The Compensation Regime and the Pharmaceutical Industry

1. The Compensation Regimeand the Pharmaceutical Industry Toronto, October 1, 2009 Marie Julie Bégin, Director, Membership Services

2. About ÉEQ • Éco Entreprises Québec is a private non-profit organization • Certified in June 2005 • Representing companies that market containers, packaging and printed materials in Quebec with respect to the Environment Quality Act • Responsible for collecting contributions of targeted companies and organizations for RECYC-QUÉBEC • 12 Board members representing the stewards

3. Mission • To represent targeted companies with regard to their responsibility to finance their share of the net costs of efficient and effective municipal curbside recycling with a view to supporting sustainable development. • Establish a basic framework for the schedule of contributions • In partnership with other stakeholders, to promote efforts to increase the volume of recovered materials through curbside recycling at the lowest possible cost

4. Legal References • Environment Quality Act • Amended by Bill 102: • Act amending the Environment Quality Act • Made more specific by Decree 1049-2004: • Regulation respecting compensation for municipal services provided to recover and reclaim residual materials • March 1, 2005 marks the coming into force of the Compensation Plan • Confirmed by • Each Tariff should be confirmed by Decree

5. What is the Compensation Plan? • Requirement to finance 50% of the net costs of municipal curbside recycling programs • Principle of shared responsibility between producers and municipalities • If you have an address in Québec, this is not a choice but rather a legal obligation, similar to paying income tax!

6. Categories Defined in the Compensation Plan • Three categories of materials have been defined: • Containers and packaging • Printed matter • Written media Éco Entreprises Québec RecycleMédias

7. Allocation of Net Costs According to Category of Materials • Québec • established by the government in 2002 • Ontario: • based on an activity-based costing analysis

8. Companies’ Contribution • Based on Schedule of Contributions • Fees must: • Evolve with the years • Raise companies’ awareness concerning the environment consequences on the materials they generate

9. Schedule of Contributions Composition • Fees established by: • Types of material: • Printed matter • Glass, metal (steel, aluminum), plastic, paper/cardboard, • Quantity of generated materials • Rates are in $/t or ¢/kg

10. Contribution Tables

11. Contribution Tables

12. Factors Influencing the Schedule of Contributions • Net costs of municipal curbside recycling • Characterization of the household waste • Financing formula • Disaggregation of plastics • Allocation of administration fees and study costs

13. Factors Influencing the Schedule of Contributions – Net Costs • EEQ's share is 80% (60% + 20%) of net costs to be assumed by the industry • Net costs * Started in March 2005, 10/12 applied

14. Factors Influencing the Schedule of Contributions – Data • For 2005 and 2006 Rates: • Data prorated from Ontario reports and characterization • For 2007 Rates: • 2005 and 2006 Company Reports • Characterization of household waste in Québec - 2006-2007

15. Factors Influencing the Schedule of Contributions – Financing Formula (based on SO’s formula) • Compensation distributed according to a 3-factor weighed formula: • Factor 1: recovery rate (40 %) • From Québec's characterization study • Factor 2: net cost of the material (40%) • From Ontario's activity-based costing analysis • Factor 3: equalizor (20%) • From Québec's characterization study and Ontario's activity-based costing analysis

16. Factors Influencing the Schedule of Contributions - Allocation of Costs Considered in the Contribution

17. Who is Targeted by the Law? • All companies and organizations, private, public or part government-owned, whose products or services generate in Quebec «containers and packaging» and «printed matter»

18. Targeted Companies • Owner of a brand, a name or a distinguishing guise with a domicile or an establishment in Québec • products sold in Quebec only

19. Companies Targeted by the Law • First importer/first supplier in Quebec • If the brand owner doesn’t have an address in Quebec • Franchiser, owner of the chain/banner or other affiliation for packaging added at retail outlets Precision: If you manufacture a product for a retailer’s private brand, you are not obligated for that product; the retailer is.

