Proceedings of the Standing Senate Committee on
Social Affairs, Science and Technology
Issue 6 - Evidence - May 13, 2010
OTTAWA, Thursday, May 13, 2010
The Standing Senate Committee on Social Affairs, Science and Technology is meeting today at 10:30 a.m. to study Health Canada's Proposal to Parliament for User Fees and Service Standards for Human Drugs and Medical Devices Programs, dated April 2010, pursuant to the User Fees Act, S.C. 2004, c. 6, sbs. 4(2).
Senator Kelvin Kenneth Ogilvie (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Honourable Senators, welcome to the Committee on Social Affairs, Science and Technology.
[English]
I am Senator Kelvin Ogilvie from Nova Scotia, and I will chair today's meeting. I would ask senators to introduce themselves.
Senator Seidman: Senator Judith Seidman from Quebec.
Senator Mahovlich: Senator Frank Mahovlich from Nova Scotia replacing Senator Callbeck.
Senator Dyck: Senator Lillian Dyck from Saskatchewan.
Senator Merchant: Senator Pana Merchant from Saskatchewan.
Senator Champagne: Senator Andrée Champagne from Quebec.
Senator Plett: Senator Don Plett from Manitoba.
Senator Greene: Senator Stephen Greene from Nova Scotia.
Senator Eaton: Senator Nicole Eaton from Ontario.
Senator Raine: Senator Nancy Greene Raine from British Columbia.
Senator Cordy: Senator Jane Cordy from Nova Scotia.
The Deputy Chair: Today we are continuing our study of Health Canada's proposal to Parliament with regard to user fees and service standards for human drugs and medical device programs. We have a number of witnesses, whom I will ask to introduce themselves.
Loretta Del Bosco, Vice-Chair, Regulatory Standing Committee, Rx&D: My name is Loretta Del Bosco. I am Director of Regulations and Quality Assurance for Abbott Laboratories. Today, I am here as the vice-chair of the Rx&D Regulatory Affairs Committee.
Russell Williams, President, Rx&D: I am Russell Williams, President of Rx&D, representing innovative pharmaceutical research companies in Canada.
Robert White, Director of Scientific and Regulatory Affairs, Consumer Health Products Canada: Robert White, Consumer Health Products Canada.
Gerry Harrington, Director of Public Affairs, Consumer Health Products Canada: Gerry Harrington, Director of Public Affairs, Consumer Health Products Canada.
Klaus Stitz, Vice-President, Regulatory Affairs, MEDEC: Klaus Stitz, Vice-President, Regulatory Affairs, MEDEC, Canada's Medical Technology Companies.
Jody Cox, Director, Federal Government Relations, Canadian Generic Pharmaceutical Association: Jody Cox, Director of Federal Government Relations for the Canadian Generic Pharmaceutical Association.
John Hems, Chair, Scientific Affairs Committee, Canadian Generic Pharmaceutical Association: John Hems, Director of Regulatory Intelligence for Apotex. I am here today as Chair of the Scientific Affairs Committee for the Canadian Generic Pharmaceutical Association.
The Deputy Chair: We did not work out an order of presentation before the meeting. Therefore, I will ask Ms. Cox to begin.
Ms. Cox: The Canadian Generic Pharmaceutical Association, CGPA, thanks honourable senators for this opportunity to provide comments on Health Canada's proposals. The generic pharmaceutical industry plays a vital role in Canada's health care system by bringing important cost-saving competition to the market for prescription drugs. Our products saved the Canadian health care system more than $4 billion in 2009 alone.
CGPA represents a dynamic group of nine leading companies that specialize in the development and production of high-quality and affordable generic medicines. Our member companies employ about 12,000 Canadians in highly skilled jobs and reinvest about 15 per cent of domestic sales into domestic research and development activities.
Canada's generic industry is highly competitive. This was confirmed in two recent studies by the Competition Bureau of Canada. This high level of competition has contributed to an increasing number of generic drug submissions and an increasing number of generic products available to Canadians over the past decade.
It is common for CGPA member companies to have more than 300 prescription medicines within their product portfolios available on the Canadian market. Many of our member companies are also filing more than a dozen Abbreviated New Drug Submissions, ANDS, in any given year. Some companies are filing closer to two or three dozen application per year.
Performance for all regulatory activities undertaken by the branch is a critical issue for the generic industry. The branch has been underfunded for many years, and funding has not been increased as workload demands have risen substantially. For example, the ANDS submission review workload for the Therapeutic Products Directorate, TPD, has increased by more than 200 per cent over the past 10 years. The result of this chronic underfunding, not surprisingly, is missed performance targets and increasing backlogs. Core program integrity within the branch is now in jeopardy, in our view.
