Proceedings of the Standing Senate Committee on National Finance
Issue 15 - Evidence
OTTAWA, Thursday, October 24, 1996
The Standing Senate Committee on National Finance met this day at 11:00 a.m. to consider its order of reference on the Main Estimates (Canada Health and Social Transfer) laid before Parliament for the fiscal year ending 1995-96.
Senator David Tkachuk (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, before we start, I should like to introduce a visitor from Russia, Mr. Sergei Kutukov, who is the Deputy Chief of Staff of the Federal Assembly of the Russian Council. He is here to study our system and our bureaucracy. He works with the Budget and Finance Committee, which comprises almost everything including banking.
Mr. Kutukov, we hope you learn something here and that as well we learn something.
Mr. Kutukov: Thank you.
The Chairman: As the committee meets this morning on the Main Estimates 1995-96 to consider the Canada Health and Social Transfer aspects, I have the pleasure to welcome Dr. Barry McLennan, Chairman of the Coalition for Biomedical and Health Research, and Associate Dean for Research at the College of Medicine, University of Saskatchewan. For those of you who do not know, that is in Saskatoon, Saskatchewan, my home town. Joining Dr. McLennan this morning is Dr. Clément Gauthier.
Dr. McLennan, it is a pleasure to have you and your associate here, and we look forward to your presentation. Would you please begin.
Dr. Barry McLennan, Chair of the Coalition for Biomedical & Health Research; and Associate Dean, Research, College of Medicine, University of Saskatchewan: Thank you, Mr. Chairman, for inviting the Coalition for Biomedical and Health Research to appear before this committee. I believe you have a copy of the brief which I will refer to, which is dated October 24. I hope everyone has a copy of it.
I will start off by referring to an ominous message given to all Canadians a month ago by the Conference Board of Canada, where it was stated that our relative position among our competitors has slipped drastically in the past decade. As we debate in Canada the changes in federal transfers as defined by the Canada Health and Social Transfer initiative, I believe we must strike a balance between preserving and enhancing our quality of life and maintaining our competitive position in the world.
The former Minister of Health, Diane Marleau, stated that the role of research is to preserve our health system in these difficult circumstances.
Our present Minister of Health, the Honourable David Dingwall, in June of this year stated: "Canada must set priorities to address critical research funding gaps that could threaten its internationally competitive health research capacity."
I would like to show you the graph which Minister Dingwall was referring to when he made that statement. This graph shows the dangerously low level of research funding. I know you cannot see the detail from where you are sitting, but it is in the appendix to the document. The bottom line is, our competitors are going up and we are going down. That, in essence, is the problem. Minister Dingwall was referring to the dangerously low level of research funding in Canada compared to our competitors.
I believe the government should be commended for having recently introduced a new Health Services Research Fund. The assumption is, and I think it is valid, that this endowment will grow to at least $300 million, and that the fund will then generate significant annual support for evaluative health research. That should generate 20 to 30 million dollars annually, which is a very significant amount of money that could be used annually for evaluative health research.
Our first recommendation, which is on page 4 of the brief, is that health care spending be stabilized for a minimum of three years at current levels, to give us time to allow optimal use of evaluative research in adapting the health care system to new fiscal realities.
You will forgive me for introducing a personal note, Mr. Chairman, since we are both from Saskatchewan. Saskatchewan is the birthplace of Medicare. We are very proud of that. It is very important to me that we preserve our health care system. I am not alone in this. It is important to all Canadians. The recent poll results released in August by the Department of Finance showed that Canadians want our government to focus on two things: health care and education. Those two things are most important to Canadians.
I want to draw your attention to a study in the U.K. by Her Majesty's Treasury, which clearly reveals the benefits of health research. These benefits are listed on page 5 of our brief, and I will just touch on them. We have listed six economic benefits from basic research: First, it produces new and useful information; second, there is the creation by basic researchers of new instrumentation and methodologies; third, skills are developed by those engaged in research -- graduate students, postdoctoral fellows, scientists, faculty, and physicians; fourth, participation in basic research gains access to networks of experts and information -- that is, the World Wide Web; fifth, the information and the facts obtained from basic research enable us to solve complex technological problems; and sixth, these results are often of great benefit to industry and lead to the creation of spin-off companies.
This report from the U.K. is not from health researchers. It is from Her Majesty's Treasury, which has a different perspective. It is important to refer to this study because it clearly demonstrates the benefits from health research.
Closer to home, we have seen in Canada evidence of the concrete benefits resulting from research supported by the Medical Research Council of Canada. I want to emphasize that in our structure the Medical Research Council's fundamental mandate is to fund and support basic research. That is its job. It is the only organization in our structure that supports basic research. That is its primary mandate.
Funding from MRC has led to the creation of BiochemPharma in Quebec, TerraGen in British Columbia and, Vascular Therapeutics in Hamilton, Ontario. These are only three examples. These are spin-off companies. BiochemPharma, for example, grew from a few people in a university laboratory to a thousand employees within ten years. They are now the fourth largest biotechnology company in the world.
In my article published in The Globe and Mail on July 15, I stated that health research funding in Canada is in a tailspin. The graph I showed you illustrates that.
There are 16 medical schools in Canada. At a meeting earlier this month of the Council of Deans of Medicine, it was revealed that cuts to transfer payments for health and post secondary education this year alone translated into an 18 to 30 per cent decline in support for biomedical, clinical and health research infrastructure at the academic health centres.
It is very important that we create and maintain an attractive environment for research and development in Canada. I refer you to the top of page 6 in the brief:
In addition to an internationally competitive regulatory environment, access to qualified scientists graduating from Canadian universities in sufficient numbers is known as a critical factor in attracting global R & D investment to Canada. In 1995-96, MRC's $241 million budget offered training opportunities for some 11,000 graduate students and postdoctoral fellows.
I quote there a letter dated September 19, 1995 from Astra Canada, one of the pharmaceutical giants, to CBHR:
A newly formed "Long Range Strategic Planning Group" at our Product Companies in Sweden has identified access to qualified scientists (Ph.Ds) in the identified areas as a critical issue in Astra's future success and important information as they plan Astra's growth and direction for the next ten years.
