Cost Recovery Framework: Consultation

Part 5 - Implementation Considerations

Independent administration

Throughout the implementation and the future operation of HPFB's cost recovery initiative, the Branch will continue to maintain an independent administrative office that is organizationally separated from sectors involved in cost recovered activities, in order to maintain the integrity of the review and regulatory functions. This office will be responsible for the general administration of the cost recovery, monitoring the performance and the reporting process.

Fee Mitigation

While HPFB charges fees to industry who make use of the services of the Branch, it is recognized that in certain instances, these fees can result in an undue burden on certain groups or individual fee payers. As is now the case, the HPFB is prepared to consider measures to address this type of impact, referred to as fee mitigation, at the explicit request of impacted stakeholders, as part of this consultation process.

Fee Mitigation Principles:

- Evidence of undue impact: Mitigation will be considered if there is evidence that a fee is an excessive financial burden, or contrary to public policy objectives.
- Fairness and consistency: Fees and mitigation measures will be established with an equitable allocation of costs.
- Unique circumstances: There will be flexibility to address unique circumstances where there is sufficient and justifiable evidence.
- Transparency: Information regarding the establishment, implementation and application of fees and mitigation procedures will be readily available and shared in a timely manner.

However, all requests for fee mitigation must be substantiated by specific data and analysis of available information provided by fee payers.

If and where fee mitigation is permitted, it is understood that other fee payers will not cross-subsidize those who receive fee reductions or exemptions. Mitigation proposals will be reviewed from the perspective that they are also dependent on Departmental funding availability to cover shortfalls due to fee reductions or exemptions.

Two criteria will be considered under fee mitigation:

1. When the recovery of the fee would have a significant, detrimental impact on the financial position of an individual or groups/classes of paying stakeholders; or
2. When the fee would reduce access to such an extent that the achievement of important program or objectives would be compromised (Program objectives relate directly or indirectly to health issues. Examples include access to therapeutic products, impact on health of Canadians, and compliance with health-related regulations).

Fee Mitigation Mechanisms:

- Exemptions address the need to define a specific class of potential payers who should be exempt from the fees in their entirety.
- Reduced fees apply to situations where a specific payer (or any payer meeting specified conditions) would be harmed by paying the full fee, or where payment of the entire fee may jeopardize public policy objectives (e.g. reducing R&D in Canada).
- Fee caps would apply where a payer meeting specified conditions would be harmed by the cumulative impact of fees, so the total amount payable is limited.
- Fee delays would apply where the requirement to pay at the normally required time would result in financial hardship.

The decision to undertake any mitigation measures must be evidence-based and take into consideration the specific nature and profile of the product and/or industry being affected by the fees, the cumulative impact of the fees, and the extent of existing subsidies or means of financial support outside of the proposed mitigation measures.

Revising Fees in the Future

A blended cost increase factor of 2.5% per year, to reflect labour and non-labour components of cost recoverable activities, has been devised from publicly available cost indices to adjust program costs from 2005/06 to 2007/08. This approach will form the basis for automatically adjusting fees on an annual basis to ensure they continue to reflect current costs. Every three years, a full costing analysis will be undertaken and fees adjusted up or down to reflect the true cost of current and new program/service delivery, according to the policies, guidelines and costing models in place in the HPFB and Health Canada.

A dispute resolution process applying to all matters relating to implemented fees and service standards will be defined, once the Cost Recovery Framework has been finalized and approved.

Annual Reporting

HPFB has been reporting revenues from fees together with associated costs and service standards for the last two fiscal years in the Departmental Performance Report based on a template established by the Treasury Board of Canada. This will continue to be the main vehicle for fulfilling this requirement.

In addition to this, the Branch produces a performance report annually, which will also include information on service standard performance as well as additional information that will assist stakeholders in understanding the activities that the Branch conducts to protect and promote the safety of Canadians.