It has been marketed worldwide for the serious condition of osteoporosis, but it has not been marketed in Canada, where it was discovered at the University of British Columbia, because it was not developed in time to get on the market before the patent expired.
Specifically in regard to your question, Mr. Abbott, I think that the existence of early working creates some queries in people's minds about the real patent term. Because when you permit the situation where companies can start working years in advance and stockpile medications, and then the day the patent runs out start flooding the market with them, there is a question in my mind at least as to whether that's really adhering to the patent intent.
The lack of interlocutory injunctions we've mentioned is a problem. The lack of patent term restoration - which is occurring in the United States and exists in most of Europe and Japan and I think Australia - is of concern.
Another concern is that we've embarked on a periodic review of the legislation, and if you're sitting outside Canada the message that tends to get across is that Canada is now going to have another review on whether they're going to adhere to the international law that exists with respect to patents. That creates some unease in people's minds.
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It's perfectly proper and appropriate to have periodic review, but it should be combined with a clear statement in the act that the intent is to adhere to the international standards.
Mr. Philip Mayfield: Thank you.
Ms Morgenthau: I just got back from B.C. When are you going to get some sunshine?
Mr. Philip Mayfield: Well, the sun was shining when I left.
Ms Morgenthau: I tell you, three days of rain...
The Chairman: Mr. Mayfield, would you like to direct your question to anybody else?
Mr. Philip Mayfield: I think Ms Morgenthau is beginning to answer.
The Chairman: Okay.
Ms Morgenthau: Actually we were thinking very seriously about this question of patents.
It seems to me when we say 20 years, we really don't have 20 years. If we're lucky to get a drug on the market that has already been in existence in other countries, we might be able to get it on, or get some of it in here, within a patent life of 10 years.
We would like to see us stay in line with GATT. We're an international grouping. Canada has tremendous prestige in the countries. We should remain that way, and we can't remain that way if we're not going to play with the big boys. So I feel we should stay with GATT.
I'm here just for the consumer. I have no axe to grind; I just have our members to represent. My feeling is very strong that the consumer should have input in the prices control board, that there should be some more communication between that particular body and the people who actually use the drugs.
One of the things we are suggesting is that instead of over-medication, we should have a trial of, say, a two-week pill instead of a hundred-day pill so that you can try the drugs, and if you have a reaction, you don't have a whole bottle sitting in your medicine chest.
There are other ways of controlling over-medication. I suggest we look at them.
The Chairman: Dr. Coambs.
Dr. Coambs: It's important to make a distinction between de jure patent protection and actual patent protection, as has been implied by other presenters.
For example, in Europe right now there's a crisis unfolding, where because of the integration of the economies and border restrictions, it's now possible to source drugs from other countries. Patent protection is very short in Spain, I believe, and so, for example, hospitals in Germany are now sourcing their medications from Spanish sources, which is technically legal, but on the other hand disastrous for the patent protection provided in European countries.
In other words, they have laws within each of these countries about duration of patent protection, but functionally Germany has a very short time, because they can source medications in this way. So there's a crisis going on and it's shortening in Europe.
The Chairman: Mr. Palmer, would you like to comment?
Mr. Palmer: Sure. I believe the original question was what are our trading partners doing? It's my information that there is patent term restoration in Europe as well as the U.S. and Japan. My understanding is it's up to an additional five years in patent term restoration.
Overall we need to look at a balance as well as our competitiveness and balancing the cost control side with the patent protection side and the incentives for R and D and investment in this country.
If we look at our major trading partners - the Europeans, the Japanese, and the Americans - they do have patent term restoration in place. We need to make a balanced examination of how that might work in this country.
The Chairman: Mr. Volpe.
Mr. Joseph Volpe (Eglinton - Lawrence, Lib.): Thank you very much.
First of all, let me offer my appreciation for the cogent manner in which the presentations were made.
I'd like to ask Madam Shulman a question. Let's review this business of effective patent life. In the United States, when you're talking about an effective patent period - the marketable period when a drug is on the market, reaping benefits on the investment incurred - were legislators in the United States sensitive to the fact that the research and development of a particular drug was done in the United States?
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Ms Shulman: I don't think that was a prevailing consideration at that point. The patent term restoration provisions of Waxman-Hatch were just one part of the act. In effect, they were put in place to balance off a new streamlined, easier-to-market system for the generic drugs.
There were many considerations at that time, principally rising expenditures for pharmaceuticals and a need to be conscious of public expenditures, but I'm not sure there was a recognition of where the actual manufacturing process was taking place. I don't think that was a factor.
Mr. Joseph Volpe: If we were to accept the basic principle that if you make an investment you deserve a return on that investment, is the investment for drug A the same when it moves over across a border or across the frontiers into another market where that investment has not been incurred, or where the investment has already been recovered, in the United States, say? Would the arguments for the same type of patent protection be as compelling?
Ms Shulman: I want to clarify your question to make sure I understand it. In effect, if the drug is manufactured in Europe and imported into Canada or the United States, is it deserving of the same...?
Mr. Joseph Volpe: The same kind of patent protection as in the originating country.