In other words, they look at Canada as one place to invest. If they do not see an environment here where research can be done adequately and capably by a cadre of well-trained people, they will not invest in Canada. They will go somewhere else. It is therefore very important that we create and maintain an attractive environment for research and development.
This leads me to our second recommendation, which is on page 7. In short we say that it is recommended that the Committee urge government to bring corrective measures in the February 1997 budget that will provide the granting councils with funding levels competitive with our competition.
In Recommendation 3 on the same page we say that it is imperative that the Advisory Council to the Prime Minister on Science and Technology evaluate the impact of the government's deficit reduction measures on research in Canada.
If we are to preserve Canada's health care system, we also need to be more innovative in health research funding. This is one of the major strengths of our proposal, which is built on the concept of potential output. It not only looks at stabilizing funding for three years to give us a chance to re-evaluate what we are doing and to take advantage of investments that have already been made, but it also considers the potential of creating 32,000 jobs in the near future, at low cost.
Investment in MRC is calculated to be about $5,500 per person, per year, to create a job. That is twenty times less than the cost of creating one job by investment from the venture capitalists, a very significant difference.
In the longer term, given strong leadership of the federal government, other beneficiaries of research, such as the medical devices companies, industries, the generic pharmaceutical companies and insurance companies, should be enticed to contribute funding for health research. We know there is no new money coming from the government, and, as Canadians, we certainly support the general thrust of deficit reduction. We all support that. Therefore, we have to find new sources. We should tap these other areas.
The Honourable Paul Martin, in his October 9 presentation to the House of Commons Finance Committee, said that there are things that business and the markets cannot and will not do. The private sector cannot succeed in providing universal health care. It is not their mandate. Businesses do not do enough basic research. They follow their own agenda. They cannot do the broad spectrum and the total quantity of basic research that we must do as a nation.
We have a very serious problem. The academic health centres are expected to and must conduct health research in Canada. Drastic and substantial action must be taken; otherwise, basic research in the academic health centres will vanish in a short period of time.
The fourth recommendation on page 12 of the report underscores what I have just said. We say:
It is recommended that the Senate National Finance Committee undertake a comprehensive evaluation of the impact of macroeconomic decisions made by governments on Canada's research system and recommend corrective measures that will ensure adequate public support for both research infrastructure and research activities in Canada.
In conclusion, may I say that we know that enquiries and studies by this Senate committee are renowned for their thoroughness and their depth. The coalition urges you to consider seriously our recommendations.
Senator Stratton: Thank you for your presentation, sir. It was most interesting.
At present, the government, in its deficit reduction program, will virtually achieve a balanced budget no later than the turn of the century, barring a severe recession. After that balanced budget is achieved, it is likely that the surplus will rise, because the economy will still be growing, and that would be an opportune time for investment in research. In other words, in the next two years or three years money will once again be put in greater quantities into this kind of research, because the surplus will be significant, if the economy keeps turning out as it is. There will be a wonderful opportunity in the new millennium to have spectacular growth and wonderful research being carried out.
With that opportunity in the new century in mind, perhaps it is a matter of trying to sustain yourself in the short term, and I believe the reality is three to five years in the short term and ten years in the long term, to bring research back to where you would really like to have it.
My question is: Can you survive that short term? Would you consider the reality of reducing the deficit to zero and then crossing that magic threshold so that your potential for growth is there in the future?
Dr. McLennan: I am not sure we can wait that long.
Senator Stratton: That is my fundamental question.
Dr. McLennan: As the graph shows, this is 1998 dollars; if the slope of that line does not change, we are going to be right off the page in four or five years, as you have suggested with your scenario. Therefore, I do not believe we can wait that long. There are several problems with that.
At the present time the university departments, the hospitals, the research institutes and so on, collectively referred to as the academic health centre, are in a crisis mode because they have experienced cutbacks to funding over the last number of years. The support for doing research has been whittled away so drastically that we are in danger of collapsing the structure. I am not sure that we can wait as long as you are proposing, and hence it is suggested we find additional, new, sources of revenue from the private sector, for example, to help offset this.
Senator Stratton: If we did get extra help from the private sector, and I believe that potential is there, you are talking about a partnership with government, essentially. Is that what other countries do? Is that what Britain, Germany or Australia do?
Dr. McLennan: Earlier in September I was at a two-day conference on international health funding here in Ottawa, at the Chateau Laurier. Twelve or fifteen other countries were represented. Those countries do some of what you suggest, but where they differ from us is that they put more money into research to start with, and they are continuing to do so. I hate to keep burdening you with this graph, but that is why those numbers are going up, because other countries are investing in research. Even Japan, which is in a recession, is putting millions of dollars into research, because they recognize the importance of it, and the economic return on that.
It is a triple-headed return: You get the benefits of the research; you create jobs; and those people pay taxes and become useful contributors in society.
Conversely, if we are not funding research, we lose those benefits as well. I am sure that is clear to you.
Other countries are doing some of what you say, in addition to putting more money into the research budget. We are perfectly convinced that we can find matching money, we can find partners to work together on this. That is why I mentioned some of those other agencies.
Senator Stratton: Thank you.
The Chairman: I have a couple of questions.
In a practical way, for example, at the University of Saskatchewan, what would the last number of years have meant to you in dollars and what other repercussions are there in your situation?
Dr. McLennan: In our own college of medicine, with which I am most familiar because I am the Dean of Research there, the entire college, not just the research sector, has gone through a twelve per cent cut in the past four years. Of course, it is more than twelve per cent, because it is twelve per cent on dollars that have less value as you go along. We thought we were through the worst of it, and then the bad news really hit. We had a zero per cent grant increase from the government to the universities, which is passed on to the colleges. To put it in perspective, Mr. Chairman, we are currently facing a $19 million problem in our own college of medicine, and we are one of sixteen colleges in Canada.
