MCrrIVATING PHARMACEJJTICAL POLICY WRING THE I.RILROEIF;Y YEARS, 1984-1993: RATIONAL SELF INTEREST OR CAPITAL ACCUMULATIW? Alexandra Niblock B.A., The University of British Columbia THESIS SUBb.IIm IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DM;8EE OF MASTER OF ARTS in the Department of Political Science @ Alexandra Niblock 1994 SIMON FRASER UNIVERSITY June 1994 All rights reserved. This work may not be reproduced in whole or in part, by photocopy or other means, without the permission of the author. APPROVAL NAME : Alexandra Nihlock DEGREE : Master of Arts TI TLE OF THES I S : Motivating Pharn~ceuticalPolicy During the Mulroney Years, 1984-1993: Rational Self-Interest or Capital Accululation? Examininq Co~nmittee: Chair : Stephen McBride Patrick J. Smith Senior Supervisor Lyida J. Erlckuon Assistant Professor Geoffrey R. Weller President and Vice Chancellor Professor of Political Science, UNBC' External Examiner PARTIAL COPYRIGHT LICENSE I hereby grant to Simon Fraser University the right to lend my thesis, project or extended essay (the title of which is shown below) to users of the Simon Fraser University Library, and to make partial or single copies only for such users or in response to a request from the library of any other university, or other educational institution, on its own behalf or for one of its users. I further agree that permission for multiple copying of this work for scholarly purposes may be granted by me or the Dean of Graduate Studies. It is understood that copying or publication of this work for financial gain shall not be allowed without my written permission. Title of Thesis/Project/Extended Essay Motivating Pharmaceutical Policy During the Mulroney Years, 1984-1993: Rational Self-Interest or Capital Accumulation? Author: , - / < (signature) Alexandra Mary Niblock (name) June 6,1994 (date) i i i Abstract : Over the last several decades, there has been a growing awareness of the increasing influence of multinational corporations (MNC~) in governmental agenda-setting and policy-making. Using models based on public choice and socialist theories of business-government relations, this thesis examines multinational influence in the development of policy for the Canadian pharmaceutical industry for the period 1984 - 1993, during which Progressive Conservative leader Brian Mulroney was Prime Minster of Canada. Two bills dealing with pharmaceutical patents were passed in this nine year span, the impact of which was to first, restrict and then, eliminate Canada's compulsory licensing system for pharmaceuticals. By limiting the patent protection of the mainly foreign pharmaceutical patentees, this system allowed cheaper generic versions of patented drugs to be sold on the Canadian pharmaceuticals market in competition with name brand products, thereby reducing drug costs for consumers. This legislation favoured the multinational sector at the expense of the mainly Canadian-owned generic sector of the pharmaceutical industry. The findings of this analysis show that because the focus of each of the models was different, both produced valuable examinations of the various aspects of the Mulroney government's decision to eliminate compulsory licensing. The narrow focus of the public choice model allowed a close look at the respective resources of the two main interests seeking to persuade government to adopt their respective policy positions. However, this model did not provide an adequate explanation for some factors, such as the United States (u.S.) government's involvement in the development of Canadian pharmaceutical policy and the extremes to which the Mulroney government's legislation favoured the mainly foreign multinational pharmaceutical companies. The socialist model, though perhaps weaker in its consideration of action at the individual level, produced a more convincing explanation of the U.S. government's involvement in the decisions taken and permits a richer understanding of the motivations of the federal government given the political context in which the pharmaceutical policy decisions took place. As the business agenda becomes less and less appealing the more we examine it, we begin to see the importance of the Globalization argument. Without it, business and government leaders would be stuck in the tight jam of trying to popularize an agenda that offers almost nothing to non-rich Canadians. But with the invocation of Globalization, the picture changes. Business and government leaders can call for what amounts to a redesign of Canada, without ever really having to sell their positions to a skeptical public. If questions get too pointed or the austerity too bleak, they can simply resort to chanting the mantra of Globalization: we have no choice, we must compete in the global marketplace ... we have no choice, we must complete in the global marketplace .... (Linda McQuaig. uckand the Dead: Brian Wonc?