Ms Shulman: I think it's difficult to take one drug and the circumstances surrounding the site of manufacturing, where it's patented or at what time it's patented in its life cycle. I think it's necessary to look at the broader context of the industry, how it's placed and how it's functioning within the borders of the country you're concerned about.
Therefore, I think you have to balance the circumstances of the health care system and of the industry at the particular moment. The site of manufacture may not be, at this point, given the increasingly global nature of the industry, as relevant as perhaps it once was.
Mr. Joseph Volpe: Permit me to probe some more. You seem to be very, very steeped in this.
If we accept the figure Dr. McArthur gave us a few moments ago, that it costs about $600 million to get a drug on the market, if I were Company A and I incurred that amount of money in the United States, I patented my invention in the United States and then priced it - I put it on the market because I fully expect it to recover my $600 million investment - the effective patent period, according to your charts, puts me somewhere at about 10.5 years. So I have about 10.5 years to recover that investment in the United States.
But because I have a good marketing strategy, I now go into Japan, a lucrative market. I go into Europe, another lucrative market. Canada is an inconsequential market, because it's only 2% of the world market.
What type of pricing would I expect to put in place? Would I, as an innovative company, attempt to recover my investment in the United States?
Ms Shulman: Again, I go back to my initial comment. I think it's very difficult to take one drug and set out a pattern for that drug.
I'm not familiar with the figure Dr. McArthur referred to. Our own centre has done fairly rigorous academic study on the development costs of a new chemical entity, and we're about to undertake an update of that study. The benefits of that investment I think must be recouped, because in the process of producing that one new, important, innovative drug, enormous numbers of drugs have failed along the way.
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It's essentially a matter of balancing. If we're going to be able to realize the full benefits that the industry can bring to the health care system, then we must accommodate it within the health care structure. The pricing mechanisms will vary from country to country.
Mr. Joseph Volpe: I think I understand that. But I'm still trying to come to grips with what type of return on investment regulatory systems will permit. I think it was Mr. Coambs who gave us an indication that there's a crisis in Europe because Spain - I think I'm quoting him correctly - has a regulatory system that is inconsistent with other competitor nations in the European Economic Community.
There must be some sort of an incentive for me, as an innovator, manufacturer or distributor, operating in Spain, that my competitors in other countries would not appreciate, or in fact even my own subsidiary in Germany would not appreciate. The return on my investment there has to keep in mind the fact that I can't market anyplace else, or that I might not be able to market someplace else. If I spend $600 million in Spain to discover this product, because it's the only place where they have research and development -
Ms Shulman: It's very unlikely you would do that.
Mr. Joseph Volpe: I see.
Ms Shulman: I should also say that the discrepancy between the patent laws of the various European countries is changing. A harmonization process is under way. Spain, as of 1998, will have a considerably more rigorous patent system in place.
Part of what has happened in the European Community - not to take us off the topic - is something called parallel trade, where importers will buy the same drug in the low-price country, such as Spain or Portugal or Greece, import it, sell it to a distributor in a high-price country, and it will be sold at a price lower than the same drug that was manufactured and packaged in the higher-priced country. This has become institutionalized. The regulatory health care system has suddenly seen the advantage of this. So it's encouraged.
But I think what is happening is that we now have a centralized registration system in the European Community. The need to look at the other disparities, including patent system disparities, has become obvious. And I think in the next five years you are going to see a much more harmonized system in that regard.
The Chairman: Thank you, Ms Shulman and Mr. Volpe.
[Translation]
Mr. Brien.
Mr. Pierre Brien: I would like to direct a question to Ms. Shulman. Are there statutory reviews of patent protection legislation in the United States? Are reviews being held only when there is strong public pressure or does the legislation call for mandatory reviews?
[English]
Ms Shulman: There was not a statutory requirement in Waxman-Hatch for a review. However, an eleven-year period has passed since the implementation of that statute. Just within the past four or five months we've heard an increasing stress on the need to go back and re-evaluate and look at the changes that have taken place in the health care system more generally. These would be some of the things I've referred to in my submissions and which some of my colleagues here at the table have referred to.
There's a very different marketplace for pharmaceuticals in 1997 from what there was in 1984. The life cycle of a drug, the lifetime of a drug, has changed, not just after patent expiry but prior to patent expiry. It's attributable to something called therapeutic substitution that we don't just have competition from generics. There's competition within therapeutic classes. There are caps on reimbursement. There are pricing structures. In the United States we don't have the level of public support for these programs that you do in Canada. Nonetheless, the competitive pressure through the private companies brings tremendous pressure to bear on the pricing structures for pharmaceuticals.
The Chairman: Madam Morgenthau. Go ahead.
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Ms Morgenthau: You bow to what is it, age before beauty?
There's a definite thought that came up with Mr. Volpe's question. That is, in Canada we have not only to pass the federal area, we also have to get a drug passed in eleven provinces and territories. This puts a tremendous amount of cost and time before a drug can be put onto the market.
When we suggested that if it passes the federal experiments it should be accepted in the rest, I do believe it would counter a great deal of the costing that would be part of what you just said. It doesn't matter if it comes in from another country, it still has to go through our regulatory process, federal and provincial. By the time it comes down, the cost of it has really gone up. One way or another, if you want to keep costs down, you have to go at it by cutting other, what I consider frivolous, lab work.