The situation has continued to worsen. Thirty-five per cent of ANDS submissions under review at TPD in the fourth quarter of 2009 were in backlog. This growing capacity gap must be addressed. The branch requires a stable, permanent increase in its resource base. This can be addressed through either an increase in the A-base funding, increased user fees paid by industry, or some combination of the two. Regardless, in our view, a solution is needed and is long overdue.
John Hems will provide specific comments on the proposals.
Mr. Hems: Honourable senators, CGPA member companies are prepared to pay reasonable fees to ensure that the branch's regulatory programs are adequately funded. However, this comes with two main caveats. First, there must be assurances that existing A-base funding will not be impacted once fees paid by industry are increased. Such assurances currently do not exist, and Treasury Board has not yet made its views known. A clawback would prevent the branch from meeting its performance standards and continuously improving its performance. CGPA hopes the committee will see fit to include a strong recommendation in this area in its report to Parliament.
Second is the inclusion of clear performance standards applicable to individual submissions and filings. This does not exist in the current proposals. For example, the current performance standard for a full cycle review of an ANDS submission — from filing to decision — is 235 days. However, the performance standard in the proposal is only for the review component, which is 180 days. The proposal remains silent on the important performance standards associated with processing and screening a submission. Industry needs assurances that these other important functions and activities will be adequately resourced. Without such assurances, this provides a loophole that creates an essentially limitless performance standard.
In addition, the revised performance standard is for an average time and not for individual submissions. This represents a significant departure from the existing performance standard.
CGPA asks the committee to recommend the inclusion of clearer, more inclusive performance standards in proposals. We also ask that the committee recommend the removal of the word ``average'' from the proposed standards to ensure that it would be applied to each individual submission, as is currently the case.
Several other recommendations are included in our brief, which we would be pleased to address during the question and answer portion of this hearing.
However, I want to draw your attention to one proposal quickly. One significant difference between the branch's 2007 proposal and the proposal currently under review is the removal of notifiable change submissions. CGPA strongly objects to the removal of these submissions. The performance standard for review for notifiable changes is currently 90 days. Current performance for these submissions can only be described as abysmal. In the fourth quarter of 2009, only 8 per cent of changes were reviewed within the 90-day standard. In the third quarter of 2009, just 2 per cent were within the target.
It is critical to our industry that changes requiring regulatory approval can be implemented in a timely manner in order to ensure generic companies can remain competitive and are able to make improvements. In our view, removal of notifiable changes from proposals is the wrong approach.
CGPA proposes a more creative solution. We want to see notifiable changes included in the proposal with the implementation of fee mitigation measures to be deferred for a set period of two to three years. This would enable the activity to be properly resourced before fee mitigation measures are in effect and would be beneficial to both industry and the branch.
Ms. Cox: We wish to thank honourable senators once again for providing us with the opportunity to share our views on these proposals. We are pleased to answer any questions you may have.
The Deputy Chair: Thank you.
Mr. Stitz: Good morning, honourable senators. MEDEC is the national association of the medical technology industry, which comprises about 2,000 corporations. I appreciate the opportunity to present today at this meeting. Our industry employs 35,000 Canadians, mostly small and medium-sized companies and a few large companies. ``Large'' is still small in other industries' dimensions.
Ninety per cent of the products that we provide to Canadians are distributed, but not manufactured, in Canada. Manufacturing often happens abroad — 40 per cent in the U.S. and about 30 per cent in Europe. Those products come to us from abroad. Our sales are recorded at about $7 billion per year.
As you heard yesterday, medical devices include a large variety of therapeutic and diagnostic items. I do not want to go into all of them, because that would take too much time that we do not have. The list of medical devices provided by Health Canada just for classification purposes is many pages long. I believe you have my presentation before you that you could follow.
The specialty of medical devices is that, first, they are classified by risk. There are four classes, of which Class I is not licensed or regulated through Health Canada. The licensing activity is restricted on Classes II, III and IV, and we heard yesterday that the focus is on Classes III and IV.
Those licences can come in various types. They can be single devices, device groups, device families and so on. That may also add to the complexity of a licensing process, because there may be lots to it.
Another topic specific to medical devices is that the life cycle of medical devices is often described as 18 to 24 months. That means that innovation and improvement happens very rapidly, which of course then causes either amendment or new application.
MEDEC accepts fees and supports Health Canada's demand for more resources, as we know that the activities in the pre-market and in the post-market have increased and are of high demand. We share the responsibility for those activities with Health Canada, and we consider that all the activities that are under establishment licensing, under product licensing or under authority to sell are in dire need to deal with the activities that Health Canada has to perform. However, we have an issue of understanding with the definition of benefit to our industry as it is used in the proposal, as we do not see that this fits in the description of ``benefit'' as it is in the User Fees Act.
Second, we see that we have a couple of participants in this market — in particular Class I devices — that are not partaking in many of the fee deliveries but are partaking in the responsibilities of Health Canada, in particular in the post-market.
