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An Overview of the Canadian Pharmaceutical Industry

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1 An Overview of the Canadian Pharmaceutical Industry
Ronnie Miller, President and CEO, Roche Canada David Meek, President and CEO, Novartis Canada Swiss Canadian Chamber of Commerce Luncheon October 16, 2008

2 Overview The pharmaceutical industry in Canada Key issues
A healthy living program Why Canada is a great place to do business Questions

3 The Pharmaceutical Industry in Canada
More than 22,000 employees Responsible for creation of 100,000 jobs (spin-off) Invest $1 billion in research and development in Canada yearly Companies inject $5 billion annually into Canadian economy The innovative pharmaceutical industry is the leading funder and performer of therapeutic products research and is the largest single source of R&D health research in the business enterprise sector. Our employees are in highly skilled positions (researchers, scientists, toxicologists, health information specialists) In Canada, the research-based pharmaceutical industry represents 20, 000 employees working for more than 50 companies. The economic impact of the companies is responsible for the creation of 100,000 direct and indirect jobs in Canada; Canada’s innovative pharmaceutical community performs a significant part of health-related R&D in Canada (32%) – second only to institutions of higher education (universities and teaching hospitals) (63%) --- (Statistics Canada, 2007). But, our community is the largest single funder of health R&D in Canada, at over 1 billion dollars every year. Companies invest, on average, $1 billion in research and development in Canada every year. This money goes to researching new medicines and vaccines, as well as to clinical trials, which are essential when testing the effectiveness of a new product. Half of the R&D investments are made in Ontario and the other half in Quebec. Our member companies also inject $5 billion annually into the Canadian economy.

4 The Pharmaceutical Industry in Canada
Pharmaceutical innovation makes a significant contribution to our economy, resulting in: highly-skilled job creation, increased scientific knowledge growth in the Gross Domestic Product (GDP), and elevation of our international ranking on innovation. Encourage and support our employees to be active volunteers in the communities in which they live and work. Provided $86 M (2005) in donations and grants to charities, community associations, hospitals, and universities across Canada

5 The Pharmaceutical Industry in Canada – An Economic Driver
Ontario Quebec Number of employees 22,000 + 10,390 10,048 Economic contribution (2005) $5 B $1.74 B $1.68 B R&D investments (2006) $1.21 B $545 M $496 M Land, facilities & equipment $2.45 B $533.2 M $1.2 B Taxes Paid (2005) $89 M $59 M

6 Rx&D – A National Association
Canada’s Research-Based Pharmaceutical Companies, Rx&D, is an association of members - including Roche & Novartis - dedicated to improving the health of all Canadians. Established in 1914. Our mission: To improve the quality of life of all Canadians and enhance our health care system by fostering the discovery, development and availability of new medicines and vaccines. In Canada, major biopharmaceutical companies have formed an association called Rx&D (Canada’s Research-Based Pharmaceutical Companies). Rx&D is composed of more than 50 member companies active in the field of pharmaceutical research and development. The mission of the association is to improve the quality of life of all Canadians and enhance the Canadian health care system by fostering the discovery, development and availability of new medicines and vaccines. The association’s objectives are to: -conduct and promote health research in Canada; -strive for full access to innovative medicines for all Canadians; -inform Canadians about the contribution of research-based pharmaceutical companies in improving their quality of life; -work cooperatively with our partners in Canada's health care system; -communicate high standards of safety and quality of medicines; and, -educate health professionals and consumers about the optimal use of medications. Comprised of companies of all sizes, Rx&D member companies are part of the global pharmaceutical industry whose members are responsible for developing over 90% of medicines available today.

7 Industry Code of Conduct
Celebrating its 20th Anniversary on October 20, 2008 A living document that is continually improved Based on 11 guiding principles The pharmaceutical industry is also driven by ethics, whether it is when developing a new medicine of when interacting with health-care professionals. Rx&D member companies have a Code of Conduct with teeth, which is a mandatory condition of membership. The Rx&D Code is a way of life for our community. At its foundation are eleven Guiding Principles that clearly affirm that the well-being of patients and all Canadians is our first priority. These Principles define and guide our interactions with health care professionals. Our Code and high ethical standards distinguish us from both other pharmaceutical companies and from generic drug makers. Why did we feel it was necessary to create a Code twenty years ago? The answer is that Canadian innovative biopharmaceutical companies saw a need for improvement in our business interactions with health care professionals. No government or outside authority forced us to take this step. We voluntarily took it upon ourselves to create the document that forms the basis of today’s Code.