[Translation]
Mr Pierre Brien: This should be taken out of the parliamentary secretary's time. Let me continue on this.
[English]
Ms Morgenthau: Oh, I didn't.
[Translation]
Mr. Pierre Brien: It does not matter. Ms. Morgenthau, if ever there were a restoration or greater protection of drug patents, health care costs in the provinces would obviously increase. Furthermore, you recommend that as soon as a drug receives federal approval it should be added automatically to the provincial lists of refundable drugs.
Therefore, in order to take your reasoning to its logical conclusion, would you advocate an increase in federal health care transfers to the provinces to allow them to absorb these increased costs? Would you go so far as to say that the federal government should increase its transfers to provinces, especially in the area of health care, since we know that these transfers have been greatly reduced over the last few years?
[English]
Ms Morgenthau: I'm glad you asked that question. First and foremost, anytime a drug comes on the market, it comes on the market because it's going to be a benefit. If it's going to be a benefit, that means that some individual, probably a senior, or possibly a senior, will not have to end up in hospital. Therefore, you'll save tons of money because they will be that much better.
In North America 100,000 people now live between 90 and 100 years of age. When Bismarck brought in the first pension in 1848, he made the pension 61 years of age because everybody was dead by then. Let's bring in these drugs. Let's stop ill health. Let the governments save money whichever way they can, but not on the backs of our population.
The Chairman: Dr. Coambs.
Dr. Coambs: Yes, I'd like to support that with a little bit of data. After all, that might sound like it's coming from a spokesman from CARP. On the other hand, we also have to realize that the position you suggested is really an empirical question. It's a scientific question that could be answered, but we don't have the answer yet.
It could well be that your position is right. We don't know. In other words, putting all brand names on formulary might actually reduce hospitalization and produce lower cost. We don't know.
One thing we do know is there are data that show a relationship between the number of prescriptions carried out by a patient leaving hospital and the number of days spent in hospital. The more scripts they walk out with, the shorter their hospitalization stay.
There seems to be some evidence to support this idea that better technology reduces hospital stays. Certainly anti-psychotic medication - you mentioned drugs for schizophrenia - vastly shortens hospital stays.
The Chairman: All right. Do you have a final point to this question?
Dr. McArthur: Yes. When we talk of costs, I hear so often about the enormous costs of pharmaceuticals. I would like to draw to the attention of the committee members that pharmaceuticals constitute 14%, approximately, of total health care costs in this country, which is about the total cost of all physician services. But in terms of taxpayer costs, the cost of pharmaceuticals accounts for 5.6% of taxpayer expenditure on health care compared with say 47% of taxpayer expenditure that goes to the hospitals. Of that amount only 2.5% goes to patent medicines.
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I think we hear very often about the enormous costs, but fail to recognize that they are really trivial. I would just emphasize the point that my colleagues here made. When I was an intern at the Toronto General many years ago, I used to scrub on an operation three or four times a week that was designed to overcome peptic ulcer disease. We would keep people in hospital for five or six days subsequent to that. We don't do that operation any more. It's just not performed any more. It's called a vagotomy and pyloroplasty. And why don't we do that? It's because of the benefits of the drugs that are available now, because we prevent that condition occurring, thereby preventing the need for hospitalization.
So I think the relatively low percentage of health care cost that goes to the pharmaceuticals and the benefits we get from them needs to be remembered.
The Chairman: Mr. Lastewka.
Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Mr. Chairman.
I'm going to take my time in questioning to get some information on what I misunderstood or to determine the origin of some of the information I've gathered.
First of all, Ms Morgenthau talked about the basic research in Canada, and she noted that the annual report of the PMPRB indicated that basic research represented 22% of the total spending, an increase of 12.6% from the previous year. But I don't know where you got that, so I'd like to have some clarification on it. Our figures show that basic research since 1991 has come down. I wonder if you could clarify that.
Ms Morgenthau: What page are you on?
Mr. Walt Lastewka: I'm on your page 4. You talked about a 12.6% increase from the previous year on basic research. Anyway, maybe you could table that with the committee.
Ms Morgenthau: Your page 4 is what...?
Mr. Walt Lastewka: Page 4, first paragraph. It says:
- In 1995, according to the PMPRB annual report, basic research represented 22.2% of the total
spending, an increase of 12.6% from the previous year.
Mr. Walt Lastewka: Our prices show that basic research went down 26.5% in 1991, down to 22.2% in 1995.
Ms Morgenthau: The research we got from the prices control board was that in 1995, according to their annual report - and that's available - the basic research represented 22... That's from their annual report.
Mr. Walt Lastewka: Okay.
Ms Morgenthau: I don't know whether there was a report after that, but this annual report was in 1995.
The Chairman: With the indulgence of Mr. Lastewka, I'm going to ask you to look at that research again with your group -
Ms Morgenthau: I'll check it.
The Chairman: - and then just let us know what -
Ms Morgenthau: I certainly will.
The Chairman: Thank you.
