EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 10, 1997

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[English]

The Vice-Chairman (Mr. Walt Lastewka (St. Catharines, Lib.)): At this time, I would like to call this meeting to order. Pursuant to Standing Order 108(2), this is a review of section 14 of the Patent Act amendment 1992, chapter 2, Statutes of Canada, 1993.

It's my pleasure to introduce our witness. With us from the Government of Manitoba is theHon. Darren Praznik, Minister of Health, to make his presentation. I would also ask him to introduce the people with him as he begins.

Mr. Praznik, welcome to Ottawa. You'll notice that there's not too much snow on the ground and the sun is shining. I hope you left the snow back home.

Hon. Darren Praznik (Minister of Health, Province of Manitoba): Mr. Chairman, thank you for that very warm welcome, both officially and personally, when I arrived. Coming from Manitoba this past week, I can tell you that coming to Ottawa is almost as good as a southern vacation. Here in the nation's capital, you should certainly enjoy the weather you're having.

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You and I talked a little bit about the good fortune of our two areas of the world that are receiving major international sports championships. I think it was announced today that Winnipeg will have the 1999 world junior hockey championships, and you will have the international sailing championships. Is that correct?

The Vice-Chairman (Mr. Walt Lastewka): We will be hosting the world championship of rowing.

Mr. Praznik: I can tell you that with the water we're expecting from the Dakotas and the Red River watershed, we could probably have ocean-going sailing this summer. We're expecting quite a crisis in our province, as you can appreciate, and it's going to be a tough spring for us.

Mr. Chair, I would like to offer the apologies of our delegation. I was hoping to be able to have a copy of my presentation for everyone in both of our nation's official languages. Regrettably, the events of this past week, with the blizzard and the shutdown of many of our offices and services, prevented us from being able to do that, both provide copies to everyone and provide them in both official languages, and I apologize to members of the committee. It's one of the hazards of trying to put the final touches on a document and have it properly translated during the course of a blizzard and the follow-up. So I offer our apologies. We hope to provide you very shortly with copies of our presentation in both the English and French languages for the benefit of all members of your committee, should they want to refer to it.

The Vice-Chairman (Mr. Walt Lastewka): Thank you very much, and I'm sure we all understand the difficulties of the past week.

Mr. Praznik: Mr. Chair, as well I would like to indicate to you today that I am here on behalf of the Government of Manitoba.

Within my delegation, I have Ms Deb Vivian, who is a senior policy adviser in the policy management secretariat of the executive council of the office of the premier; Mr. Ulrich Wendt, who is a senior policy consultant with the Ministry of Health, who deals with drug patent and other issues within our department, and Mr. Nigel Lilley, who is the director of industrial development with the provincial Department of Industry, Trade and Tourism.

So we are here today not just to make a presentation from the perspective of the Ministry of Health, but to make a presentation on behalf of the general interests of the Government of Manitoba.

Mr. Chair, as Manitoba's Minister of Health, I appreciate very much this opportunity to appear before the standing committee to present the views of the Government of Manitoba on your review of Bill C-91. As your committee reviews Bill C-91 and looks to the future, we recognize it is important not to dwell excessively on past decisions, but rather to learn from and apply the lessons of the last few years. This is the approach Manitoba has taken in preparing this submission.

As we address Bill C-91 in the context of reduced overall federal health care funding, as we attempt to balance support for domestic industry and multinational research efforts, we must not lose sight of the fact that the primary concern should be the provision of quality, affordable health care for Canadians, and it's a concern I believe we all share, whatever our political stripe. Our national health programs, our support for the health industry and related legislation, such as Bill C-91, are here to serve that end, and not the reverse.

Mr. Chair, the 1990s have seen significant changes to the Canadian health care system. A fundamental shift in the concept of health, as well as major financial, economic, social and systemic challenges, has provided the impetus to move towards a more integrated, effective and appropriate system of health care and health services. At the same time the first and foremost goal of health system renewal remains the preservation, protection and improvement of the health of Canadians.

Medications are, of course, an important element in the health care system. They play a vital role in protecting and promoting the health of the population by preventing, treating and curing disease and other health conditions. Nevertheless, pharmaceuticals also represent the single largest financially destabilizing component of the health care system today. At a time when other health care expenditure increases are being controlled, drug costs continue to escalate.

Four years ago, at a presentation to the Senate banking, trade and commerce committee, Manitoba tabled an overview of the probable impact of Bill C-91 on Manitoba's health industry and on the people of our province. That overview predicted that Bill C-91 would aggravate the problem of escalating drug prices, jeopardize health industry development in our province, and add to the financial burden on our health care system. In addition, Manitoba voiced skepticism about promises of increased regional research and development investment through the Pharmaceutical Manufacturers Association of Canada.

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Today, as I appear before the Standing Committee on Industry, I must report that every one of those major concerns outlined in the 1993 Manitoba submission turned out to be justified. There is one exception I would note. I would like to point out the very significant investment of Wyeth-Ayerst in Manitoba in both production and research. I think it's worth noting that exception to my general statement. For that general reason, our fulfilment of our predictions, I will be addressing some of the same basic concerns once again here today.

The presentation will focus on three main areas. The first is the importance of making affordable health care, including pharmacare, a primary consideration of your review. The second and third are economic development and cost containment. We will have recommendations to offer in each of these areas.

On the first one, the area of health care priority and drug programming, we all know this review is taking place simultaneously with federal and provincial efforts to renew our national health care system. Recently the Prime Minister's National Forum on Health made its contribution to that renewal process in a major report released in February. That report contained a number of comments and conclusions that are directly relevant to this review.

For example, one section of the forum's analysis dealt explicitly with Bill C-91 under the heading, appropriately enough, ``Decisions made without consideration of health outcomes''. The report stated:

Historically, whether or not information was available, many health care decisions were made without explicit health outcomes in mind.

It cited the patent drug legislation and the consequences for drug prices as a classic example.

The report went on to say:

Informed stakeholders have little patience for decision makers who neither articulate clearly nor make the basis for their decisions transparent, especially when these decisions affect health and health care.

I will return to the issues of price and cost later in the submission.

It is important to note, however, that a key recommendation of the national forum, the inclusion of a national drug program under medicare, was qualified by the further recommendation:

That the federal government should undertake to support and assist provincial efforts to manage drug utilization and costs, and avoid initiating any policies that might create impediments to such efforts...

Manitoba's first recommendation to this committee, then, is a very simple one: that the committee take into account the direct connection between the review of Bill C-91 and the discussion of the future nature and affordability of publicly funded drug programming in Canada.

Mr. Chair, the second area of our presentation is economic development. Two components of Bill C-91 have an impact on economic development in the pharmaceutical and biopharmaceutical industries in Manitoba. These are the linkage regulations and PMAC research and development.

First, about the linkage regulations, Manitoba acknowledges the importance of fulfilling federal international trade agreement commitments. We recognize that patent protection must exist for a viable pharmaceutical industry and that this protection should be equal to that provided for comparable industries in comparable G-7 countries, including the United States and the United Kingdom or other nations of the European Economic Community. But commitments under trade agreements must be balanced against commitments to affordable health care, to the Canadian industry, and to regional economic development.

Because of Canada's international trade obligations, Manitoba recognizes the need for a patent enforcement mechanism. However, the current linkage enforcement mechanism negatively affects our ability to maintain and build our domestic health industry and thus must be updated to reflect current industry needs.

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The nature of recent high-profile patent litigation involving new generic drugs is an illustration of the need for a change to the mechanism. The linkage regulations have caused up to four years' delay in notice of compliance approval.

Much of the issue around the linkage regulations is based on process patents for pharmaceutical manufacturing. Final-product patents would perhaps be a more appropriate means of dealing with this.

Simplifying the process to the advantage of both parties concerned seems to be reasonable. We would suggest that the current litigious nature of patent protection through the current linkage regulations needs replacement with a cleaner, clearer and quicker approach, an approach that continues the attempt to streamline the nature of patent protection.

There are other alternatives. For example, Canada could completely move away from process patents in pharmaceuticals, and implement and move to end-product patents. The recent and impending legislation concerning lovastatin illustrates that before the real issue of patent infringement is addressed, the companies concerned have been in court, battling notice of compliance issues.

Manitoba feels that a new mechanism should address the real issue, the patent infringement, not the side issues oriented to the NOC linkage regulations. Enforcement of drug patent law should be consistent with the enforcement of any other patent legislation. Other jurisdictions use a judicial interlocutory system to enforce patent protection, and perhaps that should be what we do in Canada.

For over a decade Manitoba has taken a proactive and aggressive position on attracting and promoting health industry development in our province. Manitoba has been successful in attracting multimillion dollar projects for research, development and the production of biopharmaceuticals. The industry's revenue has progressed from $25 million in 1984 to over $330 million in 1996.

However, the current linkage enforcement mechanism is constraining Manitoba's ability to maintain and expand our health industry sector. For this reason, our second recommendation to this committee is that current linkage regulations be discontinued and replaced with a simplified and fair enforcement mechanism, one that will balance patent protection and the development of the domestic pharmaceutical industry. The enforcement of drug patent law should be consistent with the enforcement of any other patent legislation.

Mr. Chair, the second area of economic development is research and development. Manitoba has had great concern over the R and D investment it receives from the Pharmaceutical Manufacturers Association of Canada companies, reported through the PMAC and the PMPRB publications. According to figures for 1995, Manitoba currently receives only about 1.4% of PMAC's national R and D expenditures, even though our province qualifies for about 4% to 5% of the Medical Research Council research grants for peer-reviewed research. This disproportionately low percentage has not changed since the introduction of Bill C-91, although the PMAC companies pledged a more equitable regional distribution.

Manitoba represents approximately 4% of the nation's population and looks for a PMAC percentage investment in R and D at least equal to the percentage of our population. Based on 1995 PMPRB and PMAC data, this would translate into approximately $22.4 million rather than our current estimated $7.9 million - an estimated difference of $14.5 million a year.

The industry's promise to increase support for research was an explicit reason for the benefits the industry received under Bill C-91. The PMPRB reports that total spending by pharmaceutical patentees in R and D increased by more than 11% in 1995 to $624 million, while spending on basic research in 1995 increased by 12.6% over the previous year. This spending on basic research, however - the research that leads to new drugs and supposedly improved health outcomes - represents in fact a smaller portion of R and D spending than it did in the period from 1990 to 1993.

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In other words, Mr. Chair, the share of expenditures on R and D for basic research has effectively decreased since the enactment of Bill C-91.

Manitoba has considerable R and D capabilities to promote the pharmaceutical industry. Manitoba boasts world-class research facilities, an established health biotechnology infrastructure, and an aggressive medical biotech research-oriented educational system. Manitoba is the proud home of significant industrial commitments. Company facilities such as Wyeth-Ayerst's hormone extraction plant, the Biovail sustained-release pharmaceutical production plant, and health biotechnology firms such as Apotex Fermentation Incorporated, Cangene, Novopharm, Biotech, and Genesys Pharmi are in Manitoba. Research components including the National Research Council Institute for Biodiagnostics, the new Health Canada-Agriculture Canada Bureau of Microbiology, with combined human and animal level 4 bio-containment capability, the Manitoba Institute of Cell Biology, the St. Boniface General Hospital Research Centre, the Atomic Energy of Canada Whiteshell research establishment, and a strong medical research and clinical base, provide an excellent catalyst for economic development in my province.

These commitments by innovative and generic pharmaceutical firms and federal agencies demonstrate that Manitoba does have the research excellence and investment climate that make our province an attractive choice for a share larger than 1.41% of the Pharmaceutical Manufacturers Association of Canada companies' commitment to research in our nation.

