Evidence of meeting #37 for Health in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was contract.
A recording is available from Parliament.
The Clerk of the Committee Mrs. Carmen DePape
I wish to inform the members of the committee of the resignation of Carolyn Bennett as first vice-chair.
Pursuant to Standing Order 106(2), we will now proceed with the election of a new first vice-chair.
I'm ready to receive motions to that effect.
The Clerk
It has been moved by Ms. Bennett that Susan Kadis be elected first vice-chair of the committee.
Are there any other nominations?
Conservative
Steven Fletcher Conservative Charleswood—St. James—Assiniboia, MB
I will second it.
(Motion agreed to)
Bloc
The Vice-Chair Bloc Christiane Gagnon
Good afternoon.
Today is my first time in the chair of the Health Committee. I'm very honoured to be receiving the Auditor General, Ms. Fraser. It was a major challenge to get you here today. Chairing this meeting is a great experience for me. Pursuant to Standing Order 106(2), we will proceed with the study of Chapters 8 and 10 of the report of the Auditor General of Canada.
I in this report you state fairly disturbing findings. Today, I believe all committee members will have questions to ask you so that Canadians and Quebeckers understand the issues involved. Other persons may also answer the questions.
I would like to welcome all the witnesses. Without further delay, I turn the floor over to you, Ms. Fraser.
Sheila Fraser Auditor General of Canada, Office of the Auditor General of Canada
Thank you, Madam Chair.
We thank you for this opportunity to present the results of two of our audits in our November 2006 report: chapter 8, allocating funds to regulatory programs at Health Canada; and chapter 10, award and management of a health benefits contract.
With me today are Ronnie Campbell, assistant auditor general, and Louise Dubé, the principal responsible for the audits of Health Canada.
Chapter 8, “Allocating Funds to Regulatory Programs”, focuses on one of Health Canada's core roles, that of regulator. Regulatory programs for which Health Canada has primary responsibility play an important part in furthering public health and safety. The audit examined three programs that regulate the safety and use of products commonly used by Canadians. Those are, consumer products such as cribs, medical devices such as pacemakers, and drug products such as prescription drugs.
The audit found that Health Canada does not know if it is fully meeting its regulatory responsibilities as the regulator of product safety, medical devices, and drug products. The department needs to determine the activities that must be carried out in the three programs audited in order to meet the department's regulatory responsibilities. Program managers have indicated to management that some core compliance and enforcement activities are insufficient to protect the health and safety of Canadians. At the present time, the department does not know whether it is above or below the minimum level of activity required in the three programs.
Health Canada also needs to determine performance targets for these activities. The audit found that performance indicators have been developed for the three programs, but few have measurable targets. Without targets, it is difficult to determine what a program has achieved compared with what it was intended to achieve.
Health Canada needs to determine the level of resources required to carry out the activities necessary to meet its regulatory responsibilities. We found that Health Canada's system of allocating its resources among various branches and programs is based on the previous year's funding, rather than on plans and sound financial and performance information.
The audit found that the budget for core funding for the three programs audited has significantly decreased over three years: 10% for the Products Safety Program, 32% for the Drugs Program, and 50% for the Medical Devices Program. Furthermore, the total funding allocated to two of these three programs has remained constant, but the demands on the programs are increasing. This makes it difficult for program managers to fully meet the Department's regulatory responsibilities.
These three elements together—the required activities, the defined performance targets for these activities, and the necessary resources to do this work—would provide the Department with the information needed to demonstrate whether it is meeting its regulatory responsibilities and whether adequate financial resources are being allocated to regulatory programs.
We are pleased that Health Canada has agreed with our recommendations and that it has already undertaken steps to improve its process for allocating resources. The Department has redesigned the operational planning process, which at the time of the audit, was scheduled to be implemented in 2006-07.
Madam Chair, because this area is so critically important to Canadians, your Committee may wish to ask Health Canada to provide you with a detailed action plan and a timetable for its implementation, and to provide the Committee with regular progress reports.
Let me now turn to chapter 10, “Award and Management of a Health Benefits Contract”.
The audit raised concerns about a contract at Public Works and Government Services Canada that was awarded to First Canadian Health Management Corporation in 1997 to provide claim processing services for Health Canada's non-insured health benefits program. The contract was valued at $45.7 million for the first five years, with two, two-year renewable options valued at $14.8 million and $14.4 million respectively.
The non-insured health benefits program provides medically necessary health-related goods and services not covered by other provincial, territorial, or third-party insurance plans to eligible first nations people and Inuit. Goods and services provided under the program include drugs and dental and medical supplies and equipment.
