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PACP Committee Report

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The Federal Government provides, or pays for, healthcare services directly to specific groups, including First Nations and recognized Inuit, eligible veterans and former members of the Canadian Forces (CF), serving members of the CF, regular members of the Royal Canadian Mounted Police (RCMP), inmates of federal correctional institutions, refugee protection claimants, sponsored convention refugees, and individuals detained by Citizenship and Immigration Canada.

The six Government of Canada federal organizations who are responsible for providing drug benefits want to improve the safety and cost-effectiveness of these programs. However, all have distinct policy reasons to want to go further and ensure that these programs contribute to improving health outcomes for their clients.

In the case of Health Canada's Non-Insured Health Benefit Program (NIHB), enabling First Nations and Inuit peoples to maintain and improve their health contributes to closing unacceptable gaps with other Canadians in areas like education attainment, employment and quality of life. Health Canada provides benefits similar to those offered by insurance programs. For the RCMP and the CF, the healthier their members, the better they are able to carry out their duties and protect the security and safety of Canadians. In the case of Veterans Affairs Canada, the longer the veterans and former members of the CF can achieve and maintain good health as they age, the fewer services and supports they will need to live well and with dignity. For Citizenship and Immigration Canada, the healthier recent immigrants are during their settlement experience, the more likely they will be to integrate successfully into Canadian life. And, for the inmates of Correctional Services Canada's institutions, achieving and maintaining good health while incarcerated increases the likelihood of successful reintegration into community life post-release.

The Government of Canada acknowledges the overriding importance of improving health outcomes for the million or more people eligible for health benefits provided by the federal government and welcomes the work of the Standing Committee on Public Accounts in examining Chapter 4 of the November 2004 Report of the Auditor General of Canada (Management of Federal Drug Benefit Programs). The Government appreciates the efforts of the Committee in reviewing both the Auditor General's Report and the initial departmental action plans to respond to the Auditor General's findings.

The Government shares the sense of urgency expressed by the Committee members about the need to identify and implement appropriate measures to manage program expenditures without compromising the health of clients. These measures include providing comparable coverage across the programs and, where it occurs, ensuring that inappropriate use is investigated fully and corrective action is taken, if warranted.

The Government appreciates the efforts of the Committee in putting forward recommendations to assist federal organizations who work individually and collectively to improve their drug benefit programs and in responding to the findings of the Auditor General (AG).

The Government of Canada also welcomes the opportunity, through this document, to respond to the Committee's recommendations and to clarify the government's intentions concerning:

  • The protection of clients' privacy;
  • The development of reliable performance indicators given the rapidly changing healthcare delivery environment;
  • Prioritizing drug use data analysis to ensure that scarce resources are allocated to analysis that will improve service delivery to clients and support improved health outcomes; and,
  • Plans going forward to leverage economies of scale where there are clear opportunities to improve service and achieve better health outcomes, as well as reduce costs.

While all six federal organizations want to ensure that the drug benefits coverage they provide helps their clients maintain and improve their health, each faces its own reality in terms of benefit delivery. For example, Health Canada's clients, like most Canadians, access prescription drugs via private sector pharmacists in pharmacies across Canada. However, because many of these clients live on reserve or in the north, there may be no pharmacy nearby and they may need to travel considerable distances to obtain the drugs they need. This often necessitates that Health Canada's clients obtain supplies for several months at a time. Inmates of federal correctional institutions on the other hand, are prescribed drugs by physicians working for the federal government. Drugs are purchased directly, through a combination of regional pharmacies and contracts with community pharmacies. Prescription drugs are administered to offenders daily, in a heavily supervised environment. The Department of National Defence provides drug benefits through two pathways - via a combination of military and civilian pharmacies.

With the exception of inmates of federal correctional institutions and most Canadian Forces personnel, clients fill their prescriptions at pharmacies in their communities. Access to prescription coverage at the retail pharmacy level relies on the electronic claims processing standard, developed and maintained by the Canadian Pharmacists Association (CPhA). This is how third party claims processing systems and software in retail pharmacies exchange information and it is the basis of the vast majority of retail pharmacy transactions in Canada. This point-of-service system includes a series of drug use evaluation codes that the CPhA developed to alert pharmacists at the point-of-sale to potential drug use issues. Federal drug benefit programs, like other private and public payers, use different combinations of these codes based on their experience with drug use issues prevalent in their client populations.

There is a difference between the management practices and processes used by the various organizations to deliver services to their program clients. Naturally, these different program realities produce variances in management practices and processes employed to ensure appropriate services are delivered to clients of each program. However, there are also areas where all the organizations recognize that common approaches have the potential to result in better and more timely delivery of benefits, administrative cost efficiencies, and improved health outcomes. Determining where and between which organizations these opportunities exist, and how best to exploit them without weakening or interrupting service delivery to clients, is one of the main purposes of the Federal Healthcare Partnership.


The Federal Healthcare Partnership (FHP) was established in 1994 to coordinate federal government purchasing of healthcare services and products at the lowest possible cost for approximately one million federal clients. The original goal was to provide cost savings through the process of collective federal department purchasing of selective healthcare products and services. (See Recent Achievements, for more information on cost savings and cost avoidance results.)

