June 28, 1967 (27th Parliament, 2nd Session)


Harry Cruickshank Harley


Mr. Harley:

Mr. Chairman, I want to take advantage of the debate on the estimates of the Department of National Health and Welfare to say a few words about some of the committee reports which are so seldom debated in the House of Commons. First of all, I want to say a few words about the health and welfare committee and its hearings last year on birth control. As I am sure all hon. members of the house are aware, the committee recommended that the words "preventing conception or" be removed from the Criminal Code, the effect of which would be to make the dissemination of knowledge and the sale of contraceptives legal in Canada. I must say that during its hearings the committee was greatly concerned about the fact that if these words were taken out of the Criminal Code there might be some trouble with the advertising of contraceptives which would be considered to be in bad taste and the indiscriminate sale of contraceptives in various stores which again would be in very bad taste. The committee made some very sensible recommendations regarding a few amendments of a simple nature to the Food and
June 28, 1967

Supply-Health and Welfare Drugs Act which would cover the sale and advertisement of contraceptives.
I should like to say as a member of that committee which adopted the report almost unanimously, a report which in my view reflects the feelings not only of members of this House of Commons but of the people of Canada, that I would be quite shocked and surprised if the government did not carry out the recommendations which that committee made. I certainly expect it will do so in the fall when amendments to the Criminal Code, about which we have been told, will be brought about.
In that connection I should like to say a few words about a subject which has not been discussed in the committee to date, namely, the matter of abortion. When the committee met on the question of birth control it was understood by the committee that they would be dealing solely and specifically with the question of birth control and not the question of abortion. The two matters are completely separate and should not be considered together or confused.
As the house is aware, yesterday several private members' bills dealing with abortion were sent to the committee on health and welfare which now has that reference before it. It is hoped the committee will meet soon in view of the fact that representations have already been made to various members of the committee, and hearings should be held in the fall. It is hoped that during the summer recess the people who are interested in the subject of abortion will have two or three months in which to prepare briefs and get ready for an appearance before the committee which should sit early in the fall. I believe that full and detailed hearings will be necessary. I think most people in Canada agree that some changes with regard to abortion are necessary in the Criminal Code, but there are a great many different opinions as to how far these changes should go and how they should be brought about.
I should like to devote most of my remarks to the special committee on drug costs and prices which reported to this house on April 3 of this year. However, before I get into that subject to any great extent I should like to say a few words about the 12 per cent federal sales tax on drugs which, as the Minister of Finance mentioned in his budget, would be taken off the price of drugs as of September 1 of this year. Hon. members will note that the report of the committee did not recommend that the sales tax should come off all drugs

but that it should come off prescription drugs only. It is my understanding that the government removed the sales tax from all drugs because it was administratively very difficult to take if off one form of drugs only and it would also create great difficulties for a doctor to whom a patient might say "I know I can buy such and such a drug over the counter without a prescription, but if you give me a prescription for it I can buy it without having to pay the federal sales tax." This would mean a great deal of paper work for the doctor. I thought the government made a wise decision in removing the tax from all drugs.
[DOT] (4:40 p.m.)
The reason, of course, that the effective date is September 1 is to allow the drugs now on the druggists' shelves, and on which tax has been paid, to be used up. A druggist always has to keep a large stock of drugs on hand to meet any demand, and these stocks will not be used up by the time the change is made on September 1. Unless a druggist is willing to absorb the loss on these stocks, prices will not automatically fall on September 1, 1967. As is mentioned many times in the report of the committee on drug prices, the prices of drugs will not fall 12 per cent when the 12 per cent federal sales tax is removed.
I should like to put on the record two paragraphs from the report of the joint committee on drug costs and prices, starting at page 30:
From these figures one might be inclined to conclude that elimination of sales tax could result in an average reduction of 5 to 10 per cent in the price of drugs to the consumer, depending upon the particular pricing method in use. However, reduction in prices is not ensured simply by the elimination of the sales tax. This point was emphasized by many who made representations to the committee. It was pointed out that the elimination of the federal sales tax should be taken as part of a program to reduce drug prices and that this can be better assured by introducing competition into the drug market. Evidence, for example, has been shown that tariff reductions have not always been accompanied by a corresponding decrease in the price of drugs although the cost to the manufacturer was lower.
Both the drug manufacturers and retail pharmacists offered the opinion before the committee that the benefits of a reduction in sales tax would be passed along to the consumer. However, the committee concludes that, without more effective operation of competitive forces than presently exists in the drug industry in Canada, the only certain result from removal of the tax would be a reduction in costs to the manufacturers. The consumer must also understand that the removal of the 12 per cent federal sales tax on drugs will not, (however much drug manufacturers and retail
June 28, 1967

