Legislative Assembly of Ontario

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

Thursday 12 February 2004 Jeudi 12 février 2004

2003 ANNUAL REPORT,
PROVINCIAL AUDITOR
MINISTRY OF HEALTH
AND LONG-TERM CARE

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The committee met at 1043 in committee room 1, following a closed session.

2003 ANNUAL REPORT,
PROVINCIAL AUDITOR
MINISTRY OF HEALTH
AND LONG-TERM CARE

Consideration of section 4.09, drug programs activity.

The Chair (Mr Norman W. Sterling): Good morning. My name is Norman Sterling. I'm the Chair of this committee. Mr Hassen, Deputy Minister, I thank you for appearing in front of this committee. I know how busy you can be. I know how busy Dr McCutcheon would be as well. I understand that you have some opening remarks. If you would like, I'll offer the committee an opportunity to ask you questions, and after that you would be free to go.

Mr Phil Hassen: Thank you very much. I appreciate your indulgence. Within about an hour, at 11:30, I do have another commitment and I just want to forewarn. But Dr McCutcheon is really the expert in this area, as you often know. I'm a face and a name, but I do depend on and am well served, and the ministry is well served, by Dr McCutcheon and his staff.

Let me first open and thank you. Good morning to everyone, Mr Chair and committee members. As the Chair mentioned, my name is Phil Hassen. I'm the Deputy Minister of Health and Long-Term Care. It is clearly my pleasure to be before you on the standing committee on public accounts to report on the current status of the Provincial Auditor's recommendations with respect to drug program activity.

We appreciate truly the Provincial Auditor's work and welcome his recommendations, and I think you'll see that we've actually done a number of things in that regard. So appropriate actions have already been taken in response to many of the Provincial Auditor's recommendations, and the Ministry of Health and Long-Term Care will continue to act upon the remaining recommendations in a timely manner.

I think I should provide you some background. Let me note for the members that in late 2000, the Provincial Auditor's office started an audit of the drug programs branch. Auditors were on site in the branch for approximately eight months. The auditor's review encompassed all areas of the branch, including what's called the Health Network System -- we'll speak to each of these later -- special drugs program and the Trillium drug program. The final report contains 20 recommendations and was released in late November 2001.

The branch took corrective action in response to some of the recommendations. Other recommendations required additional resources and longer time frames to implement. Still others required government decisions; for example, the recommendation to integrate the special drugs program with the Trillium drug program.

Further to the release of the 2001 annual report, the Provincial Auditor approached the ministry for a progress update on the ministry's response presented in the report. The ministry provided a progress update on March 14, 2003, which was published in the Provincial Auditor's 2003 annual report as a follow-up. This is our second progress update.

Before I delve into the details of our response to the auditor's report, I think it would be useful to provide the members with a general overview of the ministry's drug programs.

The drug programs branch of the Ministry of Health and Long-Term Care, for which Dr McCutcheon is responsible, develops and manages drug programs to ensure that the best possible pharmaceutical services are provided to Ontarians to help keep them healthy. At the same time, the branch works to achieve the desired balance between drug costs and their benefits to consumers, always a difficult task but one done well, I believe, by the branch. Drug programs play an important part in an integrated approach to family and community health care.

The Ontario drugs program consists of several components:

First, the Ontario drug benefit program is available to residents of Ontario with a valid Ontario health card who meet one of these criteria: are 65 years of age and older; residents of long-term-care facilities; residents of homes for special care; receiving professional services under the home care program; or receiving social assistance, that is, Ontario Works program or Ontario disability support program.

With respect to the Trillium drug program, it is for people who are not otherwise eligible for ODB, or Ontario drug benefit, and who have high drug costs in relation to their income.

Third, the special drugs program covers the full cost of certain expensive outpatient drugs used to treat specific diseases or conditions for the long term or for the remainder of a lifetime. Examples of these range from schizophrenia to end-stage renal disease.

Both the Ministry of Health and Long-Term Care and the Ministry of Community and Social Services fund the ODB program. In fiscal year 2002-03, that program grew by approximately 14.3%. Total expenditures for this period were over $2.6 billion. The ODB program's formulary defines the list of benefits and includes over 3,600 drug products. Before a drug can be considered for listing in the formulary, it must have received a notice of compliance and a drug identification number from the federal government. Even if a product is approved for use in Canada, it will not necessarily automatically be listed as a drug benefit under the ODB program. It is the manufacturer's responsibility to seek listing in the formulary by filing a complete submission to the ministry's drug programs branch for review by the drug quality and therapeutics committee, DQTC.

That committee provides independent specialist advice to the ministry on drug-related matters such as the evaluation of new drugs, monitoring and evaluation of current formulary listings, pharmaceutical and therapeutic questions and education about publicly funded drug programs. The committee comprises 11 members and the chair and includes experts in the fields of medicine, pharmacology, health economics, epidemiology and other disciplines. Once a product has been recommended for listing by the DQTC, the ministry then works with the manufacturer to achieve appropriate utilization and optimal cost management by establishing written agreements for brand name products.

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With respect to the Health Network System, HNS, this is critical to the administration of the Ontario drug benefit program. This is a province-wide computer network system that links Ontario pharmacies directly to the ministry. It is the largest real-time on-line system in the Ontario government. It validates eligibility, generates payment to the pharmacist, calculates the government's share of eligible prescription costs and provides utilization and review information messages that are essential for our capacity to evaluate what's going on. The network also identifies potentially dangerous drug interactions, duplicate prescriptions, multiple doctoring, inappropriate or fraudulent use of the health system, and copayment levels for ODB-eligible people.

The network currently links over 2,800 Ontario retail pharmacies to the ministry and processed over 62.5 million claims in the 2002-03 year.

The ministry is undertaking a strategic review of the ODB program involving stakeholders, aimed at improving pharmaceutical care for patients through a more effective, patient-focused and sustainable program. We are also working with Canada Health Infoway on some projects in regard to this.

Let me turn to the specifics of the Provincial Auditor's report. The Provincial Auditor's report focused on three areas: (1) the drug programs branch policy, which encompasses the drug formulary, pricing and the special drugs program; (2) drug programs branch operations, which includes formulary modernization, temporary eligibility, Trillium drug program, performance measurement and reporting, contract management, inspections, verification of limited use forms, and the written agreement process; and (3) the ministry's Health Network System -- that is, system security, claims processing, drug use review, warning and information messages.

Let me outline for you in broad terms our progress to date and what we expect to accomplish in the short as well as the long term.

The ministry has addressed the following recommendations with respect to drug program branch policy. In keeping with the government's mandate, the ministry is developing strategies to help maximize potential savings to the drug programs by listing generic drugs on the ODB formulary in a more timely way. The ministry is still working on ways to better control the drug costs of Ontario's drug programs, review the generic pricing rule, assess the cost/benefits of pricing options in other jurisdictions, ie reference drug pricing, and will be informed by the work from the drug strategy review. The ministry is working with hospitals to automate and tighten the accountability process of the special drugs program. The ministry continues to review the special drugs program and make improvements in this area.

