A Scientific and Technological Revolution in the Pharmaceutical Industry

Head Table Guests

Bruce Sinclair, Councillor, City of Toronto and a Director, The Empire Club of Canada; The Reverend Vic Reigel, Christ Church, Brampton; Gaetano Crupi, Incoming President, Eli Lilly Canada; Jeffrey C. Lozon, President and CEO, St. Michael's Hospital; Murray Elston, President, Pharmaceutical Manufacturers' Association of Canada; D. Cameron Hyde, Vice-President and General Manager, Central Operations, Xerox Canada Limited; Henry Friesen, President, Medical Research Council; and Catherine Steele, Vice-President (Toronto) and Partner, Gervais Gagnon Covington and Associates and a Director, The Empire Club of Canada.

Ladies and gentlemen, it's a great honour to be here with you today. The Empire Club has featured many distinguished speakers over its long history, and one certainly feels inspired in such company.

Health care is not a subject one hears a lot of good news about these days. Costs and cutbacks seem to dominate the headlines. So I'm pleased to use this opportunity to tell you about a few exciting developments in health care. Not just good news, but great news!

Today, the pharmaceutical industry is embarking upon a scientific and technological revolution. It is no less significant than the advances that have transformed today's information technology industry. The benefits for mankind in this biomedical revolution will indeed be extraordinary.

To put it briefly, we have reached a stage in which breakthroughs in many different fields--in genetics, biochemistry, molecular biology and other areas--are coming together with spectacular results. These advances have allowed researchers to acquire a fundamental understanding of how the body works and why it doesn't work properly when attacked by disease.

Science and technology have also allowed the pharmaceutical industry to transform the process of discovering and developing new medicines. To give you an example, researchers in the past isolated individual soil or botanical samples and then tested them against a vague notion of disease possibilities, originating in most any part of the body. It was slow, painstaking work, with enormous rates of failure.

Let me give you an example of how far we have progressed today. Just imagine that our scientists can isolate receptors in the brain that we know are linked to specific physiological activity such as schizophrenia, obesity and depression. Our scientists can then use computer technology to design the right molecule that connects to the right receptor. This lets our scientists use sophisticated tools and techniques to rapidly test these new drug candidates. The objective is to fail fast so we can quickly select the one out of 10,000 molecules that offers the best chance to succeed as an effective treatment.

As I look back on my 26 years in this industry, I find myself now amazed on a daily basis at the "warp speed" of pharmaceutical research and development. The bottom line is that our pharmaceutical industry is beginning to create powerful, effective and highly targeted medications and to develop them far faster than ever before. That means, the hope for cures to today's dreaded diseases has never been better.

Let me illustrate what this accelerating pace means for drug development. In the 15 years between 1980 and 1994, Eli Lilly introduced nine new drugs in Canada. In just the last four years, we have brought to market eight new medications. These are not line extensions, but significant new drug treatments.

Over the next five years, we plan to deliver more than 10 new pharmaceuticals. Right now, our scientific team is hard at work testing powerful new treatments for stroke, attention deficit disorder, breast and colon cancer, Alzheimer's disease, diabetes, sexual dysfunction and other illnesses.

To ensure that we achieve these breakthroughs, Eli Lilly and Company have totally re-engineered its approach to research and development. We have increased investment and created cross-functional heavyweight teams. As well, we have forged alliances with partners whose capabilities augment our own. Our alliance in the field of neuroscience with Toronto-based Allelix Biopharmaceuticals serves as just one excellent example.

Currently, we have over 200 global alliances with other large pharmaceutical companies, with biotechnology companies, and with academia in the health-care sector.

Now, let me pose a couple of questions. First, what are the implications of this current revolution in pharmaceutical discovery? And second, will Canadians benefit from these developments in the same way that many nations have reaped enormous benefits from the explosion in information technology?

I suggest that the answer to the second question is a highly qualified "yes." Canada has much of the infrastructure and knowledge to capitalise on the biomedical revolution. Yet, some barriers remain and I will touch on those in a moment.

As for the implications of this research-and-development revolution, they are profound and far-reaching.

On my way here today I passed, as you did, people living on the sidewalks, suffering the cold and most probably living with little hope. Recent studies suggest that, in this very province, the vast majority of the homeless suffer from some form of mental illness.

It can be safely said that mental illness is one of the most significant problems affecting mankind. It is, unfortunately, the root cause of much violence and crime in society and represents a terrible waste of human potential. In hard currency, it has been estimated that the annual cost of mental illness to North America is over $70 billion in health-care costs alone!

Yet, it may soon be possible to alleviate, or eliminate entirely, much of that suffering.