Annual expenditures of member federal organizations for the direct delivery of health services amount to nearly $3 billion, making the federal jurisdiction 5th in order of expenditures after Ontario, Quebec, British Columbia and Alberta. Given that federal organizations face many of the same pressures as provincial and territorial healthcare providers, over time the activities of the FHP have evolved to include examining the strategic impact of a range of complex issues affecting the provision of health services within the federal jurisdiction. The six federal organizations who are permanent members of the FHP are: Citizenship and Immigration Canada (CIC); Correctional Service Canada (CSC); Department of National Defence (DND); Health Canada (HC); Royal Canadian Mounted Police (RCMP); and Veterans Affairs Canada (VAC). These organizations work collaboratively to maximize efficiency and minimize duplication in their delivery of healthcare programs, including drug benefits programs, with a view to maintaining and, ideally, improving the quality of services they provide to the people they serve.

A Federal Healthcare Partnership Secretariat (FHPS) was established to coordinate the collaborative efforts of the partners. It provides project management, leadership and administrative support. Its activities are overseen by an Executive Committee chaired by the Associate Deputy Minister, VAC, and comprised of an Assistant Deputy Minister (or equivalent) level representative from each of the six partner organizations. A Management Committee provides guidance and advice to, and is chaired by, the Executive Director of the FHPS. It is comprised of a senior departmental functional authority (Director General or equivalent) from each of its six partners.

The FHP strives to achieve economies of scale while enhancing the quality of healthcare services that would be more difficult to achieve by the individual federal organizations acting on their own. This also creates an ideal mechanism for developing a whole government response to Chapter 4 of the November 2004 Report of the Auditor General of Canada. A “First Level Action Plan” to respond to the AG's recommendations has been developed under the aegis of the FHP, and four Task Groups of partner representatives are working to address each of the four recommendations from the Report.


The FHP Secretariat is also working to ensure Task Groups' efforts are consistent with the federal contribution to the National Pharmaceutical Strategy. In September 2004, First Ministers directed Health Ministers to establish a Ministerial Task Force to develop and implement a National Pharmaceutical Strategy (NPS), and to report on progress by June 30, 2006. FHP partners fully support the development and implementation of the NPS.

The NPS will have significant implications for all the federal drug benefit programs. Examples of what the NPS may provide to the federal benefit programs include a common national formulary, conditions for reimbursement of costs of therapies for rare diseases, etc. The partners of the FHP want to ensure that work on the NPS, and its eventual recommendations, inform what the Task Groups are doing. The FHP is one of the mechanisms through which this is being coordinated.


Pharmacy represents the largest benefit category for federal healthcare with combined federal expenditures on drug benefit programs exceeding $430 million annually. The drug benefit programs provided by the Government of Canada are subject to the same cost and management pressures as provincial and territorial programs, and those provided by the private sector health insurers.


According to Drug Expenditure in Canada: 1985 to 2004 by the Canadian Institute for Health Information (CIHI), from 1985 to 2002 total drug expenditure grew at an average annual rate of 9.7%, well beyond what inflation or population growth would explain. Overall, drug benefit programs/plans financed by both the private and public sector are experiencing rapid cost increases. According to CIHI, between 1997 and 2002, public sector expenditure on prescribed drugs grew at an average annual rate of 13.8% and private expenditure grew at an annual rate of 10.0%.

Many interrelated factors influence rising drug expenditure. However drug prices have been relatively stable over the past ten years. According to CIHI, the key factors affecting increased drug spending in Canada are the volume of drug use and the entry of new drugs into the marketplace, which are typically introduced at higher prices. Volume of drug use can be influenced by population-related factors, including changes in the population distribution and population health status, as well as in the emergence of new diseases or epidemics. Volume of drug use is also influenced by system-related factors, such as the extent of formulary listings, new treatments resulting from research and technology, and drugs that replace surgery. Finally, volume is influenced by pharmaceutical industry practices, such as promotion and marketing, as well as the practices of healthcare providers and consumers, including changes in prescribing and dispensing practices, multiple doctoring and adherence to treatment. How much pressure these various factors exert is still largely unknown. According to CIHI, while there is some literature on the effects of various factors on drug expenditure, “more research is required to quantify the effect of each factor and to inform the relationship between drug expenditure and other health care spending.” [1]

Internationally, in 2002 Canada had the third highest level of total drug expenditure per capita among eleven OECD countries, after the United States and France. Canada was the fifth highest in terms of its drug expenditure as a percentage of total health expenditure, and had the second lowest public sector funded portion of total drug expenditure.


Each of the six federal drug benefit programs has distinct elements reflecting their differing mandates and the unique circumstances of their client groups. It should be noted that drug benefits are part of a larger package of benefits provided by the six federal organizations.