We understand that activities in the pre- and post-market are funded in part by three fees, and we agree that more resources should be given to Health Canada and should be shared, and we support the concept of user fees as it gives, also, the responsibility to Health Canada to report on fee use and performance.
However, the performance we have seen over the past three years is far from satisfactory. It is known that in 2009 Health Canada delivered Class II devices 65 per cent on time, on average. Again, my predecessor said something about this topic already.
With Class III, it was 52 per cent that were decided on average on time, and in Class IV it was 49 per cent on average on time. This is of course a huge problem to our industry. Applications spend more time in queue than in assessment. We can talk about the causes of backlog during the question and answer period in more detail.
MEDEC and our members have others with the fee proposal as well. We agree that there is an increase of workload and in particular of complexity. However, chart 12 in my file shows the different activities and applications, and you can easily see that there was an increase of workload between 2001 and 2004, and there is a flattening of workload with an oscillation around a stable number up to 2009.
Exhibits 13 and 14 show medical devices cost development. The cost in 2005-06 for the medical devices program was roughly $13 million and was expected to increase in 2007-08 — two years later — to $36 million. That is an increase of 174 per cent on cost, and it is an expectation based on prognosis and not on actual figures.
Now we are talking, in 2010, about a fee increase on a higher level of cost. Unfortunately, this level of cost is only given to us for drugs and devices in total, although both sectors have their own fee structure and revenue stream. It is $227 million cost 2010 compared to $154 million cost 2007, which is, as a total, another increase of about 50 per cent.
We wonder whether anyone who sees this increase of cost has an accounting of the budget coming in, the expenses and where this is going. We see the cost and the revenue stream growing apart.
We have an issue with the international comparison as it was described yesterday. It is clear in the documentation that for medical devices — we always have to separate between devices and drugs, which is not always transparent in the proposal — the U.S. Food and Drug Administration, FDA, charges 22 per cent of fees for their activities, and the increase may go up another 5 per cent or so, but it will not change the world dramatically.
In Europe we do not even have regulatory fees for medical devices to a certain amount because these fees in Europe are paid to third parties who do the investigation. The examples given in the presentations yesterday referred to situations that are not comparable.
May I go to my proposals just quickly?
The Deputy Chair: If that is your last submission.
Mr. Stitz: That is my last statement.
The Deputy Chair: Thank you.
Mr. Stitz: We see that the fees need to be increased in a reasonable way. However, we expect Health Canada to commit to eliminating the current backlog. We expect that the fee increase should coincide with the backlog removal; that the fees be dedicated to the program and not withheld by Treasury Board and not flow into the Health Canada portfolio as funding; and that the cost sharing stay at 50 per cent for appropriation and for fees.
I have detailed proposals regarding the different fees that are concerned here, but I will go into those during the question and answer period. Thank you.
Mr. Harrington: Thank you, Mr. Chair and members of the committee, for allowing us this opportunity to comment on Health Canada's proposals on cost recovery.
Consumer Health Products Canada is a national industry association representing manufacturers, marketers and distributors of consumer health products. The association's members range from very small businesses to large corporations and account for the vast majority of sales in Canada's $4.7-billion market for these products.
Our member sales are pretty much equally divided between the two main categories of consumer health products, those being over-the-counter medications and natural health products. Our association has been the leading advocate of the consumer health products industry for more than 110 years.
The industry's position on the issue of cost recovery has not changed fundamentally since the idea was first proposed to Parliament in the 1990s. It is our view that the legislative basis for food, health product and cosmetic regulation is founded upon the need to protect the public from fraud and danger. We believe that this public benefit should fundamentally be paid for through the general revenue streams and federal taxation.
On the other hand, we do support the need for pre-market review of products in order to ensure that their safety, quality and efficacy are adequately monitored. Such a system provides the best approach to a level playing field and consumer protection. Thus, the industry has consistently been on record as supporting a fee structure of cost recovery that would provide Health Canada with sufficient resources to perform its duties and execute that pre-market authorization function in a timely and efficient manner.
Therefore, Consumer Health Products Canada supports a fee-based approach to ensure that these products get to the market sooner, providing a benefit to our membership. To that end, we want to add our voice to the chorus of support for Health Canada's application to Treasury Board to ensure that these fees are, in fact, directed to these program activities, along with the existing A-base funding.
That being said, we must also bring to your attention some inconsistencies and concerns in this proposal. As I mentioned earlier, our industry products sold by our members divide into two basic categories: natural health products and over-the-counter medications. Each of these is subject to its own set of regulations. I am sure everyone around the table is somewhat familiar with the Natural Health Products Regulations, whereas over-the-counter medications are regulated under the same regulations as prescription drugs.