Mr. Walt Lastewka: When you made your comments concerning duplication of processes between the federal government and the provincial government, I take it the point you were trying to make is that once a drug company goes through its documentation and everything to have a drug available to the market, it takes time to go through the provincial -
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Ms Morgenthau: Oh yes, it takes about an extra three years, minimum, to get through. You have to go through every single province. They have to almost duplicate what the federal people have already done. It's unnecessary and costly. If the federal government approves it, then it should be accepted by the provinces. It would certainly save money.
Mr. Walt Lastewka: Thank you.
I want to ask Dr. McArthur a question. I know that you're going to be putting in a summary report. You mentioned that the Patented Medicine Prices Review Board requires examination. I take it you are going to make some remarks on that as far as what needs to be done, how it needs to be changed, and if it needs to be changed.
Dr. McArthur: I made some earlier comment about that. Other studies have shown that sometimes the existence of regulatory bodies like this actually has a perverse effect, and increases the costs. Therefore, alternatives have to be looked at, I believe. One of the important alternatives that goes hand in glove with that is the creation of effective interlocutory injunctions. But yes, that will be expanded upon in the brief we present.
Mr. Walt Lastewka: Were you going to make any comments as to whether they should be using a limited amount of countries versus a larger group of countries, or was your meaning just to get rid of the board?
Dr. McArthur: I think it needs to be examined as to whether the board really does perform the function we hoped it would to do and whether there are better alternatives. I think that needs examination.
Mr. Walt Lastewka: I have one more question. I'm looking at the slide presentation for reference. On page 2, basically you talked about prescription monitoring and the education of patients. There's the education of the public at large on this. Can you comment on maybe what has been done to make this education available to all Canadians?
Dr. Coambs: I guess my point is that by far not enough has been done in that area. This is why we're now in this serious position of having not only expensive inappropriate prescribing, but it's also prevalent and having serious consequences. In other words, I'm saying that education would help, but not enough. By far, not enough is being done in that domain. Were it structured in an appropriate way, it could well be designed to be cost-effective.
Remember that even if we wound up spending $2.56 billion on it and managed to resolve the problem, in other words, we put ourselves in a revenue-neutral position so that we're no longer losing $2.56 billion but we would have to spend $2.56 billion to recover that, then we would be revenue neutral, but the health of Canadians would be far better off. We literally have thousands of Canadians going to hospitals because of inappropriate prescribing.
So far more could be done, and certainly patient education is a critical component of that. I did put physician training at the top of the list though, because I think that's really where we have to start.
Mr. Philip Mayfield: In talking about the term of life of a patent, there is a beginning period and a kind of a fuzzy ending period, which may be extended. As I think about this, some drugs do take a long time to develop and test and put through their trials until they actually receive the licence to market them. But other drugs don't take that long.
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I'm wondering why - perhaps it's from my ignorance of the system that I ask this question - is there not a clear starting point for the patent time to begin? For example, why would the protection continue until 10 years - and 10 is an arbitrary number - after the gun has been fired and everybody can begin selling the product that they have spent two years or 20 years getting ready for the marketplace, rather than having this fuzzy period of time when the patent really exists? Is there a reason for that?
Ms Shulman: It's a complex process. It's necessary for firms to protect their research investment by filing for a patent very early on in the process, generally at the point of synthesis.
Our figures for development times, you have to understand, are averages. Some will take longer, as you pointed out, and some will take less time. From synthesis through to the point of marketing can consume up to 14 years in the United States. I believe the equivalent figure here is a year or so longer than that.
It is essential that the firm file for their patent way back at the beginning of that process, before someone else does. They have to get their mark on that bit of research, that invention, or that innovation.
What clicks in after that are the regulatory requirements: the long, three-phase process of testing the drug on humans. Then, following that, there's the regulatory review period, the Food and Drug Administration period. At the end of that the patent comes alive, so to speak.
Mr. Philip Mayfield: That is the question I'm raising. Why is the term of the continuing patent not extended a fair period from that point so the company can have a fair period to recoup its costs, earn its profit, and satisfy its shareholders? As you say, it's an average. In some instances it's not so long and in other instances it's much longer, so we work on averages. Why can we not work on actual periods of time?
Ms Shulman: That's the theory behind patent restoration. In fact you could have a drug come through the clinical and FDA review process and potentially have one year of effective patent life left. What we're doing here is recognizing that some compensatory action must click in.
Mr. Philip Mayfield: Somehow I have the feeling we have not understood each other.
Ms Shulman: Maybe you could clarify your question.
Mr. Philip Mayfield: If I have not been clear, I apologize.
It seems to me a company takes a variable period of time to develop, test, and gain the approvals for its product. The patent exists through that period of time so that it still remains its own product. But from the time it can begin to be sold on the open market and doctors can prescribe it, can there not be a period of time that is clearly defined, whether it's 8, 10, or 14 years, from that licensing period to when the patent actually comes to an end, rather than work on the average, as we are now? Have I made myself clear this time?
The Chairman: Ms Shulman will speak first and then Ms Morgenthau would like to get into this too.
Ms Shulman: My apologies if I'm not understanding your point clearly, but I think what you're making a case for is a standard, reasonable length of effective patent life.
Mr. Philip Mayfield: That's right.