8 We are a Partner in the Health Care System
The pharmaceutical industry is an integral part of the health care system New medicines and vaccines help save money They reduce hospitalisations and surgeries They reduce death rates The Canadian pharmaceutical industry is an integral part of the health care system. The new medicines and vaccines we research, develop and produce help save money to the system by reducing hospitalisations. While overall medical expenses continue to rise, pharmaceuticals are one of the most cost-effective medical interventions, representing less than 10% of total direct health care expenditures. The Canadian Institute for Health Information (CIHI) estimates that hospitals accounted for 28.4% of the $160 billion spent on health in Canada in 2007 and make up the largest component of health care. It is forecasted that drug expenditures are second at $26.9 billion, or 16.8% of all health expenditures. Physician expenditures are third at 13.4% ($21.5 billion). Furthermore, it is essential to note that CIHI includes brand and generic drugs, as well as over the counter and other non-prescribed personal health products such as anti-perspirants, bandages, dental floss and diabetic test strips in its calculation of total drug expenditures. New medicines have reduced infant mortality; and are helping us live longer and more productive lives. They relieve pain and suffering, and allow for fewer visits to doctors. SOME FACTS: Just three decades ago, leukemia was almost always fatal. Today, 80% of children stricken with this form of cancer are still alive five years after diagnosis. Vaccinations have made once-dreaded diseases like polio and diphtheria, and even measles and chicken pox, all but obsolete. Between 1995 and 2002, the death rate from HIV/AIDS in Canada dropped by 80%. Between 1980 and 2002, the death rate due to heart attacks fell by 67%. For bronchitis, asthma and emphysema it fell by 75%. And for chronic liver disease it fell by 43%.

9 Key Stakeholders Federal government Provincial governments
Patient groups Academic community As a partner in the health care system, the pharmaceutical Industry interacts with many stakeholders to provide patients with a better access to new medicines and vaccines. The federal government is obviously a major stakeholder influencing the business climate in Canada. Provincial governments are also very important as companies invest in provinces. Provincial governments are also responsible for listing a new medicine on provincial drug plans. We also work with patient groups to establish long-term and sustainable relationships in order to help enhance understanding of the Industry and its contribution to innovation, excellence in health care and research and economic development in Canada. We are working on a collaborative basis with health care professionals, patient groups, the academic community and the business community to deliver a shared vision that combines the best health outcomes for Canadians with innovative research and economic growth.

10 About Founded in 1896 in Basel
Active in 150 countries on all continents About 80,000 employees world-wide Roche Canada founded in 1931 827 employees Head offices: Pharmaceuticals – Mississauga, Ontario Diagnostics – Laval, Quebec Invested $12M in community and patient organizations National partner of Breakfast for Learning Founding Sponsor – Canada’s Corporate Roundtable on Cancer Control Named one of Canada’s 50 Best Employers for the 5th year in a row Pharmaceuticals Diagnostics

11 About Founded in 1996 from the merger of Sandoz and Ciba-Geigy
(Sandoz AG was founded in Basel in 1886) Presence in 140 countries around the world 98,000 employees globally 800 employees in Canada One of Canada’s 50 Best Employers $86M in R&D investment in Canada $15M in grants/donations to Canadian Patient & Community groups Our Divisions (totalling 2,130 employees in Canada) Pharmaceuticals head office – Dorval, Quebec OTC, Ciba-Vision (eye care) – Mississauga, Ontario Animal Health – Mississauga and Prince Edward Island Sandoz Canada (generics) – Boucherville, Quebec

12 Key Issues – Access to New Medicines
Only 1 in 5 new medicines approved by Health Canada is listed by provinces In Canada, new molecules and vaccines are approved by Health Canada. But that does not mean that a patient will immediately have access to a new product. Once approved by Health Canada, the product goes through a second body called the Common Drug Review (CDR) that reviews its cost-effectiveness. The CDR makes a recommendation to provinces whether they should or should not list the product on their respective drug plans. Only one of five new medicines approved by Health Canada is listed by the provinces – so patients only have access to 20% of our discoveries approved for use in Canada. Often after reviewing the CDR recommendation to list or not list a new product on a provincial plan, provinces do their own cost-effectiveness assessment, which adds even more delay to patients accessing life-saving products. Wyatt Health recently released an International Comparison Study on public spending on pharmaceuticals around the world. It compares Canada’s public drug plan coverage for a mutual list of drugs that have been reviewed by the Canadian Expert Drug Advisory Committee (CEDAC) of the CDR and the other 17 OECD countries. The study findings are: Canada ranks 17 out of 18 countries public spending on pharmaceuticals In a comparison of 36 new drugs evaluated for public drug plan reimbursement by all countries, Canada’s public drug plans ranked 16 out of 18, providing less coverage than all countries except Australia and New Zealand In an analysis of 36 new drugs common to all jurisdictions studied, the CDR recommended only 61% of drugs for public drug plan reimbursement, far less than the averages of the European Union (EU) (91%) and the USA (88%). Provincial drug plan decisions further reduce the Canadian drug listing average. Of 78 recommendations issued from the inception of the CDR (in 2003) to the end of 2007, the CDR has given positive recommendations only 46% of the time, even lower than the percentage quoted in the study Wait times for the approval of priority review and orphan drugs to treat rare disorders are longer in Canada than the USA and the EU US Medicare plan extends catastrophic drug coverage for seniors far beyond what is available to Canadian patients.