Scientifically, however, there is no appreciable net difference in the benefit-to-risk profiles of natural health products and over-the-counter medications, and in fact they must meet the exact same criteria, at Health Canada's assessment, in order to become available as consumer health products.
The only concrete difference between these two product categories within the consumer health product field is a source of active ingredients in the formulations. In fact, when the Natural Health Products Regulations were created in 2004, a large number of over-the-counter medications migrated from the drug regulations to the Natural Health Products Regulations, simply because the latter were created and simply because their ingredients are naturally sourced.
In the long term, we support the inclusion of natural health products in a cost-recovery program in order to ensure that Health Canada has the resources necessary to perform its function adequately and in a timely manner. I remind you that when those products migrated from the drug regulations to the Natural Health Products Regulations, they migrated from a cost-recovered scenario to a non-cost-recovered scenario.
When the time is right to develop a natural health products cost-recovery program, we will be actively engaged in those consultations to ensure that those fees are consistent and tied to the level of complexity of the review process and the risk to consumers, so that we have a consistent approach across all areas of the department's mandate.
In the meantime, we strongly urge the committee to consider ways that this proposal could be made more equitable. For example, we draw your attention to Health Canada's proposal of an annual market authorization fee of just over $1,000 to maintain a drug or consumer health product licence on the Canadian market. I believe the committee has heard from the department that the overall approach here is to be risk-based and consistent with other international jurisdictions. I put it to you that this proposal fails on both of those particular counts.
On that score, I draw your attention to the table we provided in our package. This comparison shows that under the current proposal, the fees for prescription drugs versus consumer health products, which had been different and are different under the current status quo, will now be the same. Therefore, we are seeing a much more significant increase in the cost for consumer health products than we are seeing for other products covered by the proposal.
Equally key, this proposal will make Canada the first jurisdiction internationally that fails to distinguish between the market authorization fees for consumer health products and the greater complexity and higher risk associated with prescribed products. If you look at the cases of Australia, the U.K. and the United States, in all those instances there is a difference in the cost-recovery fee associated with consumer health products versus prescribed products.
This very issue was reviewed by the independent advisory panel that was convened by the department. That panel did in fact recommend that the current differential between higher-risk and lower-risk market authorizations be continued. Therefore, we recommend to the committee that Health Canada be directed to honour that recommendation of the independent advisory panel to restore equity to this proposal.
A further issue I would like to raise briefly is that some of the challenges that the consumer health products industry faces arise from the fact that with the creation of the Natural Health Products Regulations, the vast majority of the remaining work for the directorate within the department that deals with these fees is related to prescription drugs. There are implications in terms of the standards attached to that and in the complexity of applications. In the longer term, the department has indicated that a regulatory approach more consistent with other consumer health products will be in the offing, and I think that is a key aspect of where we are going.
With that, I will end my comments, and I look forward to our discussion.
The Deputy Chair: Thank you very much, Mr. Harrington. I will now turn to Rx&D.
[Translation]
Mr. Williams: Rx&D is the national voice of Canada's innovative pharmaceutical sector, representing over 15,000 employees in close to 50 companies. We are a leader in private sector research and development spending, with investments of more than $1 billion annually.
We are also a catalyst for the entire life sciences value chain, which includes small biotechnology start-ups such as contract research firms, as well as partnerships with universities, hospitals, and other health care stakeholders.
Above all, our objective is to discover and develop innovative drugs and vaccines to support better health outcomes for Canadians.
[English]
The concept of cost recovery and the proposal currently before the committee are important elements of a larger process by which our industry makes applications to the Minister of Health to review our products for both safety and efficacy.
Rx&D agrees with the principle of cost recovery and supports the User Fees Act. In fact, our industry has supported the concept of cost recovery since a previous federal proposal on the subject as early as 1986.
Our members pay fees, depending on the type of product, to the Therapeutic Products Directorate or the Biologic and Genetic Therapies Directorate to offset the costs of reviewing drug submissions. In turn, the directorates are required to analyze the submission for safety and effectiveness aspects and issue a Notice of Compliance when appropriate.
To ensure accountability to Canadian taxpayers, Health Canada is required to report on performance in meeting the standard of service attached to the collection of fees and associated budget. For our products, the process is not an abstract consideration. The performance of Health Canada, for which a fee is being paid and tax dollars used, directly impacts the availability of innovative treatments for Canadian patients. Performance has an impact on the quality of life and the quality of our economy.
[Translation]
As a 2010 Fraser Institute report has demonstrated, from 2004 to 2008, approval times improved somewhat but still fell short of the targets specified by the cost recovery framework. At the same time, overall Canadian approval times continue in general to fall short of other international jurisdictions, specifically the United States and the European Union.