HC's NIHB program is the largest of the federal drug benefit programs, serving First Nations and Inuit Canadians. The program operates in a manner similar to an insurance program and eligibility is based on status as a registered Indian or recognized Inuit. VAC's Prescription Drug Program is the second largest of the federal programs, serving eligible veterans and former members of the Canadian Forces. Veterans Affairs Canada provides these veterans and former members with drugs that are considered directly related to the treatment of their disability pensioned conditions. In addition, for income tested clients, VAC provides benefits to supplement provincial drug plans coverage. DND is responsible for providing selected drug benefits to eligible members of the CF. DND also maintains pharmacies and coordinates distribution of selected medical supplies for exclusive use by their clients. Regular members of the RCMP are eligible for benefit coverage. Through the Corrections and Conditional Release Act, CSC is mandated to provide all medically necessary drugs to inmates of federal correctional institutions. Finally, refugee protection claimants, sponsored convention refugees, and individuals detained by the CIC receive essential and urgent prescription drugs through that department via the Federal Health Program.

The following chart outlines the total number of eligible clients under each program, the number of clients who accessed drug benefits within the last year as well as the total cost of drug benefits for each of the federal drug benefit programs.

Federal Organizations
Eligible Clients/ Total # Number of Clients who Accessed Drug Benefits Within Last Year Total Cost for Drug Benefits (millions of dollars)
Health Canada
Non Insured Health Benefits Program
764,523 **
(First Nations and recognized Inuit)

** Estimates for 2004-2005
490,283 $ 320.6
Veterans Affairs Canada
Prescription Drug Program
(Eligible war veterans and former Canadian Forces members)
83,535 $ 112.1
Department of National Defence
Canadian Forces Drug Benefit Program
67,619 * **
(Regular Force Personnel, reserve and foreign national members)

* excludes short-term Reserves
** Data for 2003-2004
55,323 $ 238
Royal Canadian Mounted Police (RCMP)
Occupational Health and Safety
(Regular members and pensioners with medical disability)
16,238 $ 7.7
Citizenship and Immigration Canada
Interim Federal Health Program
90,423 ± 5 % (estimated)
(Refugee protection claimants, convention refugees and CIC detainees)
90,423 $ 5.3
Correctional Service Canada 21,255
(includes all inmates incarcerated and newly admitted during the year)
21,255 $ 138
All data from fiscal year 2004-2005 unless otherwise specified.


The practice of pharmacy in Canada is regulated by the provinces and territories. This means that providers of drug benefits operating on a pan-Canadian basis, which includes federal organizations and private sector insurers, contend with different provincial and territorial pharmacy associations, including their different fee guides and rules of practice such as how long a prescription is valid. This, coupled with the unique mandate of the federal programs, their clients' distinct requirements, and the fact that most of the federal programs have very limited control over distribution systems (i.e., most pharmacies are private businesses, regulated provincially) or physicians' prescription decisions, presents significant challenges in identifying viable opportunities to move towards a centrally managed approach. Developing one approach that would work everywhere for everyone would be very challenging given these differences. For example, generic substitution is applied differently from one province to another and it is unlikely that stakeholders, particularly at the pharmacy level, would agree to conduct transactions for federal program clients in ways that might differ significantly from what they do, for the rest of their larger customer base.

Where individual federal organizations share a common interest such as pharmacy dispensing fees, the FHP is a conduit for sharing policies, knowledge management and program delivery approaches. However, the programs are facing significant pressures. In the case of drug benefit programs, these include rising costs and health risks associated with the volume of drug use and the entry of new drugs into the marketplace (for which no generics exist). Collective purchasing and/or additional monitoring further contains the risk of misuse and abuse and may offer some advantages for some of the programs. The FHP is providing strategic leadership to develop harmonized plans and to enable the partners to work collaboratively in the sector with other jurisdictions and providers of drug insurance plans.


As public sector drug benefit providers, federal partner organizations are concerned with client safety as it relates to the quantity and type of drugs prescribed to clients. Federal providers and payers of drug benefits place a high priority on ensuring the management of their programs addresses the various challenges emerging as a result of the increasing trend in the use of drugs, particularly the risk of negative drug interactions.

The Committee's concerns regarding risks to safety assurance are being addressed. The federal partners that have program clients who use Canada's retail pharmacies to obtain prescription drugs are addressing this in two ways. First, at the pharmacy level, the real-time point-of-service system developed and maintained by the CPhA provides warning messages or “alerts” about safety issues and potential duplicate prescriptions to pharmacists. Using this system capability has been an active component of HC's program since 1997. Of some 10 million drug claims (totalling $321 million) that its NIHB program processed in 2004-2005, approximately 338,600 or 3% came up with a warning message, and three-quarters (249,300) of these were not filled [2]. (Pharmacists can override the warnings if, in their judgment, there is a reasonable explanation for the anomaly.) It should be noted that the system's drug use codes, which underlie its ability to generate “alerts”, were developed by the CPhA. Federal drug benefit providers who use this capability (HC, VAC, DND, RCMP and CIC) determine which combinations of codes will be used. However, only in the case of the NIHB Program are codes currently being used that can result in a claim for reimbursement being rejected.