We raised two important observations in the report. The first observation relates to Public Works awarding the contract to a company that did not meet one of the mandatory requirements related to financial stability. One of these requirements was that bidding companies were to provide evidence of their financial stability and current financial position through their sources of working capital. However, the department's files did not contain evidence of any of the bidder's sources of working capital. We therefore concluded that Public Works should not have awarded the contract to any of the bidders.
The second observation relates to Health Canada's management of the contract. The audit found that Health Canada did not comply with provisions of the Financial Administration Act when making payments to the contractor to reimburse the service providers for the costs of the drugs and dental and medical supplies that have been provided to eligible First Nations and Inuit people. From the beginning of the contract to January 2006, Health Canada made payments of about $2.6 billion out of the Consolidated Revenue Fund without certifying that value had been received. I am happy to report that the Department is now properly authorizing payments.
Madam Chair, this concludes my opening statement. We would be pleased to answer your Committee's questions.
Bloc
The Vice-Chair Bloc Christiane Gagnon
Before moving on to questions from the committee, I'm going to turn the floor over to Ms. Susan Cartwright, Associate Deputy Minister at the Department of Health. She will be making a brief address.
Susan Cartwright Associate Deputy Minister, Department of Health
Thank you, Madam Chair.
I am pleased to be here today to speak to Health Canada's part of the Auditor General's report from last November.
We thank the Auditor General for her report. We are pleased that she has recognized the progress we have already made in the areas we're here to talk about today: the regulatory programs and first nations health benefits.
First I'd like to introduce my colleagues. They will be able to provide the committee with more specific details of these programs. With me today is Richard Charlebois, who represents the Chief Financial Officer Branch,
Susan Fletcher who is the Assistant Deputy Minister for Healthy Environments and Consumer Safety Branch, Neil Yeates the Assistant Deputy Minister of Health Products and Food Branch, and Ian Potter the Assistant Deputy Minister of First Nations and Inuit Health Branch.
Let me say first that overall we agree with the Auditor General's recommendations in both chapters. In fact, the department has already started work to address some of the very issues that were raised, and in light of the report, we've prepared action plans to guide the department as we respond to each of the chapters.
Health Canada's top priority is protecting the health and safety of Canadians. Every day, our dedicated staff work to safeguard our citizens' health and safety through robust regulatory programs. I can tell you that our safety record in this regard is one of the best, according to international standards. In fact, Canada was recognized in 2002 by the Organization for Economic Cooperation and Development as a world leader in good regulatory practice and as a pioneer in the field of regulatory reform. Health Canada's role in protecting health and safety is well recognized and supported by Canadians.
That's not to say we don't face any challenges, but we continue to make progress. We appreciate the opportunity to discuss our work with you here today.
Our regulatory responsibilities are significant and broad. Just to give you an idea of the diversity, some of the areas of Health Canada's regulatory responsibilities include: drugs, medical devices, and other health products; food; pesticides; consumer products and hazardous substances in the workplace; air and water quality; and toxic substances in the environment.
Regarding drugs and medical devices, as I mentioned before, our regulatory performance measures up well. Let me give you some specific examples.
Through investments made in Budget 2003, Health Canada has substantially improved the timeliness of product reviews for drugs and medical devices while maintaining our high safety standards. We have cleared the backlog of reviews and are now meeting internationally benchmarked performance standards for reviews on an ongoing basis. This means that Canadians have earlier access to the products they need.
Another example is the strengthening of Health Canada's post-market surveillance of safety and effectiveness, as well as our compliance and enforcement capacity for drugs and medical devices. This was possible as a result of investments announced in Budget 2005.
A final example is Health Canada's commitment to improving our transparency and openness. We are making more information available to the public about the basis on which decisions are taken, adverse drug reactions and product risks, as well as increasing public involvement in the regulatory decision-making process. We've also consulted with Canadians on a new policy on public input to the health products review process, which we will be implementing next month.
Along with our progress, Health Canada is facing a number of key challenges to its regulatory programs. I might add that those challenges are ones that we share with most of our OECD colleagues.
To name a few of these, the department must respond to rapidly advancing science and technology; respond to expected and unexpected public health challenges; we must meet public and stakeholder expectations in terms of access, safety, and transparency; and there are increasing demands for faster product approvals and increased intellectual property protection. And our work is broadening in scope, requiring multi-departmental and multi-jurisdictional action.
As I mentioned earlier Health Canada is working to strengthen our regulatory systems in order to better safeguard the health and safety of Canadians.
In describing some of what we are doing, l'II note some of the key actions that address the Auditor General's recommendations on improving program management and delivery. l'm going to group some of the recommendations together into four main areas of action: program review, cost recovery, operational planning and resource allocation, and finally, performance management and reporting.