Therefore, our third recommendation is that the committee establish an enforcement mechanism for PMAC R and D allotment to resolve the issue of regional disparity in R and D funding. Integral to a more effective approach should be a target based on the percentage of population by province. Separate targets for basic and clinical research should be established by province and attained by the year 2000.

The next story I wish to deal with is price increases. PMPRB data suggest they have done a good job of regulating prices on the medications under their purview, given the rules and guidelines under which they operate. The chair of the board, Dr. Robert Elgie, has suggested the report shows the PMPRB has had a significant impact and continues to play an important role in moderating prices and price increases of drugs in the Canadian health care system. The PMPRB suggests that its compliance and enforcement activities saved consumers $32.7 million in 1995, for a total of $107 million since 1990.

The review process must be kept current to address the future costs of new drug products properly. Manitoba is concerned, however, that Bill C-91 will cut off the flow of new generics entering the market and cause significant price increases over the next five years and beyond.

Between 1975 and 1994 Canadian expenditures on drugs increased from $1.1 billion to$9.2 billion, rising from 8.7% to 12.7% of total health care spending. Drug expenditures increased faster than any other major category of health care, including hospitals. When one considers that these drug expenditures are inclusive of drug costs in the category of hospital expenditures, the rate of increase for drugs is a matter of considerable concern.

Participants in the national stakeholders conference in April 1996 expressed concern about the limitations of the PMPRB. They noted the surging costs of all drugs and cited Bill C-91 as a source of higher prices.

Drugs are a significant component of health care. The status of drugs as an essential public good makes them prone to cost escalation without limits, which shows the necessity of the PMPRB.

The critical stage in drug pricing is at the point of first listing. The PMPRB could make its price comparisons in a broader range of countries than seven. We should be looking at the lowest actual price within those countries as the basis for determining the initial drug price, not just the listing price. Since many of the drugs are covered by provincial pharmacare programs, the benefits of, in essence, bulk buy must also be part of that calculation. Our domestic objectives in health and social policy and industrial policy would then be facilitated. Protection from high drug prices would benefit the health system and our fellow citizens, would pave the way for a strong domestic drug sector and would improve the level of research and development.

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Our fourth and final recommendation, therefore, Mr. Chair, is that the PMPRB widen the number of countries to which price comparisons are made in establishing initial prices and that they look at the lowest actual price within each country, inclusive of the benefits of bulk buying. Strict price controls should be in place to ensure Canada pays only the lowest price available anywhere on an ongoing basis. Strict penalties for non-compliance should be included, and these may even include a civil action by provinces to recoup the difference in price where they are overcharged. Price increases should also be linked to meeting regional R and D targets.

Mr. Chair, to sum up, Manitoba has a strong pharmacare program and an excellent health system. Manitoba also has a growing and vital health industry infrastructure, which deserves to be allowed to further develop. Our goal is to maintain and improve our health services as we build our health industry. That is why we've attempted to set out a balanced set of recommendations for your committee that meets the objectives of improved service, economic benefits, continued research and cost containment.

I thank you so very much for the opportunity to make this presentation, and I look forward to your questions.

The Vice-Chairman (Mr. Walt Lastewka): Thank you, Minister. We'll now begin questions with Mr. Brien.

[Translation]

Mr. Pierre Brien (Témiscamingue, B.Q.): I would like to welcome the Minister of Health of Manitoba. At the beginning and in your brief, you expressed your concern about cost control. There has been a great deal of talk about patented drugs. Do you have any mechanisms in place to control the cost of generic drugs? In Ontario, there is a limit on the prices of the first generic on the market and a second one for subsequent generics. Do you have any controls of this type?

[English]

Mr. Praznik: Mr. Chair, the nature of the generic industry is that it doesn't have the protection of the patent, and what we found in our experience in our pharmacare program is that a generic industry exists. By the way, Manitobans are greater users of generic drugs per capita than most other provinces, if my data is correct.

Our pharmacare program will cover only a generic drug if a generic exists, and we'll cover only a patent drug if a generic doesn't exist. We have found time and time again that the generic industry, being highly competitive and without patent protection, has kept down the cost of the drugs they offer on the market because of the competition. Our difficulty is in the area of patent drugs where the same competition doesn't apply.

[Translation]

Mr. Pierre Brien: As I'm sure you know, the Canadian generic industry is controlled chiefly by two major players, which could limit competition to some extent. As a result, in some provinces, in particular Quebec and Ontario, a decision was made to regulate the price of generic drugs. For example, Quebec does not pay more than the province that pays the least. Ontario has a 75% maximum rule for the first generic on the market and 10% less for the second.

You have not decided to establish any similar procedures. You are concerned about cost control. So at the moment, you can control the cost of generics, but you are not doing so. Is that correct?

[English]

Mr. Praznik: Mr. Chair, we have a different pharmacare program in Manitoba. In Manitoba we have complete coverage of drugs on our formulary for all citizens, subject to a deductible based on income. I believe for a family income under $15,000 we have a deductible of 2%. Over that amount it's 3%. Then we pay the entire cost of those drugs. There are also some other provisions. That's why under our particular program we'll pay for the generic or the least-cost drug if that is available, as opposed to people making their own choice. So we have used that as a cost containment.

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The point of the matter is, though, that in our experience it has been the generic industry, which is not protected by patents, that has given us the best cost alternatives in our pharmacare program. It has not been the patent industry. So we appreciate the balance between research and cost.

That's why we're not saying we should change the basic essence of the legislation of a 20-year patent protection, consistent with other G-7 countries. But we want to make sure there are no unreasonable mechanisms in the legislation that are going to prevent the development of the generic industry or lower-cost generic drugs coming on the market on a timely basis, particularly when they are not infringing on patents.

So we are looking for mechanisms here that ensure a fair, speedy and transparent decision-making process on whether or not there's a patent infringement. We're not really challenging the basis of the legislation of a 20-year patent protection. What we're really talking about is making sure there are speedy, transparent decisions so that everyone can live by the rules. We believe that ultimately strikes the right balance and our system gets the benefit of generics. Other provinces may not. The point of the matter is really having speedy decisions on whether or not there is an infringement of the patent law. That's really the crux of our concern.

[Translation]

Mr. Pierre Brien: I conclude that you have no price control procedure in place. You take the least expensive drug, that is the generic, but you do not control its price. Your concern is that infringement disputes be settled quickly.

If there should be a link - and I emphasize "if", because that is something we are still discussing here - between the fact that at the moment generic drug companies have the privilege of going trough the approval process during the patent period, of producing drugs more quickly to ensure that they are available for the market as soon as the patent expires...

This is unique to the Canadian generic drug industry. It is allowed to do that, but, on the other hand, there are the linkage regulations. So it is not clear that there is a link between the two, but if we want a procedure similar to that for other types of patents - namely possible injunctions, recourse to the courts with damages and abolition of early reproduction - is there not a danger that this might increase the cost of the health care system?

[English]

Mr. Praznik: Mr. Chair, I guess the concern we have with the linkage is that it doesn't resolve in a quick manner the fundamental issue of whether or not there's an infringement of the patent. If a company infringes a patent, then it should suffer the results that flow in the normal course of law. If it doesn't, it should be entitled to, I think, a quick and speedy decision so it can get on with its business. I think many are aware of protracted legal battles that took place between, I believe, Merck Frosst and Apotex over a particular issue. They were in the system for nearly four years, and the fundamental issue of whether or not there was an infringement of the patent was not resolved. They're back in court under the regular system.

So what we're saying is that the Parliament of Canada, in its wisdom and consistent with other nations, established a 20-year patent protection. We all agree with that. That's consistent. You're always going to have issues about whether or not there's an infringement. What we want is a speedy, transparent process that can make those determinations so that companies can get on with their lives. If we are using generics and another province's drug system is not, we'll move on and make our decisions. But we don't think a process with an injunction system of up to 30 months and that does not have a determination of whether or not there's an infringement is a good way of doing that. Ultimately, perhaps pharmaceuticals should be treated like any other issue or any other product that is protected by patents.

[Translation]

Mr. Pierre Brien: I'm going to ask you to clarify what you just said. You said that there is an automatic injunction for a period of 30 months. However, as you know, that is the same length of time as Health Canada's approval period. The product could not be put on the market on the very day on which the two parties appear before the administrative tribunal, because the approval period would begin at the same time in any case.

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So there would not be an automatic 30-month injunction. If that is the case, please explain how there could be an automatic 30-month injunction, given that they have to go through the Health Canada approval process at the same time.

[English]

Mr. Praznik: Mr. Chair, in thinking this through a little, you really have two processes. You have a process in which Health and Welfare Canada determines whether or not this product is one that can go on the market for health reasons: a science-based process. Then you have a patent process, which protects the developer of a product and their right to have a monopoly on that product for a time. Quite frankly, I would have to question whether or not linking those two in this process is really appropriate. They are two different processes, for two different purposes.

That's one of the issues you have to sort out. We respect the fact that patent companies don't want to have their patents infringed on. If I were in their shoes I wouldn't. But no one is served by a process that ties it up for a long period without resolving the fundamental issue.

What we are suggesting to this committee is that in any government structures we create as legislators, it's only fair to expect they will be transparent and timely. Let the decision-maker, if that's going to be the courts - and we suggest that's the right place to make a decision in issues of patent infringement, just as the experts in Health and Welfare are the right place to make a decision on whether this is a safe product - get on with making that decision and using the remedies of patent law which are there for everyone else. That's what we're suggesting happens. Then each case will be decided on a timely basis and on its own merits.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Bodnar.

Mr. Morris Bodnar (Saskatoon - Dundurn, Lib.): Thank you, Mr. Chairman.

Welcome, Mr. Minister. I'm wondering whether you are appearing today and making these representations on behalf of yourself as minister or on behalf of your government in Manitoba. That wasn't clarified to me.

Mr. Praznik: Mr. Bodnar, I think I clarified that in the beginning. This is a presentation that's being made on behalf of the Province of Manitoba, not the Minister of Health.

Mr. Morris Bodnar: I see. Good.

Mr. Praznik: We spent a lot of time working internally on the balance of those issues. As health minister, I always want to keep the costs down, and an industry minister wants to make sure we're developing an industry. We've worked on those balances in making this presentation today.

Mr. Morris Bodnar: Mr. Minister, you probably heard the comments of our health minister on the PMPRB. Since the PMPRB only has patent drugs under its jurisdiction, are you in agreement that generic drugs should be under the PMPRB as well?

Mr. Praznik: I don't pretend to be a constitutional expert. I gather the authority for their current jurisdiction would probably flow from the fact that it's ancillary to the patent legislation. Property and civil rights are within the jurisdiction of the province, and there's probably an argument there that the jurisdiction to extend that may be questionable, at best. I'm not here to debate that.

Our concern has not been with the generic side of the industry. Just the nature of generic drugs has meant there has been a fair bit of competition in the industry. And we're not trying to push people out of their patent rights. It's just that we have difficulty when there is an issue of infringement or not and the system takes a long time without resolving it and prevents someone who may not be infringing a patent from getting on the market. That's our prime concern, Mr. Bodnar.

Mr. Morris Bodnar: I don't think that answers my question about generics. Do you want to consider that? The control of drugs is an important issue, because the total drug cost you refer to... Most of the drug costs are not from patent drugs. They are generic drugs and across-the-counter drugs. They are not drugs within the jurisdiction of the federal government. They are drugs that are within the jurisdiction of your government -

Mr. Praznik: Right.

