Speaking Notes for Sheridan Scott Commissioner of Competition

Competition Bureau

Information Session with National Health Care Organizations organized by the Canadian Medical Association

Information Session with National Health Care Organizations
organized by the Canadian Medical Association
Here to Help You: Healthy Markets for the Health of Canadians

Ottawa, Ontario
November 9, 2006

Here to Help You: Healthy Markets for the Health of Canadians

I want to say how happy I am to have been invited to meet so many of you today.

I want to take advantage of this opportunity by addressing two major questions that I know are on your minds: exactly what is the Competition Bureau up to, and should I be worried?

Please, fear not. To repeat that immortal, usually ironic phrase. “We are from Ottawa, and we are here to help you.” If you don't believe me now, I hope you will by the time I have outlined what the Bureau is doing in terms of the health care sector.

As you may know, the Competition Bureau is responsible for promoting competition in markets across the entire economy. But with limited resources, we have to focus our efforts on key areas where we think we can make a difference. We have identified just a handful in our current plan. And health care is one of them.

Why? Well, at approximately 10% of GDP ¹ size alone makes it a candidate. But it is also critically important to Canadians. And they have concerns, which we share, about how well health care markets are serving their interests.

I am going to talk today about some of the steps we are taking to address these concerns. But before I do, I know I have to address a question that pops up every time I speak to someone about our interest in the health care sector: Is the Bureau entering the debate regarding the publicly funded health care sector in Canada?

In a word, NO.

This is not because the debate is not important. It obviously is.

But, as you know, the system has already been studied and debated. It has been poked and prodded, analysed and assessed from virtually every angle. And from every political position as well. It continues to receive concentrated attention from independent experts, associations, politicians and others.

So when we began looking at the health care sector, we asked ourselves whether we should plunge into waters that are already well populated by so many other organizations, or apply ourselves elsewhere?

Not surprisingly, we decided to look elsewhere. Specifically, our decision was that the best use of our expertise and our law enforcement tools involves looking at the multitude of health related products and services that are bought and sold in competitive markets. These include markets dealing with: hospital construction, medical equipment, service and supplies; pharmaceuticals; many self-regulated professions; and the vast array of products and services bought directly by consumers in the interests of improving their well being.

This work is not entirely unrelated to the broader debate over health care. The health and vigour of the publicly funded sector is in fact dependent on the health of many of these more or less competitive markets. And our job at the Competition Bureau is not only to see that these markets are healthy, but that they remain so. If they are, they will deliver the high quality, innovative and low cost products and services that the publicly funded health care system depends upon.

Now I am mindful of John Wayne's sage advice to “Talk low, talk slow, and don't talk too much.”

So rather than going into detail about the Competition Act and its enforcement, I want to talk a bit about what the Bureau does in general so that you have a sense of how we are approaching the health care sector.

I will then spend a few minutes talking about what we are doing in specific cases to support the health care system. And as this is not the place to take notes, even if you wanted to, we have prepared a short but more detailed background note on our work that you can take away with you or download from our website.

But first, by way of providing some context, our work on health care markets is being conducted pursuant to the Bureau's twin roles as competition law enforcers, and as advocates for more effective markets in Canada.

In our role as competition cops, we enforce the provisions of the Competition Act. In this, we are a law enforcement agency with powers, when authorized by the courts, to conduct raids, use wiretaps, demand production of documents and so on. We used such powers, for example, this past summer when the Superior Court of Quebec granted us search warrants to investigate alleged price fixing between competitors in the retail gasoline industry in local markets in Quebec. And in September, we confirmed that we had obtained search warrants and were investigating alleged anti-competitive practices by certain tour operators.

But often, our work does not require these particular powers. Instead, we use research and other investigative tools to explore issues and factors that may be inhibiting market competitiveness. These tools are the basis for our outreach work to inform market participants about the Competition Act, competition issues and competition generally. And they provide the foundation for our efforts to fulfill our mandate to act as an informed advocate for competition.