Retrospective drug utilization evaluation or DUE is another key element in the government's approach to program integrity and safety assurance. This is conducted at two levels: across populations and for individuals. At the aggregate or population level, DUE looks at trends in the utilization rates of certain drugs; at present, only DND and HC are performing such DUEs. At the individual level, it provides an additional layer of safety assurance; at present, DND, HC, RCMP and VAC are all performing individual-level DUEs.

In 1999, DUE by Health Canada was suspended while a new approach to obtaining express consent was developed. This process involved seeking the views of First Nations and Inuit leadership as well as other stakeholders, including healthcare providers and privacy experts. Population level DUE and client level DUE by Health Canada resumed in February and November 2004 respectively, with quarterly reviews of clients using drugs which raise concerns regarding program integrity where such drugs are considered to have the potential for harmful misuse or abuse (e.g. narcotics and opiates). The purpose is to identify those cases that may require intervention with the client's prescriber(s) and pharmacist(s). In cases where client safety or inappropriate use is found to be a concern, the Program seeks the express consent of the client to share his or her personal information with healthcare providers. In cases where consent is not obtained, NIHB may refuse payment for benefits until client risk is addressed. Information is shared in order to supplement the professional judgement of healthcare providers about how best to enhance the safety of their clients. It should be noted that at no time between 1999 and 2004 was there any suspension of Health Canada's use of the point-of-service system safeguards that provide real-time warnings to pharmacists about potentially hazardous drug interactions and/or duplicate prescriptions.

In some programs, such as CIC's, the nature of the program itself provides for tighter control of prescription drug use. The CIC program provides essential and urgent drugs only. The payment for a drug that does not appear on the pre-established list requires pre-approval. In this type of structure, misuse of medication is unlikely.

VAC regularly reviews safety warnings concerning medications issued by HC's Health Products and Food Branch. These warnings are analysed monthly at VAC's Formulary Review Committee (FRC). If a warning, in the opinion of the medical professionals of the FRC, is significant to the VAC client population, a written notification will be sent to the prescribing physicians. If necessary, VAC will call FRC members together for ad hoc meetings to deal with pressing drug safety issues.


On the “supply” side, treatment approaches are changing rapidly and dramatically as a result of research and new technologies and products, including therapeutic regimens, and changes in the way healthcare services are delivered, such as by interdisciplinary teams of physicians. In the case of modern approaches to diabetes for example, there has been a dramatic increase in the number of new medications introduced, with five new classes of drugs having entered the market within the past decade. Given the complexity of this disease state, it is not uncommon to have a single diabetic client managed by their family physician and several specialists with various medications being prescribed by each.

On the “demand” side, the health status of program clients translates into atypical patterns of prescription drug use. Among the clients of the largest federal drug benefit program, First Nations and Inuit, morbidity rates are significantly higher than the Canadian average, as are injury rates. The average age of the clients of the VAC drug benefit program, the second largest federal program, is now 82. High morbidity and injury rates, and age, are significant drivers across a population group of the use of multiple prescriptions, and hence, increased costs.

VAC has undertaken, with the assistance of outside experts, the analysis of causal factors for the increasing rate of large numbers of prescriptions. This expert analysis of frequent dispensing has found four basic categories of cases:

  • Legitimate multiple dispensing, in the case of lost prescriptions;
  • Legitimate frequent dispensing, such as in cases where people have serious and complex conditions but do not have a family doctor and are using walk-in clinics where physicians typically prescribe for short durations; patients with unstable conditions where physicians may be changing prescriptions on a daily basis; and, patients on daily dispensing because their prescribing physician does not think they are capable, for psychological or emotional reasons, of handling the medication themselves;
  • Bandwidth problems at point-of-sale, where products were billed multiple times but not dispensed multiple times. In the latter case, the bandwidth problem has been addressed and ongoing audit activity is recovering monies owed to the Crown; and
  • Dubious multiple dispensing.


Individually, a number of the federal partners have stepped up efforts to review and monitor drug use. This has included expanding the use of interdisciplinary case management screening by VAC to investigate situations where clients appear to be receiving quantities or combinations of pharmaceutical products which could have a negative impact on their health. Health Canada has been monitoring the use of hard-edit overrides by pharmacists since 1997. VAC can monitor certain response or intervention codes through its third party administrator/claims processor. Indeed, improved monitoring of override codes by HC was acknowledged by the Office of the Auditor General (OAG) in the November 2004 report. HC also uses the override information to assist in determining which providers the program will audit.

Collectively, through the work of the FHP's Task Groups under the First Level Action Plan, all the federal partners are working towards consistent alert messages for pharmacists, clarifying criteria to identify clients at risk, and a common DUE framework which will make a positive contribution to clients' health outcomes.

According to the November 2004 Report of the Auditor General, total health care expenditures for prescription drugs rose 25% over two years (2002-2003 and 2003-2004). While increasing costs of the six federal drug benefit programs are not out of line with general trends in the sector across public and private drug insurance programs/plans, new initiatives have been undertaken to manage costs (e.g., reducing dispensing fees for some drugs; changing the way some drugs are listed, and promoting the use of generics where possible).