[English]
Health Canada itself reports that in 2009, approximately one third of new product reviews exceeded the department's targets, and indications of performance are getting worse, despite good efforts, in 2010. Canadian patients are forced to wait longer than necessary and longer than other countries for the same products. Clearly this does not sit just with Health Canada. This is coupled with delays with the Common Drug Review and provincial reimbursement programs that make Canada, in our recent review, come in 20 out of 25 of countries when it comes to the accessibility of new medicines.
The observations are important background to our association's qualified support for Health Canada's proposal currently before this committee. Indeed, we are still supportive of a revised user fee framework to provide sound financial footing to keep Health Canada's reviews and programs as efficient as possible for Canadian patients. However, we remain concerned about the lack of performance in these programs.
Rx&D agrees that the department's cost-recovery framework should be put on a more solid financial footing to ensure efficient reviews of submissions. We agree that without any change, the current model we have today is unsustainable.
At the same time, any increase in funding must be tied to meeting clear performance standards and must be implemented in such a way to as maintain effective and accountable review processes. I would like to highlight four recommendations in our time period.
First, the proposal should be amended to include a recommendation for Health Canada to identify and implement readily available efficiency measures, such as the use of outside experts, electronic tools and enhanced quality management of the review process and increase use of foreign reviews where appropriate.
I think we should stop for a moment and highlight, as I mentioned before, that there has been effort and that some of this work is being done. Often we do not highlight the excellent work of our departments in health and other departments in public. Sometimes we should stop and say there has been effort. We have seen some improvement, and we need to take the next steps forward.
We are looking to include explicit requirements relating to the measures I just mentioned. At the end of the day, the department should strive — and I know it is, but we should build this into the plan — to be at the forefront of international best practices in this respect.
The second recommendation is about the automatic yearly fee increase. We suggest that this should be eliminated and increases should be conditional on whether or not there has been a review of service standards and performance has been achieved, and then we take steps forward.
The third recommendation is that the proposal for the three-year program review, which we agree with, should be amended to mandate that the performance standards be assessed and internationally aligned as part of such a review. The new service standards should take both qualitative and quantitative forms, as we do in other jurisdictions.
The fourth and final recommendation — which we have heard also from other colleagues — is that we amend the proposal to ensure the government maintain the A-base funding of the Health Products and Food Branch at Health Canada. We agree with the proposal that fees collected should stay within the branch. However, any increase in fees, tied to improved performance, should not be offset by reductions in Health Canada's funding from the Consolidated Revenue Fund. Otherwise, we would negate the objective of the efficient regulatory review and negate exactly what we are trying to achieve here. That is a basic comment.
Canada deserves and is working towards a high standard of drug regulatory review that we have and want to maintain and continue to improve during the changes of complexity of review. We need to keep pace with both drug development and the evolution of best practices of regulatory practices around the world.
In summary, Rx&D supports the need for increased fees, but these increases must be tied to performance. Accountability must be paramount. Simply returning the fees if standards are not met will not contribute to a more effective regulation and ultimately would not contribute to better health care in the system.
We are looking for performance, for accountability, and then we very much are supportive of the cost-recovery proposals presented to us.
The Deputy Chair: Thank you very much to all of our presenters for being very clear in your presentations.
Before going questions, I want to remind my colleagues, as well as the total assembly, that because of our agenda today I will need to suspend the meeting at 12 noon sharp. With regard to questions, I hope to be able to give all the senators who wish to speak an opportunity, and therefore I hope you will be focused. We will assume roughly a five- minute time period for the question and the answer.
Senator Cordy: You have given us a lot of good information today. As you probably know, we met with the department yesterday. I was quite astounded when I asked about where the fees would go and the deputy minister who was with us said that they are currently in negotiations with Treasury Board to ensure that the fees remain within the department.
Mr. Stitz, in the documentation you provided to us earlier, you talked about the definition of a user fee. It says a user fee is cited as a fee that results in a direct benefit or advantage to the person paying the fee. I think that is a very credible definition, but what each and every one of you were saying, I think, is that you do not mind an increase in the fees. I think 10 years is too long a period of time, because then the businesses have to absorb substantial increases in one shot.
I believe you are all saying that we have to have some type of monitoring of the services that are being provided. What I have read before today and what you have all said today is that the waiting times are substantial. I think Mr. Stitz said it is pretty bad when the queue times are longer than the time it actually takes to evaluate the medical device or the drug.
You all made a good argument in that regard. Mr. Williams, you gave us some good things that perhaps we as a committee should append to whatever we present to the Senate.
Would any of you like to follow up? I am not sure whether I read this beforehand or I heard it today, but in many cases the wait times are three times longer than the time that is projected when you first bring it in.
I would like to be specific about what this committee should recommend regarding accountability for the user fees to ensure that Treasury Board does not absorb the money so that it goes into another department. What specific things do you suggest? Mr. Williams, you gave us some. Could anyone else give us specific things that perhaps we as a committee could recommend?