It is this advocacy role that sometimes raises the concern that we may be competition ideologues, bent on placing the interests of the marketplace above all else. This is simply not true.

We are not advocates for competition at the expense of other societal goals; that would be neither productive nor rational. Instead, our approach is to strive to ensure that these other goals are achieved in a manner which permits competitive markets, where they exist, to function effectively. ²

And this is the basis of our work in the health care sector – ensuring that Canada's health care markets benefit from healthy competition.

To do this, we are organizing our work around three broad lines: outreach to health care providers and consumers; targeted enforcement efforts where the Act has been breached; and, advocacy focused on improving the pharmaceutical marketplace. These are set out more fully in the handout I mentioned earlier, but let me outline briefly what we are doing in each of these areas.

Outreach

In terms of outreach, we have an active program to educate the public and help stakeholders detect, report and prevent costly bid-rigging schemes that target public and private procurement. Over the past two years, these outreach and awareness efforts have given particular focus to the health care sector with upwards of 20 presentations delivered to health care stakeholders across Canada, such as to the Provincial Health Services Authority of British Columbia and the Newfoundland and Labrador Health Boards Association.

The Bureau has also made presentations to major health care purchasers on potentially anti-competitive clauses in procurement contracts, such as exclusive dealing and tied selling clauses. Such clauses can cause serious long term damage to the markets. In this context we have spoken, for example, to the Public Works pharmaceuticals purchasing group and the Ontario Drug Benefits Program.

The Bureau's outreach activities also include consumers. Our website contains a special section ³ for them dealing with health fraud issues. And the Bureau has issued a consumer pamphlet educating Canadians on diabetes fraud, created in cooperation with Health Canada and the Canadian Diabetes Association.

We are also addressing the global nature of fraud affecting consumers. For example, in cooperation with partner agencies in the U.S. and Mexico, the Bureau has also developed tri-lingual "teaser" Internet sites related to diabetes and weight loss. These sites warn consumers of the types of fraudulent claims often employed by "scammers" .

Why diabetes and weight loss? These were selected on the basis of marketplace intelligence gathered by the Bureau and our enforcement partners from across North America. The targets of our compliance efforts were identified during Internet Sweeps conducted in conjuction with competition authorities from around the world and, this past year, we vastly improved our ability to detect fraudulent misrepresentation by using specialized intelligent software which scans the Internet and helps to determine where the greatest problems for consumers may lie. We are now in the process of determining the third area of health care fraud which we will target next year.

Enforcement

This sophisticated informatic system is, in fact, part of the Bureau's FairWeb project, which is aimed at combating misleading and deceptive advertising found on the web. In this case we are pursuing our enforcement mandate.

FairWeb's initial focus has been on bogus weight-loss products. These unsubstantiated claims account for a large proportion of Internet health fraud, targeting consumers who are desperate to find a solution to their weight problems.

To date, over 450 questionable Web sites related to weight-loss products have been identified through the Bureau's Internet sweeps. Of those sites, notices were sent to the most problematic; over 80% of these businesses have either removed the suspect performance claims from their sites or have expressed an intent to comply with the Act. When businesses do not respond to the Bureau's concerns, enforcement action may be considered, including contested court proceedings.

Again, recognizing that crimes often cross borders, we have joined forces with our counterpart agencies in the U.S. and Mexico to take a total of 177 compliance and enforcement actions this year against companies promoting bogus diabetes products and services, and 734 actions relating to weight loss claims in the two previous years.

As for mergers, while we do not single out specific sectors for attention, we have reviewed various transactions involving health care firms, including the recent acquisition of ID Biomedical Corporation by GlaxoSmithKline Inc. ⁴

Tobacco Inquiry

With respect to our work in the Health Sector, many of you will already be aware that we received a complaint alleging that "light" and "mild" descriptors on cigarettes may have contravened the Competition Act. I am extremely pleased to tell you today that we have reached agreements with Canadian Tobacco companies, and in particular, Imperial Tobacco Canada Limited, Rothmans Benson & Hedges Inc. and JTI-Macdonald Corp. They will voluntarily remove "light" and "mild" descriptors from all cigarette packaging commencing Dec. 31st and ending no later than July 31, 2007. Through this action Canada proudly joins the European Union and Australia where cigarettes will no longer be described as "light" and "mild". Public notices will soon appear in newspapers across Canada informing consumers of the change in packaging.