The ministry has addressed the following recommendations with respect to the drug program branch operations:

To ensure that drugs listed on the Ontario Drug Benefit Formulary are appropriate, cost-effective and in keeping with the latest clinical evidence, the ministry has completed six drug category reviews since December 2002 and will be conducting seven additional drug category reviews over the next year. The seven include hormone replacement drug products; glaucoma drug products; diabetes drug products; proton pump inhibitors; anticonvulsants for pain; COX-2 drug products like the anti-inflammatory Celebrex; and Neupogen, used to treat neutropenia, a shortage of white blood cells.

To ensure that temporary eligibility is being granted only when justified, the ministry has increased the frequency of updates to the eligibility information feeds from MCSS, the Ministry of Community and Social Services, and has reduced the incidence of these claims by approximately 50% from the previous year.

To address the Provincial Auditor's recommendation to reduce or eliminate underpayments of the Trillium drug program deductible, the branch is finalizing and working toward an agreement with the Canada Customs and Revenue Agency for electronic information-sharing, which is expected to be finalized in 2004-05.

To provide better accountability to the public and the Legislature, the ministry is working in a FPT -- or federal-provincial-territorial -- setting to develop indicators in response to the First Ministers' Accord on Health Care Renewal.

The recommendation to implement the pharmaceutical audit system to facilitate the work of inspectors has been completed. In addition, the branch will review audit activities in other provinces and work with the anti-fraud branch to ensure audit functions and resources are adequate to verify claims.

The branch has worked with the internal audit branch and has made many improvements to the internal contract management framework. As such, the specific recommendations from the Provincial Auditor will be addressed in future contracts.

The branch is currently working on ways to modernize the limited-use mechanism and continues to work on the written agreement process.

The ministry has addressed the following recommendations with respect to the Health Network System:

To address concerns regarding HNS security, the ministry has consolidated and updated all security documents and reviewed the security administration process. The ministry will continue to implement security procedures as required and will also continue to conduct periodic reviews of exception criteria to assist in claims verification.

The ministry is working toward developing the functionality of the next generation of the HNS through a technical assessment of future needs in order to develop options for long-term viability of the system.

For the next-generation HNS, the ministry is considering enhancements such as electronic prescribing tools and sharing drug profiles to implement drug use review, as well as developing more advanced drug interaction tools to improve the effectiveness of the warning and information messages provided by the HNS.

As you know, the Provincial Auditor's report set out 20 separate recommendations. Let me turn to those recommendations and our response.

Item 1, drug use review:

"To help ensure that Ontario's drug programs encourage the economic and appropriate use of prescription drugs and result in optimal improvement in the health status of recipients, the ministry, in consultation with other stakeholders, should:

"establish a drug use review program; and,

"ensure that the HNS provides accurate and complete information to implement drug use review."

The ministry promoted appropriate prescribing and utilization reviews with other stakeholders through the drug strategy review. That review's mandate is to find ways to optimize pharmaceutical care in order to ensure access to the drugs Ontarians need, now and in the future. The DSR is undertaking a review of the Ontario drug benefit program, ODB, and developing a strategy aimed at improving pharmaceutical care for patients that will include an examination of access to new and existing drugs, cost-effectiveness and pricing of drugs, appropriate drug use and program administration. Next steps planned for the DSR include the release of the interim report and sectoral consultations, followed by a final report.

Second, the ministry is studying the review process with the pharmaceutical industry and Drug Utilization Advisory Committee to ensure there is no duplication with other ongoing work such as the DQTC -- Drug Quality and Therapeutics Committee -- modernization.

Third, the ministry has utilized the evaluation conducted by the Institute for Clinical Evaluative Sciences to support ongoing work with DQTC modernization and to identify areas that may benefit from interventions to improve appropriate prescribing and utilization as part of ongoing DQTC activities.

Fourth, the ministry has contacted the College of Physicians and Surgeons of Ontario to generate a list from them of numbers for the HNS database. Ministry staff continue to participate in ongoing discussions with CPSO.

As well, e-prescribing tools including algorithms and sharing drug profiles are being considered for the future, with an expected date of completion around 2008. That will give us greater efficiency and help to ensure prescribing best practices.

The second recommendation, on the drug formulary:

"To help maximize potential savings to the drug programs activity, the ministry should pursue more timely updating of the Ontario Drug Benefit formulary when: adding approved generic drugs; and, implementing manufacturers' price reductions."

The ministry has endeavoured to strike a balance between enhancing efficiency and ensuring that drug review procedures are cost-effective and meet the needs of Ontario drug benefit recipients.

The government's goal is to continue to issue quarterly updates to the formulary. Since 1998, the ministry has released 15 formulary updates in a 57-month period. This includes three new formulary editions -- editions 36, 37 and 38; six updates to edition 36; four updates to edition 37; and most recently two updates to edition 38 -- update A, effective April 16, 2003, and update B, effective September 4, 2003.

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For submissions received in 2002, the average time to listing of the product in the formulary was 303 days, when looking at receipt of the manufacturer's submission. The ministry has met with Health Canada to further harmonize the drug listing process for generic products.

Legislation is required to maximize streamlining. Monthly formulary updates for generic products are under government consideration. It is expected that the time to listing for these products will further decrease.

The ministry participated in FPT discussions on generic streamlining in March 2003. As of September 4, 2003, Ontario has one of the most streamlined drug submission review processes. As a result, ongoing work at the FPT level will be on an information basis only.

The third item, formulary modernization: "The ministry should ensure that drugs listed in the Ontario Drug Benefit Formulary are regularly reviewed so that the Ontario drug benefit program only covers the cost of drugs that are appropriate and cost-effective."

Six drug category reviews have been completed since 2002. Over the next year, the DQTC is reviewing -- I think I've already mentioned all of those. The hormone replacement review has started. The glaucoma drug products review has started. The COX-2 drug products review is planned to start in the spring. The diabetes drug products review has started. The proton pump inhibitors review has started. The anticonvulsants for pain review has started. The Neupogen review is planned to start in 2004.

With respect to pricing: "To better control the drug costs of Ontario's drug programs and to enable the ministry to more effectively negotiate prices with drug manufacturers, the ministry should routinely compare the prices it pays for drugs with the prices paid by other provinces. The ministry should also review the generic pricing rule to ensure that it does not impede the ministry from obtaining generic drugs at the lowest possible price."

Prices are set in agreements between the ministry and the manufacturer in accordance with the regulations now in place.

As part of the work being done by the FPT working group on drug prices, a study was conducted comparing the retail prices for all drugs claimed under the programs of six provinces: Nova Scotia, Ontario, Manitoba, Saskatchewan, Alberta and British Columbia. The results of the study indicate that, for patented drugs, Ontario was the lowest-cost province. On average, Ontario prices were 1.5% below Canadian prices. For non-patented drugs, Saskatchewan was the lowest-cost province and Ontario was the next lowest. On average, Ontario's prices were 2.4% lower than Canadian prices. For generic products, Saskatchewan was the lowest-cost province and Ontario was the next lowest. Ontario prices were on average 1.3% below the Canadian average. The ministry is reviewing the present pricing policy for generic drug products through the drug strategy review.