~,Biu Business. the Seduction of Cam. Toronto: Viking, 1991; 25.) Acknowledcrements I owe many thanks to m. Lynda Erickson and, particularly, Dr. Patrick Smith for all their help and patience as I tried to pull the pieces of this project together. I also warmly thank Professor Geoffrey Weller for acting as my external committee member and for coming out of his way in order to do so. =er One .Iucti on ...................................... 1 A) Public Choice ................................................ 11 8) Socialist Political Economy .................................. 26 ChaDter .-BLlsiness-Governments in the 993............... 39 A) Definitions and the Structure of the Canadian Pharmaceutical Industry ..................................... 39 B) Background on the Patent Provisions for Canadian Pharmaceuticals. 1923-1983 ..................... 44 C) The Issue of Pharmaceutical Patent Provisions During the Mulroney Years. 1984-1993 ......................... 63 Dl Conclusion ................................................... 79 PART I: Public Choice Theory .Rational Self Interest ........... 84 1.A) The Resources of the Multinational Sector Compared to the Generic Sector ....................... 85 1) Finances ..a) Resistance and Advertising ........... 86 b) Political Donations .................. 90 C) Lobbying ............................. 94 2) Access ............................................ 102 3) Patronage by Large Corporations a) Eraployees ............................108 b) Medical Researchers ..................116 4) Weakness/Absence of Countervailing Power ..........120 B) Rational Self Interest? .....................................122 C) Support From Foreign Governments ............................ 126 PART: Socialist Theory .Capital Accumulation .................129 A) An E~planationAccording to Socialist Theory of Business-Government Relations .....................130 B) Benefits Accruing to Multinationals are Not Significant .............................................133 C) Patent Provisions are Not Onerous For Generic Companies .......................................140 D) Benefits Accrue to Canadians ................................ 146 E) Increasing Pressure to Compete for Monopoly Capital ........................................154 F) Multinational Parent States Augment the Pressure to Compete ..................................... 158 G) Back to the Legitimation Function ...........................162 References and Interviews........................................ 179 Table 4.1 PMAC and CLMA Political Contributions, 1983-1992........... 92 Table 4.2 Location of PMAC Members, 1994.............................111 Table 4.3 Current R&D Expenditures by Location, 1991 and 1992........111 Table 4.4 Location of CDMA Members, 1994..........................:..114 Table 4.5 Total R&D Expenditures By Source of Funds, 1988 and 1992.............. ......................116 Table 4.6 Price Comparisons Between Selected U.S. Brand-Name and Canadian Brand-Name and Generic Drug Prices, 1986..............................138 This thesis concerns the role of multinational corporations (MNCs) in policy making for the pharmaceutical industry in Canada during the period 1984 to 1993. It assesses the capacity of multinational pharmaceutical companies to influence the development of legislation on pharmaceuticals in Canada during the administration of Prime Minister Brian Mulroney. This examination uses analytical frameworks taken from two bodies of theory -- public choice and socialist -- regarding business-government relations in capitalist societies in order develop a broader understanding of the course which pharmaceutical legislation took during this period. over the last several decades, an increasing number of authors, most notably from the 'leftt, have noted the apparently growing impact that MNCs have had on the agenda-setting and policy making roles of national, and even sub-national, governments. They have also suggested this involvement of MNCs has not always appeared to be in the best interest of the majority of citizens within the territory conce~ned.~I consider this phenomenon with respect to two pieces See, for example, Marjorie Cohen, ''The Lunacy of Free Trade. 1992; Jim Benn, '"The U.S. and the Global E~onomy.~~1992; Daniel Drache, "The Systematic Search for Flexibility: National Competitiveness and New Work Relations.", 1991; Daniel Drache and Meric S. Gertler Vhe World Economy and the Nation-State: The New International Order." 1991; Walter Adants, "Corporate Concentration and Power.", 233-252; stephen Gill and David Law "The Power of Capita1.l' Chapter in Gh&al-. , 1988;