The review of our regulatory programs is where I'd like to start. We are currently undertaking comprehensive reviews of all of our regulatory programs and activities in order to define the level of activities, performance, and resources required to meet our regulatory and other responsibilities, based on the full cost of these activities. In the Health Products and Food Branch, this review is complemented by a policy review and renewal exercise for the health products and food system. Together, these reviews will help us to further strengthen the regulatory system and meet the needs of Canadians in the future.
In the Healthy Environments and Consumer Safety Branch, a comprehensive review and an assessment of our regulatory responsibilities are also under way. They also include compliance and enforcement capacities.
Secondly, we are updating our cost-recovery regime in HPFB to ensure that the department recovers a reasonable portion of its costs for regulatory programs, including overhead costs. Fees were originally set in the 1990s and have not been adjusted since. Integral to this process will be consideration of the appropriate proportion of resource levels that should come from cost recovery.
Third, as part of the strengthening of our Financial Management Control Framework, we are improving our operational planning and resource allocation process. We are also implementing a Budget Management Framework. This means that, once funding is allocated to regulatory programs, the department has adequate tools to compare the program objectives and expected results.
These expected results and our performance against them will, in turn, help us to make prudent future funding and resource allocation and reallocation decisions. We are incorporating directives to ensure that the department complies with the conditions and decisions of Treasury Board, and builds on improvements at the branch and departmental level over the past several years.
We are pleased that the Auditor General has noted the department's steps toward improvement in this area.
Fourth, we are strengthening our performance measurement and reporting. HPFB is revising its entire performance measurement framework, including performance indicators and targets for all of its regulatory programs. This new framework will be in place by April of this year.
One further but very important note is that HECSB's product safety program has also been investing the resources to develop and implement an effective planning and performance measurement framework. There will be further work carried out as part of a branch-wide effort to enhance and/or establish appropriate indicators, baselines, and measurable targets towards tangible results.
We accept the Auditor General's recommendations on chapter 8, and actions are under way to implement them.
On chapter 10, “Award and Management of a Health Benefits Contract”, this contract is Health Canada's largest. It provides access for eligible first nations and Inuit to needed pharmacy, dental, and medical supplies and equipment health benefits. Approximately 80% of our clients are low-income Canadians, and our clients experience a higher disease burden than the national average. For most of our clients this is their only supplemental health benefits program.
Last year, this contract processed 15.5 million claim lines, over 500,000 different individuals received pharmacy benefits, and over 286,000 received dental services. This contract remains an extremely important delivery mechanism for the department's health program and for 780,000 first nations and Inuit clients.
The Auditor General's Report points to a number of shortcomings in the way Health Canada handled this contract over the years but has acknowledged the progress that the department has made. While there is no excuse for not being compliant with the Financial Administration Act, the department acted quickly to respond to the contract management issues found in 2003 and conducted various internal audits and audits of the contractor's books, and took corrective measures.
The department implemented stronger financial controls and contract management and, working with Public Works and Government Services, strengthened the contract provisions that had been determined to be weak.
There has never been any indication of fraud or overpayment related to the payments Health Canada has made to the contractor for the payments to health providers.
At the outset of this contract there were a number of service risks that the department was managing. First of all, every transition to a new contract has risks of service interruption, and this contract was no exception. The contractor was unable to commence service on schedule, and temporary arrangements with the previous supplier had to be put in place.
Secondly, the experienced claims processor subcontractor decided early in the contract to leave the business, and the prime contractor had to find a replacement. This meant that the department had another period of adjustment in managing service continuity to its clients.
Health Canada had begun implementing improvements as a result of our internal reviews when the Office of the Auditor General began its audit of the HICPS contract. We worked closely with the Office of the Auditor General, and further improvements were implemented in advance of the tabling of the November report. We are pleased that the Auditor General acknowledged in her November report that we had resolved the contract management issues identified in the report.
My colleagues and I will be happy to answer any questions relating to chapters 8 and 10 of the Auditor General's report.
Thank you.
Liberal
Hedy Fry Liberal Vancouver Centre, BC
Thank you very much.
My first question is for the Auditor General.
You said in your audit that you did not examine the efficiency or the effectiveness of the three programs selected, which are product safety, drug products, and medical devices, although I suppose one could argue that efficiency would have been hampered by some of the things you pointed out, for instance, not having appropriate funding, seeing as funding remained static but need increased. But effectiveness is extremely important. If the department wasn't being effective in monitoring those three things, then obviously Canadians' health and safety would have been very compromised. Do you have evidence that while they may not have been efficient, the department was effective or was not ineffective—in terms of not harming people? Is there evidence of that?