On reference drug pricing, the Provincial Auditor recommended: "To help ensure that it obtains better value for money for its drug expenditures, the ministry should assess the costs/benefits of pricing options that have been successfully implemented in other jurisdictions."

The ministry has regularly examined and will continue to examine the pricing options used in other jurisdictions. Canada's Patented Medicine Prices Review Board states that the prices in Canada are approximately 10% below the median of international prices. Ontario is a participant in the FPT working group on drug prices that is examining price initiatives across jurisdictions.

As part of the pricing of drugs, the drug strategy review will examine medium- and long-term pricing options for both brand names and generic drugs to achieve fair and reasonable prices for new and existing drugs. The review is also undertaking research on key pharmaceutical policy trends, including pricing strategies in select jurisdictions to inform the work of the review.

The sixth item from the Provincial Auditor, regarding agreements with the brand-name manufacturers:

"To help ensure that drug costs are more effectively managed, the ministry should evaluate the extent to which the current written agreement process with drug manufacturers is meeting its objectives; and make improvements as required."

The ministry identified the need for a review of the written agreement process in 2000 and an internal report on the written agreement process has now been completed. Internal work has begun, with planned completion by spring 2004.

With respect to the Health Network System, the Provincial Auditor stated:

"When selecting a vendor to provide long-term services without using a competitive process, the ministry should ensure that it:

"receives value for money through respective contracts with such vendors; and

"complies with Management Board of Cabinet directives."

Since our last follow-up, a consultant was hired to develop a business case and an RFR -- request for review, is that what it is? -- for a vendor of record to conduct a value-for-money audit. The ministry is moving toward decisions related to an RFP for the next Health Network System.

As part of the analysis phase in preparing of the RFP an assessment, including a review or value-for-money audit of the HNS, both the on-line transaction process system and ancillary systems, is being carried out to determine its long-term viability in terms of both software and hardware. The expected date of completion is the winter of 2004.

With respect to claims processing the auditor said:

"To help ensure that pharmacy data within the Health Network System is complete and accurate, the ministry should periodically verify pharmacy registrations with the Ontario College of Pharmacists.

"To help ensure that only eligible individuals receive benefits for the Ontario drug benefit program, the ministry should:

"review and follow up on exception reports, which identify mismatched or missing information in the" HNS "recipient database; and

"regularly compare data in the," at the time, "Ministry of Community, Family and Children Services' database with the network's database."

The ministry pharmacy registration desk communicates with the Ontario College of Pharmacists on a daily basis to verify pharmacy closings and pharmacy ownership, information that has been provided directly to the ministry. The ministry will continue to look at real ways to enhance verification of the Ontario College of Pharmacists' registration information, consider making this a mandatory part of the network agreement and investigate the potential for regular updates with OCP. The ministry is conducting periodic reviews with exception reporting and is working with the Ministry of Community and Social Services to ensure the recipient is as accurate and up to date as possible. The ministry will also do another verification to ensure accuracy.

Temporary eligibility:

"To help ensure that temporary eligibility is being granted only where justified, the ministry should:

"periodically verify the adequacy of supporting documentation maintained by pharmacies where there are significant numbers of unsubstantiated claims; and

"together with the Ministry of Community and Social Services, expedite necessary improvements to the MCSS database."

Since our last update, MCSS has moved from a weekly to a daily feed. This will be monitored to determine whether a continued daily feed is operationally sustainable. The ministry has also reviewed the number of temporary eligibility claims for the period of March 2003 to April 2004 and found that their instance has decreased by approximately 50% from the previous year. Although there are fluctuations, the declining trend is obvious. In fiscal year 2000, we received 140,000 claims per month and in March 2003 we received about 72,000 claims. Let me assure the committee that the ministry will continue to review this on a regular basis.

Warning and information messages:

"To improve the effectiveness of the Health Network System's warnings and information messages, the ministry should assess whether:

"the existing warning and information messages need to be revised; and

"other potential drug therapy problems, such as a therapeutic duplication check, should be added to the network."

The HNS uses drug use review tables developed by an external service provider. These are the tables most commonly used for drug interactions and warnings. The tables now in place in the network are the most up-to-date versions available in the market and include a check on therapeutic ingredients and therapeutic duplication that identify drugs in the same therapeutic class. The drug use review tables are a standardized system that helps pharmacists identify potential drug-related problems. Pharmacists decide what action is required within the scope and standards of practice. At this time the DPB is considering including more advanced drug interaction tools as part of the next RFP for this system.

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System security:

"To help safeguard information in the Health Network System against unauthorized use, disclosure, modification, damage, or loss, the ministry should:

"assign the responsibility for the network's security to an appropriate senior manager;

"ensure that appropriate security policies and procedures are in place;

"review staff duties to ensure that system access is appropriate;

"implement more rigorous control over the access administration process and system protection; and

"ensure that the network's security is actively monitored."

I'm pleased to report that DPB worked with Green Shield and our information technology human services cluster to consolidate all security-related documentation and update where appropriate. A security document was finalized and approved. The communication network replacement date has been rescheduled to begin in the spring of 2004. The ministry will continue to implement security procedures as required. The security administration process has been reviewed and is managed through one branch manager to ensure more rigorous controls over the access administration process system protection and to ensure that the network's security is actively monitored.

Contract management:

"To enhance accountability, the ministry should ensure that it has adequate policies and procedures in place to monitor whether contracted services are carried out in accordance with the terms, conditions, and performance standards set out in contracts."

Staff from the ministry's internal audit branch developed procedures for periodic reviews. As the contract expires in June 2004, the ministry will incorporate recommendations into the new contract.

Inspections and verifications:

"To help ensure that inspection resources are used efficiently and effectively, the ministry should:

"implement needed improvements to the pharmaceutical audit system to facilitate the work of inspectors;

"ensure inspection plans are prepared and approved by branch management;

"provide for sufficient management review of the work of inspectors; and

"review the adequacy of the policies and procedures in the draft manual."

We've made good progress in this area: PHAST has been completely implemented. That's the process. The final stage of the training program has been completed. The manual entitled PHAST Key Criteria and Pharmacy Audit Users Guide has been finalized.

Inspection coverage:

"To minimize the risk of paying for invalid claims, the ministry should ensure that sufficient resources are assigned for the inspection of pharmacies."

The ministry has a policy of zero tolerance on fraud and reports all cases of suspected fraud to the ministry's fraud unit. The ministry has reviewed and will continue to review inspection activities in other provinces and jurisdictions to determine the most effective method of identifying and inspecting high-risk pharmacies. In addition, the ministry will review the resources in place to inspect pharmacies. The branch is working with the ministry's fraud programs branch on a review, with an expected date of completion of fall/winter 2004.

Verification letters:

"To help ensure that the drug programs pay only for valid prescription claims submitted by pharmacists, the ministry should implement adequate procedures to verify claims with recipients."