Ms Shulman: That was the underpinning of the Waxman-Hatch legislation in 1984: that we would set up a system where the maximum period could be 14 years.
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there was some opposition to setting a fixed period of time for all drugs because, as you pointed out earlier, some drugs do come through the system faster than others, and in fact have a natural effective patent life of that period of time or close to it. So they require less in the way of restoration. But I think there would be a lot of support for considering a set longer period of effective patent life.
Mr. Philip Mayfield: Perhaps that is so for those drugs that take a long period of time to develop, test and prove marketable, but for other drugs that don't take that period of time, they may not need to have that extended period.
Ms Shulman: They'll have it anyway.
Mr. Philip Mayfield: They will have it anyway.
Ms Shulman: They'll have it naturally because it will come through faster.
The Chairman: Perhaps we could use the rest of your time to have these other two witnesses respond to the point.
Mr. Philip Mayfield: Yes, thank you very much. Yes, please, Dr. McArthur.
The Chairman: Ms Morgenthau has been waiting for quite a while, then Dr. Coambs and then someone else.
Ms Morgenthau.
Ms Morgenthau: I think I understand what you're saying, and I've often had the same thought. Why aren't a certain number of years given to the company that brings something the moment it hits the shelf? When it hits the shelf and is on the market, would it be possible for them to have x number of years to get their money back? I think that's what you mean, when it hits the shelf and then it's marketable. So it can be two years being done or twenty years being done, but once it hits the shelf, it has x number of years. Isn't that what you mean?
Mr. Philip Mayfield: That's basically what I'm saying. Maybe that period of time should be 10, 15, or 8. I don't know what's a fair period of time.
Ms Shulman: It's a fairly revolutionary concept to impose on the patent system that is that simple.
Mr. Philip Mayfield: It strikes me that a company that has 20 years of patent life and it takes them 22 years to develop doesn't get a very fair shake at the profits.
Dr. Coambs: If I can just respond to that, basically what you're suggesting though is a legislative change. All those at this end of the table are people who are really working within the existing legislation. But you do have the power to create other legislation.
Mr. Philip Mayfield: That's why I'm a legislator.
Dr. Coambs: That's right, so I put it back to you. I think it's an excellent idea myself.
The Chairman: Thank you very much, Dr. Coambs.
We have two or three Liberal members who want to ask some questions here. We'll start with Mr. MacDonald.
Mr. Ron MacDonald (Dartmouth, Lib.): Thank you.
The Chairman: Keep in mind, Mr. MacDonald, that the bell will start in 15 minutes.
Mr. Ron MacDonald: I was watching the clock carefully during the last couple of presenters. It's very difficult for us on this side of the table to get questions in, because there are so many of us and because of the rotation. Many times when we get to put the question, it has already been asked.
I hope the chair will indulge me a few moments. There are five witnesses, all of whom have had a good debate, but there are four members over here who haven't been able to participate yet.
I first want to comment so that there's no misunderstanding. Canada is in compliance with all the international agreements to which it's a signator. I've heard some comments that may lead somebody to believe that somehow we are trying to shirk our responsibilities internationally. It simply is not the case.
As a matter of fact, to whatever presenter mentioned this, Ms Shulman, the legislation with respect to the ascension to GATT that was done in the United States in 1995 with respect to patent terms was done here two years prior to that. Indeed, Canada was two years ahead. GATT hadn't even been approved when we passed Bill C-91. It was an anticipatory piece of legislation. That is my first point.
The second point is the review. I think it was Dr. McArthur who mentioned this causes uncertainty. This review is a statutory review. Anybody who was here when Bill C-91 was passed knows it was a bit of comfort to ensure the industry did what it said it would do, and actually that the Canadian health care system wasn't adversely affected by Bill C-91.
Nobody in the international arena, particularly in the patent medicine producing companies, should be surprised nor concerned that a review is being done. They supported such a review.
Those are my two points.
The first thing I want to ask is to Ms Shulman. I fully agree that the holder of an innovative property patent - in this case a pharmaceutical - must be able to get a reasonable return on their investment. The thing we've been stuck with at this committee is that we can't quite figure out what is reasonable. The Patented Medicine Prices Review Board says reasonable shall be based on whether or not you're about in the middle of seven other countries on the pricing.
You indicate in the United States with this piece of legislation, which is rather unique because it tries to balance the interests of both sides, that in some cases the government can extend the effective patent term restoration. How is it determined what a reasonable extension is, based on the principle of a reasonable return on investment? The PMPRB tells us they don't get the information that is required to make a decision as to what is a reasonable return because they don't know what the investment was. How do they do it in the United States?
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Ms Shulman: I'm sorry, you've got two concepts.
Mr. Ron MacDonald: If you give patent term extension in the United States under this law, you said it is done so that the patent holder can get a reasonable return on its investment in the pharmaceutical. How do you determine what the reasonable return is and therefore what the extension should be?
Ms Shulman: The reasonable return on investment is not a factor that's considered in determining the length of the extension.
Mr. Ron MacDonald: It isn't a factor.
Ms Shulman: The only thing that is considered in determining the length of the extension is how long that drug has taken to come through what is called the regulatory review period. The regulatory review period is defined in the statute to include the clinical testing period.