20. Key Differences Between ÉEQ and SO programs Both programs are very similar except for: • de minimis: • In 2005-2006: No de minimis in Qc - Optional flat fee rate for low volume producers • In 2007: de minimis based: • < $1 M gross revenues • < 1 m.t. of generated materials, • < 1 point of sales

21. Key Differences Between ÉEQ and SO programs • Designated materials : • Not designated in Québec: • Textiles packaging • Designated materials in Québec: • General use paper: white paper, notebook,lined paper

22. Key Differences Between ÉEQ and SO programs • Notification: • In Quebec, because of the law, you are automatically targeted • ÉEQ doesn’t have to notify the targeted companies which have the obligation to register • Reporting year vs current year: • ÉEQ has a 2 year delay (Report 2007 due in 2009) because of the negotiation process with municipalities

23. Specific Issues for Distribution Center Outside Québec • Distribution center : check the destination of your products sent to a distribution center. If sold in Québec, they must be in your Québec report.

24. Voluntary Contributor …to Simplify the Program • Is allowed in ÉEQ rules, • If your products or goods are sold in Quebec but you have no address • Should read and sign the agreement with ÉEQ • Have to inform your suppliers • The voluntary contributor and his suppliers are jointly responsible for the obligations which they are subject to, pursuant to the Fee Regulation

25. Types of Designated Containers, Packaging and Printed Matter • All plastic, glass, metal, paper/carton containers and packaging used to contain, protect or wrap a product • All printed matter, paper and other cellulose fibres, whether or not it is used as a medium for text or images, except for books and materials described in "written media"

26. Containers and Packaging Exempted or Excluded Under the Law • Tertiary or transport packaging • Textile or wood containers • Containers and packaging included in another expanded responsibility program (ex. deposit programs) • Business-to-business (B2B) sales • Products sold to companies and institutions for their own needs

27. What Should a Targeted Company Do? • Go on ÉEQ Website www.ecoentreprises.qc.ca to obtain any relevant information • If not done yet, register your company or apply as a Voluntary Contributor • Collect your data • Complete an online report

28. What Are the Reference Years? • Year for which you have to collect your material data • The reference year for calculation purposes: • 2004 or 2005 for reporting years 2005 and 2006 • 2007 for 2007 • Should be in the future: • 2007 for 2008 • 2008 for 2009 • …

29. How to Collect Data? 3 ways of calculation of quantities of materials generated • Obtain real weight of containers, packaging and printed matter generated by products and services distributed in Québec • Obtain data for Québec from known databases for Canada and use an appropriate allocation factor • Use one or more calculators authorized by ÉEQ • Only the Québec version will be accepted

30. Calculators Approved and Accepted by Éco Entreprises Québec • Unit-based Calculator for grocery retailers (UBC) • Composite Base Calculator (CBC) (units) • Sectoral Calculators ($) • Mostly replaced in 2007 Schedule of Contributions with unit-based calculators (Excel file)

31. Calculators Approved and Accepted by Éco Entreprises Québec 2005 and 2006 Reports: • Available online ($ or units) or upon request (UBC) 2007 Report: • A request to use a calculator must be made to: • activate the online calculator • receive the appropriate Excel file

32. Updated Calculator • Not included in any calculator: • “Paper for general use” materials • In-store service packaging • Advertising (inserts, information sheet, etc.)

33. Explain your Methodology Must be included in your report: • Explanation on how calculations were made and allowing the validation of data provided • Calculation files and worksheets • Justification of the method used and obtain EEQ authorization, if appropriate • Brands included in the Company Report. If not indicated, they cannot be counted in quantities reported

34. Timelines and Fees for Noncompliance • Contributions: • 2005 – 2006 : due in July 2007 • 2007 : due in Sept. 2009 • 2008: still in negotiation • Companies who did not comply, still have to complete their obligation reports • As per the Tariff, interests and collection fees apply, if noncompliance • ÉEQ may also bill a company who did not comply

35. Highlights of Company Reporting

36. Highlights of Company Reporting

37. Repartition of Pharmaceutical Manufacturers and Retailers 11 % of companies which have contributed are from your sector Contribution (average): Retailers: $31 k Manufacturers: $19 k

38. What’s Up for 2008 and Further ? • Contributions:: • 2008: • Possibility of “fast track” negotiation • If so, contributions are due in spring 2010 • 2009 • must include some sustainable criteria in the fees such as the content of recycled materials • Non recyclable materials will be penalized • New policy from the government (Fall 2009) • Change the % of shared responsibility?

39. Thank you for your attention • To reach us: • www.ecoentreprises.qc.ca • Customer Service Department • 514-987-1700 or 1-877-987-1491 • service@ecoentreprises.qc.ca • mjbegin@ecoentreprises.qc.ca