Collectively, measures to enhance cost containment include bringing the fees that some of the federal programs pay in line with those of provincial drug benefit providers, most of whom have much larger client bases, and leveraging their economies of scale to the advantage of the Crown. For example, in June 2005, HC, VAC, DND and RCMP signed an agreement with the Representative Board of Saskatchewan Pharmacists to extend for another year the removal of graded mark-up on prescription drugs (replaced with a flat percentage), and to increase minimally the flat dispensing fee on over-the-counter prescriptions and the dispensing fee of prescription drugs. An estimated yearly savings/cost avoidance of over $2.2 million results from this arrangement.

All FHP partner organizations are participants in the Common Drug Review (CDR), with the FHPS representing CSC and RCMP. DND, HC and VAC have their own representatives. The CDR process has established the Canadian Expert Drug Advisory Committee. It provides all jurisdictions with drug listing recommendations. While primarily focussed on therapeutics as opposed to cost containment, the CDR will vastly improve the capacity of all jurisdictions providing drug benefits to make evidence-based and consistent drug listings decisions. These will reduce duplication of effort by participating drug programs, optimize resources and expertise, and provide equal access to the same high level of evidence and expert advice. Meanwhile, eligible drug benefits for all the federal plans have been identified based on the advice of the Federal Pharmacy and Therapeutics (FP&T) Committee. The membership of this Committee includes practising physicians and pharmacists from community and hospital settings. In its review of drugs, the FP&T Committee follows an evidence-based approach and considers current medical and scientific knowledge, current clinical practice, healthcare delivery and specific client health needs.


The following are the government's responses to each of the Standing Committee's specific recommendations, providing further detail on the Action Plans of the FHP, and of each of the individual federal organizations, in responding to the recommendations of the Auditor General.


That the Chair of the Executive Committee of the Federal Healthcare Partnership ensures that progress reports on the implementation of the First Level Action Plan, the next level action plan, and all progress reports concerning both action plans are tabled in the House of Commons immediately upon completion, with copies sent to the Standing Committee on Public Accounts.

The Government of Canada agrees with this recommendation and will, via the Chair of the Executive Committee of the Federal Healthcare Partnership, table in the House of Commons the progress reports on the implementation of the First Level Action Plan, the next level action plan and all progress reports concerning both action plans upon their completion. Copies will also be sent to the Standing Committee on Public Accounts.

The FHP also plans to submit progress reports and the next level action plan to the Auditor General of Canada by October 31, 2005.


That the Department of National Defence, Royal Canadian Mounted Police, Citizenship and Immigration, and Correctional Service Canada, provide action plans to the Standing Committee on Public Accounts detailing the measures they will take to implement the recommendations contained in Chapter 4 of the November 2004 Report of the Auditor General of Canada. These plans must reference each recommendation, contain timelines (target implementation and completion dates) for every action listed, and be submitted to the Committee no later than September 30, 2005.

Individual action plans have been or are being prepared by DND, the RCMP, CIC and CSC. The DND plan will be submitted to the Standing Committee on Public Accounts following a presentation of the next level FHP Action Plan to the OAG in October 2005. The federal organizations tabled their reports with the Standing Committee to which they were invited. The RCMP tabled a workplan with the Standing Committee on Health on February 21, 2005. CSC also tabled its plan with the Standing Committee on Health on February 21, and CIC tabled its action plan with the Standing Committee on Health on March 7, 2005. In the coming months, individual plans already prepared (i.e., by RCMP, CIC and CSC) will be updated to align with the next level Action Plan of the FHP which will be submitted to the AG by October 2005. At that time, it, along with the individual departmental plans, will be tabled with the Standing Committee on Public Accounts.

Through the FHP Action Plan, all six federal organizations who provide drug benefits are responding to four of the five recommendations contained in Chapter 4 of the AG's 2004 Report. As set out in the Government of Canada First Level Action Plan, FHP's work to develop the next level Action Plan involves four Task Groups of representatives from the federal partner organizations, each dedicated to one of the four AG recommendations that pertain to all the partners. These are: establishing a common objective statement and establishing and/or strengthening performance measures; upgrading claims processing systems; analyzing drug utilization trends; and, cost management strategies. (The fifth AG recommendation, which applies to VAC and HC alone and concerns identifying amounts owing to the Crown from pharmacy audits, will be addressed by both these departments in the Public Accounts effective 2005-2006.) In addition, the FHP Secretariat is working to ensure the four Task Groups' efforts are consistent with the federal contribution to the National Pharmaceutical Strategy (NPS) and that eventual NPS recommendations inform Task Group work.


That beginning in 2006 Health Canada, the Department of National Defence, the Royal Canadian Mounted Police, Citizenship and Immigration Canada, Correctional Service Canada, and Veterans Affairs Canada include distinct sections in their annual reports on plans and priorities, and performance reports that address their drug benefits programs and begin with a clear statement of program objectives followed by the indicators used to assess performance.