13 Key Issues - New drug approvals not keeping pace with R&D spending
R&D Expenditures New Drug Approvals R&D expenditures through 2004 are adjusted for inflation Source: Tufts CSDD Approved NCE Database, PhRMA, 2007

14 Key Issues – Attract R&D Investments
Fierce competition to attract pharmaceutical R&D, especially from Brazil, Russia, India, China, Mexico, South Korea and Turkey. Need to create an environment where innovation can flourish Bring stability to the Canadian intellectual property regime Reward the risk associated with innovation The decision to invest in a country is made at the global level of each pharmaceutical company. Every CEO wants to attract pharmaceutical R&D in his or her country. The CEO must have the right tools to demonstrate to the global headquarter that the country where investment should be made, rewards innovation and provide access to new medicines to patients. The competition to attract pharmaceutical R&D is fierce, especially from emerging and BRIC (Brazil, Russia, India, China) economies. Canada must continue improving its environment to attract knowledge economy investments as other countries continue to do so as well. In Canada, the data protection regime was upgraded in But recent court challenges to data protection and decisions under the Patented Medicines (Notice of Compliance) Regulations (NOC Regulations) are harming innovative Canadian biopharmaceutical providers by creating significant uncertainty with respect to the IP protection essential to the development of tomorrow’s medicines and vaccines. At the moment, Canada does not have an effective mechanism to appeal court decisions that can affect innovators. The need to reward the risk associated with innovation is essential because innovation is costly and risky. It takes, on average 12 years and one billion dollars of investment to bring a new medicine to market. Only three out of ten new medicines will recoup or exceed their initial investment costs. It also includes a fair pricing regime for innovative medicines. In Canada, the price of patented medicines is regulated by the Patented Medicine Prices Review Board. Prices of patented medicines have generally decreased over the last several years. However, Canadians pay more for generic drugs than in many other comparator countries such as the United States. If governments want to address drug costs, they should look at the price of generic drugs as the Canada Competition Bureau and others have done. Most recently, the Fraser Institute found that in 2007 Canadian prices for generic prescription drugs were 112% higher on average than U.S. prices for identical drugs. At the same time, Canadian prices for innovative medicines were 53% lower on average than American prices. This is not surprising given that in 2006 the top four generic drug makers accounted for more than 70% of sales to hospitals and retail pharmacies.

15 Positive Signals Biopharmaceutical Investment Fund in Ontario
British Columbia Pharmaceutical Task Force Report Quebec’s Drug Policy Over the past few months, the pharmaceutical industry saw opportunities to better positioning Canada on the world front through announcement made by provinces. In Ontario, the government created a Biopharmaceutical Investment Fund through the Next Generation Jobs Fund to encourage research-based pharmaceutical companies to invest in Ontario. The government believes that attracting these investments will create good-paying jobs that support the discovery of new medical treatments for diseases that affect us all. This fund sends a signal not only to the domestic biopharmaceutical industry, but also to our global community, that Ontario values this sector and its potential for growth. In British Columbia, the government created a Pharmaceutical Task Force to address the issue of access in that province. The Task Force tabled its report last May and BC Health Minister George Abbott accepted all recommendations. “The Ministry of Health will begin working with stakeholders on some recommendations immediately, while others are more complex and will take some time to plan and implement,” said Abbott. “Our work to enhance the Province’s pharmaceutical policy has the interests of patients as our foremost consideration, while assuring maximum value for taxpayers.” Government’s implementation of the recommendations will be guided by six principles: 1. The best interests of the patient are paramount. 2. The B.C. government is obliged to seek the best value possible for taxpayer dollars in its expenditures. 3. The foundation of all drug benefit decisions will be predicated upon a transparent evidence-based review process. 4. The B.C. government is committed to fair, open and transparent procurement processes. 5. All persons involved in making decisions respecting the procurement of goods and services by government must be free from conflict of interest, both real and perceived. 6. The B.C. government values a healthy, competitive pharmaceutical industry that will continue to provide both financial and human resource investments in B.C. We are now working in consultation with the BC Health Ministry to implement the recommendations. In Quebec, the province tabled a first Drug Policy in In that policy, the government recognizes the contribution of new pharmaceuticals in the health-care system as well as the positive impact of the Industry in Quebec’s economy. The government also lifted the price freeze that was in place for more than 12 years.

16 Knowledge is the best medicine
Consumer education program on appropriate and safe use of medications, improving health through healthy living 14+ years, 3.5 million copies distributed In partnership with 2,500 organizations throughout Canada The pharmaceutical industry is not just about pills. It is primarily about the wellbeing of patients. For more than 14 years, the Industry has been heavily involved in the Knowledge is the best medicine program. The program is about the appropriate and safe use of medicines. It clearly states that there is not “a pill for every ill.” It is about patient safety and improving health through healthy living. More than 3.5 million copies for the program have been distributed in partnership with organizations throughout Canada.

17 Knowledge is the best medicine
Our Partners: The new redesigned program was launched at the end of September with two new partners: The Canadian Medical Association and the Canadian Pharmacists Association. They helped us redesign the program and they will promote it as well.

18 Why Canada is a great place for 2 Swiss Pharmas
Improving intellectual property and patent protection Large clinical trial centres = large pool of patients/clinical trial subjects for international trials Access to key global opinion leaders and researchers Large talent pool of skilled employees and leaders Basel often recruits from our affiliates

19 Questions

20 Thank you

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