February 12, 1968 (27th Parliament, 2nd Session)


Harry Cruickshank Harley


Mr. H. C. Harley (Halion):

Mr. Speaker, it is my honour to participate in the debate. Tonight I wish to do so as the ex-chairman of the special committee on drug costs and prices, to which reference has been made during this debate. I would like to put on the record the terms of reference of the committee, which were as follows:
That the committee be empowered to consider and recommend, as it may deem expedient, respecting a comprehensive and effective program to reduce the price of drugs.
As the house is aware, the committee reported on April 3, 1967 after over one year of intensive and detailed study. I think the basic feeling of the majority of the committee was that if we were to make recommendations which were to be taken seriously by the government, these recommendations had to be based on fact, and I believe we accomplished that. While many people have disagreed with our conclusions and recommendations, to my knowledge no one has challenged the material in the report on which these conclusions were based. I should like to remind the house that this was the unanimous report of a committee of the House of Commons composed of members from every political party in the house.
Patent Act-Trade Marks Act
I would remind the house that there was no mention in the terms of reference to the matter of safety or quality of drugs. I am sure hon. members are aware that two years previous to that time a committee of the house had dealt in considerable detail with drug safety. The present committee realized that the question of costs could not be completely separated from that of safety. The actual cost of safety or quality control cannot be segregated from ordinary manufacturing costs, as they are often an integral part of the manufacturing process in any industry, whether it be a pharmaceutical or any other product. In any event, the committee found the actual cost of safety or quality control to be small but very essential. I would emphasize to the house that no recommendations of this committee would reduce the money spent on safety. As a matter of fact, the matter of safety must come before that of cost. After all, life is more important than money, and no recommendation of our committee should be carried out unless safety can be assured as much as possible.
We all know that the complete safety of any drug cannot be guaranteed, no matter how minor the drug or how major the government's caution and concern. As a matter of fact, if I were to summarize the report of the committee, I would say that the majority of the recommendations, by actual count 20 out of 23, fell into two major categories: first, those that were intended to make lower cost drugs available in Canada and, second, those that would ensure as much as practicable that these lower cost drugs would be safe for the use of the consumer.
[DOT] (8:40 p.m.)
I should like to review a few of the conclusions of the report and make a few comments on them. The first one I should like to comment upon is that no significant change has taken place in the drug cost structure since the recommendations of the Hall commission, which were primarily based upon the recommendations of the Restrictive Trade Practices Commission. So far as the committee could see, the drug industry had made no attempt to reduce drug costs, despite those reports which were very critical of the drug industry. The drug industry had not taken the report seriously and apparently had never expected the government to take any further action on that report, or on our report.
As has been mentioned before, there exists no single method or simple approach which
February 12, 1968

Patent Act-Trade Marks Act can be taken to reduce the price of drugs to the consumer. It was therefore necessary to present a series of recommendations to effect this purpose. As hon. members are aware, and as the minister said, the federal sales tax has been removed and some changes have been made in tariffs. This bill No. C-190 deals with another series of recommendations our committee made.
The medical profession, of course, is responsible for prescribing most drugs. If these committee recommendations are to be fully effective, the medical profession must be completely assured by the food and drug directorate of the safety of all drugs. If the medical practitioners in Canada cannot be assured that drugs in Canada are as safe, and I mean "safe" in a reasonable manner as human effort can reasonably make them, and are, therefore, prepared to use the lower priced drugs, then the report we submitted and the minister's proposed legislation is not worth the paper it is printed on. This legislation will be of no benefit to anyone unless the medical practitioners in Canada can be assured that the drugs that would be available under the minister's legislation would be safe for them to use.
The next conclusion concerns the implementation of the recommendation in connection with marketing and promotional expenses, and the reduction of excessive profits. As an example, the committee was greatly concerned with the average expenditure of 30 per cent of the manufacturer's dollar on promotion and marketing as opposed to 7 per cent being spent on research. In other words, more than four times as much money was being spent on marketing and advertising a drug as was being spent on research into medicinal products. As the hon. member for Hamilton South (Mr. Howe) said, it is important to know also that a good deal of the 7 per cent spent on research was spent on applied research, applying the benefits of other forms of research. Only a very small proportion of that was spent on basic medical research. The committee realized that the implementation of our recommendations could alter, in some respects, the form of the drug industry as it exists in Canada today, removing inefficiency and increasing competition. What the committee felt must be done is to introduce competition into the drug industry, not product competition such as duplication of another successful product which increases cost, but competition on prices, which is the kind that is needed in the drug industry.