All federal organizations responsible for federal drug benefits programs agree with this recommendation. Through the FHP, federal organizations are working collaboratively to establish or strengthen drug benefit program objectives and performance measures, appropriate to their client populations and mandates, against which progress will be regularly reported.

This work includes developing common drug benefit program objective statements that will serve as the foundation for the development of common performance measures. These measures will permit inter-department comparison and public reporting of results being achieved by the partner organizations in the delivery of their drug benefit programs.

The individual federal organizations will report as follows:

  • HC proposes to include reporting on its NIHB program in its Departmental Performance Report (DPR) and the Report on Plans and Priorities (RPP) by referring to an electronic web link to the NIHB annual report in the First Nations and Inuit Health section of those reports.
  • DND will ensure that future versions of its annual reports incorporate information on its drug benefit program. Exact information elements to be included are still to be determined, and will be influenced by the work on the FHP to establish and strengthen common performance measures. However, given that proposed modifications to the DPR /RPP reporting structure will likely limit the elements which may be reported in this venue, alternate reporting mechanisms will also be identified.
  • The RCMP will have a hyperlink in its annual reports to a web-page that will contain reporting information.
  • CSC plans to include information within their RPP and DPR.
  • CIC will include distinct sections in its RPP and DPR that address its drug benefit programs and include a clear statement of program objectives and indicators to assess performance. CIC will include a hyperlink to its Interim Federal Health Program web-page that will contain reporting information.
  • VAC will provide an overview of its prescription drug program and key information on the performance and management of the Program through its RPP and DPR.

However, reporting limitations will be imposed by the various information systems that some federal organizations use, and wide variances in the priority afforded drug benefit programs given other more pressing departmental priorities.


That Health Canada provide information on the full cost of its consent gathering initiative under the Non-Insured Health Benefits Program, a full explanation of how the privacy environment has evolved in ways affecting the issue of consent and list the insights it has gained regarding the issue of consent in its performance report for the period ending March 31, 2005.

Health Canada's activities to obtain consent from its clients cost $5.6 million and took place over the four years ending March 31, 2004. As these activities occurred prior to the current reporting year, they will not form part of the department's performance report for 2004-2005. In response to the Committee's questions, a chronology and summary of this activity, as well as insights gained concerning the process of obtaining express consent from NIHB's Program clients, are provided below.

The privacy environment within which the issue of consent has evolved includes several key pieces of federal legislation, as well as a number of Government of Canada policies related to privacy and the protection of information. As well, case law involving the right to privacy under the Canadian Charter of Rights and Freedoms has evolved significantly over the last few years raising the government's awareness over the need to ensure the privacy rights of its clients are respected in the management of the NIHB Program. Many provinces have also passed or updated legislation related to privacy and information, which affect third parties service providers in the private sector which are either under contract to or communicate with Health Canada in the delivery of the program.

The federal legislation affecting the issue of consent includes the Privacy Act (1983) and Access to Information Act (1983). As well consideration must be given to the Canadian Charter of Rights and Freedoms (1982) which is part of the Constitution Act, 1982. Since the consent initiative was first undertaken two other key acts have been passed, the Library and Archives of Canada Act (2004), and Personal Information Protection and Electronic Documents Act (PIPEDA) (2004). Key government policies include: Privacy and Data Protection Policy (Treasury Board, 1993), The Management of Government Information Policy (Treasury Board, 1989), The Management of Information Technology (TB, 1990), Health Canada's Security Policy (1996), and Health Canada's Records Management Policy (1998). Since the consent initiative was launched, other key government policies which have come into force include: the Privacy Impact Assessment Policy and Guidelines (TB, 2002) and the Government Security Policy (TB, 2002 ).

Health Canada, as with other government or private providers of benefit programs, conducts various activities, such as drug utilization evaluations (DUE), to assist in ensuring the safety of its clients. In the past, where the results of a DUE indicated that there was a potential client safety issue, Health Canada intervened by sharing information with the client's pharmacist(s) and/or physician(s) to supplement their professional judgement.

In 1999, however, concerns were raised regarding a possible violation of the Charter of Rights by the sharing of this information without client consent. Health Canada, unlike other federal drug benefit providers such as VAC, has no statutory or regulatory authority to allow for disclosure without consent. There is also no opportunity to obtain specific authority by means of an enrolment process for the Program. As a result, the department ceased drug utilization evaluation (DUE) until such time as the issue of express consent was resolved.

Health Canada made a broad-based and sustained effort to obtain the required client consent, in large part by engaging First Nations and Inuit leadership, as well as other stakeholders including healthcare providers and privacy experts, in the process. An extensive program to communicate the use of consent and how to provide it was put in place, including the establishment of the Consent Centre and a toll-free telephone number, as well as a series of community meetings throughout the country. Notwithstanding these efforts, less than a quarter of clients completed the consent forms. This reaffirmed Health Canada's awareness of the importance and sensitivity surrounding the issues of privacy for First Nations and Inuit. It also left Health Canada in the position of trying to reconcile concerns about privacy with the challenges of program management and delivery. This required that alternate solutions be found.