Then I have a question for the department. You talked about the fact that you don't have any baselines and you do not know if you are fully meeting your responsibilities as the regulator of drug products, medical devices, and product safety. Surely, this is what you're supposed to know. If you are dealing with things that actually affect the safety of Canadians, how is it that Health Canada does not know if it's fully meeting those responsibilities under three areas that are absolutely critical to the health and safety of Canadians?
Perhaps you can start, Madam Fraser.
Auditor General of Canada, Office of the Auditor General of Canada
Thank you, madam.
We, ourselves, do not do audits of effectiveness or effectiveness studies. Those would require evaluations. In fact, if you look at the Auditor General Act, it says that we should look to the departments to see what they have in place to measure their effectiveness. So in a way, this audit is pointing to a lack of information within the department to be able to measure the effectiveness—the types of activities that should be carried out and the targets and measurement of those.
What we were really focusing on here was the whole resource allocation process. How are resources within the department being allocated to the various regulatory programs and on what basis? What information is being used for that? The department has obviously indicated that it is starting to work on that, but I think in order to really judge the effectiveness, you need to have that base information, which isn't there.
We do audits of specific programs. We did an audit two years ago on the medical devices program, and we raised a number of issues there. In fact, the whole allocation of resources was noted as an issue when we did that first audit, when we saw the funding profile for the program. That's why we decided to conduct a specific audit looking at how resources were allocated.
Associate Deputy Minister, Department of Health
Madam Chair, in terms of the baselines, we recognize that one of our challenges was a lack, in some areas of the department, of baseline information, and we've accepted the Auditor General's recommendation in that area. We have work already under way to establish those baselines.
I think it's important to underline that we are meeting our regulatory responsibilities. We have a strong regulatory system for drugs, for medical devices, and for a wide range of other health products. As I indicated in my opening remarks, we have one of the best safety records in the world.
As a result of the Auditor General's work, we found that we were lacking information in the areas she identified. We have undertaken work, as I already said, to bring ourselves to a position where we are able to both furnish that information to others and also use it in our resource allocation process.
The other area in which the Auditor General identified we had work to do—and we agreed—was in our operational planning process. We made some significant improvements to that process this current fiscal year, which is just coming to an end. We've conducted a lessons learned exercise so that next year our operational planning process will profit from that experience in the first year.
I don't think there's any question in our minds that we are not meeting our regulatory responsibilities. What we do concede is that we were lacking in some of the information to demonstrate that clearly to others. And we've undertaken to address that.
Liberal
Hedy Fry Liberal Vancouver Centre, BC
This is what I want to ask, then.
You say you have a terrific safety record, one of the best in the world. How do you know if there are adverse reactions when you don't have mandatory reporting of adverse reactions? Is it only when enormous problems occur and suddenly there is a class action suit? How do you know, based on some drugs?
One of the things we had talked about a while ago was mandatory reporting, which I firmly believe in. Even though it would it have been a hardship for me as a physician, I still think it's really important. How else are you going to know what's going on? Unless a crisis occurs and that flags it to you, how do you know whether there were minor things that you could add up together that may improve the device when you are regulating it for later on, or for the drug?
Associate Deputy Minister, Department of Health
May I ask my colleague Mr. Yeates to respond?
Neil Yeates Assistant Deputy Minister, Health Products and Food Branch, Department of Health
Certainly.
Specifically, in terms of drugs and medical devices, you're correct that we do not have a mandatory reporting system for practitioners. We do for manufacturers. We still receive, however, a significant number of adverse event reports, around 14,000 Canadian reports a year, and we receive about 200,000 international reports. So we have a large volume of information to sort through.
There are also things that appear in the literature continuously, so we're always monitoring what's happening in terms of studies of various products and drugs. We keep a close eye on those. There are also other post-market studies that we may require as part of conditions of approval of a particular product. So there are many different sources of information.
We stay in close contact with our regulatory colleagues from other countries, particularly the FDA in the U.S. and those in the European Union, and we share information with them as well.
So we have a large volume of information and many sources of information that we use. Canadian adverse events are one, and from those we distil what the signals are out there and whether or not some regulatory action is required to be taken.
Liberal
Susan Kadis Liberal Thornhill, ON
Thank you, Madam Chair.
In terms of discussing establishing the program baselines by March 31, 2008, I'd like to ask the Auditor General if she's satisfied with that deadline.
Do you believe it should be moved up, or is that a reasonable timeline?
Auditor General of Canada, Office of the Auditor General of Canada
I think that's a reasonable timeline. It's obviously the estimation of the department as to how quickly they can move on this, and I think we have to recognize that it will take some time to do it. So to have it done within a little more than a year is I think a reasonable time.
Bloc
The Vice-Chair Bloc Christiane Gagnon
Thank you.
There's still two minutes left. If you've finished, Ms. Bennett will speak.