Mr. Morris Bodnar: - that are escalating.

I am wondering whether you will help the federal government by delegating generic drugs to the federal PMPRB so that the price of generics can be regulated by the PMPRB.

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Mr. Praznik: Mr. Chair, if I look at information my staff provided to me, I understand that patented prescribed drugs account for the largest share of drugs consumed in Canada today, some 44%, as opposed to -

Mr. Morris Bodnar: It's not true.

Mr. Praznik: Pardon?

Mr. Morris Bodnar: It's not the case. We don't agree with you from the evidence we have. If you have information, we ask that you file it with our committee so we can look at.

Mr. Praznik: I would be glad to. The information that's provided to me, I believe, comes from your Ministry of Health.

Mr. Morris Bodnar: We'd appreciate a copy.

Mr. Praznik: We will check that for you.

The fact is that in our pharmacare program, we have managed by using generic drugs to bring some degree of cost containment against the patented product.

Mr. Morris Bodnar: But you haven't answered my question.

Mr. Praznik: Are we prepared to cede jurisdiction to the federal government?

Mr. Morris Bodnar: Are you or not?

Mr. Praznik: No, because we'll manage our program.

Mr. Morris Bodnar: Now, cost containment is what we're talking about with drugs. Let me give you an example. I use my own example because I'm on two medications, mostly because I have to control blood pressure. One of my medications costs $25 a month and the other costs $18.

Let's take the $18 one. There is a dispensing fee of $6 on it. In the province of Saskatchewan I must pay that dispensing fee every month. I cannot pay one dispensing fee and buy a year's supply. In other words, the consumer cannot buy in bulk. I pay 33% more for my drug because the Province of Saskatchewan has determined that I pay 33% more for my drug than I should be paying. Then they blame the federal government for the high cost of drugs. What's the rule in Manitoba?

Mr. Praznik: Mr. Bodnar, I might suggest that you consider moving to Manitoba.

Mr. Morris Bodnar: Make me an offer I can't refuse.

Some hon. members: Oh, oh!

Mr. Praznik: My local Liberal MP is stepping down. You might want to consider a nomination in our province.

We've traditionally had one of the richest, if not the richest, pharmacare programs in the country. Because of rising costs in general we had to make some changes, but we provide a deductible. In Manitoba you pay a deductible based on a percentage of your income. When you reach that point, 100% of your costs are paid for by the provincial pharmacare program.

By running the program as we do, by being really a large purchaser through that program, we have improved, and hope to be able to improve continuously, our ability to get better prices.

Mr. Morris Bodnar: Mr. Minister, you talked about pharmacare, you talked about publicly funding pharmacare, but you didn't say whether ``publicly'' means provincially or federally. What's your solution to the pharmacare program? Should it be cost-shared?

Mr. Praznik: We're getting into the proposals being floated now by your party, with a federal election coming up.

Mr. Morris Bodnar: No, I'm asking you because you used the term ``publicly funded''.

Mr. Praznik: Today in our province pharmacare is provincially funded. It's part of our program. We've had a pharmacare program in Manitoba, and a very rich one by national standards, going back to the 1970s. We have maintained it and it's been one of our fastest-growing budget lines.

Where should the federal government be? I would welcome federal participation in pharmacare. I have no problem with that, except - and my caveat is this - if in the next federal election a federal government initiative to become involved in pharmacare used trial projects across the country or provided for a level that we are already providing without reimbursing us, I would have great trouble with that. That would be a patchwork approach. Since we are already providing a fairly rich program by national standards, if you were going to raise other provinces to our level without paying us for what we're doing, I would have a concern with that.

Mr. Morris Bodnar: With respect to R and D in your province, is it the policy of your province to stimulate drug companies to establish in Manitoba by providing certain incentives?

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Mr. Praznik: We provide a 15% research and development tax credit, which goes on top of the federal tax credit. We have worked very hard to build an industry. Generally we've had great success in our province.

I might point out, about research and development, that there has been a sizeable withdrawal of federal commitment to research and development. In my own constituency the Atomic Energy of Canada facility that is being closed -

Mr. Morris Bodnar: That's not my question, sir.

Mr. Praznik: I'm just pointing out, sir, that -

Mr. Morris Bodnar: I just want you to answer the question, about the incentives you provide. For example, with Apotex or any of these companies you have a 15% R and D credit. What other incentives do you offer?

Mr. Praznik: We also have a MIOP loan program, which is a repayment program, and we offer that to anyone.

The point you're getting at, Mr. Bodnar, is whether we would welcome the patent drug industry coming to Manitoba. Absolutely. Wyeth-Ayerst, which I flagged at the beginning of my presentation, is a patent company. They have made a sizeable investment in Manitoba in the PMU area, in Brandon. They are a tremendous company. In fact, I understand just a few weeks ago they were in my colleague's office discussing this particular area and their total commitment. We're very pleased with their commitment. But we haven't seen the same for many of the other companies that made the commitment. Consequently, as a province we're not getting what we believe to be our fair share of the national expenditure by the patent drug companies that made that commitment some years ago.

Mr. Morris Bodnar: I'm told by my chair that I have one more question. I don't know which one to ask you.

On containment of costs, would you agree pharmacare could be instituted by the federal government without any need for increased costs overall and it could be done within the dollars being spent in Canada right now?

Mr. Praznik: That's an excellent question, because it's one you are probably facing as you develop your policy. I guess the question is what is the level of public support now? If you were to provide an equal program across the country and want the provinces to put their current expenditure into the pot, Manitobans would lose, so I would not support that. On a per capita basis we already have, and have had, one of the best programs in the country. So I don't see how you could do that.

Mr. Morris Bodnar: Thank you, sir.

The Vice-Chairman (Mr. Walt Lastewka): I didn't hear Mr. Bodnar's answer on whether he was moving to Manitoba. Maybe we'll talk about that later.

Mr. Morris Bodnar: Not yet.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Brien.

[Translation]

Mr. Pierre Brien: I would like to go back to my last question, because I felt that I did not get an answer to it.

You said that the current linkage regulations provided for an automatic 30-month injunction, and delayed the arrival of generic products on the market. I would like you to tell me how this works and why. That is not my understanding of the regulations.

[English]

Mr. Praznik: Thank you, Mr. Chairman. I appreciate that for the member and myself. These are very complex issues which I, as a new Minister of Health, am attempting to understand and appreciate as well.

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From the understanding I have of the issue, it's not the prevention of generics coming on the market in itself. It is a process established under this bill that provides for a process when there is a challenge or a claim of patent infringement on a generic that is seeking its notice of compliance. But that process - and I think history has proven the case with the Apotex-Merck Frosst dispute - is a long one that does not ultimately decide, or rarely ultimately decides, the fundamental issue, which is whether or not there is patent infringement.

What we're saying, and I think this is an important point, is that we're not here to defend the generic companies or the patent companies. Both have their role to play, and both have a very legitimate role to play.

What we're saying very simply is that we have 20-year patent protection. We are always going to have challenges of patent infringement. But all players, the patent companies and the generic companies, have a right, we believe, to have a speedy, timely and transparent disposition of their issues. That serves the public interest because it means if there is a patent infringement, it's known, decided and done, and the results flow from that. If there isn't a patent infringement, then that company can get on with its life on a timely basis and get into production and offer its product. We're not picking sides in this. We're just asking for a reasonable, fair and timely process that will decide the issue. Quite frankly, there is a lot of precedent in patent law in virtually every other area of patent infringement.

Under this process a lot of decisions have been made over a long period of time that didn't necessarily settle the issue. If there is not a legitimate infringement of patent - and I'm sure the patent companies would perhaps argue they need more information in order to make that decision, and that might be very valid - and you have a good, low-cost generic that could be on the market faster because it doesn't infringe and there's no reason why it shouldn't be, the delay costs the taxpayers money.

If in fact there is an infringement and someone's right to have their patent protected for the 20-year period is being infringed upon, they should have the right to make sure that isn't the case. That's all we're suggesting, a change in the process.

We're not here to pick a side between the generics and the patents. Both have legitimate interests. But we are suggesting the disputes between them, which inevitably will happen in the protection of people's rights or claims of infringement, be decided in a speedy, timely and transparent way. That's all we're asking.

[Translation]

Mr. Pierre Brien: We have to be careful here. We cannot draw general conclusions about the linkage regulations on the basis of the case you mentioned involving Merck Frosst Canada Inc. and Apotex. We cannot say that one case is representative, particularly if it is an extreme case. We have to be cautious. That is hardly a mathematical approach.

If we were to amend the linkage regulations to clarify the process and to ensure that decisions are available in more reasonable lengths of time, could you live with the existing regulations?

[English]

Mr. Praznik: Absolutely. What we are looking for is a speedy resolution. We talked about the case of Apotex and Merck Frosst. One of the results of that case put a major plant in Manitoba in jeopardy. As the decisions have turned out, at this level Apotex has won. To lose those jobs simply because of process, whether they be in Quebec, Manitoba or wherever, is unfair to the people involved. So, yes, if you can develop a speedy, timely and transparent process that is going to give a quick decision by a fair decision-maker on the fundamental issue of whether or not there has been an infringement of patents, we would be supportive of that.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Patry.

[Translation]

Mr. Bernard Patry (Pierrefonds - Dollard, Lib.): As you know, Minister, this body is reviewing drug patents, as required, but because of the Notices of Compliance issued by the Department of Health, its make-up has been broadened. I'm delighted that we have a provincial Minister of Health as one of our witnesses today.

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I would like to ask you a question about the Patented Medicine Prices Review Board.

In one of your recommendations, number 4, I think, you say that in order to determine the initial price of drugs, the PMPRB should increase the number of countries it uses to establish a median price.

How many countries would you suggest?

[English]

Mr. Praznik: Mr. Chair, I appreciate the question on the specifics. You asked me whether it is eight, nine, ten, or eleven. I'm not going to offer a specific example. I don't think I'm in a position to do that.

But the point we're trying to get at is if we can give that board some greater tools to ensure that Canadians, particularly in their publicly funded pharmacare programs, are getting the best possible price internationally, that is what we would like to see happen. We also know there is the benefit of a bulk buy, because where our pharmacare programs cover a specific drug, that drug is going to be used, and whether it's sold individually or to a province in bulk, it still is known that there's going to be a certain market for it. We're just trying to make sure your colleague from Saskatchewan can get the best price on his product.

Mr. Bernard Patry: Mr. Chair, I have another question. Do you have any evidence that the introductory prices for brand-name drugs in Canada are too high?

Mr. Praznik: I don't have that information today, but I know within our work we are doing - and, again, we're involved in an ongoing process of reviewing these issues - we suspect there may be better prices from a bulk buy of some of these products in the United States. I can't offer that proof today.

All we're suggesting to this committee is that we somewhat broaden the mandate of setting that price and give that committee some greater tools to work with. Whether or not I have evidence really isn't important, because if the tools are broadened and there is no cause for concern, it won't affect the price for those companies. If there is a better price to be had by casting a net a little wider, then the only people who benefit, I believe, are Canadians.

[Translation]

Mr. Bernard Patry: A number of our witnesses, particularly those from the health field, told us that the role of the PMPRB should be broadened to include non-patented drugs.

You told my colleague from Saskatchewan that non-patented drugs came under provincial jurisdiction, and that you were not prepared to recommend that your government turn over this responsibility to the federal government. That is clear.

As members of this committee, we are very sensitive to the fact that the cost issues involves not only brand name drugs, but also non-patented drugs. How will the government of Manitoba respond to all these pressure groups, to all these seniors who tell us that non-patented drugs are too expensive, even when they cost 75% of the entry price as in Ontario and when their prices are established as they are in Manitoba?