In February 2004, Health Canada's Non-Insured Health Benefits Program (NIHB) adopted a new approach to obtaining express consent from its clients. The approach reflects the complex question of managing privacy rights and control of personal information. Retrospective Drug Use Evaluation (DUE) resumed with quarterly reviews of clients using drugs of concern (e.g. narcotics, opiates) that are considered vulnerable to abuse or potential misuse and thereby raises concerns regarding program integrity. Now, in cases where DUE suggests client safety or inappropriate use is a concern, the Program must seek the express consent of clients to share their personal information with their healthcare providers. The Program will not disclose this information to the prescriber(s) or pharmacist(s) until this consent (in written form or verbal) is provided, or is authorized by law (e.g. through legal proceedings initiated in cases where there is reasonable evidence to suggest unlawful activity may be occurring).

By December 2005, the program will undertake system enhancements to require prior approval for specific drugs which have been identified as susceptible to misuse or abuse through DUE. The program will not fund these drugs until the physician provides a rationale to the pharmacist or to the program.

The main insights gained from the consent initiative are:

  • the sharing of personal information, especially in the area of healthcare, is an important issue with clients;
  • the determination of the need for consent and the process for obtaining it are very complex questions, especially when trying to balance personal privacy, client safety and program management issues; and,
  • issues regarding restrictions related to the Personal Information Protection and Electronic Documents Act may emerge through private sector providers or claims processors over which the federal organizations have no control.


That beginning with its departmental performance report for the period ending March 31, 2005, Health Canada provide data on the number of times it has sought verbal and written consent from Non-Insured Health Benefits Program clients to share personal health information with healthcare providers, the number of consents given, the number of consents withdrawn, and the number of instances in which it has refused payments arising from lack of consent. Data on written and verbal consent must be presented separately.

As noted in the response to Recommendation 4, the NIHB consent initiative spanned four years. Throughout the history of the initiative, the Program has received approximately 165,000 consent forms and, though significant in number, this represents less than a quarter of the eligible client population. Since November 2004, efforts on obtaining consent have been focussed on clients at risk. Of the 140 clients in this category, written consent has been sought from 30 and received from five clients. Of the remaining clients, some have already provided consent. Benefits have not been denied due to lack of express consent for information sharing. The current approach is to have clients provide express consent only where circumstances warrant it at the time of dispensing, rather than to have Health Canada seek it of every individual on a broad basis. Under this approach, we are capturing information on the number of written consents given and withdrawn. Unlike written consent, verbal consent is provided for the particular transaction and not on an ongoing basis. Since verbal consents are only valid for the transaction at the time given, they are not currently captured in a form conducive for reporting purposes, but a process will be put into place to do so in the near future.


That Health Canada complete its examination of legislative options, including the option of obtaining specific enabling legislation for the Non-Insured Health Benefits Program, that would permit the collection and sharing of client health information with health professionals and report the conclusions to the Committee no later than 31 December 2005.

The Health Portfolio is currently considering possible legislative options in areas such as health protection to address a range of issues concerning the collection and disclosure of health information including its application to the NIHB program. Health Canada will provide the Standing Committee on Public Accounts with a status report on this work prior to 31 December 2005.


That Health Canada fulfill its commitment made in response to the Tenth Report (37th Parliament, 1st Session) of the Standing Committee on Public Accounts by immediately upgrading its point-of-sale system in pharmacies to provide the dates, quantities, and drugs prescribed at minimum of a client's last three prescriptions and last three doctors visited.

The Canadian Pharmacists Association (CPhA)'s point-of-service system is an industry standard tool neither owned nor controlled by Health Canada. Version 3 continues to be the industry standard and currently over ninety-nine percent of providers (i.e., retail pharmacies) that NIHB Program clients use are on this system. This relationship was noted to the Committee in Health Canada's May 2002 update on previous Auditor General and Standing Committee recommendations, as well as in documents tabled with the committee in February 2005.

A technical advisory group representing the CPhA and a broad spectrum of users including HC's First Nations and Inuit Health Branch are continuing to develop enhancements to facilitate communications among pharmacists and all other healthcare professionals. The department continues to advocate within the industry, whenever possible, for the development and implementation of the enhanced software standard and will monitor system enhancements as they are implemented by industry and will adjust procedures accordingly.

It should be noted that the CPhA recently transferred the project to the Canadian Institute for Health Information (CIHI). The National e-Claims Standard (NeCST) has been developed but has not yet been adopted by the industry. Once the industry has agreed to the implementation of the new standard, the NIHB Program will use it. Until such time, HC's NIHB Program is not able to unilaterally enhance the point-of-service system in retail pharmacies.


That Veterans Affairs Canada (VAC) immediately upgrade its claims processing system so that it can provide intra-pharmacy alerts related to prescription drugs that are susceptible to potential abuse and misuse.

The Federal Healthcare Partnership (FHP) has established a Task Group to refine the function of intra-pharmacy alerts so that standardized messages and wording will be generated by all federal organizations. VAC supports these efforts and is also working with the other two departments that use Blue Cross as their claims processor on potential system enhancements.


