The refusal of provincial governments to allow the Red Cross to build its own blood-fractionation plant has cost taxpayers $700-million over the past 15 years, according to the former head of the blood program.

Building such a plant would also have ensured safer blood products for Canadians and perhaps prevented hundreds of infections with the AIDS virus, Dr. Roger Perrault, director of the Red Cross blood transfusion service from 1974 to 1990, testified in Toronto earlier this year at an inquiry into Canada's tainted-blood tragedy.

He said time has proved that the provinces made a grave error by promoting local job creation in the short-term instead of making a forward-looking public-health decision that would have ensured a safer, more secure blood supply in the long term. he said at the inquiry.

Just over $43-million in government spending went in direct subsidies to fractionation plants that no longer operate, while the bulk of the money was "wasted," according to Dr. Perrault, and spent importing blood products from the United States when they could have been manufactured in Canada at a fraction of the cost.

While he did not file documentation supporting the figure at the inquiry, Dr. Perrault agreed to provide The Globe and Mail with a breakdown of the $700-million figure.

The vast majority of the spending consisted of "custom fractionation" (when Canadian plasma is sent to U.S. plants to be fractionated, or broken down into specialized blood products), and purchases of blood products made with U.S. plasma (which cost two to three times more than those made with donated Canadian blood).

In 1985, for example, the Red Cross spent almost $21-million on fractionation products, more than half of them from custom fractionation deals, and extensive purchases on the U.S. market. That year, shipping alone cost Canadian taxpayers $689,000, Dr. Perrault said.

Those costs have climbed steadily in the past decade, with the bill for fractionation products exceeding $100-million last year, meaning the provinces are paying a considerable premium.

The Red Cross estimates that a new fractionation plant it is building in partnership with the pharmaceutical giant Bayer AG of Germany in Nova Scotia will save the provinces about $5-million a month.

The Red Cross first asked for permission to build a fractionation plant in 1976 after a consultant warned that its lack of manufacturing facilities could place it in a precarious situation. At the time, a host of new blood products were being introduced into the marketplace, notably concentrates of clotting factors for hemophiliacs.

A plant then would have cost $21-million to build and, under the Red Cross proposal, it would have been fully repaid in six years. The humanitarian agency made a second proposal in 1979, just before the AIDS crisis began.

The provinces chose instead to provide grants to three pharmaceutical companies with illustrious histories so they could build fractionation plants. The efforts of Connaught Laboratories at the University of Toronto, Rh Institute at the University of Winnipeg and the Armand- Frappier Institute in suburban Montreal were an unmitigated disaster. The latter two never produced usable products, despite receiving $38-million in government grants: $28-million to Rh Institute, which built a fractionation plant that was obsolete by the time it was operational, and $10-million to Armand-Frappier, which never got past the planning stages.

Connaught, according to Dr. Perrault's calculations, received $5.5- million in grants from the Ontario government. The pharmaceutical company was owned by the Canada Development Corp., a federal Crown corporation. It has since been purchased by Pasteur Merieux of France.

The industrial failings of Connaught have often been cited as a major contributing factor to Canada's tainted-blood tragedy. The provinces forced the Red Cross to send all the plasma it collected to Connaught for costly fractionation. As well, in the crucial years when the AIDS virus had infected the Canadian and U.S. blood supplies, Connaught's outdated facilities resulted in wastage equivalent to more than six months worth of volunteer blood donations.

Connaught not only supplemented its stock with U.S. plasma at a time when AIDS was spreading like wildfire in the United States, but it was unable to heat treat its concentrate to kill the human immunodeficiency virus, which leads to AIDS. At the same time, the Red Cross was buying half of Canada's supply of clotting factor concentrate south of the border at a premium, because donors are paid for plasma in the United States.

The open hostility that the fractionation issue created between the Red Cross and the provinces also made it difficult to develop strategies to counter the threat of blood-borne HIV. Those factors combined to give Canada one of the worst HIV-infection rates in the world among hemophiliacs; about 750 of the country's 1,650 hemophiliacs being treated in Canadian hospitals in the 1980s were infected with the AIDS virus.

Dr. Perrault said a state-of-the-art plant, centrally controlled, would have resulted in faster introduction of heat-treated concentrate. It took eight months between the time the federal government ordered a switch to heat treatment and the products being made available to hemophiliacs.

The Red Cross is currently building a fractionation plant in Bedford, N.S., in conjunction with Bayer Inc., a division of Bayer AG. The provinces have not approved the plant, nor have they formally disapproved. But they have told the Red Cross its plant would be considered a "preferred supplier." Construction of the $300-million plant is slated to begin in early 1997, and the blood products will be available for use in Canada at the turn of the century, said Lara Merritt, co-ordinator of corporate relations for the Canadian Red Cross Fractionation Corp.

The only government money the Bayer-Red Cross project will receive is $10-million for job training from the government of Nova Scotia and the Atlantic Canada Opportunities Agency.

The American Red Cross, unlike its Canadian counterpart, decided not to build a fractionation plant. In 1980, it signed a long-term contract to have its plasma transformed into blood products by Travenol, a California pharmaceutical company.

Most products now purchased by the Canadian Red Cross come from a Bayer plant in Clayton, N.C.

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