pharmacists honestly co-operate), lower the price of drugs 12 per cent for the reasons already discussed in this section.
_ Since the publication of this report, Mr. Chairman, we have heard rumours that drug prices either have gone up or will go up prior to September 1 so that there will be no effect from the removal of the sales tax. I personally, along with many other members of the committee, have had a great deal of interest in this subject. I have taken pains to make as many detailed inquiries as I could concerning this rumour. I must say I have found no evidence at all other than the case of one drug by the name of demerol, which is a narcotic that is not prescribed very widely nor it is very expensive. I feel it is only fair to the drug manufacturers and pharmacists to point out these facts. I have found no evidence that drug prices have gone up or will go up. As a matter of fact, I am told no increase in drug prices will take place now after all the adverse publicity. I should point out that one of the companies brought about a reduction in the price of a fairly expensive antibiotic during the hearings of the drug committee.
As I know all members are aware, the special committee made 23 recommendations, which we refer to as a package deal, to bring down the cost of drugs. Generally speaking, the recommendations contained in the report can be divided into two sections, each of which emphasizes a basic idea. The first section of these recommendations to lower drug prices would make cheaper drugs available in Canada or make drugs manufactured in Canada less expensive. Fifteen of these recommendations were designed for that purpose.
The second group contains six recommendations, and these are designed to make sure that if available drugs are cheaper or if cheaper drugs are available-I am sure hon. members will see the distinction-they meet the requirements for safety established by the food and drug directorate. There were three other recommendations made in the report which probably have no effect on the first two groups but which the committee felt might be useful.
I should point out that while lower drug prices are important, they are of no use if the drugs are not prescribed. I should point out too that the report itself is not worth the paper it is written on if we cannot convince the medical profession that they can safely prescribe the drugs that are available in Canada. Less expensive drugs must not be 27053-133J

Supply-Health and Welfare less safe. We must do what we can to bring down prices but we cannot do that by sacrificing the safety or the quality of our drugs. There is no question but that less expensive drugs are available in Canada now. If one has any doubt about this, one has only to look at the practice of the government of Canada and most of the provinces in tendering. I am pleased to say that there was no evidence before the committee that any significant problem dealing with the safety of drugs had been introduced since the government began issuing the requirements for drug firms tendering on a particular drug.
These requirements come under the Canadian government specification board and are called standards for manufacture, control and distribution of drugs. Certainly the drugs purchased by the government are cheaper because no federal sales tax is paid on them, but the saving as a result of tendering on drugs goes far beyond that. The inspection of drugs intended for government use or public use comes under the food and drug directorate.
It seems to me that cheaper drugs can be made available because the inspection services are the same. I feel that to ask doctors to change their prescribing habits would be a very serious responsibility, but the committee undertook it and eventually the government will have to take that responsibility. When the doctor prescribes drugs he wants to be sure they are safe. I should point out, and I am sure every member of the committee is aware, that any drug can kill if it is taken in large enough doses. Some drugs can kill even if they are taken in the prescribed manner because the person may develop an idiosyncrasy or allergic reaction. As a result of my experience I can say that no drug is ever prescribed or taken lightly by the medical profession.
In order to ensure knowledge of drugs and their safety, the committee also recommended that a bulletin be published and that copies of it be given free to the doctors. It should be published by the federal government and sent to the doctors monthly. Here I would include the following information which is found in the report on page 17, and this information should be contained in the publication:
(i) Generic name of the drug
(ii) Names of all manufacturers of the drug, and brand names of the above drug
(iii) Comparative costs and clinical equivalency of the above drugs
(iv) Therapeutic action of drug
(v) Side effects of drug, contra-indications and toxicity
June 28, 1967