Mr. Ron MacDonald: So there is no price test.
Ms Shulman: There's no price test at all.
Mr. Ron MacDonald: Okay. This is a concern I have, as well as others on this side. It's not just that a drug enters the market at a certain price; we want to know whether or not that is reasonable. You're dealing with a monopoly situation.
I'll go over to Dr. McArthur. You indicated you believe that in the situation we're in now, with some fiscal restraint and pressures on our health care system, we should scrap the regulatory agency that tries to moderate price increases and indeed the entry level price of drugs. The situation we've got is a monopoly in any patent, but in Canada you're dealing with a health care system that is part of our national fabric. It's a defining characteristic. It's different from the United States and it's different from some European countries.
How could you possibly believe it would be in the public interest and in the interest of the consumer to get rid of the Patented Medicine Prices Review Board? It certainly believes it has had a moderating impact on prices, and maybe some others on the panel would as well.
Dr. McArthur: I pointed out that I feel strongly this is a consideration that needs to be examined, and the reason for examining it is a very simple one. It's a cost measure. Substantive evidence from Europe shows that where regulatory mechanisms such as this exist, over a period of three to five years the costs are higher than if the regulatory mechanism did not exist. If that is the case in Canada, we should look at it and we should look at alternatives.
Mr. Ron MacDonld: We have looked at it, doctor. Prior to the PMPRB coming in, back in 1987, we were told we had the highest drug prices of any of the seven industrialized countries that we used as our comparisons. It's been only as a result of the PMPRB coming in that we've seen our drug prices have fallen into the middle of that basket.
Dr. McArthur: I think this is true, and it needs to be checked, but I believe in Canada you do have the highest generic drug costs.
Mr. Ron MacDonald: I'm talking about what is regulated under the PMPRB. You know that generic drug patents are not the jurisdiction currently of the PMPRB. We're talking about the PMPRB.
I asked you a question. You made a statement that you believe it should be done away with and that will drive prices down. I've just given you irrefutable evidence that prior to the PMPRB's establishment, the prescription drug prices in Canada were the highest of those of the seven industrialized countries we used for comparisons.
Dr. McArthur: In my view, it is unwise to ignore such substantive evidence that suggests there may be a better way of doing it.
Mr. Ron MacDonald: I just gave you substantive evidence that's empirical evidence, and you seem to ignore that.
The Chairman: This has been going on for seven or eight minutes; it's longer than I've given everybody else. I have to be fair to everyone. Mrs. Parrish.
Mrs. Carolyn Parrish (Mississauga West, Lib.): Thank you, Mr. Chairman.
I want to ask Dr. Coambs a question. I'm quite fascinated by the idea that we're over-prescribing and we're in fact mis-prescribing drugs. It's a very interesting problem, particularly when you've had someone in your family who's been affected that way.
We heard Mr. Sherman of Apotex say that the patent companies put out very glossy brochures for doctors, simply to push expensive medications. I'd like you to comment on whether you've looked over some of the stuff they've put out and what function it serves.
Secondly, I'm curious as to whether this committee is prepared to make a recommendation. It's like telling a guy who builds large apartment buildings we're going to regulate your blocks and your mortar. We're telling the pharmaceutical companies that have to do research that they must do 10% research.
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I'm wondering if this committee should recommend something they don't have to do to make a profit, which is to put a percentage of their profits into educating doctors and the consuming public. This might be a different approach to saving lots of money, if in fact over-prescribing is costing the medicare system a lot of money.
I'd like you to comment on those two ideas.
Dr. Coambs: Those are both very interesting ideas.
Inappropriate prescribing involves writing prescriptions for things that aren't needed, but it also involves not writing prescriptions when they are needed. A good example would be under-prescribing opioids for cancer pain; there's serious suffering related to that.
As for the relationship between glossy brochures and over-prescribing, we reviewed the evidence looking at the sources of over-prescribing and found that in fact this notion that drug representatives are somehow forcing or inveigling physicians to write prescriptions does not seem to be supported by the evidence.
There is evidence, absolutely, that if it were not the case that marketing occurred, new medications would not be used. A good example would be Fosamax, a very potent bone-building drug for osteoporosis, which would remain on shelves, I'm sure, and not be used at all were it not for some marketing efforts, because physicians would be unaware of the pharmaceutical.
But do the glossy brochures result in inappropriate prescribing? To some extent yes, but it is buried in a large number of other problems, mostly around insufficient guidelines for medication; unawareness of those guidelines; physician training problems, where they might be novice physicians; physician personality characteristics; patients' requests for medication; and a host of other reasons.
There's a host of other reasons that over-prescribing or inappropriate prescribing occurs; it's not simply because of glossy brochures.
Mrs. Carolyn Parrish: So would you believe then that a two-prong system, something that further educates doctors but also begins to educate the public, is something we should be doing?
Dr. Coambs: That's a very interesting idea. What I call CME, continuing medical education, is a critical part of the whole problem.
Approaching the whole system rather with a cooperative effort of asking what pharmaceutical makers can do for the health care system and how we can work together as legislators to get an optimal relationship between the legislation and the health of Canadians seems to me a better approach. This is again the tobacco control thing, where we have spent years in cooperative effort and are getting somewhere because we cooperated rather than using an adversarial approach.