Today, medical science has the power to identify psychosis and other mental conditions at their earliest stages. So what that means is that people suffering from the devastating effects of panic disorders, clinical depression, schizophrenia or anxiety need not suffer for months or years before we can help them. The pharmaceutical industry, led by research-based companies such as my own, make this possible.

These new drugs represent a quantum leap forward in biomedical technology.

Zyprexa, Lilly's new treatment for schizophrenia, serves as an important example. Zyprexa patients experience minimal side effects compared with patients using earlier generations of anti-psychotic drugs. I can tell you from the results I have seen that this drug works.

Zyprexa is proving to be as safe and effective in its role as Prozac is for depression. A great added benefit of Prozac is that it has helped to de-stigmatise depression. We believe and we hope that Zyprexa will have a similar effect on public attitudes toward schizophrenia.

Mental illness represents only one disease category. Pharmaceutical research today drives progress across a wide range of diseases.

Among other developments, we are beginning to witness the extraordinary potential for using genetic information to predict diseases to which individuals are most susceptible--and then intervening to prevent those diseases from occurring.

The implications for human health are profound. Just imagine a world where invasive and painful surgery is increasingly replaced by pharmaceutical strategies. Or, where long hospital stays give way to short periods of recuperation at home.

Ultimately, many of us in this room may live to see the day when diseases that have long afflicted the human race--such as cancer and heart disease or those that have appeared out of nowhere like AIDS--are finally brought under control or vanquished entirely.

In addition to improving health, this research-and-development revolution will have a far-reaching impact on the overall cost of health care. In fact, it will make it possible to actually lower the overall cost of health care in many cases.

That remark may strike some of you as counter-intuitive because the cost of drug development is much higher today than in the past.

Identifying and developing a new medication and then bringing it through approvals to market can cost as much as half to three quarters of a billion dollars. However, to understand the real cost and benefits of new drugs, we need to step back and look at the impact on the total health-care spending. And what we see is that patented medicines represent one of the most cost-effective interventions available in our health-care system. They shorten, and in some cases eliminate, hospital visits altogether. They reduce the need for surgery, emergency room admissions and repeated physician visits.

Drug therapies target diseases in their early stages, preventing long and painful illnesses and debilitating side effects. They alleviate suffering, reduce trauma and its consequences for patients and their families, and enable people to return to work faster.

Along with the devastating human costs, schizophrenia costs Canadian taxpayers over $4 billion annually. I suggest that many of these patients could eliminate expensive hospitalisations by utilising the latest pharmaceutical therapies. The potential savings to the health-care system could be quite dramatic.

Unfortunately, we are accustomed to managing our health-care system in silos, with cost control narrowly focused on separate components. Budgets are separately managed for physician costs, hospital costs, pharmaceuticals and diagnostics. Consequently, opportunities for real savings across the system are often not realised.

Information tools now make it possible to take a more integrated look at costs. We must begin using these tools to their full potential. Longer term, our goal should include a national, system-wide approach to health care that focuses on the patient's total needs--including prevention--and delivers the best clinical result at the optimal cost.

Let me quickly touch on the broader economic implications of this R and D revolution--on jobs and on economic growth. Today, the research-based pharmaceutical industry, represented by the Pharmaceutical Manufacturers Association of Canada, provides employment, directly and indirectly, for over 43,000 Canadians.

We have already witnessed the impact of a thriving information technology sector on Ottawa, Kitchener-Waterloo--and also on Austin, Seattle and Palo Alto in the United States. In exactly the same way, pharmaceutical and biotech companies will cluster in specific North American centres, acting as engines of economic growth and job creation.

Toronto and Montreal, homes to Canada's largest pharmaceutical companies, will definitely benefit. There has never been a better opportunity than right now for Canada's small, uniquely positioned biotech industry to become a significant engine for economic growth, creating knowledge-based, value-added jobs for Canadian scientists. Our biotechnology industry should develop a major presence in Canadian centres that support a top-ranking medical school--cities such as Hamilton, Calgary, Edmonton and Halifax, in addition to Toronto, Montreal and Vancouver.

Many opportunities lie ahead. However, Canada's ability to capitalise on those opportunities is not guaranteed--particularly today, when pharmaceutical companies are in a fiercely competitive global market. There are many countries in which companies may choose to invest. It is a situation much like what we see in the mining sector. There are precious metals all over the globe, but exploration investment goes to jurisdictions with stable mining regimes that encourage and reward that investment.

To attract the necessary investment for biomedical research, we must, as a nation, meet certain requirements. Here are what I consider to be the five critical success factors behind a strong research-based pharmaceutical industry.