The mandate of a college of medicine, of course, is to teach and to provide clinical service; and our mission says that you do both of these things best if you base them on research, if you base the practice of medicine on evidence-based decision making. When we cannot afford the research, we immediately threaten the two things that we want to do, the teaching and the clinical service.
The Chairman: What does that mean across the country? It would be self-evident that it would perhaps mean loss of people.
Dr. McLennan: Oh, yes.
The Chairman: Senator Stratton, do you want to add to that?
Senator Stratton: I have personal experience with the Fresh Water Institute at the University of Manitoba, as an example. They do basic research into the effects of acid rain on the lakes east of Winnipeg, and their funding has been virtually cut off there. Many of the key Ph.D.s that ran this research have not only left the Fresh Water Institute but have left the country to work elsewhere.
Another example is Atomic Energy of Canada in Petawawa, where they have just served notice on 90 Ph.D.s who were doing fundamental and basic research into the safe storage of nuclear waste. There is a loss there. There is a severe loss taking place today in our intellectual capacity and it is threatening the whole area Dr. McLennan is talking about. It is rather scary when you see this kind of fundamental, basic research leaving the country.
This is a statement, I realize, rather than a question, but it is in support of Dr. McLennan. In watching the personal experiences of people one knows, who have to leave the country to go elsewhere to obtain employment, I think we are losing something that will never be regained. That is the fear I have.
I think there is a marvellous opportunity for us, if we could find a level of sustaining ourselves until we cross that magic threshold, but there is severe loss now.
Dr. McLennan: You are absolutely right. We are losing faculty in our own college. Worse than that, there is a long time-line, a continuum, between when a student starts to train to do research and when he can actually seek a position and practice what he has been trained to do.
The morale among our graduate students is really low, because they look at the loss of faculty in our colleges of medicine, they look at the low morale in the trenches, and they ask, "Why would I go into research?"
We know as a nation that we must keep priming the pump. I refer you to our diagram in Appendix V, which has the title, "Research Investments Create a Virtuous Cycle of Growth and Development Opportunities." At the top of the circle is "Basic Research". You have to prime the pump; you have to put the money into basic research, as Senator Stratton is saying, which then leads to start-up companies, growth companies, economic return and so on. You have to keep priming the pump. What we are doing right now is letting the pump go dry, and that is our dilemma.
I would like to invite my colleague to answer a question on funding.
The Chairman: From a national perspective, it seems to me that the brain drain would be a major problem for the country if this continues.
Dr. Clément Gauthier, Executive Director, Coalition for Biomedical & Health Research: Yes, Senator Tkachuk. You ask what the underfunding problem means in the level of the whole country. I invite you to look at Appendix III of our document. What you have there is basically the output potential gap that we have. This is based on the last two competitions of the MRC, the Medical Research Council of Canada. This is the total for unfunded grants and awards that were recommended and assessed by international peer review system to be very good science, and that means above the grade of three. That is very good science, and these are MRC's standards, competitive with any other international standards.
The total means that over the last year we had $82.1 million worth of wasted potential of excellent science that was not turned into actual knowledge. Then you must link that with what Dr. McLennan said with respect to Appendix V. This is essentially lost potential in terms of basic research that would prime and activate the virtuous cycle of growth and development opportunities. The extent of the impact goes beyond the immediate employment of students and training of researchers; it goes as far as ten to twelve years down the line with fewer BiochemPharmas, fewer Vascular Therapeutics, fewer companies exploiting and transferring technology because they cannot do those things unless the pool of knowledge that is necessary to bring together investors is generated.
That is the extent of the problem we have and that is the basis, also, of our proposal to address this serious problem, the proposal to create 32,000 jobs per year for three years for government at a cost of $500 million. This is the basis for it at the same time and this is based on the numbers of students and services supported by MRC's budget on an annual basis.
The Chairman: So we get it into the record, did we, in the 1980s, have a growth in research dollars, in pure research dollars, to the sixteen universities? Did we have a growth in cash?
Dr. Gauthier: Yes, there was a slow growth over the years of, on the average, two to three per cent, and you see it on the graph again here as a cumulative growth. We were still the lowest among all the other OECD countries.
An important point that does not appear here is that, for example, taking the basal level -- not the trends but the basal level -- on a per capita basis, the United States invests five times more than Canada in health research. In addition to investing proportionally less at the basal level, the slope increases slowly by two to three per cent a year, which is less than the inflation rate, which is also much less than the seven per cent scientific inflation index. We were not even catching up with inflation but were increasing, even though we were the member of the G7 countries with the lowest increase. Yes, it was increasing.
Under the Honourable Monique Bégin, who was Minister of Health in the early '80s, the Medical Research Council of Canada received a boost of $30 million. This was basically due to her very active role in getting the budget increased for a single year. That was not the case for the other two granting councils.
We have a way here to compare the impact of that boost. At that time MRC had a budget of about $150 million; therefore, it was a substantial boost. The result was that, three years later, Canada was a leader. One way to evaluate the impact of your science compared to that of other countries is to look at, first, the number of citations, or the citation index, and, second, the impact index. That is the number of times scientists outside of Canada quote articles produced by Canadians scientists. Figures produced in 1991 show that from 1983 to 1986 Canadian clinical and biomedical research was the leader among all scientific fields in the number of publications, and we were number one in the world, even ahead of the United States, in terms of impact of our publications per capita. Now we are number two. We have moved behind the States. I presume that it will keep slipping unless we do something about it.
We had a nice pilot run here showing that the small boost of $30 million over a budget of $150 million basically propelled us to the top, and provided Canada with the ground necessary to welcome pharmaceutical investments. This boost has also helped in improving the infrastructure base we need to welcome the pharmaceutical industry to invest in Canada.
Senator Bolduc: In view of what you have said about the impact on business, how can one understand Appendix IV, where it says that there will be venture capital increasing in 1995 and 1996 in Canada --
Dr. Gauthier: Yes.
Senator Bolduc: -- even though the basic research budget is apparently going down?
Dr. McLennan: Are you referring to this graph on Appendix IV?
Senator Bolduc: Yes.