Mr. Harrington: There is one other element in my full comments that I submitted to the committee in which this is addressed — the way the regulations are administered and the costs associated with that. There I am even speaking to where within the department they are addressed so that we take advantage of all the efficiencies of a common mindset. An issue I raised in our testimony is that right now consumer health products are divided between two areas of the department; one area has a very strong focus on self-care and consumer-oriented products, risk-based, lower-risk products; in the other area, overwhelmingly, 90 per cent to 95 per cent of the workload is associated with prescription drugs of a higher risk.
The impact of those two different environments on the thinking that goes into the review process, and the complexity, is not insignificant. Therefore it is not directly a cost-recovery matter, but it is an administrative issue that definitely could impact on the equitability of the proposals and the efficiency of the overall process.
Mr. Stitz: It has been said that the delay times are reported as an average, which is of course a problem by itself, because if the average is exceeding the target times by 200 per cent, what is the expectation that the utmost outlier would take? It can be a multiple of that even, so it is then going into years where we account for a completion of a review within 100 days. That is one problem.
When we look at the causes of the issue, we as a medical device industry refer of course also to the question of what we can do to improve that. We have provided examples, and I also mentioned this in my deposit to you, that Canada has 90 per cent of its devices coming from abroad with review before the devices touch our soil. We feel that the basing of decision making and review on existing review that has already been performed, either in Europe or in the United States or in any other market that it deems comparable to our safety standards, is not considered sufficiently.
For example, the Australian market has a much higher basing of their decision making on the European approval. An EU-marked or CU-marked product in Australia has an abbreviated review and an abbreviated cost to it.
There are models for how to base decisions. My colleagues also mentioned dependency or reliance on international review that has not been done before, and scientists around the world are not doing different things in science, so it can be a cost saving and can make our program more sustainable than it is today. It has been missed when we were seeing those increases for fees; a 300 per cent increase in fees is dramatic. It is not just an increase — it is a new level of fee.
Ms. Cox: You cannot meet performance targets without having enough bodies to do the work. One of our observations, which is in our submission as well, is that we see a little bit of firefighting — I apologize for the term — where, if there is an urgent need, the staff is reallocated. We feel strongly that there needs to be an increase in resources, just for the staff. We need more bodies to conduct the appropriate reviews and to meet performance targets.
Ms. Del Bosco: Their performance is public from Health Canada on an annual basis, so those numbers are available. It is a question of qualitative and quantitative performance. To look at a more qualitative performance, you might look at a toolbox that Health Canada and industry use together that includes, as Mr. Williams said, things such as foreign reviews or expert reviews, but it is about building that toolbox as well and keeping track of how that is helping the process. You do add resources, but it is also about how well you use those resources to make that final decision in the time frame that the cost recovery specifies.
Senator Eaton: Mr. Stitz, you were talking about foreign reviews and how we could help Health Canada speed things up. Does the U.S. accept foreign reviews in the assessment of its drugs?
Mr. Stitz: No, I do not believe it does, but the situation is also different because a much higher percentage of reviews of U.S.-based products are being done in the United States.
Senator Eaton: Would the U.S. not sell a product based on an assessment that Health Canada has done? Do you have to take a product back and then through the U.S. channels?
Mr. Stitz: Currently, the Canadian products do not go that way. We have a trade deficit on medical devices with the international market, particularly with the U.S., so that question poses itself very little.
Senator Eaton: But does it, if it does?
Mr. Stitz: Reciprocally accepting each other's reviews would be a point of negotiation between the two regulators. This is an opportunity that could be used, but in the example just given, Australia did not insist that Europe take Australia's products, because it has the same situation. Australia is a country of just over 22 million people, and the flow of products from the outside — Europe — into Australia is overwhelming compared to the benefit Australia would have by being recognized as an equal partner.
I fully support your question, and it should be the target, but first, what is the goal?
Senator Eaton: It is not reciprocity, however.
Mr. Stitz: No, it is clearly not.
Senator Eaton: Mr. White, regarding the timelines, does Health Canada not have performance standards, and if it does not meet those standards, is there not a lowering of the cost? Is that not part of the original act?
Mr. White: You are correct. The fees can be reduced. It depends. If a target is missed by 10 per cent, fees for the next year would be reduced by 10 per cent, to a maximum of 50 per cent.
Mr. Williams: My point is that, ultimately, we are not interested in getting back lower fees. We are very interested in a better system. We acknowledge that that check and balance is in there, but if we get other performance reviews and balances, it would be more effective than giving back some of the money. We are all trying to do that.