I should like to say in passing that many countries, including the United States and the United Kingdom, are having a series of studies made of this problem. It is interesting to note in passing that the Sainsbury report in the United Kingdom recently recommended abolishing trade names and using only generic names for drugs.
I should like to talk for a few minutes about one of the major recommendations of the committee, namely that the food and drug directorate publish not less than once a month an informative bulletin to the medical profession giving complete details on drugs and their actions, and reviewing major drug usage in Canada. This would of course go not only to the medical profession but also to the related professions including pharmacy. The committee realizes that to ask a doctor to change his prescribing habits is a very serious responsibility. It should be done only if the doctor can be assured that the drugs he has the option of prescribing are as safe as possible. To do this the doctor should, and indeed must, have free access to a non-biased current report on drugs which would include certain data-and I should like to emphasize the words "non-biased". In other words, the bulletin would not be put out by a drug company and would be available free to the medical profession. The committee felt the following should be included in that bulletin:
1. The generic name of the drug.
2. Names of all manufacturers of the drug, and brand names of the drug.
3. Comparative costs and clinical effectiveness of the drug.
4. How the drug works; side effects, contraindications and toxicity.
5. The last assay for each company's prod-duct, of content and availability of active ingredient, solubility and disintegration.
6. Any problems with any company's product such as toxicity, impurity, seizures, court actions failure to meet food and drug directorate standards.
The committee feels that the food and drug directorate has been keeping some of its activities from the medical profession. The findings on drugs should be openly reported to the medical profession in public documents. If there are poor quality drugs on the market, then the medical and pharmaceutical professions should be told. The medical and related professions have to be convinced that
February 12, 1968