Dr. McLennan: This graph is not basic research funding. This graph shows venture capital investment in life sciences. This is the technology transfer component.
Suppose you take 100 basic research projects. A very small number of those, and that is no reflection on the research, but a very small number of those will lead to a "commercializable" product, a commercial spin-off. I would agree with the notion, and the graph shows it from 1993 to1996. Look at the difference. We need to spend more time and give more attention to capitalizing on our research productivity. This graph shows essentially the activity of the Canadian Medical Discovery Fund and other venture capital investments, showing there is a lot of activity out there now but it is very recent, 1995-96. We are beginning to capitalize on that, and we must do that as a nation. This is good but this is at the end of the rope in terms of the continuum between starting the basic research, getting a product that is "commercializable" and so on.
Senator Bolduc: In other words, we get the benefits of what happened in the eighties.
Dr. McLennan: Exactly.
Senator Bolduc: I would like to come back then to the table regarding the budget for research in health. We see, as you said, that Canada is going down a little, but the others in the western world, the most important of them being the United States and Europe -- United Kingdom, Germany and France -- are going up from approximately 25 to 50 per cent of entries between 1990 and 1996, in five years. So that means, on average, between a five and ten per cent increase each year. How can they do that when they have the same public finance difficulties that we have? I suspect that here we are talking about public money. We are not talking about private money.
Dr. McLennan: Yes, this is public money. Again I refer to that conference in September right here in Ottawa, the conference on international funding. The Japanese model is probably the most interesting one, in that they have simply stated as a government -- and Prime Minister Chrétien would probably love to have that kind of power -- "This is what we are going to do," and they are doing it. They have decided to put this tremendous amount of money into research.
Now let me go to the U.S. figures. Yes, the graph shows the U.S. doing very well. We were given at the same meeting the budget figures for NIH, the National Institute of Health, which is like the Medical Research Council in Canada; their basic job is to fund health research. Their budget will go from $12 million to $25 million. They are getting a 6.9 per cent increase in this year, but they are doubling their budget.
Senator Bolduc: Of public money.
Dr. McLennan: Yes. In the U.K., they decided a year ago to spend 1 per cent of their health care budget on research. It is question of priorities, I suggest. We want to live within our means, but at the same time, what is important to us as a nation?
Senator Bolduc: The relative decrease in Canada by comparison to the other western countries is not a reaction to the lowering of federal transfers to the provinces.
Dr. McLennan: No. That is just beginning to feed in. What this graph shows is that, when you do across-the-board cuts, you affect all the players. To his credit, Dr. Henry Friesen, the president of the Medical Research Council, tried very hard to take his base budget money that had been allocated to him and to lever that money, to use it to generate funds from other sources.
Unfortunately, the across-the-board cuts to Health Canada and other government departments of course also affect the MRC, so his attempts to lever his base budget have essentially been strangled by the across-the-board cuts, and his room to manoeuvre has been severely restrained. The consequences can be seen in the graph that my colleague Dr. Gauthier referred to, where we have the situation of so many very high quality research projects being approved for funding on the basis of scientific validity and merit but not being funded because there is insufficient money in the base budget.
Senator Bolduc: That money is outside of the social transfer completely.
Dr. McLennan: Yes.
Senator Bolduc: For research.
Dr. McLennan: This is the health research, yes.
Senator Bolduc: There is some money that is transferred through the social transfer fund that goes to the universities all over Canada. Of course, that has been cut also.
Dr. McLennan: The cash component.
Senator Bolduc: Yes. In that cash component, do you think that there are research projects also or is it just operations of the faculty of medicine and other faculties in the universities?
Dr. Gauthier: If I may respond, Dr. McLennan, in his presentation, referred to a meeting of the Council of Deans of the various faculties of medicine. In October they confirmed that, subsequent to the cuts in transfer payments for post-secondary education and health, there were decreased resources for research infrastructure in universities, teaching hospitals and affiliated research institutes, varying between 18 and 30 per cent across Canada in one year, and that is the impact of the first year of the application of the decrease in transfer payments under the CHST.
Senator Bolduc: Do you know if the provinces cut as much from medicine as they cut from, for example, the law faculty or the engineering faculty or the administration faculty?
Dr. McLennan: I can speak for my own province more clearly because I know that one the best. The provincial government in Saskatchewan simply told the University of Saskatchewan that its budget was cut across the board, and that its grant had been reduced by so much, and the president of the university in his wisdom said, "All right. Deans of colleges, your budget this year is this much less. You do with it what you want."
Senator Bolduc: So there is no reallocation among the universities themselves.
Dr. McLennan: No. You get into the sticky area of university autonomy and so on, but it is a decision within the institution on how to do it, and they are struggling with it. The question we are asking at our own university -- and I am sure it is happening in the others across the country as well -- is what do we keep? Which colleges? Which programs do we cancel? Which ones do we keep? Of course, it is not a quick decision, or a quick recovery of money, because if your son or daughter or niece or nephew is in university, they have a five-year or four-year contract with the institution to deliver that degree product; so if I say tomorrow that we will close the college of medicine in Saskatoon, we do not save any money for five years anyway. The real dilemma for the universities is how to maintain some activity until we get this surplus of resources that we hope will materialize down the road.
Senator Bolduc: In the U.S. and in the U.K., is there any participation by private business in fundamental research?
Dr. McLennan: I do not know what the percentage is.
Senator Bolduc: Normally, they would not be involved in that very much, because they would have no immediate interest in doing it. In terms of fiscal expenditure, suppose, for example, that General Electric decided that, with $2 billion in profit this year, they would agree to put, let us say, $300 million into the University of Chicago for basic research. Would that be an accepted fiscal expenditure?
Dr. McLennan: I do not have the hard numbers from those other countries, but I would suggest the situation is exactly the same as we see here. Industry, or the private sector, has a mandate to do what they set out to do, and as I said in my opening remarks, they cannot do the basic research unrelated to their specific goals, and they are not simply going to hand money over, especially in today's situation, as a gift. There will be strings on it. So they rely on the university community, the academic health centre, to do the basic research.
Senator Bolduc: And how about the foundations?
