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What faces the Canadian pharmaceutical industry?

The Canadian pharmaceutical manufacturers see themselves as the kind of industry that this country needs for the future: technology- and research based, not just extracting raw materials and shipping them somewhere else to be processed. This industry, as its members point out, is third to the telecommunications and aerospace sectors in the percentage of money, in relation to sales, spent on research and development. If size taken into consideration, the pharmaceutical industry could rank first.

But if you ask almost anyone in the industry, they will tell you that three things stand between it and what they feel the industry could mean to Canada. These are: patent protection, the length of time needed for approval by the Health Protection Branch (HPB) of Health and Welfare Canada, and the role the provinces play in the health care system.

Patent Protection

Bill C-22, which partially restored normal patent protection to drugs, was passed in 1987. It gave a minimum of seven years of market exclusivity to new patented medicines before generic copies could be introduced.

When the bill was passed the Canadian pharmaceutical industry, through the Pharmaceutical Manufacturers Association of Canada (PMAC), made a public commitment to double its financial contribution to R&D by 1996, to 10% of sales. This represents a total investment of $3-billion over that period, and means $1.4-billion of new R&D spending.

The bill also included a clause stating that the price of patented medicines would increase at no more than the consumer price index (CPI). The industry's adherence to this restriction is monitored by the Patented Medicine Prices Review Board (PMPRB). The board was established under the terms of Bill C-22, and reports to the Minister of Consumer and Corporate Affairs on an annual basis.

In its report dated December 31, 1990, the PMPRB said that the pharmaceutical industry had increased its spending on R&D to 8.8% of sales in 1990. It also stated that the price of patented medicines increased at a rate of 3.1%, about 30% lower than the CPI.

However, the industry sees Bill C-22 as only the first step in the right direction when it comes to patent protection. Glen Duff, director of issues management for Ciba-Geigy Inc. (Toronto), says that intellectual property rights (IPR) is one of the two major issues facing the pharmaceutical industry today. He points out that the Canadian position concerning IPR in pharmaceuticals is inconsistent with its position on IPR in other areas, and the position of the rest of the world.

John Pye, director of public affairs for the PMAC, refers to the question of patent protection as "a major irritant". "Canada's position," he continues, "makes this country look no better than the Third World countries in ripping off intellectual innovations".

The world-wide norm for patent protection is 16 years from the point of introduction, compared to seven years in Canada, says Colin Mallet, president of Sandoz Canada inc. (Montreal). He says that there is a need to bring Canadian patent protection into line. The first big step, he continues, was in 1987. There was some scepticism at that time about the commitment of the pharmaceutical industry, but he feels that the last three years have proved the cynics wrong.

Much of the Canadian pharmaceutical industry (about 85%) is multinational, and the competition for research dollars is now intra- as well as inter-company. Those in the industry point out that the current Canadian patent legislation makes it difficult for the Canadian subsidiaries to compete with the other sections of their company for research funds and projects.

What is different about the Canadian situation is something called compulsory licensing. As early as seven years after a product has received HPB approval, a generic version can be on the market. This action effectively terminates any patent protection that may be left for the drug's inventor. All that a generic drug manufacturer has to do is request such a compulsory license and it is granted almost automatically.

IPR protection is becoming more important as other countries extend or improve their own patent legislation. The US and Mexico have laws in place extending the effective patent life of a product (the amount of time a drug is on the market while still patented) to 14 years. Similar bills for 16 years protection is in the works in Europe. Questions Pye at the PMAC, "Can the commitments made on the basis of Bill C-22 be maintained as other countries improve their patent protection?" The Drug Lag Each new drug to be introduced onto the Canadian market has to receive HPB approval. Even drugs that have already received approval in other countries with similar procedures, such as the US, still have to go through clinical trials.

Mallet, at SanLioz, says that it takes about 1000 days for a drug to be approved by the federal government, and this follows as much as 12 years and three phases of clinical trials. It takes almost 18 months, he continues, for the HPB to even open the dossier because of the backlog of work that needs to be done. This is a far worse situation than in Europe, where there is some competition to see which government can provide the most speedy approval process. In the UK, Mallet says, the approval process can take between six and nine months.

In some ways, the pharmaceutical industry is the author of its own misfortune when it comes to the drug lag. The industry is making more submissions, and of a more complex nature, than ever before. This is happening at a time of budgetary restrictions, as well as personnel and equipment cutbacks, in the federal government.