You definitely have a good point there. It's the kernel of an important idea about cooperation.
Mrs. Carolyn Parrish: Thank you.
The Chairman: Mr. Volpe and then Mr. MacDonald.
Mr. Joseph Volpe: First of all, Mr. Chairman, I want to apologize to my colleague to my left, who's a doctor. He's been getting beat up in this presentation. If you guys think he's responsible for all the drug cost increases, you're mistaken. He's really a nice guy.
Mr. Bernard Patry (Pierrefonds - Dollard, Lib.): Thanks, Joe.
Mr. Joseph Volpe: Madam Shulman, can we go back for a second to fixed patent life? I thought in the last response you gave an indication that the reason patent term extension is given is almost exclusively associated with the approval process. It doesn't really have anything to do with the amount of money, the costs associated with the research and eventual bringing to the approval stage of a drug. It has nothing to do with costs and everything to do with the approval process and the costs associated with that approval process. Did I hear you correctly?
Ms Shulman: You did, and that was in response to a question as to how one calculates the amount of the extension. In calculating the amount of the extension, there is no consideration given to costs, rates of return, or anything of that sort.
If we're going to look at the policy issues behind the implementation of patent term restoration, clearly there's a recognition of the long pre-clinical testing period, which in fact in our cost study was the most costly component of the entire process, and then at the other end the FDA review process.
So indirectly there is a recognition that this is a period of time when there's a tremendous investment and no opportunity to gain returns on it.
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Mr. Joseph Volpe: I appreciate what you're saying, and I'd really like to have that study so we could ask you questions on that component. I'm satisfied with the response you gave me on the patent term extension as it applies to the policy of getting through the approval process.
I wanted to avoid asking Mr. McArthur a question, because I thought his presentation was pretty straightforward and didn't leave much room for doubt about where he stood.
Dr. McArthur: Thank you.
Mr. Joseph Volpe: Except I think about seven times you gave an indication of theft, stealing, piracy, and so on. I was under the impression that our legal system worked quite well actually, and that anybody who was coming in with a pharmaceutical not of the innovative variety - and I use that word in quotation marks - really had to go through a regulatory process, was quite strictly governed by the legislation in Canada, and was subject to all kinds of punitive consequences if it didn't go through that system. So I was a little bit surprised.
I wanted to ask you about the one drug you said was not on the market because the patent life expired and it was no longer worthwhile for the company to engage in a health-related, socially desirable activity. That struck me, because the PMPRB came before this committee a couple of days ago and said 44% of non-patented drugs are responsible for 44% of all prescription drug costs, so the companies that are marketing those drugs responsible for 44% of all costs for prescription drugs don't feel the need to have patent protection. I think that's what they said. Do you have another explanation?
Dr. McArthur: All I can do, sir, is give you the details of the example. It's one I happen to be personally familiar with, because this particular drug, called calcitonin, was discovered at the University of British Columbia when I was a research student there in 1960.
It was licensed in Canada I think in 1976 for treating two obscure diseases, Paget's disease and hypercalcemia, which are both very rare diseases. The use it is particularly important for is the treatment of osteoporosis, particularly in women. It's virtually a miracle drug in the treatment of the pain that goes with osteoporosis.
It still has not passed all the regulatory steps that have been set up by HPB. In fact the pharmaceutical companies tell me the regulatory steps that were set up to obtain licence for the drug were unethical and were such that they could not do them. I can't speak to that - you'd have to ask them about it - but they've certainly said that in public.
So here we have a drug that was discovered at the University of British Columbia in 1960 and was licensed for limited purposes in 1976 but is still not available in Canada in 1997, 37 years later, for an extremely important treatment modality. But it is available in, I'm told, over 100 other countries worldwide for that purpose.
The Chairman: Thank you for that example.
Mr. MacDonald and then Mr. Patry.
Mr. Ron MacDonald: I need to ask a question of Ms Morgenthau.
If I recall, originally on Bill C-91 seniors generally were very concerned about the extension of patent protection and its potential impact on pharmacare programs and the like. They were concerned about potential increases in the price of drugs, or at the very least no lowering in some drug prices because there would not be the competition on the market as quickly. Is it not still a concern of your membership that pharmacare programs are becoming more restrictive because of rising drug costs?
Ms Morgenthau: Let me be very specific. At no time have we been concerned about time. We feel time is not the essential thing. What is essential is that drugs should be available and affordable, that we should keep our scientists in Canada, and that the prices control board should have teeth to make sure those prices are there. At no time have we said anything about extension or not extension. If the extension will bring those drugs onto the market, then we want that.
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I will say something about Mrs. Parrish's question about education. An excellent program has been put out by PMAC, called ``Knowledge is the Best Medicine'' - and we have participated in it - whereby anyone can freely get the knowledge necessary to educate them as far as medications are concerned. They set out what I call a bank book that everyone can take to their doctor or their pharmacist, and in it are registered all of their drugs.
That is fantastic, because then you don't duplicate your drugs and you don't get drugs that bump into each other. That whole program is being done by the pharmaceuticals, and that's great.