A review with the fraud branch has been initiated to review the audit activities in other provinces. The branch will also work with the anti-fraud branch and audit branch to ensure that its audit functions and resources are adequate. Implementation will be dependent on recommendations from the review.

Verification of limited-use drug forms:

"To help ensure that the costs of limited-use drugs are only covered where warranted, the ministry should:

"ensure that adequate procedures are in place to periodically verify that limited-use claims are supported by valid documentation; and

"enforce recoveries where pharmacists do not provide adequate evidence that limited-use drug criteria have been met."

Since the ministry will be modernizing the entire limited-use mechanism over the next two to three years, it will not be conducting audits of the existing mechanism at this time.

Trillium drug program:

"To better ensure that Trillium drug program (TDP) benefits are provided in accordance with the intent of the program, the ministry should develop policies and procedures to:

"reduce or eliminate underpayments of the deductible; and

"recover any underpaid deductibles."

The Health Network System no longer allows a pharmacist to dispense more than 30 days supply of a drug beyond the end of the third quarter, May 30. When an on-line claim is made, the HNS automatically calculates the days supply limit from the dispensing date and, if appropriate, applies the days supply limit.

The branch is exploring an electronic feed of income data from/with Canada Customs and Revenue Agency (CCRA) and is in the process of finalizing the documents required prior to signing a memorandum of understanding. Those documents will be completed shortly.

Special drugs program:

"The ministry should consider whether the special drug program (SDP) is needed in its current form and whether it could be integrated with the Ontario drug benefit and Trillium drug programs."

In the short term, new brands/formats of existing substances will be added to provide choice of products to physicians, and the special drugs program will be automated to actively manage and increase accountability in the system. Aranesp, for patients with end-stage renal disease, was added to the program. Other brands/formats will be considered for addition over the upcoming months.

The ministry has communicated with hospitals and associations to inform them of the changes to the special drugs program and manufacturers to inform them of the changes to the SDP, as well as the process for adding new brands/formats of existing substances.

Partial automation of the SDP is expected to be complete by spring/summer 2004.

The ministry will continue to consult with stakeholders as it moves toward the longer-term objective of integration of the SDP with the TDP, the Trillium drug program. Benefits of integration include equal and convenient access to drug therapy for all patients, fair treatment of all manufacturers and increased accountability for claimants: patients, physicians, institutions and pharmacies.

Payment processing:

"To help ensure that payments from the special drugs program (SDP) are reasonable, the ministry should:

"establish procedures to compare invoiced amounts to prices in contracts between hospitals and manufacturers;

"ensure any administrative costs being paid to the hospital are justified; and

"monitor the volume of drugs paid for by the program."

In December 2002, the ministry sent out a notice that the special drugs program would be automated to actively manage and increase accountability. Consultations with hospitals and relevant associations have been held to obtain feedback on concerns, issues and implications of automation.

There are a total of eight categories of products that are reimbursed under the SDP. A pilot project with two categories of SDP products was conducted at three sites to initiate the automation process. This will be rolled out to other SDP hospitals linked to the ministry's Health Network System for on-line claims adjudication over a period of three to four months. Those hospitals not linked to the HNS -- approximately 20 of the 40 hospitals invoicing through the SDP -- will need to purchase hardware and software in order to get the linkage. Automation of claims from these hospitals will occur over a longer time period, likely four to six months.

During the period of phasing in of automation, both the manual invoicing and on-line adjudication systems of reimbursement will be in place.

Options for automation for the other six categories of SDP drugs are being researched individually, as each category has unique issues such as distribution from sites that act as depots and monitoring programs needed to ensure the safety of therapy.

We've developed a process to check each invoice for non-standard pricing and ensure that all proper documentation has been submitted. This will continue, long term, until full automation begins. If a category cannot be automated, the current invoice process will continue.

The final recommendation of the auditor, on performance measurement and reporting:

"To provide better accountability to the public and the Legislature, the ministry should develop a comprehensive set of performance measures and report regularly and publicly on the performance of the drug benefit programs."

We undertook to release information annually on the drug program, and DPB has indeed posted the Ontario drug benefit annual report on the ministry's Web site.

In response to the 2003 first ministers' accord on health care renewal, the branch identified 11 possible performance measures. Three of these measures will be investigated further through the pharmaceutical care working group, one of the five working groups established in response to the Romanow commission and the health accord.

That concludes my formal presentation. And now my staff, including my assistant deputy minister, Dr David McCutcheon, and I will be pleased to respond to members' questions.

The Chair: Thank you. Does anyone have any questions of the deputy in particular? You may be excused, Deputy.

Mr Hassen: Thank you very much. I'll leave him in charge. He'll do a great job for you.

The Chair: Ms Munro, do you have a question?

Ms Laurel C. Broten (Etobicoke-Lakeshore): Were we not starting with the PA?

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The Chair: No. I have to recognize whoever asks first, and the PA hasn't asked me yet.

Mr David Zimmer (Willowdale): Just a second. I thought the convention that had developed over the last couple of days was that the PA started first.

The Chair: No. In fact, it probably should be the opposition that starts first, in sort of the tradition of the public accounts. I did it because the PA came and spoke to me before so that I was able then to --

Ms Broten: That's fine. From our side of the table, Mr Fonseca will take the first question, if that's all right with you. I can follow Ms Munro.

The Chair: Members over here, does it matter? No. OK. Go ahead, Mr Fonseca.

Mr Peter Fonseca (Mississauga East): Thank you, Mr Chair.

On page 35 of the Provincial Auditor's report he states, "Delays in adding approved generic drugs to the Ontario drug benefit formulary and in implementing manufacturers' price reductions resulted in lost savings totalling $17 million over a two-year period."

In a speech by the deputy minister, on page 11, he mentions that it takes an average of 303 days, when looking at receipt of the manufacturer's submission, to listing the product in the formulary. Can you please explain what steps are involved in this process and how we can move to reduce this time period? How does this compare for the rest of Canada also?

Dr David McCutcheon: Let me first go through the process for submission and then maybe give some explanation as to why there are the different delays.

The first step in the process is that the generic drug manufacturer must get a notification from the federal government that the drug is actually approved in Canada. Following that approval, the generic drug manufacturer is obliged to submit to the branch a request for listing of their drug on the formulary. That particular listing then is reviewed by the Drug Quality and Therapeutics Committee. Following that review, a recommendation is brought forward in the formulary. The formulary then needs to be approved through the ministry process, followed by the cabinet process. Once the cabinet process has been complete, about three to four weeks after completion, the formulary is published and the drug becomes available at the price listed.

The issues of incorporating delay included the frequency of the formulary. So the first improvement that was made was to bring in quarterly formularies. I think the deputy outlined that. The frequency of which the formularies have been approved has improved in itself very significantly.

The second thing we've done, particularly with generic drugs, is we've made sure that we can fast-track them through the DQTC process so that once we have received a submission -- and that submission must be complete -- we can go through the process.