Dr. McLennan: You mean private foundations?
Senator Bolduc: Yes.
Dr. McLennan: I do not have the numbers for Canada, but in our own medical school, and we are a small medical school, of the $15 million in research grants and contracts that we have each year, about a third comes from the MRC and about a third comes from private and national foundations, so they are increasingly taking up more and more of the activity.
Senator Bolduc: Is that one of the reasons why in the U.S. and in England it is increasing?
Dr. McLennan: It could be. This graph just shows public funding. This is not private sector money.
[Translation]
Senator Rizzuto: Mr. Chairman, many people are concerned about the manner in which research centres operate, in particular those which receive funding from either the federal or provincial government. In some respects, they have made a great deal of money and some people wonder if they may not be engaged in speculative activities.
At one point, companies held shares valued at $10 a piece and the value rose to $50. The opposite also occurred. The impression we get is that the funding granted to enhance our research efforts does not always serve its intended purpose. In some cases, the money does not go to research, but rather is used to help certain financial companies increase their profit margin.
The outcome can be quite damaging. I come from the Montreal area and a number of people are concerned. When they hear talk of helping university centres, they become somewhat critical. Are our tax dollars really being used for research or are they helping certain people to engage in speculative activities? A number of people are concerned about this. Are you aware of the problem? If so, what can we do to rectify the situation?
[English]
Dr. McLennan: In the province of Quebec, as I understand it -- and I envy the situation there from this point of view -- the prOvincial government, several decades ago, made the decision to invest more of its provincial money in health research. They have created FRSQ, the Research Foundation for Health, which has been tremendously useful in financing basic research in the province. It has allowed those people to interact with the private sector and generate research projects and so on.
Now, as to your question whether there is public money going directly into the private sector, I do not know if you have a specific example or not, but as I indicated in my remarks, we need this investment in research and development in Canada. We need to have this R & D activity to create the spin-off companies and so on, and I mentioned BiochemPharma and TerraGen as examples.
The companies, from the global perspective, are looking for a place to do business. We cannot stick our heads in the sand and say we do not want to taint ourselves with private sector money. We need this investment in Canada. We need this to provide jobs for our cadre of scientists. I do not know if I have answered your question, but in one sense Quebec has created an environment which is envied in the rest of the country, because they have created this infrastructure support for research which is so positive.
The Chairman: Dr. Gauthier.
[Translation]
Dr. Gauthier: Mr. Chairman, I want to reassure you about the process. There are two things we have to consider. When we talk about public funds granted through federal agencies, in particular the Medical Research Council of Canada, the CSRMC and the Social Sciences and Humanities Research Council, we must remember that these agencies distribute funds to researchers on the basis of a peer review.
These three agencies account for the vast majority of academic research conducted in universities, teaching hospitals and associated research institutes. All of the public funds granted are first subject to a peer review. At this level, extremely stringent criteria are applied. The money is not going to support industry directly, but rather to support so-called fundamental research.
By definition, the money has no specific intended purpose when it is received. That is our problem. That is why we cannot have the money going to industry. They have no interest in this. We are talking about fundamental research, carried out on a broad scale for the general public.
Mechanisms in place ensure accountability; taxpayers' dollars really go to universities, not to companies. That is the first point I wanted to make.
The second point is this: when a health care infrastructure is in place, researchers with up-to-date knowledge can compete with other countries. Provincial governments also do their share by covering indirect costs through a health care infrastructure. We then have what we need to attract international investment to our country and to our provinces.
The industry uses its own money to pay for independent contracts. it does not operate with public funds, but rather with private funds. Public funds are administered in whole by federal agencies on the basis of extremely stringent criteria and an accountability process. The latter was examined in the course of the federal program review and was judged the best, so much so that the National Council for Science and Technology recommended that other departments allocate new funding to research because of the quality of the system and the accountability in place. Clearly, funding is directed only to research which benefits the public, not private companies.
Senator Rizzuto: If I understand correctly, these companies receive financial assistance, not necessarily research funds, but assistance from other departments for job creation and so forth. A number of companies received such funding. If the funds are used solely for research purposes, then we have to find a way to let the public know this.
[English]
The Chairman: We are talking about the grants. We are talking about money going to university research, not to private companies.
Dr. Gauthier: Research is a very expensive undertaking. To remain competitive with other countries, we need very expensive materiel, and very expensive infrastructure. Often what happens is that a pharmaceutical firm will sponsor an institute, thereby paying for part of the infrastructure cost, but the direct costs for the actual research being done in the institute that is sometimes co-sponsored by industry is channelled through the federal granting councils through the peer review process.
Both here and in the United States those institutes may have the funding for their infrastructures -- bricks and mortars -- provided in part by industry, often in partnership with the provincial government. It is becoming the norm more and more because of the cost of all those things, but the research itself is peer reviewed and the money that the federal government gives is given through the granting council; so it is very much accountable to that extent.
I realize that the question you raised is perhaps related to that -- donations by industry for some centres; and this happens, but it does not interfere. The name is there but the company does not directly receive the money for research, the researchers do.
Senator De Bané: Dr. McLennan, Monsieur Gauthier, I should like to ask a question about the issue in your brief entitled: The Role of Research in Preserving Canada's Health System. Under that heading, on page 4, you quote two ministers of health of the present government: Madam Marleau, who said, "Our health system ... must be defended and preserved in difficult and challenging circumstances. This is the role of Research," and Mr. Dingwall, the present minister, who said, "Canada must set priorities to address critical research funding gaps."
The other day a medical researcher was telling me that the tragedy of declining funding for medical research is that the damage to the quality of medical services in Canada due to a lack of funding is invisible, because, from year to year, the damage to the quality of medical services cannot be perceived by the public. He said that in 15 years from now it will become very visible, but that by then it will be too late, because it would take another 15 years to bring it back up to world standards.
My first question is whether it is true that, because of lack of funding for research, the quality of medical services will then gradually deteriorate and that that fact will become very visible in 10, 15 or 20 years?