That is a very important issue for the members of this committee. There's a great deal of talk about brand name drugs, but we've heard from health care workers and seniors as well. I would like to know how your province can meet their demands?

[English]

Mr. Praznik: Mr. Chair, that's an excellent area. If I were asked by a national Minister of Health about some of the areas in our system of health care where I as a provincial minister could see a role for federal coordination or effort, the area of bulk purchasing and buying and the acquisition of better prices on product due to coordination at the provincial level are two areas I would offer, and there are a number of others. I know that when we as provincial ministers next meet, this is going to be one of the issues on our agenda. We hope we can see a role for the federal government in coordinating the provinces and doing those kinds of things. If the federal government doesn't do it, we're likely to do it ourselves over time.

The Vice-Chairman (Mr. Walt Lastewka): Thank you, Mr. Patry.

Mr. Volpe.

Mr. Joseph Volpe (Eglinton - Lawrence, Lib.): I have just a couple of comments. First of all, welcome. On behalf of the committee, let me say that before this committee you've discharged your responsibilities as minister quite well. My compliments.

I take it from your last answer, though, that you would favour a national formulary.

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Mr. Praznik: I guess we would have to get into the detail of what that would mean. I'll tell you one area that today frustrates me as a provincial Minister of Health - and there is a great role for the national government, and it's not necessarily an expensive role - is that we need to have that cost-benefit analysis done, particularly on new drugs.

In Manitoba and other provinces we're dealing with one now with Betaseron. As provinces, each of us sits there and has to make a decision on whether we include a very costly drug in our formulary. In fact, I'm advised over three years it could cost somewhere in the neighbourhood of $50,000 for one individual. The health benefits of this drug are very limited. What has happened, because of the pressure from users that goes on - and of course people are always looking for something when they suffer from MS, which I believe is the element it provides some relief from; the question of how much is really in dispute - is that you will have one province say yes, we'll try it, and another...so the pressure grows.

I can see a very big role for the federal government in working with the provinces to develop the kinds of criteria and process where we could have a national assessment of new drugs, particularly very expensive ones, on what health effects they have. I think that would prevent this being picked apart on a provincial level.

So there is a very big role for the federal government in that area. There's a role in coordinating the bulk buy, the bulk purchase for our pharmacare programs, particularly for our hospital programs. One thing we've learned in health care over the last number of years - I think all of us who come to it, particularly from different political parties - is that where we're able to walk together on sound facts we have much greater success in making the changes we need to do. It's where we get picked apart and we're not making decisions on sound facts that we get into trouble.

The national government has a very big role to play. I would love the national government to send us a cheque for pharmacare every year, but I know you have probably even greater budget difficulties than we do today. At least we're running a surplus. So is that realistic or not? I don't know. But there are some very needed roles a national government can get into, and I would suggest that's one of them. I hope to make that suggestion to Mr. Dingwall at our next meeting.

[Translation]

Mr. Pierre Brien: You would like there to be more countries included in the price comparisons made in determining the entry price of brand name drugs. I would like to know why you do not apply the same reasoning to the drugs you control, namely generic drugs. Why do you not compare prices internationally or even in other provinces so that the reimbursements you provide are similar to those provided elsewhere.

As you know, some generic drugs sell at different prices in different places.

[English]

Mr. Praznik: This gets down to some fundamental principles about what we're talking about. In the generic industry, by its nature, you have a competitive market, because you don't have the protection of patents. In the patented market you have a monopoly: the sole right to produce and supply a product for a time. The company that supplies that product obviously is supplying it in an international marketplace. They are going to negotiate the best price they can achieve for their product - I would do the same if I were in their shoes - in each different jurisdiction.

What we are talking about in patented drugs for us as a nation is to be able to give ourselves some leverage to be able to secure the best possible price that drug is going on the international marketplace for. We are suggesting to you that we have that mechanism in the review board and that we broaden its tools somewhat. If there isn't really a need, broadening its tools isn't going to make a difference. If there is, if there are countries in the world where arrangements are being made by patent companies at a lower price than the price at which they are supplying Canadians, give that board a wider range of tools in which to find it for Canadians.

With the generic industry you're talking about an industry that doesn't have patent protection. Its products are open to be replicated and supplied. So there is the opportunity for the market to push that price down continually. That's why there's a difference in the way the two are treated. We're talking about reviewing patent prices because patent drugs have the protection, and rightly so, of their patent for a period, in the case of most of the world, of twenty years. Generic drugs have none of that. So there is a difference in principle.

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[Translation]

Mr. Pierre Brien: So Manitoba's position with respect to controlling the price of non-patented drugs, that is the generics, is to leave it completely up to the market to decide.

[English]

Mr. Praznik: Yes, and as a major purchaser in that market, we have some market power. We are maybe not major by world standards, but in the national sense of it we are purchasing, through our formulary, by listing, for 1.1 million people.

If I as a provincial minister am able, perhaps with the assistance of the federal government, to include more provinces in making a bulk buy, I have power; I have room. We can look at other suppliers. There is a marketplace in which we can exercise our muscle as a significant purchaser. That is not the case with patent drugs because there is only one supplier. That's why there is a review board.

All we're asking is that this committee, in its wisdom, look at expanding the tools available to that board just in case there are better deals to be had from those patent drug suppliers in other parts of the world. Why shouldn't we as Canadians want to get them? That's really the question.

So there are two different systems in operation. I welcome the ability to get better bulk buys by joining other provinces.

The Vice-Chairman (Mr. Walt Lastewka): Thank you, Mr. Brien.

Mr. Volpe, I thought you were finished. I apologize. You have another minute.

Mr. Joseph Volpe: I just thought we were at the end of the intervention. The last couple of questions have taken us a little off topic, but I want to thank the minister for bringing us back.

The issue of any company, whether it is a patent company or a generic company, charging a higher price outside Canadian boundaries than it charges here is immaterial to this discussion. I'm sure people from Quebec or Manitoba would be just as happy to get a lower price in Manitoba, and Ontario be damned. But I don't think that is the issue. I'm glad you cleared that up. Thank you.

The Vice-Chairman (Mr. Walt Lastewka): I'd like to conclude this session by thanking the minister for also representing the Minister of Industry. That will be an interesting discussion when you get back home.

Mr. Praznik: Thank you very much. It's been very enjoyable. Enjoy your weather.

The Vice-Chairman (Mr. Walt Lastewka): We'll now do a quick change and get back to our previous session with Professor Vaver.

.1637

.1643

The Vice-Chairman (Mr. Walt Lastewka): Could the witnesses come to the table, please, and the all-party caucus too.

For the benefit of members, in discussion with Professor Vaver and in his discussion with the counsels, we've covered a number of the topics. I wanted to find out which areas we are going to spend some time on. We have a deadline of no later than 6 p.m., and I want to make sure we have some time at the end for free-flowing discussion on anything that any member wants to bring up with either the counsels or Professor Vaver.

Professor Vaver, perhaps you could give us an outline of how we are going to proceed, and then when Ms Grell comes we'll begin.

Professor David Vaver (Osgoode Hall Law School): With your permission, I've spoken with the counsel involved. It seems to me if we turn to page 7 of this sheet we've been looking at till now, the notice of compliance or NOC link regulations sheet, it has at the top topic 2(c), reform options. The third paragraph starts with ``Repeal regulations, and exceptions (see Option II.1)'', then ``Repeal regulations, but not exceptions (Option II.2)'', and so forth.

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It seems to me much of the discussion this morning covered the first three items under the repeal regulations. In other words, the committee and the council were discussing the options centred around this question. If the regulations are thought to be completely unworkable and we ought to ditch them and leave the matter to the courts, what would happen then? The discussion went along those lines. It seems to me in effect we discussed option II.1, which I will read to you very briefly. It is on the sheet labelled ``Option I.1''. It doesn't actually have a name or anything on it. It was among the sheets that were handed out together.

It seems to me we discussed the one which says one possibility is to:

Repeal the NOC Regulations, as well as the regulatory approval and stockpiling exceptions.

Under this option, the patentee would rely upon traditional relief from patent infringement, eg. interlocutory injunctive relief, and suits for infringement.

I think we talked about that at some length; and equally we talked about option II.2, which was in effect the same, except for leaving the regulatory approval and stockpiling exceptions in there.

We also spoke reasonably, I think, about the third of the repeal regulations, heading on page 7, which was ``Repeal Regulations, and lower threshold for interlocutory injunctive relief'', which is option II.3. I'm not sure we identified it in exactly this way, but we certainly did discuss the question of whether, if the regulations were completely repealed, it would be necessary to amend the criteria for interlocutory relief and what other incidental amendments might be made there. We probably did not go into that last point very much, but I think in the time available it's really not necessary to go much more fully into that.

The fourth item, which again appears on page 7 - I'm sorry to keep leaping back and forth - is the option that states ``Repeal Regulations, and provide effective data package protection'', which is option II.4 on the other sheet. This was introduced, sir, as you may recall, in response to one of the member's questions. There were also some comments by both counsel, but not in a particularly structured way, if I may say so.

I would suggest this might be a point at which counsel could start. I could give you an overview of where I think we could go, with your approval.

The next item would be what appears as option I.1, which now moved to a completely different phase of things. That bundle of options proceeds on the fundamental premise that the regulations are no good and we should repeal them. The question then becomes repeal plus anything, and if so, what? Those were the essential options that would have been dealt with until then.

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The alternative is to say the regulations may not be perfect, but they are not so bad that they warrant repealing. There may be means by which we can improve them. So there are now a number of options that deal with that point.

The most radical of them - radical in terms of not just tinkering around the edges, as it were, but restructuring - I think is the one labelled option I.1, which is appropriately enough the first one here, and at last we will get to it. If I may just paraphrase it very quickly for introduction -

The Vice-Chairman (Mr. Walt Lastewka): Would it be possible, Mr. Vaver, to begin with option II.4, conclude that discussion, then go back to I.1, and then to option III.1 and the following in as much time as we have?

Prof. Vaver: Yes, sir. That would be my suggestion.

The Vice-Chairman (Mr. Walt Lastewka): Okay. Could we do that, then? Could we go right to option II.4, which is on a page that's not numbered, and begin there?

Prof. Vaver: I will just introduce it extremely briefly and then ask counsel to deal with it. This is the option that says if you do repeal the regulations, there is still a need to give some protection in respect of the data package that has been submitted by the patentee for its own NOC compliance. This is a provision that appears in a number of countries, including the European Union and the United States in one form or another.

With your permission, I would just ask counsel to address that issue. I haven't asked who should start on that. Would you like to?

The Vice-Chairman (Mr. Walt Lastewka): We tossed a coin this morning, so let's continue on with the coins. Ms Grell?

Ms Emma Grell (Partner, Gowling, Strathy and Henderson): Certainly. Our position, very briefly, on data package protection is that it is something that should be provided for in Canada, not as an alternative to repealing the regulations or effective patent protection, but in line with our obligations under the NAFTA and the GATT as an independent means of protection of the confidential data. These agreements require both effective patent protection and data package protection for the innovative data.

The GATT provision, in particular, has no limits on when the data was filed, and it is our proposal that Canada move to implement that. Also, the GATT proposal has no limit on the length of data package protection.

Again, it is our proposal that Canada move to the length of data package protection given in Europe, which is a period of ten years before which the second entry, i.e. the generic new drug submission, may be filed.

The Vice-Chairman (Mr. Walt Lastewka): Are we okay on the translation? We had some problems there this morning.