The last part that we're looking at, and looking at other provinces, is the question as to whether the cabinet needs to approve a generic addition to the formulary whereas in some other provinces the minister can approve a listing on the formulary. If we got to the minister approving a listing on the formulary, we would then not have the time associated with Management Board and the cabinet committee on legislation and regulations process. So if we can deal with first of all handling the submissions efficiently, if we can deal with removing the cabinet process, then we could get down to a very short time frame of turnaround.

The branch itself was very sensitive to the Provincial Auditor's recommendation and has made improvements in terms of its processing of submissions. So we feel we've got that part down pretty well. What we need to do now is pursue the issue of a change from cabinet approval to ministry approval. That's going to require legislative change, so that process needs to get underway.

The Chair: Thank you.

Mr Zimmer: On a point of order, Mr Chair: I had a comment from someone in the audience that they're having difficulty following the exchange because of the sidebar conversations.

The Chair: OK. Thank you, Mr Zimmer.

Mrs Julia Munro (York North): I have questions that I think are somewhat in the same area of concern. I wondered if you could explain for us the difference between working with the manufacturers of a generic brand and a brand name. Is there any difference in terms of the process that is required in terms of application or time taken in the process you've just finished describing?

Dr McCutcheon: There are some very significant differences. The first thing is that a generic drug that is coming forward for listing is a generic version of a drug that is already on the formulary. So the first point is that the effectiveness and cost-effectiveness of the drug has been reviewed and approved in the listing of the brand name drug on the formulary previously. The issue for the approval of a generic drug is, first of all, is the generic a pure substitute for the drug that's already on the formulary? The other part then is, what is the price at which the generic drug will be listed? The current rule is that 70% of the brand name is the list price for the generic drug. So once those are established, then the process can go forward.

The significant difference between the two is that for the brand name they tend to bring in a new drug whereas for the generic they bring in a substitution. Some of the brand listings that we'll get will be a change in the formulation, maybe from capsule to tablet form, or a change in the dosage strength, so they're much more easily handled. The real difference is in a new drug not previously listed. That has to go through a very rigorous process in DQTC. They have to evaluate the effectiveness of the drug and they have to evaluate the cost-effectiveness of the drug.

Mrs Munro: I understand, then, the point you made in terms of the difference between these two. But in answering the question asked previously, you mentioned that your recommendation, or your wish -- I'm not quite sure which that would be -- in terms of eliminating the cabinet process in terms of being able to give the minister the authority would reduce the length of time. I wondered, though: In suggesting that, would that be related primarily to generic as opposed to brand name? Would you make a distinction between those two?

Dr McCutcheon: Yes, because the generic is automatically a cost saving and the brand name tends to be automatically a cost increase to the system. So we would need to go through the approval process, unless we reformed the mechanism by which we can estimate precisely which drugs are coming forward in the formulary and do it in some form of a budgetary process. But certainly in my view, the more appropriate process is that where there is a significant increase in cost, that would need to go through the challenge of a cabinet process.

Mrs Munro: So your recommendation then would be to separate these two in terms of each receiving a different kind of scrutiny? Is that what you would support?

Dr McCutcheon: I think they would both need scrutiny. The question is at what level of approval. If we take the comparison with other provinces, then other provinces can approve at the level of the minister, and that would speed the process.

Mrs Munro: OK. My other question: Perhaps you could explain for us what the difference is between a federally approved drug and then the nature of the provincial scrutiny of that drug. You've referred to the DQTC several times, obviously, as kind of our arm, from a medical point of view, of the value of the drugs. I just wondered if you could explain for us what the federal government does. What's the difference between the two processes?

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Dr McCutcheon: There's been some change in the process recently, so I'll be very careful and try to be very clear in the answer.

The first piece that the federal government does for a new drug is establish a drug identification number for the drug. In that process, it determines that the drug is effective for the indications that have been submitted by the manufacturer. So the federal government establishes that the drug is safe and can be used in the areas or modifies the uses that the manufacturer has sought. That's one piece.

The second thing the federal government does is establish a price for that particular drug. In doing that, it reviews, through a C-7 process, comparisons with other countries and helps establish what the maximum price for that drug should be.

In the past, the company would come to the province and the province would make a decision as to whether to put that drug on the formulary based upon the effectiveness, compared to other drugs on the formulary, and cost-effectiveness of that drug.

In the past couple of years, the Premiers agreed to a common drug review process. For this, the effectiveness and cost-effectiveness part the DQTC would do is now being done for the whole country by a common drug review group. That process is just getting underway. Once that common drug review group makes a decision, the province has to decide whether or not it's going to make that a benefit under the formulary. So the province will still have to make a decision whether or not to list, based on the economic situation of the province.

Mrs Munro: So would you see that in the future we could expect that less work would need to be done at the provincial level in establishing the value of a particular drug; would it now become more an issue of the economics, if you like, of using the drug?

Dr McCutcheon: The ability of the province to pay will be the decision for the province.

Mrs Munro: Would you suggest that will also contribute to shortening the time for a drug, from the point at which it is applied for to the eventual decision?

Dr McCutcheon: The hope is that the total time taken to get the drug listed will improve with the common drug review process. Ontario is very concerned -- and we have to look for the outcomes of the common drug review process -- because we have fought very hard for the drug review process to occur as frequently as our DQTC used to meet. Originally they were planning to meet every two months, and we meet every month. We don't want a common process to delay listing of drugs on our formulary. We're working very hard on the federal-provincial level to make sure the process and the outcomes, particularly for new drugs, are at least as good with the common drug review as with DQTC, and then we would look to improve it subsequent to that.

Mrs Munro: Have you identified any significant differences in this new common process vis-à-vis Ontario and any other group of provinces based on the sheer numbers we deal with in this province in comparison? I'm asking that from the perspective that with 11 million people in the province and the differences with the other provinces, does this create some special problems for Ontario going into that common process?

Dr McCutcheon: I don't think it creates any special problem. From the process perspective, I think our biggest concern is that the new process be as quick as the previous one was.

The issue we really need to look at is that there are different drugs on the formulary in different provinces. That's because they have made different decisions in the past than Ontario has. The Quebec formulary, for example, is different from the Ontario formulary. Part of the reason for that is the benefits in one province are different from the benefits in another, so ability to pay, the amount of deductible and these kinds of things vary quite considerably.

While we might get a common drug review process, whether we end up at the end of the day with the same formulary from one province to another is a whole different matter.

Mrs Munro: Thank you very much.

Dr McCutcheon: You're very welcome.

Mr John R. Baird (Nepean-Carleton): On a point of order, Mr Chair: I just want to raise a concern that's been brought to my attention by my colleague from Nickel Belt about the format of the rotation. I'm just asking, perhaps, for some thought by you, Mr Chair and members of the committee, and I concede that I'm not on the committee on a full-time basis. This is a government oversight committee whose primary role is to be a legislative branch check on the executive branch. In the standing committee on finance and economic affairs, we have a rotation where the member from the New Democratic Party has an opportunity to participate fully. I know Ms Martel has been a member of this committee for quite some time and has expressed a concern, and it's certainly one the official opposition shares.