My second question: If that is true, why is it vital that the research be done in Canada? Can we not benefit just as much if it is done in the United States?
I understand the economic aspect of it, that if there is no research in Canada, then there will be no BiochemPharma companies in Canada and they will be in the United States and Switzerland. I am just talking now for Canadian citizens, for their own health services that they receive. Is it important for me as a Canadian consumer whether the research is done in Canada or in Italy or in Germany or in the United States? Those are my questions.
Dr. McLennan: Yes. The answer is yes, yes, yes. His statement is absolutely true, the researcher you were talking to. This is the dilemma. We cannot wait until future funding maybe becomes available down the road. We have to keep working and feeding the system now. I used the phrase "priming the pump" earlier, and that is exactly what it means.
You ask, why can we not let other countries do the research? What makes you think that other countries would give us the information freely? Do you not think it would cost even more to buy this information?
Secondly, as I have said earlier, good teaching in universities and good clinical practice, as done at our academic health centres, depends on research. If you look at the mission statement of all 16 medical schools in this country, I am sure you will see a similarly worded statement, that good teaching, good clinical service, good health care delivery, depends on research. You cannot substitute that. You cannot buy that.
Let me give you an example. When the Gulf War was on we did not have a blood products fractionation plant in Canada. I was not aware of that at the time. All our blood donations were sent to other countries for analysis to derive the blood products that our patients in hospitals needed from time to time. Yes, we had a volunteer agency where you could donate blood and so on, but I did not realize we were not self-sufficient. Number one, we do not donate enough blood to satisfy the needs of our teaching hospitals, but, most important, the blood fractionation was done for Canada in several centres in the United States.
When the Gulf War was on, the President of the United States signed an executive order, unbeknownst to me and I suspect most Canadians, that stated that, if things really blew up in the Gulf, and they had thousands of casualties in the American military, all blood products would be retained in the United States for use in the military. Those countries, such as Canada, that were depending on the United States to fractionate the blood, to do the research, would have been absolutely shut out.
That is a simple example but I think it illustrates the point that we cannot allow ourselves to become completely dependent on others; we have to have our own research knowledge and information.
Then you say, all right, even within the country, it is important to sustain the activity in all of our medical centres across the country. We cannot concentrate it all in Montreal and Toronto, because, to attract good faculty in Halifax, in Calgary, in Saskatoon, we have to have an environment where they can maintain their credentials, hold their heads up with their peers across the world. We have to provide an environment in which they can do what they are trained to do. The best teachers, the best clinicians, are those who are involved in research.
That is why we cannot rely on other countries to do it for us. First, I do not think they would give us the information; second, it would probably cost more than doing it on our own, and then we would miss all the other benefits.
The Chairman: Dr. Gauthier.
[Translation]
Dr. Gauthier: Senator De Bané, you asked a very interesting question, namely why is research done in Canada instead of being exported from the United States? At the University of Montreal, we have an excellent economist who specializes in econometrics. His name is Dr. Pierre Mohnen.
Dr. Mohnen authored the latest study released by the Science Council of Canada. It examines the relationship between productivity and investment in research and development and reviews international literature on the subject.
Among other things, the study concluded that investing in research generates a rate of return which is 10 per cent to 40 per cent higher than the rate of return on capital investment. Furthermore, social investment, that is the spinoffs on industries and groups associated with the investing party generates an additional 50 per cent to 100 per cent return on investment. Dr. Mohnen's study also showed that the return on investment in fundamental research was much higher than the return on investment in applied research. Lastly, the return on investment in research done in Canada is 10 times greater than if this technological information had been purchased or imported from another country. This economic argument reinforces Dr. McLennan's argument about the quality of the training of health professionals. This study was very well received.
Senator De Bané: Dr. McLennan gave us a very specific example about the Gulf war. The U.S. President stated that if ever there was a need for blood, it could not be exported. I can understand this example. However, I am sorry but I do not understand why the dissemination of knowledge poses a problem. If there is one area that knows no borders, it is the scientific field. Every week, Canadian scientists participate by the hundreds in international conferences. A scientist working in a Saskatchewan laboratory is in daily contact with his colleagues around the world working in the same field.
Does it really make a difference to Canadians and to the quality of health care if the research is conducted here in Canada or elsewhere? I agree with Montreal econometrist Dr. Mohnen that each dollar invested generates fifteen, thirty or forty dollars in return. We have here with us Senator Lavoie-Roux, the former Minister of Health, who is very knowledgeable about this subject. Does it make a great deal of difference to the patient if the research is done in Canada or in the United States? Is it important that the research be done here? Do you think that this is critical?
I recall when I served as the Minister of Fisheries and Oceans. This department has a sizeable scientific component and every week, 15 or 20 departmental officials attended international conferences and the like. There were no borders in this field.
[English]
Dr. McLennan: May I respond to that? Yes, I think we need to distinguish between the generation of knowledge, the preservation and dissemination of knowledge on the one hand, and the ownership of intellectual property on the other. You point out that the dissemination of knowledge can be done on the Internet. You can communicate there, as scientists do, and I applaud them for doing so, and I encourage my own scientists to do that. You must collaborate. You must make better use of your intellectual resources and your economic resources by collaboration.
The days of the individual scientist working away in his individual laboratory and making significant discoveries are essentially gone, because things are moving too fast. Scientists must collaborate.
We have to distinguish, I submit, between that generation of knowledge and the ownership of intellectual property, and there's the rub. There is the distinction. If you create the knowledge, you own that intellectual property.
Let us extend that one step further and suppose that intellectual property or knowledge becomes a commercializable product. If you own that product, you retain ownership of it and you dictate what happens to it -- and we can use the blood example again if you wish. You must distinguish between the general assembly and creation of knowledge and the commercialization and economic return of that. There is a distinction to be made there.
I submit we can contribute, and our scientists must contribute globally. They must go to conferences and so on. I am not suggesting that the Canadian scientists can, or should, do everything. We have to decide where our strengths are and pursue them. We are a small nation on the global scene. From the pharmaceutical figures, we are something like three per cent of the world figures. We are really a small player and in a sense you could say, "Well, why should they invest in Canada at all?" We are only three per cent of the activity. However, coming back to your point, they do recognize that we have a cadre of very well-trained, highly qualified people in our country.