Ms Grell: There's no problem.

The Vice-Chairman (Mr. Walt Lastewka): No problem? Okay.

Mr. Hore.

Mr. Edward Hore (Lawyer, Hazzard and Hore): Very briefly, we already have this in Canada under regulation 843 of the Food and Drugs Act. We already have five-year data exclusivity, so we're not sure really what's meant. We don't really think it's a good idea. We think exclusivity should be dealt with under the Patent Act. It should be a patent related matter, and health and safety should be a health and safety related matter in there, and never the twain should meet.

I might just make a general comment here, and that is, I would expect everybody's eyes are going to glaze over with this stuff fairly soon. I'm certainly happy to assist the committee and talk about it, but I would suggest that really what we're doing now is a precise illustration of what I've been saying. It probably isn't really appropriate for a parliamentary committee to be dealing with the minutiae of what is really a litigation process. These are things that are dealt with by rules committees in the provinces that deal with the litigation process. There's a rules committee in the Federal Court that deals with rules. There are lawyers who are interested in this kind of thing, and deal with this kind of question. I don't think it really makes a lot of sense for Parliament to be spending time micromanaging patent litigation in one industry, and that's in effect what we're doing here.

.1655

The Vice-Chairman (Mr. Walt Lastewka): Yes, I understand your opinion on that. But as a standing committee, we many times bring items for discussion on the macro and the micro. This is part of the process of making sure we have heard from many witnesses. I think I mentioned last night that we have met with many, many witnesses and tried to make it as open as possible, and you may be right on some items, but that's the process of the standing committee.

Mr. Brien, would you have any questions?

[Translation]

Mr. Pierre Brien: I would like to comment on that.

I do not share your view, Mr. Hore. It is not inappropriate for Parliament to deal with these issues, even though they are very complicated and technical, and experts could do the job. I think our constituents and citizens generally expect us to study many things.

I would like to know what sort of impact effective protection would have. In concrete terms, will this improve current effective patent protection? Will it delay the arrival of generics on the market? If so, by how long?

I know that you're lawyers, but I am sure you can explain the economic aspects of such a decision.

[English]

Mr. Hore: As I said, we already have this. There were amendments passed to the food and drug regulations in 1995, if memory serves, and there were at that time extensive submissions requested from various sectors of the industry. After much consideration and pondering, my understanding is that a five-year data exclusivity provision was adopted, and it's actually in the regulations now.

Do you want me to go on?

Mr. Pierre Brien: What was the impact on the industry of having to wait five years?

Mr. Hore: Frankly, I'm just not able to answer. I'm an intellectual property lawyer. I'm not a health and safety, food and drug law expert. I have not done a detailed analysis of how that particular section of the regulations has impacted on the industry, so I'd be reluctant to answer, because I simply don't know.

We'd be able to provide that detailed information if you really want it. Keep in mind, though, we heard of this proposal for the first time yesterday, and we were surprised by it, because it seems to already exist. We're not sure why it's being made.

The Vice-Chairman (Mr. Walt Lastewka): Are there any further comment before I go to the other side? Ms Grell.

Ms Grell: Yes, I have a brief comment on the existing provision, Mr. Chairman.

The provision is limited to data filed after January 1, 1994, and as it is currently framed, it does not adequately meet the international standard test, because it's only five years. But it allows in effect the generic to rely on the data prior to the five-year expiry, because it only requires that Health Canada not grant approval to the generic company until five years have expired.

The Vice-Chairman (Mr. Walt Lastewka): Are there any questions on this side? Pass?

Professor Vaver, I take it that we are going to option I.1.

Prof. Vaver: Yes. The option suggested here is that the regulations be maintained, but that the automatic stay, as it were, be modified so that the patent holder has to meet a particular threshold before he can get a prohibition order.

Essentially, the criteria - if you see them in paragraph two of the bold type in option I.1 - would be very similar to the criteria for an interlocutory injunction, so that the patent holder would not be able, immediately upon contesting the notice, to immediately get the stay on filing. It would have to go further and show a seriously arguable case, a serious issue to be tried, material harm that might be defined, and also that the balance of convenience lies in its favour.

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I would perhaps ask counsel to comment on that.

Ms Grell: As pointed out by Professor Vaver, this is a very new proposal and we've not had much time to consider it. It certainly raises matters of interest that would merit further consideration. It does appear on its face to be somewhat complex and cumbersome, to be combining two systems, and to be very complex compared to the existing linkage system. I think if it were to go any further, it would require some further consideration.

For example, one immediate problem that leaps out on reading this is that during the 45-day period when the patentee would have to apply for the prohibition or the stay, it appears possible under that option that Health Canada might go ahead anyway and issue the notice of compliance. You might be trying to shut the stable door after the horse has well and truly bolted.

It's our general position, Mr. Chairman, that the best option is to continue linkage, making the improvements to it that we have suggested. Generally we are interested in looking at other things that could work as effectively or better, with the advantages that linkage has of getting the issues resolved during the regulatory approval period.

Mr. Hore: Mr. Chairman, we've had one set of regulations replacing the normal court procedure, and that hasn't worked for a whole lot of reasons. Now we're going to have another go at it and we're going to have another very complicated system, which I submit is not going to work for exactly the same reasons. It's essentially the very same thing except with different words.

For example, with the test for this interlocutory injunction that would be obtained, I disagree with Mr. Vaver that it's not a substantial difference. There is in fact a very big difference, because apparently all they have to show to get this injunction is a substantial loss of revenue. Obviously, any patentee that has a market monopoly is going to suffer a substantial loss of revenue if a second entry product comes along. That will happen invariably in every case.

The question is whether they are entitled to the market monopoly. If all they have to show is that if the generic comes along they are going to lose money, then why even have the hearing? Of course they're going to lose money if a generic comes along. The question is whether they are entitled to that market monopoly.

This, in our view, does not represent any improvement over the existing system, and in many ways it is worse, simply because it involves yet another procedural upheaval in the Federal Court as we attempt to figure out what on earth it all means.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Brien, do you have comments?

[Translation]

Mr. Pierre Brien: Not right away. If someone else wants the floor, I will come back later on.

[English]

The Vice-Chairman (Mr. Walt Lastewka): Mr. Volpe.

Mr. Joseph Volpe: I would like clarification from Professor Vaver and maybe the others if necessary. This third paragraph states: ``If the criteria were met, prohibition would issue, until expiry of the last relevant patent''. Since we had discussed earlier the end product, making reference to the process and the concept of evergreening, does this in your mind mean the last patent placed on that end product, or just the first product that went on the market?

Prof. Vaver: It seems to me, unless I've misunderstood something, that this is simply replicating the current scheme. Is that not the way you understand it? My understanding is that it's the last relevant patent on the patent list relating to that drug.

So I don't believe this change is intended to change the current system in that respect. Do you understand it any differently?

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Ms Grell: I'm like Mr. Volpe. It's a question I would have to ask as arising out of this proposal as presented.

Mr. Hore: It's clear that procedural complexities of the sort you've referred to - and there would undoubtedly be others - would be many. It would take a very long time to sort them out and there would be repeated trips to the Federal Court of Appeal to do that. It's different from the normal patent system. That would be why everybody would be confused.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Bodnar.

Mr. Morris Bodnar: Thank you, Mr. Chairman.

Mr. Hore, I take it what you are saying is that this particular procedure which is itemized in effect gives an automatic injunction anyway, because any patent holder can establish a substantial or material harm when that includes substantial loss of revenue and substantial loss of marketplace because they will be able to just say they will lose x million dollars, lose their market to such-and-such formularies, therefore they are entitled to an injunction. ``Why are we here? It's automatic.''

Mr. Hore: Right.

Mr. Morris Bodnar: Do you agree, Ms Grell?

Ms Grell: I would have to part company with Mr. Hore on this. It doesn't seem to me this is truly an automatic injunction that is being proposed. It's the same misnomer, I think, because this is a patent taking place while the generic is engaged in obtaining regulatory approval. At that stage there is not a generic kind of market anyway, so you would not be stopping the generic from getting onto market.

As I understand this, if a prohibition is then obtained it is up to the generic to get a declaration of patent invalidity or infringement. Then the timing would be under the control of the generic company to move it along. It would also know just how well its application is progressing during that time from the regulatory point of view.

Mr. Morris Bodnar: We're talking about a distinction without a distinction, are we not? I look at the whole and look at this section and I hear Mr. Hore and I think maybe it's saying in different words exactly what exists now. That's what I'm trying to determine in my mind. Do we have in here exactly what exists right now but in a different way? It's taking a different road but getting to the same place.

Mr. Hore: I think that's well put, Mr. Bodnar. That's exactly right.

Ms Grell: It is tempting to impose a new threshold, a new preliminary proceeding, to be brought before the court, and then a second proceeding. That would be a radical difference from the current system.

Mr. Morris Bodnar: But the result will be the same.

Ms Grell: That is possible. If the system allows the courts to give the stay, then at the end of the day you should have a situation whereby the generic could get the issue of infringement determined and the prohibition lifted during the same time as it's awaiting regulatory approval. That seems to be the way it's set up.

Mr. Morris Bodnar: But if one of the goals, or at least the goal of the committee, might be to streamline procedures, get everything through the system much quicker than it has been going through in the past, this seems to go in the opposite direction, does it not?

Ms Grell: I believe that's a valid comment. We have proposals for speeding up the current linkage system as it now stands and we think they would be a much better option.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Brien.

[Translation]

Mr. Pierre Brien: I've a question for Mr. Vaver.

We're talking about two processes. How much time would it take to get the order? Would it be within the 30 months, or would it be in addition to that?

[English]

Prof. Vaver: The intention would be that it be within the thirty-month period. That seems to be the object. The thirty-month period has been taken as a reasonable period from the point of view of protection of both parties. That's the reason it has been taken. I think this is to be included within that period.

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The Vice-Chairman (Mr. Walt Lastewka): We'll now proceed to III.(i).1.

Professor Vaver.

Prof. Vaver: Sir, with your permission, it's been pointed out to me that I have omitted two particular things. One flows really from the discussion we've just had. It was suggested to me that perhaps the option relating to the repeal of the regulations and the lower threshold of the interlocutory injunctive relief was perhaps not as fully discussed as it might have been before. I'm not sure whether that was your perception or not, but it seemed to me to flow a little from the discussion we just had. If it was your view that it would be worth while to look now at that particular option, which was option II.3, then we might do so. I'm obviously in your hands on that.

This was the option that said if we do repeal the regulations, then because of the particular difficulties there are in getting interlocutory injunctions in patent cases, we ought to improve that by making the submission of a party's NOC submission, a generic's NOC submission, technically an act of patent infringement, which would then require Health Canada to notify the innovator company, and then the company, if it wished, would bring its interlocutory application in the ordinary way in the court, but perhaps subject to a lower standard on irreparable harm. That's at option II.3.

So I don't know whether that was fully discussed, in your view, before. It was pointed out to me by an independent party that related to your committee that perhaps it had not been discussed as fully as it might have been in the earlier submissions.

The Vice-Chairman (Mr. Walt Lastewka): Maybe we could ask the council to be specific in their points, and if there are further questions we'll go from there. Could we do it that way? I was going to start with Mr. Hore, and then Ms Grell, as we went through all the options. We'll finish the day by going back and forth.

I'll ask Ms Grell to start on this one and then Mr. Hore will start on the next one.