I'm asking -- not quoting a section of the standing orders -- what consideration might be given that would allow her or her substitute to perhaps, as one of the three members of the opposition, be able to ask questions in this oversight committee? What consideration might be given? I'm not throwing out this section of the standing orders, but I'm just raising it as a concern that might be addressed.

The Chair: I had actually asked our House leader and yourself whether you wanted to formalize or reach an agreement with regard to the House leaders in terms of giving direction to the committee. I've attempted to keep it somewhat informal, tried to allow every member of the committee to participate, tried to keep track of time taken, in terms of dividing up time in rotation. For instance, this morning Mr Fonseca took a very brief amount of time and Ms Munro took almost 15 minutes. In determining who's next on the rotation, I try to take that into account. If the House leaders want to debate that -- I don't want to get into a long point of order; we've sort of been able to work informally.

Yesterday we had two members of the third party here. Our rules for debate in the Legislature, which I believe we have to mirror in committee, call for much less debate time for the opposition. Then again, this particular committee's primary function is to call the government to account, and that has to be taken into consideration. I invite you, as our deputy House leader, to raise this issue with Mr Duncan, the government House leader, if you want to bring more direction, but I don't think there's a clear answer to this.

Mr Baird: It's just a concern I wanted to raise. I was a parliamentary assistant, and I have a very high regard for Mr Fonseca and the other individuals who serve as parliamentary assistants. They are members of the executive branch of government as well. So particularly on this committee, the government agencies committee and the estimates committee -- the three oversight committees -- just a request, not a demand, not slamming my fist on the table; I just ask for consideration on that issue.

The Chair: OK, but I do invite you to discuss it with the other House leaders. Obviously, the government side has six members here. They control the votes in this particular committee. They have, in my view, been patient in terms of allowing Ms Martel and Mr Kormos quite a bit of time yesterday. They haven't, in my view, tried to limit the opposition.

Mr Baird: I'm not suggesting they have.

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The Chair: Well, whatever. At any rate, I think it's best to try to accommodate everybody and to try to work it on an informal basis as best we can at this point in time.

Ms Shelley Martel (Nickel Belt): I have questions in five areas. I'll go through them as quickly as I can. They follow in the order that the deputy gave us this morning.

Let me just return quickly to the drug formulary. I heard what your preference is. In other provinces you said ministerial approval prevails. Is that in both cases -- for brand names being added to the formulary and for generics -- or is there a cabinet role for brand names being added and ministerial approval for the generics?

Dr McCutcheon: I'll have to get back to you on the specifics of that, but I know for sure that in some provinces the generics are subject to ministerial approval. I just need to do some research but I can get back to you maybe later today on the other piece. I'd be happy to do that.

Ms Martel: When you have time that would be great, because if it requires an amendment, and I suspect it would be to the Ontario Drug Benefit Act, it would be interesting to know if there is such a division or if ministerial approval applies to both.

On page 14, the middle of the page, the ministry is reviewing the present pricing policy for generic drug benefits through the drug strategy review. The drug strategy review sounds like it's encompassing a whole number of things. I saw that it was looking specifically at drug prices in other jurisdictions but also a review of the Ontario drug benefit plan, if I'm correct. What are the terms and conditions or the criteria that have been established for the review of the ODB generally and when are recommendations due; and second, can you give us some update with respect to the look at other jurisdictions and drug pricing policies there?

Dr McCutcheon: First of all, in terms of the drug strategy review, the scope of that includes access to new and existing drugs, including how to best operationalize the common drug review, which I mentioned in a previous question, the cost-effectiveness and pricing of drugs, and the transparency in DQTC decision-making and examining price increases in the marketplace resulting in the government paying higher costs through cost-to-operator claims.

If I might explain that just a little bit, the cost-to-operator claim process is a process by which a pharmacist may submit a bill when the supplier of the drug has supplied a drug beyond the cost that's in the formulary. That leads to cost-to-operator claims, so part of the review is to look at the reasons why and some of the issues dealing with that. It's to look at appropriate drug use, and by that we mean making sure the right person is taking the right drug at the right time. It has as much to do with making sure that we're not underprescribing as to make sure that we're not overprescribing, particularly in chronic diseases, and then to look at the administration of the program itself. The review is not looking at eligibility criteria at this time.

Ms Martel: I was interested in that, thanks.

Can you give the committee a listing of the people who are involved -- you don't have to do that now -- the members of the committee?

Dr McCutcheon: I'd be pleased to do that.

Ms Martel: When do you expect a report (a) on the overall review, and (b) a report, even if it's interim, on pricing policies in other jurisdictions?

Dr McCutcheon: The committee is finalizing its recommendations at the moment and then will submit a report to the minister. I'm not sure of the time frame for the other item. I believe it's part of the process and I just need to get back to you in terms of the time frame.

Ms Martel: OK, that would be great.

On page 16 you talk about the written agreements with the brand-name manufacturers. The ministry identified a need for a review in 2000 and you have said an interim report is complete and there is some additional work that will be completed this spring. Can you tell me, based on the interim report, what recommendations were made requiring how the ministry should handle the written agreement process? Is that possible? Is that public information at this point?

Dr McCutcheon: I can't recall specifically what the recommendations are, but what I can say is that in terms of written agreements, we're looking at more robust written agreements that would deal with items such as price performance in the marketplace, as well as utilization performance in the marketplace.

Ms Martel: I'm not sure if I understand that, when you say "price performance." Is that to try and get a better arrangement, a better deal in terms of the pricing?

Dr McCutcheon: I think one of the issues that we need to be aware of is that in the current mechanism, we have a situation where there has been no price increase for the drugs that are on the formulary since 1994. So part of the issue is that manufacturers are looking at 10 years as a long time with no change in price. That's one of the items that we would need to look at, and that's one of the items being looked at within this drug strategy review.

Ms Martel: So that could have some significant implications for your costs in your program branch?

Dr McCutcheon: It could create issues and benefits, yes.

Ms Martel: The next page had to do with your network. The auditor raised some specific concerns about a lack of a competitive process with respect to the renewal of this particular contract. I see on page 16 that you are saying that there has been a consultant hired to conduct a value-for-money audit. I wanted to be clear that the value-for-money audit is on the contract itself -- I'm assuming it's the terms and conditions of the contract itself that you have with the vendor -- and that that value-for-money audit is going to be completed before the next contract renewal so that any changes can be incorporated into the new RFP. I'm assuming that's what you're doing.

Dr McCutcheon: Yes.

Ms Martel: Has the consultant been hired and has the audit begun?

Dr McCutcheon: Brent will help me in terms of the logistics. This is Brent Fraser. He's a pharmacist and a senior manager in the drug program, and he's responsible for the Health Network System. So he'll help us in terms of detail.

Mr Brent Fraser: We've had some initial work done with regard to looking at the terms of reference that would be necessary to complete a value-for-money assessment of our Health Network System. We have not retained a consultant right now to perform this work. Over the next year, we're looking at the system, and as part of that work, we'll be doing two things. One is just a technical assessment of what our current system is capable of doing and what it will be able to do in future. As part of that, we'll also be doing a value-for-money type of review with our current system. So if we were to make changes to the Health Network System, we have this information available to us to help inform the process further.