That Veterans Affairs Canada begin immediately to collect data on claims processing alerts and overrides, and perform regular analysis of the results that includes an assessment of the volume of alerts and the reasons for overrides. This data, along with the analysis, should be provided to Parliament annually in the Departments' performance reports beginning with the report for the period ending 31 March 2006.

VAC currently collects and analyses data pertaining to duplicate drug therapy, drug-to-drug interactions, and the potential overuse/abuse of narcotics as part of its current Drug Utilization Evaluation (DUE) process. Work is underway to make this activity more robust to enhance the safety of clients, such as by finding ways to include over the counter drugs which can cause negative drug interactions with prescription medication, in monitoring activity. However, it should be noted that VAC does not use the codes in the CPhA's point-of-service system that produce the types of alerts that can be “overridden” by pharmacists. Consequently, it can neither collect nor analyze data on overrides or reasons for overrides.

DND has institutionalized a systemic approach to risk management by providing the training, tools, guidance, templates, expert support and regular reviews by senior management.


That all federal government entities delivering drug benefits programs work together to ensure that there is no duplication in the client base for their respective programs.

Eligibility for more than one program can work to the health advantage of the common client. For example, under the NIHB Program's payer of last resort policy, a veteran would first access all eligible pensionable benefits from VAC's program. When and if these benefits are exhausted, the veteran would then access NIHB for benefits which are not an entitlement due to the pensioned condition. This demonstrates why client eligibility for both programs can be important in ensuring optimal coverage for better health outcomes and should remain in place.

Federal organizations are working bilaterally and collectively in this area. For example, with regards to members having dual eligibility (Dual Card) between the CF and VAC, the two departments have taken the following step to prevent members from accessing VAC health care while still serving. For example, the Eligibility systems from VAC (Client Master File) and CF (Member Enrolment System) have been linked and require five pieces of information shared between the Departments to ensure that the member's records are properly linked. (Information that is shared between the departments is in accordance with the Privacy Act.) By having the two systems linked, still serving members are only able to access health care through the CF as the member's VAC record is deactivated automatically as soon as, and as long as, the member is active in the CF System. As a result, any claims submitted to VAC are automatically rejected with a message to invoice CF.

There are also overarching privacy issues, and in the case of the RCMP, security concerns about sharing information.


That each federal department provide information on efforts to meet the goals of a centrally-managed system as well as overall program objectives, costs, and performance in their annual reports to Parliament on plans and priorities, and performance.

As per their response to the Auditor General's recommendation, the six partner organizations in the FHP are working collaboratively to explore cost-effective drug use and system efficiency while maintaining departmental mandates and ministerial authorities. In the longer term, as part of the federal involvement in the development and implementation of the National Pharmaceutical Strategy, the federal government will ensure that the specific needs of federal client populations are reflected.

To this end, the six federal organizations have begun to work on a number of initiatives, including defining a common core formulary and using this common core formulary to assist with cost management of the programs.

For information on individual and collective efforts of the federal organizations to enhance reporting to Parliament on drug benefits programs objectives, costs and performance please see the response to Recommendation 3.


That, beginning in fiscal year 2006-07, Veterans Affairs Canada, National Defence, the Royal Canadian Mounted Police, Correctional Service Canada, and Citizenship and Immigration Canada provide a comprehensive annual report (similar to that provided by Health Canada in its overall NIHB Program) containing information on their drug benefits programs.

All five federal organizations are committed to continuously improving their ability to report in meaningful ways on their program performance to Parliament and to Canadians. As explained in the response to Recommendation 3, establishing and/or strengthening drug benefit program objectives and performance measures is also a priority across all the federal organizations. However, given the relative size of their drug benefit programs, other departmental priorities, and constraints on available resources for evaluation and reporting activities, not all federal organizations are able to produce discrete reports on their drug benefit programs.

VAC will provide, through its RPP and DPR, an overview of the Prescription Drug Program and key information on the performance and management of the Program. In addition, VAC has detailed information similar to that included in Health Canada's NIHB Annual Report. However, given limited resources and competing priorities, a comprehensive annual report is not contemplated at the present time. Targeted information could, however, be made available in an appropriate format upon specific request.

DND plans to provide all information of interest, including reporting on the common cost-based performance indicators identified through the FHP Task Groups, in its departmental Drug Benefit Plan report.

Beginning in fiscal year 2006-07, the RCMP will prepare a comprehensive annual report containing information on its drug benefit program. CSC is working on developing the tools and capacity it needs to be able to report comprehensively on its offender program results, and expects to be in a position to do so by 2009-2010 when its health information management module is fully operational.

CIC has produced reports on its drug benefit program, although not at regular intervals. It will begin to produce a more comprehensive annual report by the requested target date, though the department cautions that, given the smaller size of its program and constraints on its reporting resources, its annual report will not be as comprehensive as the Health Canada document.

[1] Drug Expenditure in Canada 1985 - 2004, Canadian Institute for Health Information, 2005, ISBN#: 1-55392-596-3 (PDF), page 37

[2] All numbers are estimates for 2004-2005.