Ms Grell: I agree that we commented on the new test when we were dealing with the option on the first page, option I.1. A further comment on this interesting proposal is that this kind of proposal would have to be driven by something that was not expressly mentioned, and that is the provision, right from the word ``go'' by the generics, of full information as to what it actually proposes to do. We'll see later that this is something that would help the current system as well: early and fullest disclosure as to what the generic is going to do, so that before the parties can decide whether they should resort to the courts, they will be able to make a better decision. Also, the patentee and the court will know what the generic case is that they're seeking so-called injunctive relief for.

The current situation with regard to what exactly is in the generic's new drug submission is regarded by both the generic and by Health Canada as confidential. Thus, with any such system that is driven by what the generic is doing in its new drug submission, there would have to be early disclosure, and there could be a provision that provides for automatic confidentiality of that information from the very moment it first has to be disclosed.

The Vice-Chairman (Mr. Walt Lastewka): Thank you.

Mr. Hore.

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Mr. Hore: My comments on this option are essentially the same as on the one we just discussed. It creates exactly the same tests; namely, you can get an injection if you can show a substantial or material loss of revenues. That is at (a), down towards the bottom of the page. It's exactly the same as before.

If you are a brand name company and a generic product comes along, you are going to suffer a loss of revenues - that's not rocket science - so obviously you're going to be able to get an automatic injunction. That's good for pharmaceutical patentees and it's bad for generics. It's essentially an automatic injunction. It's more or less the same as we have now.

Also, in the second line of the boldface they talk about a ``technical act of patent infringement'', so you're creating a kind of legal fiction. Of course the generic product may not infringe the patent. That's the very issue. You're creating a sort of deemed infringement when that's the issue - in order to achieve I'm not sure what, but apparently for some sort of procedural objective.

Again, it gets down to creating an extremely complex system to replace a workable patent litigation system we already have. There are many fairly obvious problems that jump out at me even on a very superficial review of it. No doubt if we were to change the system to something along these lines we would have, once again, extensive litigation on exactly what it all means, so I don't think we would be very much further ahead. We might actually be behind.

Mr. Morris Bodnar: Ms Grell, do you agree this particular option is really the same as the one we just looked at and the results would really be about the same?

Ms Grell: It is similar to the one we just looked at, because of the text involved. Option II.3 puts the test in the context of applying for a type of injunctive relief. Option I.1 puts it in the context of applying for a prohibition. From the limited time we've had to study this, that appears to be a similarity between them.

I would comment that of course ``technical act of patent infringement'' is the language found in the U.S. linkage system. It has been well known since 1984 and is, of course, always in the context where you have a generic new drug submission that says it wants to sell exactly what is covered by the patented product; it's bio-equivalent and interchangeable. That's what we're talking about. So it's not so technical as it sounds.

Mr. Morris Bodnar: Ms Grell, are you getting convinced that maybe we should just rely on the ordinary injunctive procedures and the common laws that exist right now?

Ms Grell: No, sir, and you had our position on that this morning.

Mr. Morris Bodnar: I realize that. I was wondering if you were changing it. I wasn't here, but I was watching you on television in the other room.

Ms Grell: This is all in the context of our position.

Mr. Morris Bodnar: Mr. Hore, you mentioned that it's the same result, but really the test is a little different. You're looking at a serious issue to be tried, and substantial or material harm, and balance of convenience.

Mr. Hore: Right.

Mr. Morris Bodnar: You have additional factors. It isn't the same as in the previous example.

Mr. Hore: Having argued interlocutory injunction cases, I can tell you that if you are the defendant in this situation and this is the test, you're going to lose, because, first of all, the revenue thing is obviously going to work against you. You are going to cause a decrease in revenue -

Mr. Morris Bodnar: What about the balance of convenience?

Mr. Hore: The balance of convenience is presumably that you are arguing the thing and the brand name is on the market and you're not. Obviously the balance of convenience favours the party that's on the market and goes against the party that wants to get on the market and causes a big disruption. So you're going to lose on that one.

Mr. Morris Bodnar: It's almost redundant.

Mr. Hore: It's redundant, yes.

The serious issue to be tried has been interpreted under the RJR case as meaning no more than a frivolous case. That's the way it's interpreted.

You're just going to lose. It's as simple as that.

Mr. Morris Bodnar: Thank you.

Mr. Bernard Patry: I have just a very short question for Ms Grell.

What is the difference between the last two procedures you mentioned?

Ms Grell: The last two options?

Mr. Bernard Patry: Yes.

.1720

Ms Grell: As I see it, the option we just looked at is the same, in that it requires the patentee to be given notice of the generic's new drug submission. I would assume - I'm somewhat in the dark myself - there would still be a patent list system.

Prof. Vaver: I don't see that there would be, because the presumption would be that the similarity in the two submissions would be the technical act of infringement.

Ms Grell: So there's a difference. Just the filing of the generic's new drug submission would be deemed the act of infringement that triggers the proceeding in the court. Then the standard for getting the relief, which is called ``prohibition'' in the first one and ``injunctive'' in the second, seems to be the same.

What is not stated is what happens next. Do you go on to a full trial? In that sense we are in the dark. These are very new proposals, in principle. They would need to be looked at further to see how feasible they really are and whether they are going to give us something more beneficial or effective than what we have.

The Vice-Chairman (Mr. Walt Lastewka): I think we've exhausted the question.

Mr. Volpe, did you have a short question?

Mr. Joseph Volpe: Sure. I want to ask it of the person who teaches law.

In the interventions this morning one of the questions you raised was that we should be considering in context why one particular product would differ from all other products under the Patent Act. If this particular option were to be considered seriously and we were looking at changing the threshold for interlocutory injunctive relief, what would be the justification for doing it for one product and not for all of them?

Prof. Vaver: That is a very good question, of course. It really will come back to the point that the drug industry, because it is in a special case - I'm not putting this forward as a fact, but it would come back to that question - whether you think there are enough special features about this industry, not only historically but as it now exists and as it's likely to exist in the future, to justify making it easier for the patent holders to get this form of relief. I think they justifiably say it is quite difficult to get this form of relief. But that's true of other patentees as well.

So yes, it would -

Mr. Joseph Volpe: We would be accepting the premise that there should be built-in discrimination among industries covered by the Patent Act.

Prof. Vaver: I wouldn't use the word ``discrimination'', because it always has charter overtones, but I would certainly say you would be making them different from others, yes.

Mr. Joseph Volpe: You're probably going to be teaching aspiring lawyers this as well. Is it your view, then, that these three new criteria would lead to an automatic granting of injunctive relief?

Prof. Vaver: That's a hard one for me to say, but I would certainly say it would be easier. If I were counsel for plaintiff I would be much happier with a set of criteria like this. I would more likely get my relief than under the current criteria. I think that would be true.

How it would turn out in practice I don't know, because it may be that courts would start giving the question of balance of convenience a rather harder look than they do now. Courts are interesting things. Sometimes when you force them to do one particular thing they will say, well, that's fine, but we may need to examine another aspect of the case that previously we didn't examine as heavily as we might have; we will now look at that part more closely. I wouldn't rule out the possibility that balance of convenience might be reinterpreted or there will be more pressure to look at that more stringently than they have looked at it until now. But that's speculation on my part, so I couldn't go any higher than that.

Mr. Joseph Volpe: But it would go for one industry only: is that what you're suggesting?

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Prof. Vaver: It would tend to have a spillover effect, I think. Once the courts started looking at balanced convenience more rigorously in respect of one industry, the counsel in another case is going to say, you've introduced these criteria under balanced convenience there, why not us as well?

Mr. Joseph Volpe: We're still in the realm of speculating -

Prof. Vaver: Absolutely.

Mr. Joseph Volpe: - and looking at how the courts might react later on. Is that not the same thing as giving direction to the courts about what we would like to see as an outcome?

Prof. Vaver: I think that's right to an extent, sir. You're giving the court directions rather than directing them, which is the way I would put it, because it would still be a discretionary order of the court. The courts here, I think, say, we are acting in our equitable discretion, and we will look at all of the facts. But it's true that if Parliament has told them they should now treat rather more lightly one of the factors they have tended to treat quite strictly, they will do that because you've directed them to do that. They will take that seriously. I don't think they would take that amiss. I think they would say, Parliament has told us this; we've obviously been doing something Parliament doesn't like, and we'll do it differently now.

Mr. Joseph Volpe: In the realm of public policy, which I think is where some of the discussion went this morning, where they said if you don't think you have good legislation Parliament can always change it, and therefore the courts will think things through differently, as I read this particular option, I'm struck with one of two ideas. One, there's an effort to achieve a particular balance, and it suggests here that the generics be allowed to get on the market a lot faster. The second suggestion, which you might consider contradictory, says, we'll give the patent-holder an opportunity to get injunctive relief a lot more quickly if it's justified. Is that an accurate assessment?

Prof. Vaver: I think that's a very good description, actually, of what is sought to be done by this. Whether it achieves that is a good question. But I think that's a fair comment.

Mr. Joseph Volpe: One of the criticisms of the last round with regard to the regulations was that there wasn't any consultation. This review of the bill provides a good opportunity for consultation and to get some feedback. So you'll forgive me if I press you a little bit further.

The Vice-Chairman (Mr. Walt Lastewka): You have time for one more question.

Mr. Joseph Volpe: Does this achieve a change in public policy as it currently exists, or is this option the same as the status quo? Does it achieve exactly the same result?

Prof. Vaver: It depends what you start by saying the first objective is.

Mr. Joseph Volpe: No, I said the status quo, what we have now.

Prof. Vaver: It's stiffer than the status quo in terms of what it's doing.

Mr. Joseph Volpe: What about in terms of the results?

Prof. Vaver: Whether or not it's fulfilling the same overall objective, sir, depends how widely you define the overall objective.

Mr. Joseph Volpe: Perhaps you can get off your balance beam for a second.

Prof. Vaver: I'm doing my best.

Mr. Joseph Volpe: I suspect I know what the answer will be from both Ms Grell and Mr. Hore. If this is an effort at public policy, I just wondered what the end result of that public policy initiative will be.

Prof. Vaver: It's difficult to say. On the one hand, as you rightly said, it enables the generic to come in apparently earlier. On the other hand, it does let the patentee have the chance of stopping the holder, not automatically, as appears to be the position at the moment, but by having to prove some criteria, which are less than the criteria available under current interlocutory injunction standards. I don't know if I can put it any better than that. In response to the question as to what does it achieve, I think it does achieve that.

Mr. Joseph Volpe: You can answer the question on the next round.

The Vice-Chairman (Mr. Walt Lastewka): We're slowly getting to the end of this one.

Mr. Bodnar.

Mr. Hore: I'd like to make a comment. I have no idea what you mean when you say this allows the generic on the market earlier. I just don't know what on earth you mean. What happens is you make the submission and then they go for this injunction. As I say, it appears to me they automatically get it. So by definition you're enjoined before you've got your regulatory approval. It seems to me you never get on the market with this. That seems to me to be obvious, but maybe I'm reading it differently.

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The Vice-Chairman (Mr. Walt Lastewka): Mr. Bodnar.

Mr. Morris Bodnar: Professor, what we're arguing over is what tests should be put in place. Obviously, when you have two combatants, you want a test that's going to be fair to one and that's going to give the other one a fighting chance. First of all, do you think this particular option gives that fighting chance? If it doesn't, what particular change in that particular test would you suggest in order to make it more balanced so that the generic can in the right circumstances, shall we say, have a pretty good chance of winning and so that the patent-holder wins when the generic is not in the right position? If that's not putting you on the spot, I don't know what is.

Prof. Vaver: I don't know what is either.

Some hon. members: Oh, oh!

