Rx&D Presentation for the CIPIHMr. Jean-François LeprincePresident, Aventis Pharma Inc.

Mr. Terry McCoolVice President, Corporate AffairsEli Lilly Canada Inc.

Thursday, October 7, 2004

Outline

• Background on Rx&D• Bill C-9• Working in Partnership• The Importance of IPP in Canada• Conclusions

Background on Rx&D

About Rx&D

• Canada’s Research-Based Pharmaceutical Companies (Rx&D) is the national association representing approximately 24,000 Canadians who work for this country’s 53 research-based pharmaceutical companies.

• Comprised of companies of all sizes, the majority of which are based in Canada, the Association’s membership is part of the global pharmaceutical industry whose members are responsible for developing in excess of 90 % of the medicines that are available today.

Rx&D’s Mission

Canada’s Research-Based Pharmaceutical Companies improves the quality of life of all Canadians and enhances our health care system by fostering the discovery, development and availability of new medicines.

Bill C-9

Bill C-9

• This legislation was a response to the WTO Decision of August 2003

• Consultations were held with a wide variety of stakeholders• Rx&D played a constructive and supportive role in the

process• Bill C-9 is a successful example of how IPR can be used to

improve access to medicines • Government of Canada effectively implemented the WTO

Decision while faithfully addressing domestic Canadian considerations

Benefits of Bill C-9

• Focuses on the Needs of Under-Developed Countries

• Provides a Workable Process

• Is a Fair Solution

Main Features of Bill C-9

• Includes voluntary licensing stage • Includes schedules of countries and products

• Certain non-WTO developing and all least-developed countries are included

• Not specific to only HIV/AIDS, Malaria and TB• Calls for generic distinguishability• Expected that generic products will undergo Canadian review

and approval• Opportunity to apply to the Canadian Federal Court for

oversight of the compulsory licence• Including if a contract is “commercial in nature”

Bill C-9’s Safeguards

• Duration of contracts is 2 years with one possible renewal• Only products approved and sold in Canada• Only generic products manufactured in Canada• NGOs can contract with permission• The process is transparent

a) Notification the country’s need to the patenteeb) Information given to patentee before each shipment

from Canadac) Generic must post information on its website, and

maintain it

Working in Partnerships

Partnerships and Research Programs

• CIHR/Rx&D Program – increasing Canadian health research activities

• Rx&D Health Research Foundation – providing funds to develop Canada’s health research leaders

• Health Partners International of Canada – donating needed medicines to address humanitarian crises

• Rx&D member companies’ research initiatives

Canada’s Support for Health Research

• Government of Canada has made financial commitments to:

• Expand the Canadian Institutes for Health Research (CIHR)• Support infrastructure development through the Canadian

Foundation for Innovation• Establish indirect cost programs• Support breakthrough genetic research through Genome

Canada• Create Canada Research Chairs• Provide ongoing support for the Networks of Centres of

Excellence

The Importance of IPP in Canada

IPP Changes in Canada

Compulsory Licensing Provisions were Amended1969

18 years

Growth of Canadian generic sector

Canada’s reputation suffered

Plants closed

Lost research mandates

Other countries were building their infrastructure and a more hospitable investment climate /regulatory environment.

Bill C-227 years of market exclusivity while maintaining compulsory

licensingCreation of the PMPRB

of R&D from 4.9% to 8% of sales by 1991of R&D to 10% of sales by 1996

1987

6 years

1993 Bill C-91Abolition of compulsory licensing

Regulatory provisions to ensure effective enforcement of patents – PM NOC “linkage” Regulations

Strengthened powers of PMPRB

Parliamentary Review in 5 years

IPP Changes in Canada

Economic Contribution: Research-Based Pharmaceutical Industry R&D Investment (1984 - 2002)

6 9 8 2 9 3 1 0 6 1 6 62 4 5

3 0 53 7 6

4 1 25 0 4

5 6 1 6 2 56 6 5

8 2 58 7 9

9 4 4 9 6 8

1 1 3 11 2 2 0

0

2 0 0

4 0 0

6 0 0

8 0 0

1 0 0 0

1 2 0 0

1 4 0 0

CD

N$

Mill

ions

1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2

1984-1987 data compiled by Peat Marwick, Chartered Accountants. 1988 - 1996 - as reported by the Patented Medicines Prices Review Board. 1997-1998 - Rx&D Annual Statistical Survey compiled by Deloitte and Touche (1999).1999 - 2001 - Rx&D Annual Statistical Survey compiled by Deloitte & Touche and PMPRB Annual Report