With respect to your first question, my understanding is that there is a lot of informal exchange right now between regulators, and if I understood the basis of your question, ultimately, the decision must be a Canadian decision. There is no doubt about that. However, if it is the same molecule, the same science and the same regulatory review, is there not a more formalized system so that we can be assured it is accurate? Could we not get a more formalized system of benefiting from each other's reviews, saving money and time? Ultimately, however, the decision must be Canadian.
Senator Eaton: Mr. White, how much does it cost to take an over-the-counter product from development to market, in other words, through the review process?
Mr. White: The development costs can vary. Clinical trials could be required to ensure that the product can be used by the consumer, so there would be development costs there. Those clinical trials could range anywhere from half a million to several million dollars, depending on what type of clinical trials were conducted. I believe the submission review fees at Health Canada would be around $47,000 to have that done. Those are just round estimates. In terms of times, switching a product from prescription to over-the-counter status would probably take three to five years from conception.
Mr. Harrington: Regarding the point raised about the science required to be reviewed by Health Canada for switching from prescription to over-the-counter, we also face a challenge whenever introducing a new product that may be a combination of two established products.
Senator Eaton: An example could be from a perfume to a hand sanitizer.
Mr. Harrington: Yes, it could be that kind of thing, exactly. Let us talk about combining two active ingredients, aloe with a sunscreen, both of which are regulated products with claims associated with them. Under the drug regulation, that automatically gets kicked into new-drug status, which means an expensive full review by Health Canada, even though those are two innocuous, well-established and well-understood ingredients. It is an automatic process. One of the fundamental issues we have is having consumer products in this divided status, where some are treated as drugs, and others are treated as natural health products.
Senator Eaton: Since you raised the issue of the cost of an over-the-counter drug, which is $1,000 — in England, it is $1,600 — I guess I was trying to find that that is a very small percentage of what it costs you to take it from development to market.
Mr. White: Thank you for clarifying the question. We are talking about an annual licence for every single product. Therefore, if we suppose a company has a thousand products, they pay $500,000 per year. Under the proposals, that would double, so that a company would then have to pay about $1 million. It has nothing to do with the development of the product to bring it to market; it is just the ability to have it on the market each year.
Senator Eaton: That is the tracking, because it must be a product with a certain amount of risk.
Mr. White: You are exactly right. That is why, when you look at the other regulatory jurisdictions, such as Australia, the U.S. and the U.K., their fees are based on risk. They have done some costing, and they have found that the risks are higher with, perhaps, new chemical entities or prescription drugs, and they have a fee associated with that. The fee in those countries is lower for over-the-counter medications because they believe there is not as much activity or risk associated with those products. For example, if you have a new chemical entity that has never been on the Canadian market before, a lot of post-marketing surveillance must be done to ensure that consumers are getting and using that product correctly. We believe there is a big difference where something has been on the market for decades and is well-established and well-known. The other jurisdictions that have cost recovery recognize that and do a risk- based approach for the fees.
Senator Eaton: If you add something to that old product, for example a scent or anything else, do you think it should be considered the same old product?
Mr. White: That is essentially correct.
Senator Merchant: Thank you. I will go back to many of the concerns we heard this morning. I thought I heard that an increase in fees does not necessarily mean you will get better performance levels from Health Canada than you are getting right now. I think you are all saying you have not seen in the past the correlation between an increase in fees and an appropriate increase in performance by Health Canada.
In private enterprise, where you are producing things, you can understand a little bit better what you are getting for your money. However, governments manage ideas, and it is difficult to measure the performance there.
I am a little concerned, because we are talking about sums of money, and you are all quite prepared to see an increase in fees. However, if you increase your fees, the price of your product goes up. If a car company makes a car and it will now cost $5,000 more because there is a gadget in it, then the consumer has a choice to make. Maybe sales will go down or something like that.
However, with you, we want Canadians to have very good health care, and everyone wants to be protected. Eventually, with these costs for the user fees or those the Canadian government collects through taxes, there is another component. I think a lot of the health costs are borne by the provinces, because they use many of the things Mr. Stitz is talking about, not only the medicines.
How do we come to terms with raising all these costs and yet getting the performance we expect for the money we pay? In the final analysis, the consumer and the provinces have to bear all these expenses.
Mr. Harrington: Ultimately, we look at the cost recovery proposal as an opportunity to ensure that Health Canada has the resources it needs to do the job effectively. We structured our input to you today to try to ensure that everything possible is done to make it responsive to that fundamental need.
There are a lot of consequences in terms of failure to improve the efficiency and to meet those targets. We know the department works extremely hard to do that. However, as you pointed out, the level of complexity — the number of impacts and the number of factors that are important considerations — is very broad, so regarding this proposal, we have tried to focus on ensuring at least some basic items, ensuring that the fees are returned to the department and that they do not result in a reduction in A-base funding.
There are a number of things that can be done to minimize the risk. At the end of the day, there are many factors that go into performance, and cost recovery is but one.