Prof. Vaver: I would be very reluctant to be drawn into that because I would then be saying here is a particular thing I myself would favour, and I'm not sure I would necessarily want to do that. But certainly, if you went this route, this appears to put the balance more in favour of the patent-holder than exists under the current irreparable harm test. Of that there is no doubt.

Whether or not it would be as automatic as Mr. Hore suggests...I'm not sure I would call it automatic. I think courts would still look at the equities and the balance of convenience, and there would still be an undertaking given as to damages so that the patentee -

Mr. Hore: Would there? It doesn't say that.

Prof. Vaver: That would be the standard for typical interlocutory relief. So there would be an undertaking as to damages.

Mr. Morris Bodnar: Are we better off leaving the rule for interlocutory injunctions the way it is - not the way it is now, but the common law rule - and then putting in place a provision for double or triple damages?

Prof. Vaver: Do you mean double and triple damages in the event you're wrong?

Mr. Morris Bodnar: Yes.

Prof. Vaver: It's certainly an option. It's not one I've thought of.

Mr. Morris Bodnar: It prevents frivolous applications. It sure makes a party not oppose an application if they feel they're going to eventually lose. In other words, they have to look at whether or not they have a serious issue and whether or not they will win. It really makes the parties think twice as to whether they're going to litigate. I throw this out not as a parliamentary secretary, but simply thinking out loud right now.

Mr. Hore: You mean damages on the patentee if it does not ultimately succeed.

Mr. Morris Bodnar: It depends on who wins on the interlocutory injunction, because this is just an interlocutory injunction pending litigation. Is that correct?

Mr. Hore: Right.

Mr. Morris Bodnar: So if the generic wins at this stage but loses the litigation, the generic has triple damages or double damages against them. The same applies the other way. If the patent drug company wins on the interlocutory injunction and then loses the litigation, that party gets stuck with double or triple damages.

Mr. Hore: In the United States there is a culture where there are punitive damages awarded. So we read in the papers about a woman who spills coffee on herself and is awarded $10 million in damages. Every time I pick up some American newspaper they're talking about the litigation explosion in the United States and the huge awards of damages. That is part of the American litigation culture, which no other country in the world that I know of has adopted.

Certainly, it is foreign to the common law we've inherited from Great Britain. It is not something that Britain ever adopted. The idea we've inherited from Great Britain is that you want damages in order to put somebody who has been wronged back in the position they should have been in.

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In other words, you want it to be just, but you don't want to use damages as a cudgel, a punishment, a way of whipping somebody, because then it becomes essentially a profit-making enterprise to commence litigation. If you do that you're going to have a hell of a lot of litigation against everybody and everybody has to get an awful lot of litigation insurance and so on.

So it is a really substantial change in our culture. Maybe one day we will have this, but I would suggest this is something that would involve a wholesale change to our entire -

Mr. Morris Bodnar: So were the link regulations. So is this proposal a change to our legal culture. I'm suggesting another possible alternative. Maybe the damages shouldn't go to the winning party. Maybe they should go into research in Canada.

Mr. Hore: The way it works in the United States is if it looks as if the patent might be invalid or something like that you get parties buying off other parties and so on. Down there having a right of litigation becomes a thing you can buy and sell. The issue never gets resolved.

It is not a provision I would suggest you would find a lot of support for among the judiciary or among lawyers throughout Canada. The idea of punitive damages is just something that is outside our Canadian legal tradition. I think there are very sound reasons for that, and I think you're well aware of what they are, Mr. Bodnar, as a lawyer.

The Vice-Chairman (Mr. Walt Lastewka): With those comments, we will go to option III.(i).1.

Professor Vaver.

Prof. Vaver: I want to make one minor correction. We do have punitive damages in patent cases, but very rarely.

One of the options that did not get discussed - it doesn't appear very clearly from the deck, but indeed it is there - is the option relating to the U.S. system. It was raised briefly. It's option I.2, which was the removal of the regulations but again making a submission of a generic NOC application a technical act of infringement and then placing the onus on the patentee to move into court within 45 days of receiving notice of the generic's application. Once the lawsuit had commenced, the 30-month prohibition would apply and there would be a patent infringement suit in court. Presumably some resolution would be reached in that way.

That was an option raised in the deck, but a little further down. I think it was also mentioned in response to one of the questions one of the members put. It might be worth while mentioning that before we look at the technical things.

Ms Grell: This option has obvious attractions. It comes from a system that has been in place since 1984. It has gone through all its learning curves. It does address the comment made today that the current system does not make any adjudication on infringement. I pointed out earlier that the facts are to the contrary, that decisions are made as to whether or not that particular process infringes the patent. However, such a system would put that issue beyond doubt, because at the end of the day in the infringement action no one would be in any doubt as to whether or not there was a simple declaration of infringement or invalidity.

A couple of comments from what I know of the U.S. system. The U.S. system works more efficiently than ours in the sense that their patentees get truly detailed statements from the word ``go''. I have seen some that cover the same type of situation where we get two paragraphs, and in the U.S. they are ten pages long. Therefore, you get better information up front.

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One other attraction of the patent infringement system is that you have a true discovery process as part of it. At that stage there is an opportunity for everyone to put forward a full case before the courts.

So there are some obvious attractions to this system that merit further consideration.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Hore.

Mr. Hore: The U.S. system, as I said this morning, is really a horse designed by a committee. It was really the product of a complex congressional deal in 1984. It was put together through complicated deal-making and very heavy lobbying by many parties at that time in the United States, and it was combined with a whole package of other reforms applicable to the situation in the United States at the time. I could go on at considerable length about what these were.

What I would say is that the problems we have now with the system - and the reason we're here - in large part are still there. You get in effect an automatic injunction simply by starting this litigation. You get the litigation and then there's the 30-month period, which can be extended. So we have the same problem of products being kept off the market, which means the public is paying more. That, I would submit, is not a very good thing.

Also, we're going to have a lot of lawsuits because there are the same incentives to start these lawsuits that exist now - namely, you get the automatic injunction merely by starting one - but the difference is that those lawsuits are going to be much more voluminous. They're going to be full-scale actions and there will be a lot more of them.

If we import the U.S. act into Canadian law, we're taking something that grew out of a particular situation that was unique to the U.S. political situation in the early 1980s and we're transplanting it into the foreign soil of Canada, where we have a very different judicial tradition, a very different political and economic situation, and a much greater commitment to publicly funded health care. I would suggest that this is not at all a good idea. We'll have many of the problems we have now, but they will be greater problems because the litigation that will go on will be much more complex.

The Vice-Chairman (Mr. Walt Lastewka): Are there any questions?

What about option III.(i).1?

Prof. Vaver: This set of matters really is a bundle of things dealing with the situation that might arise if you decided the regulations were worth keeping but could do with some improvement. A number of suggestions for improvement are made here. I will go very quickly through them, because some of them are fairly eye-glazing even to some of the specialists involved, let alone anybody who's not.

Essentially III.(i).1 deals with the question of the matters that get on the patent list. There apparently have been situations where patents appear on the patent list that really ought not to be there. The question arises whether that ought to be dealt with simply by a regular court procedure or whether there ought to be a mechanism by which an independent authority, be it Health Canada or somebody from the Canadian intellectual property office, audits the patents to make sure they fall properly within the scope of the regulations. That's a possible option.

Going on to III.(i).2, there have been some situations where multiple notices of allegation have been made with respect to the same drug. It's been suggested that this has caused some complexity of procedure and that there ought to be some means of consolidating or making sure that as many of the allegations that are relevant to a drug as possible are put forward in one document at one time, not in a series of confetti-like applications over a period of time.

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The third option, III.(i).3, essentially deals with a decision of the court that has suggested that the presumption that applies in infringement proceedings, if one has a process or a product by process patent, and a particular product is applied for...can one tell that the product falls within the process? How does one find out whether the process by which the product has been produced is within the patent? Under the infringement proceedings there is a presumption in certain cases that the particular product has been produced by the patented process, and it's up to the defendant to show what process has been used if it intends to challenge that.

The argument has been made that a similar type of presumption ought to apply when a notice of compliance by a generic is proffered, because there are difficulties in finding out at that point, unless the generic voluntarily reveals its process, exactly what process is being used.

There is another option that follows, III.(ii).1, which deals with a problem that has arisen with multiple versions of a drug. The simplest situation might be where the patent list relates to an ingestible version of the drug and then a later injectable version is made that contains the same active ingredient but in fact is an invention. The question has been raised whether it is appropriate that the second version be included in the patent list, or whether it would be better or fairer that it simply not be added. Perhaps the patentee who complains of variations of its initial major patent ought to go the regular route of injunction and not rely on the special regulation procedure.

The final option presented here is option III.(ii).2, which talks about redrafting the damages provision. Earlier in our discussion - it seems so long ago now to all of us, I'm sure - a comment was made that there is indeed a damages provision in the regulations. It relates to a situation where something amiss has occurred and the generic has been injured by it.

There is no jurisprudence on the provision, but it seems extremely narrowly drafted. It seems to me on first reading that it's really drafted to cover a situation where a minister has wrongly delayed the grant of an NOC, which doesn't seem to occur too often. I know there are some cases at the moment in which this is being alleged.

One problem that generics might legitimately complain about is the situation in which they are put under prohibition, but ultimately if the case goes to trial, it is found that they have been wrongly put under the prohibition in that they are not infringing or the patent is invalid. There may be a case for saying that damages ought to be payable by the patentee in that circumstance, or where indeed the patentee loses the prohibition proceeding in the first place so the generic has been wrongly kept off the market for the period between notice of compliance and the non-order that has occurred.

Those were a number of options that seemed to arise from the case law in which there has been some complaint made. There may be others. But they amount essentially to tinkering with the regulations. I say that in the nicest way - making minor amendments, accepting the basic thrust of the regulation, but saying it isn't perfect and we can do a little bit of socket-wrenching here and there to tighten things up and make it better for all parties concerned.

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I guess that's all by way of a rather lengthy introduction. I'm sorry.

The Vice-Chairman (Mr. Walt Lastewka): That's all right.

To the members, is there a specific one you wanted to get some discussion on?

Mr. Morris Bodnar: The last one.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Volpe.

Mr. Joseph Volpe: I wanted a quick comment on each of them by the counsel for both sides.

The Vice-Chairman (Mr. Walt Lastewka): Mr. Brien? Same thing.

Mr. Schmidt.

Mr. Werner Schmidt (Okanagan Centre, Ref.): I wanted to ask a quick question. How much would these options reduce the cost of drugs?

The Vice-Chairman (Mr. Walt Lastewka): Maybe they could include that in their discussion.

I think there is consensus that we get some short comments on the options from each counsel. I will start with option III.(i).1 and Mr. Hore. Next we'll have Ms Grell.

Mr. Hore: My general view is that this is an illustration of what happens when you have regulations governing a litigation process. You find it doesn't work and then you have to change it, so you end up having micromanagement of the litigation process by Parliament. In every one of these issues there are very well developed rules in the normal litigation process that would deal with the issue. They are worked out and there is case law and everybody understands how it works.

Essentially the modifications are trying to make it fair, to make it more like the existing system. It raises the question of why we don't just go back to the existing system, which everybody understands and which applies to any other patent in any other industry.

I'll quickly go through these. On the authority to audit the patent list, the minister is essentially doing this. The case that was referred to about whether the minister has jurisdiction to do it was heard last week. The decision has been reserved. I argued it, in fact, on behalf of the generics.