Bill C-22 Bill C-91

3 3 1 %

8 2 %5 4 %

1 9 %0 %

1 0 0 %

2 0 0 %

3 0 0 %

4 0 0 %

M e d i c a l R & D M a r k e t i n g &S a l e s

A d m i n i s t r a t i o n M a n u f a c t u r i n g

Economic Contribution: % Growth in Research-Based Pharmaceutical Industry Employment in Canada (from 1987 to 2002)

Source: Rx&D Annual Statistical Survey as compiled by Deloitte & Touche (1987, 2001)

Number of Health Biotech Companies in Canada –1987 vs. 2001

7 0

1 9 7

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

1 9 8 7 2 0 0 1

Source: Realizing the Full Benefits of the Canadian Innovation-Based Pharmaceutical Industry, SECOR Consulting, May 2003

0.01997 2001

227

416

0

100

200

300

400

500

Number of Canadian biotech firms

1997 2001

0.5

1.4

0.0

0.5

1.0

Can$1.5B

R&D spend by Canadian biotech firms

1997 2001

227

416

0

100

200

300

400

500

Number of Canadian biotech firms

1997 2001

0.5

1.4

0.5

1.0

Can$1.5B

R&D spend by Canadian biotech firms

Network Effects Support Growth of Canada’s Biotechnology Sector

Source: The Impact on Canada of Pharmaceutical Regulations and Pricing Policies, Bain and Company Inc., September 2004

Economic Contribution: Indexed Growth in Pharmaceutical R&D Investment, Sales, & Prices in Canada - 1987-2001

0

2 0 0

4 0 0

6 0 0

8 0 0

1 0 0 0

1 2 0 0

1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1

Inde

xed

Gro

wth

(198

7 =

100)

R & D I n v e s t m e n t b y R x & D C o m p a n i e s P a t e n t e d M e d i c i n e S a l e s

P r i c e s ( P a t e n t e d M e d i c i n e P r i c e I n d e x )

Sources: Patented Medicine Prices Review Board Annual Reports, RX&D Annual Statistical Survey

Aggregate Sales GrowthResearch Based Industry vs. Generics (1988-2000)

0 %

1 0 0 %

2 0 0 %

3 0 0 %

4 0 0 %

5 0 0 %

6 0 0 %

1 9 8 71 9 8 81 9 8 91 9 9 01 9 9 11 9 9 21 9 9 31 9 9 41 9 9 51 9 9 61 9 9 71 9 9 81 9 9 92 0 0 0

R x & DG e n e r i c s

(C-22) (C-91)

Source: Rx&D (based on data from IMS Canada)

“With the New Legislation (C-22), it is not just a question of our not being able to grow, we will not be able to continue to exist” Barry Sherman, Chairman of Apotex, 1986

$295 million

“The Canadian pharmaceutical industry will shrink to two percent of the total market” CDMA, 1992

$1.4 billion

544%

187%

SWI CAN DEU UK US AUS SWE FRA ITL NZ

110100

76 74 69 68 6760 59

32

0

25

50

75

100

125%

Average Ratio of Minimum Foreign GenericPrice to Minimum Canadian Generic Price

Source: The Impact on Canada of Pharmaceutical Regulations and Pricing Policies, Bain and Company Inc., September 2004

Conclusions

Conclusions

• The research-based pharmaceutical industry is an active participant in global pharmaceutical partnership initiatives

• Members of Rx&D are actively involved in researching treatments to address a number of diseases that primarily affect developing countries

• The passage of Bill C-9 provides the international community with an example of a fair, workable process that will effectively address the medical needs of poor countries

• Rx&D’s role in the development of Bill C-9 is a prime example of how stakeholder involvement can effectively address humanitarian needs while maintaining a competitive IP environment for innovation

• Competitive IP protection in Canada has resulted in:• Significant R&D growth• Increased R&D-related employment• Development of a vibrant biotech community

• Improving IP has not negatively impacted Canada’s thriving generic pharmaceutical sector

Conclusions

Thank you