But time is not the important thing. What is important is that drugs should be available.
Mr. Ron MacDonald: Could I have a quick answer, Dr. Palmer? Your report is very impressive. How was that paid for? Was it commissioned by someone?
Mr. Palmer: The research was funded by the brand-name pharmaceutical industry.
Mr. Ron MacDonald: Thank you, Doctor.
The Chairman: Mr. Patry.
Mr. Bernard Patry: I have one question for Mr. Palmer. My question is about cost.
It seems the population feels that when a new drug comes on the market, the price of this new drug or medication will remain at the same level for the next 10 years. You drop it for when it first comes on the market. Will you comment about the competition between the brand-name companies for the same class of medication?
Mr. Palmer: If I understand your question, sir, what a pharmaceutical company tries to sell is value for their particular product. I'm not sure whether or not you're going to get the costs of manufacturing and making these drugs, but the way these prices are set is in terms of value. If we have a crowded therapeutic class, then there's competition to keep those prices down, but the way the prices are set is in terms of the value a particular product offers for the therapy it delivers.
Mr. Bernard Patry: No, that was not my question.
Mr. Palmer: I'm sorry.
Mr. Bernard Patry: Let's say you're taking something in the ACE inhibitors family. The first ones coming on the market could be four times a day, as it is with Capoten. Then suddenly another brand-name company comes out with another drug, and that means it brings to the population a decrease in the price of the first drug, because if the first company wants to remain on the market, it needs to decrease its drug price.
Mr. Palmer: Typically the first and second products on the market will be priced at about the same level and the subsequent entrants will come in at a lower price. The first one may or may not lower its price to compete. Typically the evidence is it doesn't, because it was the first one there. It has established the market and it will hang onto that market and typically not have to lower its price.
The new ones that come on will have to either come in with a better product or lower their price or both to compete in a market such as the ACE inhibitor market, and we've seen that with products such as quinapril and others that are lower-priced than captopril and enalapril.
Mr. Bernard Patry: Thank you.
The Chairman: Ms Brown.
Ms Bonnie Brown (Oakville - Milton, Lib.): Thanks, Mr. Chairman.
Madam Shulman, you mentioned that the centre is attached to Tufts University and is partly funded by Tufts and partly by the industry. I assume by that you mean the pharmaceutical industry.
Ms Shulman: I do, yes.
Ms Bonnie Brown: Could you tell me what percentage of your budget is funded by the university versus the industry?
Ms Shulman: I would say the university contribution might be a third.
Ms Bonnie Brown: And the industry about 66%?
Ms Shulman: The industry would not be the full balance of that. We do get government grants and grants from other foundations.
Ms Bonnie Brown: Could you be specific about the percentage from the pharmaceutical industry?
Ms Shulman: There's no doubt it is the majority source of our funding. I would say it would likely be 55% to 60%.
Ms Bonnie Brown: Thank you very much.
We've already heard today that one of the studies was funded by the Pharmaceutical Manufacturers Association. I'm wondering about your study, which was most interesting, about over-medication. Who funded that study?
Dr. Coambs: That was funded by a grant from the Pharmaceutical Manufacturers Association of Canada.
Ms Bonnie Brown: Thank you.
Dr. Coambs: We, by the way, are an independent scientific group. In a sense we are paid for our objectivity.
Ms Bonnie Brown: Yes, I understand.
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Madam Morgenthau, you were describing to us the wonderful information that was available through the PMAC. I wonder if that's where you got your information. Were you also briefed by the Canadian Drug Manufacturers Association, or just by the one group?
Ms Morgenthau: No.
Ms Bonnie Brown: May I ask you, considering seniors groups in the country are very concerned about this review and about the 20-year patent life - which we all agree has been agreed to in these international agreements - why yours is the only group that seems to be on the other side on the issue? How do you explain that?
Ms Morgenthau: Fact and fiction. We do what our members say. We are certainly not funded by any other area.
Ms Bonnie Brown: I didn't think you would be.
Did you have a board meeting to clear your brief before you came?
Ms Morgenthau: Oh yes, of course. And by the way -
Ms Bonnie Brown: How often do you have a general meeting?
Ms Morgenthau: If I may continue, we get information from the prices review board and the government. We get tremendous information from the generics companies, and we get information from the pharmaceutical companies. From all of those, we select a policy. We do not -
Ms Bonnie Brown: Is it the executive of your association that does that?
Ms Morgenthau: Yes. All the briefs go through the executive and our policy firm. We have a number of research people and public relations people. These are the people we can ask for information. Everybody is very happy to give us their information, and from that information we put together briefs. We are not paid by any organization or any corporation -
Ms Bonnie Brown: No, I didn't think you were.
Ms Morgenthau: And I think we're a unique group of persons in the whole of Canada. We're growing very quickly. I did bring some applications for anybody here who is over the age of 50.
The Chairman: Ms Morgenthau, I'm sorry, we have a vote in another minute and a half that people have to be down in the House for.
I thank the panelists very much for coming here today.
Two of you have reports. Could you table your reports, please, and give them to the researcher?
The committee is adjourned until 7 p.m., when we will meet in the room across the hall.