I don't even know if I want to embark on this. I think the minister clearly has that jurisdiction. The court may disagree. I think it will probably agree, but who knows? It's very hard to say. Much will depend on the outcome of that case. If there was a decision that the minister couldn't audit, then I suppose we'd have a procedural problem that would really be part of all the other procedural problems that exist.

The Vice-Chairman (Mr. Walt Lastewka): Ms Grell.

Ms Grell: On the patent list issue, our basic position, which would have avoided that issue, is that once there is a patent that is capable of being infringed and will be infringed by marketing a product - for example, it will be shown that the process the generic uses is the process in the patent - that patent should be on the patent list.

The other types of patents that have been held by the courts to be not included in patent lists under the regulations as drafted are patents that cover intermediates useful only for making the medicine.

If these patents, because they all deal with infringements, are back on the patent list, you do not have a problem of auditing. Otherwise, if there are limits to the patent list, the best forum for determining whether or not they're properly listed, because that is a matter of the scope of the patents, is the courts.

One comment on this proposal is that it does not necessarily reduce litigation. If you had someone auditing, you would also potentially end up in the courts because there would be a dispute as to the auditor's decision. You would then be applying to the court for judicial review of whether the auditor was right or wrong.

Mr. Werner Schmidt: I have a generic type of question. Are we really changing, or maybe introducing, two sets of litigation: one a litigation under the regulatory function of the department and the other the court system? It strikes me that this is almost what we're developing here - two different kinds of litigation systems. Is that correct? And if that's the case, aren't we making it worse rather than better? I'd like to ask the mediator here.

The Vice-Chairman (Mr. Walt Lastewka): I think that's a repeat of what we talked about earlier.

Mr. Werner Schmidt: I'm sorry. Ignore the question then.

The Vice-Chairman (Mr. Walt Lastewka): We are just trying to get some remarks from either side before we -

Mr. Werner Schmidt: Sorry. I was called into the House.

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The Vice-Chairman (Mr. Walt Lastewka): I appreciate the emergency.

Ms Grell, could you make some comments on option III.(i).2?

Ms Grell: Is that on the multiple notices of allegation?

The Vice-Chairman (Mr. Walt Lastewka): Yes.

Ms Grell: Multiple notices of allegation, or what are sometimes called repeat applications, arise where you have a proceeding pending before the courts and the generic serves another notice of allegation, and therefore you have multiple ones proceeding at the same time.

Our position is that repeated notices of allegation by the same generic for the same drug should not be allowed. That merely increases the amount of litigation, rather than moving towards the ideal by making improvements that have the potential to decrease litigation.

At the moment there are 55 cases outstanding for decision under the regulations. Twenty-four of those are repeat applications.

There are some alternatives we proposed in the document entitled ``Technical Improvements to the Patented Medicines (Notice of Compliance) Regulations''. This was tabled with the committee on March 6. I don't know if this is a good time to go into them, but they are directed at making sure the first proceeding gets determined before the court ever gets to the stage where it has to determine the second one.

I'm trying to speak about this on a very broad basis in the interest of time. There is one option for reform we consider to be very important that is not listed in there, and that is the issue of the extension of the 30-month period. At the moment, under the regulations, that can be done only on a very limited basis on the finding by the court that one party has failed to reasonably cooperate. That is a recent decision from the Federal Court of Appeal in February, implemented in the lovastatin decision.

What we are advocating, and have done so for quite some time, is that the court be allowed to exercise the inherent powers, which it is so capable of exercising, when it comes to controlling its own process. Questions as to when and how the 30-month period should be extended should be determined by the court in the interests of justice in the case or by consent of the parties, because by definition the generic is not going to be consenting to an extension of the time that's going to be prejudicing its new drug submission, and it should be left to the court to determine it on the special facts of the case.

You would avoid a situation, which we now have, where what has been put before the committee as a generic win is not. The matter has not been decided on the merits. The time was extended initially for one year because there was an implicit finding that the generic failed to cooperate. The second extension of time was refused by the court in unfortunate circumstances because the parties were acting on what was understood to be the inherent practice of the courts and what had been accepted in the courts up to that time. But there was in fact a further failure to cooperate by the generic at that time. So because of delays caused by the generic, the 30-month period is at an end as extended, and there has been no decision on the merits.

Mr. Hore: In the lovastatin case, the reason the time was not extended was specifically because Merck did not put forward any evidence showing that Apotex had delayed. That's specifically why the Federal Court of Appeal said, we're not going to extend this period any more; we think 45 months is enough; enough is enough. That's why they said it.

Ms Grell: The court noted there was such evidence. The parties just went for the extension on the basis -

The Vice-Chairman (Mr. Walt Lastewka): I just wanted to hear both sides. I'm sure we could stay here all night.

Mr. Hore: Of course, they want the 45 months to be longer, no doubt about it. They'd like it to go on forever.

Mr. Werner Schmidt: Do you want to stay here for 45 days?

The Vice-Chairman (Mr. Walt Lastewka): No, we're almost finished.

Mr. Hore: I'll deal with the multiple notices of allegation. Here we're talking about what in any normal litigation would be called the pleadings; in other words, where one party says what its case is and the other party says what its case is. Because of the bizarre procedural complexities of the regulations, the odd bind the generics got into is they would say they were not infringing, and then it would turn out that allegation was for some reason premature, such as technical reasons or perhaps they came up with a new source or a new process.

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There might be various reasons, of course, why you might discover later on that you wanted to amend what you had to say, but you couldn't amend your allegation under the arcane and bizarre procedure. Therefore, you had to start a new case, which of course is not something the generics want to do. They don't want to conspire to keep themselves off the market. They want to keep it simple. But unfortunately, the regulations were so peculiar they were forced to bring multiple cases in order just to get one product onto the market. So what Ms Grell was suggesting, really, is that they should be actually prevented from making any kind of subsequent argument, which I don't think really makes any sense.

What we want is a system that actually gets the issue before the court. The regulations essentially make that impossible. Limiting the allegations that you could make would make it even more impossible, so it would just make a system that's already confusing and counterproductive even more confusing and counterproductive.

The Vice-Chairman (Mr. Walt Lastewka): There was a request that we have some comment on option III.(i).2, as we have almost run out of time.

Mr. Morris Bodnar: Can I make a comment on that?

The Vice-Chairman (Mr. Walt Lastewka): No.

Mr. Hore, perhaps you could make some comments on number III.(i).2 on the last page, and then we'll go back to Ms Grell. We'll ask the professor to do a little bit of a wrap-up, and then we will complete the session.

Mr. Hore: There's no doubt the damages sections are completely inadequate. The Federal Court of Appeal actually called them ``particularly obscure in their wording''. Those are the actual words of the Federal Court of Appeal in describing section 8.

That doesn't really solve the problem, because you have a generic that's kept off the market, and although the generic might get damages if that change were made, which would certainly be a good thing, it wouldn't solve the problem that the public is not being compensated for this product being kept off the market, possibly for years. It also wouldn't deal with the other problems under the regulations, namely, that you have a separate judicial review proceeding that does not resolve the issue so that you have to have another patent litigation action started by the same parties over the same drug where essentially the same issues are in dispute. It doesn't resolve any of the really procedural complexities that have so bedevilled the whole process and that, I would submit, are caused essentially by deciding to start again with the litigation process and create a new one, essentially reinventing the wheel when the old one works just fine.

The Vice-Chairman (Mr. Walt Lastewka): Ms Grell.

Ms Grell: In principle, Mr. Chairman, where you have a certain set of conditions, it would be appropriate to have an award of damages. Those conditions would be that the generic has won the case after all appeals have been exhausted and the court determined the cause of the delay in generic market entry was attributable to the patentee. It was something the patentee did, some abusive conduct on its part, some failure to cooperate. The delay we are talking about, of course, is a delay that would have to be certified by the party who knows best what the delay is, that is, HPB itself, which could tell you when the generic NOC would otherwise have been ready. Then you could see how much delay was attributable to the fact that it was still before the court after that time. It will only be for that time period that there could be compensation.

Following up on the committee's recommendations, there's no reason the generic could not donate those damages to a research fund or to the public interest. I throw that out for what it's worth.

The Vice-Chairman (Mr. Walt Lastewka): We have gone past our time.

Mr. Volpe, you wanted to have some discussion on other issues, but I did promise various individuals we would close off at 6 p.m. We'll have one question from Mr. Bodnar and any other short questions or remarks. I'll then ask Professor Vaver to make his final remarks. Then I'll conclude the meeting.

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Mr. Morris Bodnar: I simply have a comment, and that comment is - and maybe it goes back to what Mr. Hore said about us dealing with this in such a micro fashion - we're here because the industry, and primarily the two sides, are unable to deal with this matter themselves.

It seems that one person sneezes and all of a sudden we have a litigation going on. So many cases are going on. We as parliamentarians are having this dumped in our lap to be dealt with.

I want to deal with the consumers and I want to deal with what Mr. Schmidt said. We want to deal with consumer prices. We want to see that the consumer gets a better price. Here we are dealing with two sides of an industry that are unhappy with each other - it appears, because they're litigating all the time - and dealing with procedures that are to be utilized by them. It's very difficult.

We've dealt with it in bankruptcy legislation by having input from many areas over a period of years, and it was resolved with new bankruptcy legislation, which I hope will be passed in the near future.

I'm just wondering if it's at all possible for the industry to sit down and resolve these matters to the best interests of everyone, including the public, because the public then doesn't have to pay these high costs of litigation. Can the industry deal with this in a streamlined fashion, rather than coming and asking us to resolve this matter? Perhaps I'm not asking the right parties.

Mr. Hore: The generics do not want to be involved in all this litigation. The reason litigation gets started is because they're automatically kept off the market, so there's an incentive to start the litigation -

Mr. Morris Bodnar: They're kept off the market because there are patent-holders who have come up with a product, and then the question is how long their patent should be.

Mr. Hore: No, the question is, is it infringed?

Mr. Morris Bodnar: I won't get into a full-fledged argument over this, but surely there could be an agreement between the parties to get together and discuss this.

The Vice-Chairman (Mr. Walt Lastewka): Any further comment, Mr. Hore?

Ms Grell, did you want to make a comment on that?

Ms Grell: On an agreement to discuss? I cannot speak for anyone but myself, but I think everyone should always be open to discussions.

The Vice-Chairman (Mr. Walt Lastewka): Professor Vaver, any remarks? Any assistance you might give to these members?

Prof. Vaver: The only assistance I can give is to ask you to do your wisest best.

The Vice-Chairman (Mr. Walt Lastewka): With that, I would like to thank the witnesses. I know this has been a bit of a different procedure for us - not only for you but for us, too.

Mr. Hore: Mr. Chairman, I'd like to thank all of you for sitting through this. I know you have devoted a lot of attention and time to it, and I've been very impressed with the level of interest and education you have brought to it. I think that's great. I know you've all been putting very long hours into these hearings, so I'm very impressed by the parliamentary performance we're getting here.

The Vice-Chairman (Mr. Walt Lastewka): Thank you.

I want to thank all our support staff who have been very patient the last three or four days in helping us until almost midnight, and you, the members, for your participation.

Ms Grell: I would like to thank you for hearing us. If there are any further questions we could answer by way of written answers to you, we'd be happy to do so. Thank you.

The Vice-Chairman (Mr. Walt Lastewka): I'm sure with the comment Mr. Bodnar made...we'd like you to go outside into another room, resolve it, and come back with an amicable answer.

Ms Grell: You'd be the moderator.

The Vice-Chairman (Mr. Walt Lastewka): I want to thank you very much. This concludes this session until Tuesday, April 15, at 3:30 p.m. in room 253-D, Centre Block.

The meeting is adjourned.

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