Our educational system, our scientific peer review system that Dr. Gauthier referred to, is highly regarded. There are not usually any political strings to it. It is good stuff. Your question is difficult to answer, but I just return to the theme that we must be able to hold our own head up. We must be able to show that we can produce and generate wealth in this country, and that wealth comes from doing the research.
Again, I refer you to Appendix V in our document, which shows the basic research engine at the top leading, with time, four or five years down the road, or maybe eight years, to spin-off companies and so on. We do ourselves as a nation a great disservice if we do not invest in the basic research and capitalize on that investment.
The Chairman: You are the experts in this matter, but on the little bit of reading I have done on this stuff, pure research is bit of a problem because, for the consumer, what is important is what I call "dumbing down".
Smart people are curious people, and if you lose research dollars, you lose smart people. When smart people move, you have dumber people teaching students. We have situations like this all over the world, where there are countries that do not conduct any research, and that could borrow the ideas and the research information, but there is nobody smart enough there to borrow it, frankly. If it was so easy, then the other developed countries would just borrow all this research, but no one wants to work there anyway, because the smart people want to work where the research dollars are and where their curiosity can drive them.
We cannot lose these people, because these are our best people to teach our future doctors, our future researchers and our future innovators. That is my concern about this.
If our top people leave the University of Saskatchewan, that hurts the student enrolling into the School of Medicine who would have had that very bright and top quality instruction, and then the whole quality of our health care goes down, with poorer managers and everything else. That is my concern based on things that I have read about research in other industries. That has always been my concern about it.
Senator Lavoie-Roux: It is natural for a group like yours to come and ask for more money and "faire un plaidoyer", to plead to protect medical research. I think it is a good attitude. One thing I wanted to ask you, though, is whether you recognize that everybody has had to cut budgets. Let me use Saskatchewan, because you might not have the figures for other provinces, but if you compare your lack of increase in research, or even the loss in grants for research, for the health care system in your province with that of any other province, I think you will find that they have been even more taxed than you have been. Am I wrong in saying that they have suffered greater loss than you have in the field of research? They certainly did not get any increase for about the last two, three, or four years.
Dr. McLennan: In Saskatchewan, we believe that recession is a natural state of affairs. Let me answer your question on a national basis. I like to tease my colleagues in Ontario, who recently have gone through research cuts and whatnot; I tell them they don't know what they are talking about, but that is too provincial. Let us come back to the national scene.
Appendix III shows the picture very well. Let me explain briefly, if I may, about this peer review system. The peer review system is an arm's length system. It asks, "What do the best researchers in the world think of your work, and should it be funded?" It is an arm's length process. It is the best way to evaluate the validity of research.
As Dr. Gauthier was saying earlier, at the moment, or in the last twelve months, in this scale of rating of zero to four, the maximum score you can get on a grant is 4.9. That is 100 per cent. When I was doing bench research a few years ago, anyone who had a grant of 2.5 or better was quite happy because they were pretty sure they would get funded. Now the cut-off is 4.0. In other words, if you get 4.1 or 4.2, you will get funded, but if you get lower than 4.0, you do not. When I said it was zero to four, I should have said 4.9. That would be the maximum score.
This figure on the table in Appendix III shows the problem of the unrealized potential, and you ask where the money would come from. We have invested in these young people, these scientists, these faculties, these positions. We have trained them. We have put them in positions to do research and generate economic return for Canada, as we have explained in our brief. We are not funding them.
This 82 million is the unfunded potential, what we are missing here. This is the group that were between 3.0 and the cut-off. I can tell you about one of our researchers who had a rating of 3.79 this year in Saskatchewan. He did not get funded. In other words, if anybody around the review table sneezes or hiccups, that is a negative signal; you do not get funded.
It is an absolutely devastating situation, because the base budget of MRC has been cut so badly. So there is the unfunded potential. If we could fund that, and restore that base budget, we would prime the pump and create the economic return that we all desire. That is where part of the money comes from.
Secondly, we have a tremendous data base in Canada. We have been doing medical research and health research for a number of years, but we really have not put much effort into evaluating what we have done. As an example, if you give a drug to a patient for a particular situation for 20 years, what are the other effects of that? Are there other things we could learn from that research? In other words, evaluation research must be done. This is not going to cost a lot more money, but we need to do it to better understand where we are going.
As a nation, and certainly in Saskatchewan, we think we have a niche to create for this; and we are no different from any other province, we need to look at what we are doing with evaluative research, health outcomes research, population health research, and so on. We could capitalize tremendously on our investments that have already been made there by looking at this. This again is part of the output potential that we talk about in our brief.
Therefore, yes, I quite agree with you, we have to live within our means, but at the same time there are things we could do to make better use of the dollars we have.
Senator Lavoie-Roux: My other question, I believe, was partially answered before. Dr. Gauthier referred to the FRSQ in Quebec. I would like to know, in other provinces, what is the input of the various provinces to medical research?
Dr. McLennan: I can answer that briefly. FRSQ is the gold standard. The rest wish that their provincial governments had invested in health research to a similar extent.
Senator Lavoie-Roux: They always scream that they never have enough, I can tell you that.
Dr. McLennan: Of course, but that is like a baby in the candy shop.
Alberta spends about $9 per capita on health research. In Saskatchewan we spend $1.2 per capita on health research. British Columbia is somewhere between us, at $4 or $5 per person on health research. I do not know what the figure is for Ontario. In Atlantic Canada, it is pretty low as well.
I realize perfectly that provinces have responsibility for health and education, as we all know. Some provinces have their house in order much better than others, and some have made a decision to invest in health research, and they are now getting the return on that investment.
I use a local example, and I do not want to overwhelm you with information from Saskatchewan, but a number of years ago, the provincial government was persuaded to invest money in agricultural technology. As you may know, at our university in Saskatoon, the University of Saskatchewan, we now have a world class agriculture biotechnology research centre. It is fantastic. I sit back and I marvel at how this machine works. It attracts its own investment now. Why did it happen? It happened because the provincial government said, "We will invest in this and get it started."