Advocacy

You can get more information on our enforcement actions from the handout and from our website. But I want to let us get back to more informal discussions with you by wrapping my presentation up with a brief - I promise- comment on our advocacy efforts, which are focused on the critically important pharmaceutical market, with additional work underway regarding certain professional services.

As you probably know, prescription and non-prescribed drugs, make up nearly 18% of total health care spending, and have been growing at an average of 10% annually. ⁵ This money comes out of the pockets of consumers and tax payers.

Now we recognize that new and improved medicines play a critical role in improving the health of Canadians, and may even reduce costs, for example by reducing the need for surgery or by preventing the onset of disease. But we have questions about whether existing restrictions on pharmaceutical markets cause prices to be unduly high.

So we have launched a study of generic drugs to better understand their pricing, which appears to be higher in Canada than elsewhere. We have also organized a roundtable on intellectual property to explore issues related to the best balance between protection to support innovation, and competition, which also supports innovation. Amongst other issues, this roundtable will look at authorized generics, an issue of obvious interest to you.

We exercised our advocacy function as well to comment on the government's proposed changes to the Notice of Compliance Regulations. Our focus was on ensuring that our appropriate balance was maintained between protecting intellectual property rights and facilitating a competitive supply of pharmaceutical products for Canadian consumers.

I should note that in one very specialized advocacy case, we intervened in a court case involving drug manufacturers ⁶ Eli Lilly and Apotex where the original judge's ruling would have resulted in a serious weakening of the Competition Act's ability to deal with cases where companies acquired patents, possibly with the effect of lessening competition.

Now as I mentioned, we are also interested in professional services, as are our counterparts in the U.K., Australia, the EU and Ireland. ⁷ We are looking specifically at whether there are unnecessary restrictions on pharmacists, and other health related professionals, that may be limiting competitive forces.

And the Bureau has been in contact with various provincial governments, supporting provincial initiatives to create independent colleges of dental hygiene and suggesting ways to establish meaningful competition in the provision of dental hygiene services. In fact, Alberta has just removed the requirement for dental hygienists to work under the supervision of a dentist.

By now, I suspect that information overload may be setting in. But I hope that if nothing else, you will take away the understanding that the Competition Bureau is dedicated to supporting Canadians and our health care system.

This system is a sophisticated response to the vitally important challenge of providing world quality health care to all Canadians. Its success to date is a tribute to the strength of the system and the contributions made by the many dedicated professionals like you. And the challenges it faces – better outcomes, increased quality and lower costs – are key objectives for all of the work of the Competition Bureau.

I hope you will now agree that we truly are “here to help you”.

Thank you very much for your attention and once again thanks to the CMA for organizing this event.

---

¹ Canadian Institute for Health Information (CIHI), Health Care in Canada 2006.

² See “Regulation and Competition: Moving to a More Productive Future”, C.D. Howe Institute Policy Conference Competition Policy in Regulated Industries: Principles and Exceptions

³ Health Fraud .

⁴ Technical Backgrounder, “Acquisition of ID Biomedical Corporation by GlaxoSmithKline Inc.”

⁵ Canadian Institute for Health Information (CIHI), Drug Expenditure in Canada 1985-2005.

⁶ Apotex Inc. v. Eli Lilly and Company, Docket: A-579-04. Citation: 2005 FCA 361

⁷ For market studies on helath professionals carried out by the Irish Competition Authority, see The Competition Authority . For work of the European Commission on “Liberal Professions”, see Competition Policy and Liberal Professions .