Supply-Health and Welfare
(vi) Last assay for each company's product, of content and availability of active ingredient, solubility and disintegration
(vii) Any problems with any company's product toxicity, impurity, seizures, court actions, failure to meet standards, etc.
4f this bulletin were published it would provide the doctor with knowledge of all the products which were available on the Canadian market, how safe they were and how much they would cost in each case. I am convinced that cheaper drugs, or perhaps a better expression is less expensive drugs, can be made available in Canada, first of all, by importing cheaper drugs. The committee made many recommendations concerning trade mark and patent changes. If these were carried out as recommended by the committee the importing of cheaper drugs would be possible.
[DOT] (4:50 p.m.)
I know that the drug manufacturing industry in Canada is afraid that if these recommendations were carried out the industry would suffer a great deal and perhaps disappear. I do not agree with that view at all. I think it is a very live industry and that it would drop its prices and be forced to compete. Bringing in cheaper drugs from outside Canada, provided they were safe-and the committee report took that into account -would inject competition into a relatively non-competitive market as it exists at the present time.
The second way that less expensive drugs could be made available in Canada is by lowering the cost of the drugs that are actually manufactured in Canada. One of the startling things to committee members, I think, was when it was revealed that approximately one third of the manufacturers' dollar in Canada actually goes on marketing and promotional expenses.
Reference was made in this debate earlier and also in the committee hearings to a recommendation in the Hall report concerning marketing expenses, and I should like to put it on the record. I read from page 22 of the committee report on drug costs and prices:
The Hall commission likewise came to the conclusion that marketing expenses in the drug industry were too high, and recommended a compulsory method whereby this expense might be lowered, namely, "that in the application of the provisions of the corporation Income Tax Act to the manufacturers, importers and distributors of drugs, consideration should be given to establishing a maximum of 15 per cent of total sales as the allowable deductible expense for advertising, sales promotion, 'detail men', and other similar items",

The committee did not agree with the Hall commission on this point, and in explanation of that disagreement I want to put on the record a sentence in our report. If I may again quote the committee report, in the next paragraph there appears this passage:
Yet again, regardless of the savings hopefully expected as a result of the recommendation, it might well be that the drug companies would, regardless of increased taxes, press their promotional activity to meet the continued competition of their rivals-which might easily result in higher costs at the manufacturers' level, and then higher drug costs to the consumer.
So the committee felt that the recommendation of the Hall commission would actually tend to increase the price of drugs rather than lower it.
We often hear a great deal about the question of quality control or safety of drugs. Evidence put before the committee showed that this is not a feature of great cost; therefore the question of safety is not a debatable one. There is nothing in this report that would jeopardize the safety or quality of any drug. To use safety as an argument for the high cost of drugs is just not acceptable.
In summary, Mr. Chairman, what the report really says is that price competition is the answer in the Canadian drug market, not product competition between companies as now exists, with the accompanying high marketing and promotional costs. As I mentioned earlier, this is a package deal. The recommendations made in the report would mean changes to the Food and Drugs Act, the Customs Act, the Patent Act, the Trade Marks Act and, as I have already said, there have been changes made in the budget.
The federal government actually has no power to carry out many of the recommendations which have been made, but we certainly hope that those who have jurisdiction in these areas will carry out their own investigation based on our recommendations. Personally I am convinced-and I think the members of the committee are too; the report was adopted unanimously-that less expensive but safe drugs are possible in Canada. I ask the government, and in particular the Minister of National Health and Welfare and the Registrar General who are responsible for implementing many of these recommendations, to bring in the necessary legislation early this fall.

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