Mr. Stitz: You mentioned the behaviours industries, and I would like to pick up on that. When we look into the cost-recovery proposal as tabled and look into the past and the future, we have two pictures. We see that the fees have not been increased over 10 or 15 years — let us count it that way. Then we have the projection provided by Health Canada with regards to the next three years in the future.
I do not want to dispute whether the increase should be automatic or not, because that is not my topic. The automatic increase is 2 per cent, but the top line cost increase is actually 7 per cent. This is another recipe for disaster. Ten years from now, we will talk about the same thing because it is all prognosis and estimation, and the two pros of the development go far from each other.
Now looking back into the past 10 years, if we take that 2 per cent and say this is an inflationary increase that is being replaced here by fee increases, over the last 10 years, 2 per cent would amount to 35 per cent fee increases and not to 350 per cent fee increases.
I see here a dimensional disconnect that is not explained in the proposal. It is therefore very difficult to deal with, from industry and also from your end.
Mr. Williams: I would like to back up to underline the importance of the senator's question. It is a very complex issue right now. We have not had fee increases. Canadians expect, demand and deserve a very efficient and safe health care network. We are proud that we have it. If we are to protect that and the complexities, we have to address this issue.
It is our responsibility as industry to continue to work on efficiencies also. Today we are talking about Health Canada. Our industry, as we go through more and more research complexities and regulatory complexities, is trying to adjust. However, it is quite a dilemma. I look at it from a Canadian perspective, and I look at the resources the FDA has. Again, we are talking about the same molecules, and the U.S. has substantially more resources.
It is not just about more money; it is about efficiency and it is about performance. It is the balance we are trying to seek here; that is why we will not have the answer in 2010 alone. We will need constant and regular reviews to improve it.
The Deputy Chair: Mr. White, I would like to come back to your answer to the senator's question with regard to mixing two separately authorized active components under regulation and the implication that there is no change when mixing them together in a new formulation.
Is there not a reason to take a look at what happens when you take two separately regulated components and put them together in a new formulation?
Mr. White: I would agree that it is good to look at it. However, we must understand that there is a well-established history with those two different ingredients. The challenge we have is that they are regulated the same as if they were a new chemical entity. Otherwise, the same regulations come into play, as if they were a new drug entirely. That is where our concern is in moving in this direction.
Mr. Harrington: I want to make another point clear. We are not saying those combinations should not be reviewed. We are saying specifically that when you do that, you put them into the highest category of risk review. Therefore, as Mr. White said, it becomes equivalent to a new chemical entity.
The Deputy Chair: Thank you very much. It is a dynamic, and I wanted to add it.
[Translation]
Senator Champagne: I think everybody agrees that the biggest problem you face is the fact that the pre-evaluation waiting period is lengthier than the evaluation itself. You say that this is often the case because of a lack of staff or resources.
Is that why, Mr. Stitz, one of your suggestions is to do away with fee mitigation or exemptions, which are used to help, for instance, a small start-up research company, whose existence would be jeopardized by exorbitant fees?
As far as individual fees go, you would like there to be no mitigation and fewer exemptions. Clearly, this would free up more money, and more money would equal more staff. Is that how we should look at things?
[English]
Mr. Stitz: I do not think I made myself completely clear. We talk about three different types of areas. We talk about evaluation fees, which are new products that are changed and innovative products; then we talk about medical device establishment licences; and we talk about authorization for sale for products that are in the market and must be annually renewed and pay a fee for that.
With the last two — establishment licences and authorization for sale — there is no requirement to mitigate those two fees. Why? Because, first, the fees are not exorbitant. The majority of the cost to get a product into the market and to get innovation to Canadians is in the evaluation fee in the pre-market. Those two other fees more relate to the post- market in particular.
Also, Health Canada associates activities in the post-market with them. Therefore, if someone has a product in the market, there is no need for the authorization for sale and for the medical device establishment licence to be mitigated.
What you see right now, and when you look into my numbers, is that the establishment licence holders have increased from 600 to 2,100 over the last 10 years, and many of those licence holders are small distributing enterprises, ma-and-pa shops.
There is nothing wrong with that because it is an enterprise. However, those small companies may make small amounts of money and fall into mitigation. In the post-market, they cause the same need for oversight for having their distribution record in place, having their standard operating procedures so that the post-market can manage.
Why would that small company not pay the fee and contribute to the post-market activity that Health Canada has to provide — the same as with the authorization to sell?
The Deputy Chair: You have been very clear in your explanations. Our senators have asked very clear questions to which you have, again, responded clearly. I think they have gained the information they needed with regard to their questions.
Thank you for having appeared before us. Unless there is some strike of lightning with regard to thought from any of you, I will suspend this committee and we will go in camera.
(The committee continued in camera.)