First of all, we need a globally competitive research infrastructure--scientists with the appropriate skill sets, first-rate medical schools, and excellent teaching hospitals. This must be supported, in turn, by an excellent public school system and post-secondary institutions with a strong emphasis on the life sciences. Unless we encourage today's youth to study and enter scientific fields, I believe we will soon see a shortage of scientists.

Canadians have built health and education systems that are among the best in the world. However, persistent under-funding of our health care and education systems would definitely hurt Canada's competitiveness in the long run.

To build a globally competitive research infrastructure, our federal government must refocus its level of investment in basic research. Specifically, the federal government must once again step up to the plate again and fund The Medical Research Council of Canada at globally competitive levels. Dr. Friesen is our Canadian champion for this cause; we must listen, and we must follow his lead.

A second criteria necessary to attract global private-sector investment in medical research is a competitive intellectual property protection regime for our new medicines. We must be competitive with other industrialised nations. Federal legislation in 1987 and 1993 restored patent protection for pharmaceutical products and moved us closer to world standards. Yet, we still fall short in some critical areas.

In contrast to the European Union, the United States and Japan, Canada does not provide for patent term restoration, which extends patent protection to compensate for lengthy periods of regulatory approval. In addition, we should do a better job of protecting proprietary data submitted for these approvals.

A third important criteria for future investment is a Health Protection Branch approval process that needs to be both efficient and competitive with regulatory processes in other countries. While consumer safety is paramount, the timely introduction of effective new medicines is also important.

I do want to emphasise that the Health Protection Branch has improved its performance over the past few years, which is both recognised and appreciated. Despite these improvements, however, we continue to lag behind our trading partners. In 1997, the average time for approvals in Canada was 549 days, compared with 492 days in the United States. This represents a review time 12 per cent slower than that of our largest trading partner. Clearly, we must continue to improve.

A fourth factor for success is a more realistic mandate for Canada's Patented Medicine Prices Review Board. This Board was established with Bill C-22 to ensure that Canadians do not pay excessive prices for patented pharmaceuticals. An honorable intent, and one I clearly support. However, the Board's current guidelines for pharmaceutical prices are so restrictive that they actually threaten investment, innovation and access to new medicines.

Average pharmaceutical prices in Canada are 11 per cent lower than the international median price of seven benchmark countries used by the Board. In fact, for some products, Canada is below third-world standards for pricing of pharmaceuticals.

You can imagine the impact on Canadians if auto prices were set by a regulatory agency without recognising that this year's model represents an advance over older models. In such an environment, investment and innovation would be discouraged and we would soon all be driving rusty old cars or taking the bus!

If constrictive drug pricing persists, many new therapies will never make it to patients in Canada. We will lose the important progress we have made in creating a competitive research-based industry. This is not a threat. Rather, it is a reality of globalisation. A reality for the pharmaceutical industry just as it is for any other industry.

Fifth and finally, provincial governments have a great opportunity to embrace new drug technologies through their formulary listings policies. The trend towards restrictive listing practices as a cost-containment tool compromises the quality of patient care, restricts access to one of the most cost-efficient health resources and certainly discourages innovation.

The pharmaceutical industry would like to work with governments and other stakeholders to improve the use of medicines and reduce waste, while ensuring that the public has access to the best therapies available. We believe this is possible. We are also encouraged by the results of recent negotiations with the Ontario government along these lines.

Those are the five factors for building a winning pharmaceutical industry that include big pharma as well as the entrepreneurial biotechnology sector. But in addition, small biopharmaceutical companies require a sixth factor. These companies need access to capital and an environment that encourages joint ventures with global pharmaceutical companies. Without the support of big pharma, biotech would ultimately struggle for survival. Simply put, they need alliances too.

So far, Alberta and Quebec have best demonstrated commitment to nurturing biotechnology. Ontario and British Columbia have many opportunities to create a truly world-class environment to encourage investment and job creation in this important industry.

Without question, we are on the edge of an extraordinary future. Canada has in place many of the building blocks to become a world leader in pharmaceutical and biotechnology research. We are fortunate to possess outstanding scientific intellect, a growing support infrastructure and a pharmaceutical industry that is among the best in the world.

We certainly have the resources--providing we have the will--to create the winning conditions for success. As a once and future resident, I see a nation that has the resources and the skills to position itself at the forefront of a global revolution in health-care research. Let us move forward to tackle diseases, to improve the health of Canadians and to create knowledge-based jobs all across this great country.

Thank you.

The appreciation of the meeting was expressed by Catherine Steele, Vice-President (Toronto) and Partner, Gervais Gagnon Covington and Associates and a Director, The Empire Club of Canada.