the food and drug directorate has full and accurate knowledge of the drug industry. To do this, they have to report fully and I believe, in a public bulletin. If the medical profession cannot be assured by giving them freely full and unbiased evidence of all the factors concerning drugs, then it is obvious we cannot expect the medical profession to change their prescribing habits in favour of the lower cost drugs.
I have been asked in what way this might tend to lower the price of drugs. Certainly, the staff that would be required by the food and drug directorate to publish such a bulletin would be expensive and would probably take up to two years to set into motion. I believe, however, that the savings that could be made if the medical profession used this bulletin to their own advantage, and more particularly to their patients' advantage, would be very substantial. The consumer would benefit greatly from this saving, enough to more than justify the expense.
Many hon. members here are aware of the large savings that can be made, many of which have been referred to today, when drugs are purchased under a tendering system. Most of these drugs do come from generic manufacturing houses. Many generic drugs are used by the staffs of various hospitals. These same staff doctors may not use generic drugs outside their hospital practice, but many are often doing so inside the hospital without being fully aware of the source of the medication they are prescribing.
I am convinced more doctors would prescribe the lower cost drugs of generic manufacturers if they were convinced that they were safe to use and equally effective. I hope therefore that the government will see fit, in the very near future, following these recommendations, to introduce the type of bulletin to which the committee made reference. Obviously the federal government has no power to implement some of the recommendations of our committee. Some of the recommendations come under the jurisdiction of provincial governments and some come under the heads of pharmaceutical bodies and other public bodies. I hope all those interested bodies will see to it that the recommendations are given serious consideration. Obviously the government cannot implement in a field in which it has no jurisdiction; we can only bring in recommendations. For instance, we have no control over the field of retail pharmacy, and therefore the government can make no recommendations in that area.
Patent Act-Trade Marks Act [DOT] (8:50 p.m.)
The unanimous conclusion-I emphasize the word "unanimous"-not only of the special committee on drug costs and prices but of the various other inquiries in Canada is that drug prices are higher than they need be and certainly higher than the public is prepared to pay without question. One of the major causes of drug costs has been attributed to the degree of protection accorded to the drug manufacturing industry by such laws as the Patent Act and the Trade Marks Act. This has resulted in a lack of competition. What the committee hopes the recommendation will accomplish is the injection of a greater degree of competition in the pharmaceutical industry at all levels. Despite the many studies that have taken place over the past ten years the industry has not, as far as I am aware, made any attempt to produce solutions to the problems. As I have said, Mr. Speaker, the government has removed the federal sales tax and has made changes in some of the various laws. Today's move is to bring in recommendations that change the patent and trade marks laws in such a way as to provide Canadians with less expensive but equally safe drugs.
There has been a great deal of discussion about patents and patent protection. I should like to point out to the house that patent protection at the present time in Canada is for 17 years and that the present legislation will not change it. The system of compulsory licensing that we are talking about has actually been in effect since 1923. The principle that food and drugs are different from other inventions was actually established in 1923, and is not being established now.
As far as compulsory licences are concerned, Mr. Speaker, I should like to quote the report of the special committee of the House of Commons on drug costs and prices. At page 38 appears this paragraph:
The committee found that up to 1949 no applications for compulsory licences had been made in Canada.
As I have said, Mr. Speaker, this was included in the legislation in 1923.
-Since 1949 the commissioner of patents has had to deal with thirty-four applications for licences upon medicinal products. Fourteen were granted, thirteen were abandoned or withdrawn, one was refused and six are pending.
Those figures were as of September, 1966. The system of compulsory licensing has been
Patent Act-Trade Marks Act in existence in Canada since 1923, and up to the present time has not been put to any great use.
As the minister mentioned previously, patents in Canada-at least those relating to drugs-are now over 95 per cent foreign owned. Patent rights, despite this legislation, will be retained; and I do not believe that there will be any international implications of the kind several hon. members of the house alluded to during the debate.
As I have said, compulsory licensing has been the practice in Canada since 1923. It is also a system that is used in the United Kingdom under very similar legislation. To my knowledge, no one in the United Kingdom or in Canada has ever complained on an international level that the compulsory licensing system interfered with their patent rights, to their great detriment.
Some reference has been made to some literature that all of us have received during the last few days, particularly to a letter and a brief forwarded to various members of the house by P.M.A.C., the Pharmaceutical Manufacturers Association of Canada. The second paragraph of the letter reads:
Bill C-190 essentially would abolish normal patent and some trade mark rights as they relate to prescription medicines made in Canada.
Then it goes on:
We believe it might set an unfortunate precedent.
I have just pointed out to the house, Mr. Speaker, that this is not so. First of all, it would not abolish normal patent protection; nor would it set a precedent. The precedent was actually set in 1923.
In the third paragraph of their letter the association say that they had hoped there might be consultation on this legislation prior to its introduction. This legislation was introduced almost a year after the recommendations of our committee. The Pharmaceutical Manufacturers Association of Canada had the advantage of making many representations to the committee. Since that time the minister's office has been open to them for representations, and the minister has seen representatives of the association as a body on at least two occasions. He has also seen representatives of any drug company that wished to see him regarding the legislation, and has seen them, as far as I am aware, to the fullest of their wishes. Certainly it is my understanding that no one has been denied an interview with the minister or the department on this matter.