Ms Martel: Does the ministry have particular concerns with the contract that is in place right now? As you head into a renewal, which should be about 2005, are there specific items -- I understand the technical part of it; I'm not talking about system upgrades as much as I'm talking about the contract itself with the vendor. That's quite a significant amount of money that is being paid.

Mr Fraser: We don't have any exact concerns with the current contract. I think as we continue to use the Health Network System, we're looking at opportunities to really improve the efficiencies of the management of the contracts and looking, really, at opportunities as we continue to use the system for claims adjudication. So there aren't any specific concerns right now that we need to address. It's really to inform the process as we move forward with any future contracts with the Health Network System.

Ms Martel: One final question: Did the auditor -- and I apologize for not knowing this -- in their review have a look at the contract itself and make any recommendations, or was the concern essentially around the process, or lack of process, around that contract?

Mr Fraser: I think, specifically, my understanding is that the auditor's concern was that we should be ensuring that we are receiving good value for money with any contract that the ministry signs. So it was really more of an assurance that as we continue with the Health Network System, we continue to ensure that we are always receiving good value for money. I'm not aware of any specific concerns that they had with the current contract.

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Ms Martel: OK, thank you. I had a final set of questions about inspections.

On page 21, item 14, you're talking about inspection coverage. I just had a quick question. How many inspectors do you have now who would actually be able to go out and inspect pharmacies and procedures?

Mr Fraser: Right now we have five inspectors for all of the pharmacies within Ontario. The inspectors are responsible for maintaining a certain region within Ontario. One inspector is assigned to one area. These inspectors have been with the ministry for a significant period of time and are quite familiar with the territories that they deal with and with the types of services the pharmacies provide in those regions.

Ms Martel: And you have, I believe I read in here, about 2,300 pharmacies that are on the network.

Mr Fraser: Approximately 2,800.

Ms Martel: And is everybody on the network, so you've got 2,800 retail pharmacies in the province that you would try to inspect?

Mr Fraser: I would say over 99% of them are connected to our network.

Ms Martel: So we've got 2,800 pharmacies. How often do your folks get in to any of these, sir? What's your pattern of inspection? Is there one?

Mr Fraser: I'm not sure if I can say there is an exact pattern of inspection. Because we only have five inspectors, we try to ensure that we are using them in the most time-efficient way, I guess. There is a lot of work done looking at the claims that are submitted through the Health Network System to the ministry for payment. The inspectors are all previous managers of pharmacies. They're very aware of the types of transactions that occur in the pharmacies, so they're able to review the claims for the pharmacies that are within their region. What we try to do is identify trends that may be of concern, and those pharmacies would be identified as areas that we should be looking at with a closer inspection, either an on-site inspection or the inspectors will do a more detailed review of the claims that were submitted by that pharmacy over a certain time period.

Ms Martel: My final question in this regard: In terms of that look and that review which those five folks are trying to do, can the ministry make an assessment of what seem to be the common problems? Are you really detecting fraud, or --

Mr Fraser: Really, there are two purposes for the inspectors' role. One is really an education component, where they go out to the pharmacies. If we notice that one pharmacy in a region has a higher volume of claims that are submitted compared to other pharmacies within that area, they'll go through and review the claims with them. Sometimes it's a misunderstanding of the processes, so a lot of the inspector's time would be spent sitting down with the pharmacist and explaining the results of the audit or inspection that was done at that setting and identifying areas where they may be able to improve their processes.

There are situations in which the ministry has identified that claims may not have been submitted appropriately. That's not the jurisdiction of the inspectors' responsibilities. They do review the claims, and if they identify that there are specific concerns, we will refer the case further to the Ministry of Health-OPP fraud investigations unit, and it is their responsibility to take that further. So we have referred cases in the past, but a lot of it is that pharmacies just may not be aware of the exact details that are required with a claims submission, so it's just correcting the process before it becomes a problem.

The Chair: The last three questioners are Ms Broten, Ms Sandals and Mr Delaney. I would hope we would be able to wrap up after that, unless there are any other members of the committee, so that we can judge our time overall.

Whoever wants to go first.

Ms Broten: I wanted to talk for a moment about pricing. The auditor was certainly critical of the pricing of generic drugs and seemed to hold the view that we could effect significant savings across the province if we perhaps implemented systems that were more comparable to other jurisdictions; Saskatchewan is one of the ones I'm thinking about. I wonder if you can just speak to that issue, as to what developments may be coming on-line in this time of fiscal restraint so that we may be able to affect those savings across the province.

Dr McCutcheon: The principal strategy is around generic drugs, because PMPRB establishes the price for brand-name drugs. In the process of the drug strategy review we've become aware of significant rebates that pharmacies received from generic drug companies, which suggests that there is room for some price reduction in terms of generic drugs. We also know that, using C-7 comparisons, the prices in Canada for generic drugs are not as close to the median as the brand-name drugs are, so there's room to reduce generic prices when we compare with other countries.

One of the strategies that some other provinces such as Saskatchewan use is a competitive tendering process. But certainly, from looking at what happens in the marketplace, the advantage that Saskatchewan gets in the tendering process is not really as strong as looking at some other ways of potentially changing the generic drug pricing. So the options really are between a tendering process or between review of the 70% rule that is in place now and to look to a new pricing formula for generic drugs. The discounting or the rebates are obviously in areas where there are multiple products in the same treatment area: the same type of drug, for example for lowering your blood pressure, or whatever it might be. So where there are multiple products there seems to be discounting.

The question is whether the pharmacist should get full benefit of the discount or whether the Ontario drug benefit plan should get some benefit of the discount. That's the opportunity. The question is, what mechanism might we put in place in order achieve that? So there is potential there. What we need to do is bring forward some options for realizing that. The drug strategy review is dealing with these items. As the recommendations come forward, then I think we can look to those recommendations being considered by government.

Ms Broten: Thank you.

Dr McCutcheon: You're welcome.

Mrs Liz Sandals (Guelph-Wellington): When I talk to constituents, I think the thing that worries the person on the street is, "What happens to me if I or some family member have some sort of chronic or complex illness where the drug costs are just humungous?" the sort of catastrophic drug cost. As somebody who is quite new to this, I'm not sure I understand how the Ontario drug benefit versus the Trillium versus the special drugs program would cover that. I wonder if you could speak very briefly about how those programs address that problem and whether we're satisfied that we are getting good value and are handling that problem appropriately.

Dr McCutcheon: I'll start, and I'll ask Sharon to help me with part of the answers. As she comes forward I'll start the answer.

The first thing is that for the purposes that you mentioned -- just to deal with the special drugs program -- the special drugs program deals with some very specific drugs. If your constituent or friend or whatever had a specific illness, then the drugs dealing with that illness may be covered in the special drugs program. The example I'll give you is that people on dialysis need to have their blood level boosted, so they take EPREX, and that EPREX drug, which is expensive, is covered. That's the first case.