I have had no success so far in making the argument to the provincial Minister of Health: "Why do you not invest in health research in the same way and we will have a mirror image at my end of the campus of this agriculture biotechnology centre?" So far I have not been successful in convincing him. The model is there. It works.
The Chairman: You need a doctor as a premier.
Dr. McLennan: I guess that is it.
Senator Lavoie-Roux: I was a little bit surprised by your first recommendation, in which you state that the federal government spends over four times as much on social programs as it does on health care. You say, "CBHR recommends strongly that health care spending be given higher priority, and be at least sustained and guaranteed at the current levels for a minimum of three years..."
I have the feeling, maybe I am wrong, that social programs in this country have been harder hit by the deficit reduction. I do not think you can separate the objective or the result of social programs from health; you cannot dissociate it from health, because the two are intertwined, they are so closely related.
Let us say they would still be going on and increasing family allowance and all kind of social programs, but we have witnessed quite the contrary in the last few years. I was, therefore, a little bit surprised by this recommendation.
Dr. McLennan: I would respond by going back to the question that Senator De Bané asked a while ago, talking to his research friend saying, "If I do not continue doing this, will it matter?"
Every application today, every medical procedure, every drug that you take, has only come about because of basic research that was done a number of years ago. This is what is so hard for the general public to understand. It is the same problem with my 19-year-old son, who smokes a little bit. He does not smoke in the house, but he smokes. I say to him, "You should not smoke, because this is what will happen to you in 20 years." He does not understand.
Senator Lavoie-Roux: My grandfather is still alive and he smokes.
Dr. McLennan: There is always an exception. My point is, you have to keep investing in the basic research to deliver the products and the therapies that we need down the road. Senator De Bané's friend is absolutely right that, if we do not do this, the effect is invisible at the moment but it will materialize.
Returning to your concern, we are not saying that spending on social programs is not important, but we are saying that delivery of health care is an integral part of this social cohesion that we think is so important in our country. I think that is my answer to your question.
Senator Lavoie-Roux: Except that if you cut too much from the needs of the people who are socially handicapped, I will say for the purposes of the discussion, there will be an increase in health problems, too.
Dr. McLennan: Exactly. Their social health is part of their health, yes.
Senator Lavoie-Roux: I am for medical research. Nobody here is against it, but you must establish your priorities and you must at this point establish the cutting of one program versus the other one. It is a very delicate thing.
Dr. McLennan: As I said in my opening remarks, we have to strike the proper balance.
Dr. Gauthier: I will make one quick closing remark on investment in health. You should keep in mind that transfers from the federal government to the provinces for health also support the health research infrastructure at teaching hospitals and research institutions. This is an investment in the sense that, if we do evaluative research, this has a potential to lead to lower costs. This is a positive feedback, as we say in our specialty field, that will actually help reduce the cost in the long run. Therefore, this is an investment as compared to spending, in that sense.
I would like also to give one example to Senator De Bané about why physicians should care about having scientists in their surroundings who are up to date in their knowledge and who are actively running research. I believe one point that we are missing here, because we always talk about the global or national picture and we always try to address that, but we should not forget that Canada is made of regions and provinces. There are specific health needs to this country. For example, I come from Lac Saint- Jean.
Senator Lavoie-Roux: Another one.
Dr. Gauthier: In this area of the country, hypertriglyceridemia, a disease specific to problems of metabolism with lipids, is very prominent because of the inbreeding, basically, in the region. There has been a lot of research done around that theme in that province that would not have been done in the United States because this is not the number one priority for them. Their number one priority might be cardiovascular disease or AIDS or something.
We have to answer also the needs of our population, be it the aboriginal people or people from Lac Saint-Jean, who tend to have a specific disease, and you need to have a team of treating physicians and specialist researchers who can interface with them to give adequate treatment.
The Chairman: Did you have a question, Senator Stratton?
Senator Stratton: Yes, I do. If we are exploring possibilities and probabilities, there have been trial balloons floated lately, I guess for the last two or three years, about economic union of the Atlantic provinces, for example, and an economic union between Manitoba and Saskatchewan, just simply because we have too small a population base to sustain all of the infrastructure that we currently have. That is not a farfetched idea, especially when you look at Manitoba and Saskatchewan, each having around one million people.
Speaking of my own province, I think Manitoba has three universities, for example. Realizing the importance of sustaining research in your home province, for the quality of health care, would it not be appropriate for the universities of Canada to consider rationaliziation. For example, Manitoba and Saskatchewan could get together and say, "Okay, folks, we are going to have to do some program cutting here and some mutual beneficial targeting of what we should and should not do." In other words, Manitoba and Saskatchewan, for example, would benefit as between the two provinces, by being able to rationalize -- a wonderful word -- and downsize -- another wonderful word we all love to use right now -- in order to really make the system work better on diminished funds. Could you comment on that?
Dr. McLennan: I think you are absolutely right. As a matter of fact, we use the phrase "regional academic health alliance" to accomplish just what you are saying, or at least to set a framework to accomplish just what you are saying. I completely agree with you.
As I said earlier, research has no boundaries. I say this to my faculty all the time. Within the institution, there are no boundaries. Departmental structures are inhibitive to research. You are absolutely right, and the regional academic health alliances are an attempt to do just that.
As you know, every province is going through some manifestation of health reform. This is no less true in Saskatchewan. Part of that health reform is looking at health outcomes research, and bringing together a group of people, four or five professionals in addition to the physician, to have them together bear on the problems. It is exactly what you are saying except interprovincially.
Senator Stratton: That is already occurring? That is happening?
Dr. McLennan: Oh, yes. That is phase two of health reform.
The Chairman: If there are no further questions, I would just thank you, gentlemen, for appearing before our committee today. I think a good meeting is one in which we all learn something, and I think we all did today. This was very informative. We appreciate your coming.
I thank all the senators for asking questions.
The committee adjourned.