DEBATES February 12, 1968
While I am talking about the Pharmaceutical Manufacturers Association of Canada, Mr. Speaker, I should also like to disagree with a statement that was made in Florida by the president of the association. He stated that the Canadian parliamentary committee was willing to put Canada at the mercy of foreign nations in the event of world wide epidemics.
I am not sure how I should qualify this statement. Whether the changes in the legislation with regard to compulsory licensing go through or not, this statement could perhaps be said basically to be true. As was pointed out this afternoon, Canada does not have a significant, basic fine chemical industry. I might point out that the basic chemicals used by the drug industry in Canada today do not originate in Canada, but come mainly from the United States. Therefore, Mr. Speaker, if the statement to which I have referred is true after the legislation passes, then it is equally true before the legislation passes.
I also think the house should understand that under the laws and regulations of the food and drug directorate at least a five-year monopoly is given to any company that introduces a new drug into Canada under the principle of patent protection. This is because a drug that comes into Canada under a patent protection is classified as a new drug until it satisfies the directorate that the company has met their requirements concerning research on the particular drug in question.
The minimum period of time that elapses before a drug loses its new drug status is five years, and usually is a great deal longer than that. In other words, the company that produces the drug does indeed have a five-year monopoly, during which time it may regain its research costs and can actually go out and try to corner the market for that particular product. The company has five years' access to a completely monopolized market; and as I have said, Mr. Speaker, usually the period is more than five years.
No company, Mr. Speaker, has asked or is likely to ask for a compulsory licence before new drug status is lost. If it does this, it means that it has to reduplicate all the investigational work on the particular drug. No compulsory licence has ever been applied for by a company while that stipulation was there. It is a very expensive procedure to introduce a new drug. Therefore I think it very unlikely that a compulsory licence would be asked for during that time. So there is no question, Mr. Speaker, that the major
February 12, 1968
patent rights are retained, and certainly a complete monopoly without any risk of compulsory licence is available to the company for at least five, and perhaps many more years.
There is no question that patents do influence the price of drugs. I think reference was made to the fact that the United States, does not have a compulsory licensing system, as we have in Canada. Chloromycetin was much cheaper in Canada under our compulsory licensing system than it was in the United States. Recently the patent in the United States ran out, and practically overnight the price of Chloromycetin in the United States fell almost 50 per cent. So indeed, Mr. Speaker, patent protection does influence greatly the price of drugs.
The hon. member for Simcoe East (Mr. Ry-nard) made reference this afternoon to Appendix A of the brief submitted by the Pharmaceutical Manufacturers Association of Canada. This appendix refers to nine drug companies which were told to stop marketing chloramphenicol. It is my understanding the chloramphenicol has been rechecked by the food and drug directorate and is now free to come on the market.
[DOT] (9:00 p.m.)
I point out to the house that if drugs are imported into Canada in final dosage forms under compulsory licences, which is what the legislation recommends, those drugs must pass the food and drug regulations as they concern quality and safety, in the same way as the drugs of Canadian manufacturers must pass those regulations. Those drugs will not be exempt from any tests that are applied to other drugs.
Mention has been made of inspection services. How are we to maintain inspection services, particularly in foreign countries, some hon. members have asked. So far as food and drug inspectors are concerned I point out that inspectors at present work in foreign countries, and particularly in European countries. These inspectors are Canadian members of the food and drug staff who act as inspectors in connection with the purchase of drugs. Certain classes of drugs, namely biological products, require inspection at source before they are allowed into Canada. As I say, at present we have inspectors in Europe.
Sending inspectors of the food and drug directorate to other countries, including European countries, cannot be considered a precedent. They inspect manufacturing facilities
Patent Act-Trade Marks Act and make sure that proper quality control and safety standards are being met, and in this regard their service is an extension of the service that is presently performed in Canada.
Another point I wish to mention is that if drugs are brought in under compulsory licence, the originating company will receive royalties which are based on the cost of production and not on the selling price of the product. Because, as has been mentioned and admitted in evidence before the committee, the selling price of a product bears no relation to the cost of producing that product.
This afternoon the hon. member for Simcoe East (Mr. Rynard) quite justifiably mentioned that great Canadian discovery, insulin, and he paid compliments to the Canadian discoverers, Drs. Banting and Best. He knows that insulin was discovered, not in the laboratory of any drug company, but at the University of Toronto. He mentioned that the University of Toronto now spends a great deal of money on medical research because Drs. Banting and Best turned over the royalties to the university in order that the royalties might be used in medical research. Exactly the same situation might prevail if a compulsory licence were granted. Royalties are still paid and there is no reason for the type of activity I have just mentioned not to continue under the proposed legislation.
The committee was greatly concerned with the fact that the manufacturing companies spend 30 per cent of their dollar on promotion and marketing and only 7 per cent of their dollar on research. The committee believed that the 30 per cent that was spent on promotion and marketing was unnecessary. Almost every doctor in Canada will tell you that most of the material that crosses his desk is never read but thrown into the waste-paper basket, at great expense to the drug companies.
We believe that if drug companies in Canada are forced to cut back, because of drugs at more competitive prices being brought into the country, they can do so by cutting down on some of the frills, particularly the 30 per cent they spend for promotion and marketing. They can still make a profit within the Canadian economy. As everyone knows, the drug companies must make some profit in order that investors may invest their money in such companies.
February 12, 1368