Francesco Bellini, MCIC, president of IAF BioChem International Ltd. (Ville de Laval, PQ) sees the drug lag as the major obstacles facing his company. IAF spends about one-half of its annual budget on basic research (about $8-million in 1991). Bellini feels that the Canadian approval process is just not fast enough for a company such as his, where it is vitally important for a product to begin paying back its developmental costs.

And the situation in the US, Bellini says, is not that different. It takes almost the same amount of time for the Food and Drug Administration (FDA) to approve a new drug for sale as it does the HPB. He also feels that the FDA holds back applications from non-American companies until one, for a similar product, is received from an American firm. What Bellini would like to see is, in effect, a free trade agreement between Canada and the US on clinical testing. Approval in one country would also mean approval in the other. This idea could become very more important in 1992, when the European Economic Community becomes one unit. Then approval will be needed in only one country for sale within that entire market.

The Provinces

According to Harold Jeffries, industrial liaison to the director general of drugs at Health and Welfare Canada, the provinces are very major players in pharamceuticals. He points out that people over 65 consume 80% of the drugs sold in this country, and most of these drugs are listed for reimbursement under provincial health care plans. If a company can't convince a province to add a drug to its plan, sales in that province could be affected drastically.

Pye, at the PMAC, says the pharmaceutical industry now has to convince different levels of government of the efficacy of products. He points out that, after the three years needed to get HPB approval, it could take another 18 months to be listed on a provincial drug benefit plan. All the while, the patent protection clock is ticking.

Sandoz president Mallet agrees. The drug lag at the federal level, he says, is compounded by the same series of delays at the provincial level. In particular, the Ontario provincial government is setting up its own drug approval system, effectively a duplication of what is done by HPB.

The provinces, says Duff at Ciba-Geigy, are responsible for the delivery of health care. As such, they are under constant pressure to keep costs down. Ontario, for example, goes one step further and permits and encourages (even for cash-paying customers) substitution of generic products. The pharmacist is under no obligation to tell the patient that this has been done.

Prescription medicines, most industry members think, are a convenient and easy target, but perhaps not the most effective one in the battle to keep health care costs down. Pye points out that $1 spent on medicine saves $5 to $10 in other associated health care costs. He also says that prescription drugs are only 6% of total health care costs. If dispensing fees are removed from the equation, that figure drops to 3%, he continues.

While the Ontario provincial government is seen as being somewhat obstructive in its dealings with the pharmaceutical industry, the Quebec government seems to have a more integrated and positive approach. Mallet at Sandoz says Quebec has a clear policy concerning the type of industry it wishes to encourage. The province has made a decision that pharmaceutical research industry is to be one of its cornerstones. As such, he continues, it considers the whole contribution of the industry to the province. In Ontario, the research-based drug industry appears to be considered only as a cost, with little linkage made to its positive role in either the health care system or the industrial structure of the province. And For the Future Most members of the pharmaceutical industry agree that increased patent protection is needed: Bill C-22 was a good start, but more is needed now. Canada needs to have consistent policies, with its trading partners, on IPR security.

Some smaller drug companies feel that the type of research being done here has to change in order for the industry to contribute more effectively. Bellini, at IAF BioChem, says that most of the R&D money spent in this country is on clinical, rather than basic, research. It may be a legal requirement, but he doesn't consider that type of activity research. The hope is that adequate patent protection will be able to help make this change happen.

The drug lag has to be addressed, and hopefully reduced. Recommendations have been made by industry to the federal government on how to do this but so far, these have not been fully implemented. Industry is also working with the government to help avoid budgetary cutbacks in the HPB.

The industry itself has begun to see the need to make its case to more than just the stakeholder groups: health care professionals, bureaucrats and politicians. Pharmaceutical companies have increased their funding for medical research at a time when the federal government has reduced theirs. At the moment, says MacDonald at Merck Frosst, the industry is funding more medical R&D at universities than the federal government. As well public relations activities have been started by the PMAC, as well as by a number of drug manufacturers. The industry hopes to make its contributions to the health care system more widely known.

The pharmaceutical industry, says Duff at Ciba-Geigy, fits in well with the direction in which Canada has to go - specialization. MacDonald at Merck Frosst agrees. Canada has to move into intelligent industries, he says, and needs to create an environment conducive to and with these types of industries. IAF BioChem's president Bellini says that what the industry needs is a good climate (in which to do business), the ability to protect intellectual property and the ability to sell products in a timely fashion. In the end, sales are what drives the R&D machine.
COPYRIGHT 1991 Chemical Institute of Canada
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Hollingshead, Sandra
Publication:Canadian Chemical News
Article Type:Editorial
Date:Sep 1, 1991
Words:1942
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