Patent Act-Trade Marks Act
I point out that though generic drug companies sell their drugs at prices that are different from the prices charged for brand name drugs, the companies still make a profit. No one suggests that they are doing this at a lower profit than is available to companies selling brand name drugs.
As I have already mentioned, the committee heard a great deal of evidence about the safety aspect of drugs. We have been very fortunate in Canada because we have had few problems with drugs that have been manufactured in Canada. Few serious problems have arisen in connection with trade mark or generic brands, yet the Question of safety has been talked about and worried about in Canada and in the United States, much more than the evidence of unsafe drugs would warrant.
I expect that members of the house are aware that the government of Canada purchases great quantities of drugs to be used in the Department of National Health and Welfare and the Department of Veterans Affairs, as well as in the Canadian Armed Forces. The committee called members of the government purchasing service before it, as shown in volume 2, page 1509 of the testimony before the special committee on drug costs and prices, 1966-67. The questioning was about the safety aspect of drugs and on that page Mr. Ellis, a witness before the committee, says this:
Mr Chairman, as far as the Department of National Health and Welfare is concerned, we depend on our two suppliers, as I pointed out in my statement. We get all our drugs from either Department of Veterans Affairs or through the surgeon general's branch of the Department of National Defence. We depend on the testing procedures of those two departments.
I can make an unequivocal statement, though, that we have had not a single complaint of lack of efficacy in our drugs. This was borne out this past week by phone calls to four senior pharmacists across the country.
of dosage forms of drugs of all types. At present you can import drugs into Canada in their chemical form. The changes in the act would allow the importation of drugs in all forms. The second matter, the doctors' bulletin, I have already referred to.
I wish to refer briefly to one statement that the hon. member for Simcoe East made. Toward the end of his remarks he asked for this matter to be sent to committee for further study. Originally, the special committee on drug costs and prices was set up in 1963 as a result of the thalidomide tragedy, and originally it was to consider only the safety aspect of drugs in Canada. The question of costs was added about one year later, in the new terms of reference which were established by the minister of national health and welfare of that day. As I said, the committee which brought in its report on April 3, 1967, sat extensively. It lasted for well over one year. The entire idea behind the setting up of the committee is several years old. Anyone reading the evidence will find that of the 2,700 pages of evidence which are concerned with the cost of drugs and the price of drugs, at least half have to do with the aspect of safety.
[DOT] (9:10 p.m.)
I believe it would be nothing but repetition to send a matter like this back to a committee of this House of Commons. I believe nothing is to be gained by it. The legislation which the minister has introduced is the product of the recommendations of a committee of this house, and to send the same legislation back for further committee study would be repetitious, ridiculous and a great waste of time of the house. I hope the house will see fit to pass this legislation quickly because I believe the need in Canada is to provide safe and effective drugs at reasonable and competitive prices.
I expect members of the house know that the government buys under a tendering system and most drug supplies are bought from companies that are classified as manufacturers of generic drugs.
I believe that the questions of safety and quality are not debatable. They are factual. For the reasons I have already given, the first consideration with respect to drugs must be safety and quality. Two things must be done if safe drugs at lower costs are to be made available to all Canadians. As the committee recommended, the first of these would be to grant compulsory licences for the importation

Full View