Mrs Sandals: So if you have that disease, then that's covered.

Dr McCutcheon: That's covered. So the first part of the answer is that it depends on the disease. Then, if you are over 65 you have access to the seniors', or if you're in a nursing home or in home care then the Ontario drug benefit program kicks in. Where the situation is with, say, somebody who is under 65, has a very significant amount of illness and requires a lot of medication, then the Trillium drug program comes into play.

I'll just ask Sharon if she will help me in terms of the specifics of the Trillium program. That program supports not only the individual but the family of that individual as well.

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Ms Sharon Berman: Any family that has high drug costs compared to their income is eligible for drug benefits under the Trillium drug program. On average, individuals pay 4% of their income toward the deductible, and then for any eligible drug that's covered under the ODB program they pay $2 per prescription. As I said, the deductible is based on income. It's adjusted also based on the number of family members. So if you are an individual and you have a high income with relatively low drug costs, you'll pay more in your deductible. If you are a family with children or more than one person in the family, and you have relatively high drug costs compared to your income, your deductible will be lower.

The deductibles originally were paid on an annual basis. In order to ease that payment process, it was converted to a quarterly deductible to make the payment process easier.

Individuals are eligible for the Trillium drug program if they have private insurance and that private insurance doesn't cover all of their drug costs. But the drugs that are covered under private insurance are ineligible for coverage under the Trillium program. So it's a safe gap if you don't have insurance or if you don't have enough insurance.

Mrs Sandals: I'm guessing that this one becomes very complex to administer, because it's the one where there seem to be a lot of ifs and decision points around what is covered, who is covered, whether you're in or whether you're out. Is this one of the areas where we're looking for agreements with the feds in terms of information exchanged to expedite that around income levels?

Ms Berman: Absolutely. Currently we ask individuals to submit all of their income documentation to us. It's quite an intense process both for the ministry to administer and for the individual to understand which document they send forward. We're in the process of negotiations with CCRA, the federal government, to get an electronic feed of that income documentation so that clients who give us consent to get that information electronically don't have to submit the paper form.

Mrs Sandals: That would expedite the process from the patient's point of view but it would also improve accuracy and reduce administration costs from the province's point of view.

Ms Berman: Exactly. Yes.

Mr Bob Delaney (Mississauga West): I have two what I hope are fairly short questions. I have a passing familiarity with the province of Saskatchewan and some of its systems on drugs. You mentioned that Saskatchewan was able to realize savings of $54 million annually on generic drugs. Could you describe to me, please, how Saskatchewan was able to do so and what process Saskatchewan uses to set the price of generic drugs?

Dr McCutcheon: The number you refer to was in a specific time frame. I'll have my staff help me in terms of what current savings Saskatchewan gets. The process they use is a tendering process for multiple-source products, so where there are multiple products in the marketplace, they will tender and ask individual companies. I believe the tendering process is on an annual basis, so the companies bid to be the supplier to Saskatchewan for them. It's easy for a relatively small province that does not have an infrastructure like a generic drug manufacturing system to do that. In Ontario, with 12.2 million people, if we were to get into that, we would be creating great seas of production for the different generic companies. So there's an economic issue in terms of looking at that. That's the first part.

The second part: I understand that the savings Saskatchewan got at the time -- that number has eroded over time, and staff will help me with the latest number in terms of what Saskatchewan's benefit is over Ontario.

Interjection.

Dr McCutcheon: We'll get you the exact number, because it varies from year to year and I just want to be precise with it. But my understanding is that the benefit they're getting is not as great now as what it was then.

Mr Delaney: Thank you. The actual number may not be necessary. It was the first question that was more important.

Ontario has the largest drug market in Canada and, to use the deputy's figure, it's growing at 14% annually. I believe the deputy covered fairly well how Ontario's drug market compares to other Canadian jurisdictions, but what are the options that you see Ontario has to contain growth, and what processes have you normally followed to date to contain the growth in what Ontario spends on drugs?

Dr McCutcheon: Let me just give you a clinical response to that first and I'll explain the reason why. The question of course is, what level of medication is the right level of medication for the people of the province? I'm concerned, as a past practising physician, about reports coming out that show that in Canada and in the world, we have the drugs available -- indeed they're covered in ODB -- but people with diabetes are not necessarily taking all the drugs they should be taking and therefore they're getting into need for dialysis and getting into eye complications and other complications of diabetes because they're not adequately medicated. That's one issue. Another example is people with blood pressure. Not all of them have their blood pressure lowered to the optimal level, so we need to think about that.

When you think about the program growing, part of the reason the program is growing is that more people are taking more appropriate drugs. One would assume that the reason it is growing is that more people are taking inappropriate drugs; for example, antibiotics. The balance we have to do is to make sure we have more appropriate use -- that's some recommendations from the strategic drug review; hopefully, they'll come forward with that -- but also to develop patterns of prescribing for chronic diseases. Once we've got that in play, as we look to other jurisdictions, other countries, and compare, the rate of growth in our drug budget is pretty well similar to -- it changes from year to year, depending on what drug gets added, but all of them are growing generally at double-digit rates.

Some of the options you have to consider are, how much of a breakthrough do you need to consider before you add a drug to the formulary? You also have to consider, on the other side, what are the eligibility criteria one needs to look at? Because there are two sides to this. The other aspect, which is difficult, but we know there are factors, is that if we do treat people with diabetes better than we are now, hospitalization for that condition or hospitalization for heart failure will decrease. So it may be right to grow the drug budget but at the same time transfer some of the costs because of decreased hospitalization. That's theoretically possible, but until we have the wait times reduced, we'll always have somebody else in that hospital bed.

Mr Delaney: I have a number of pharmacist friends who tell me that one of their principal problems is to ensure that patients for whom drugs are prescribed actually take them.

Dr McCutcheon: That's right. Compliance is a very big issue.

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The Chair: I just want to ask a supplementary here, because something arose here that I wasn't aware of before. The statement in the auditor's report way, way back in 2001 was that they estimate the ministry could have saved $54 million annually if it paid the same price as Saskatchewan did for these generic products. There are two parts to a prescription. One part is the actual medicine. The other part is the dispensing fee. What I assume -- and maybe you can confirm this -- is that in Saskatchewan when you go in for a generic drug, you're not given the option of A, B, C; you take whatever the bid has done, so you take B if that's the one that won. So the pharmacist in Saskatchewan is not receiving a discount because B drug company has got the market.

I think it's relevant, therefore, for us to know whether the pharmacist fees in Saskatchewan are more or less than in Ontario. Essentially, we haven't increased our pharmacists' fees for a long period of time and therefore they've sought other ways to do it. So is the $54 million a real number? Because what we've basically done is subsidized the pharmacists' fee by allowing them to have a discount in this particular market.

Dr McCutcheon: I'll ask Brent if he'll help me with the answer to that. The question essentially is that we need to look at the total cost to the program and that the cost comes from not only the drug but from the dispensing fee, and I just don't know what the comparison of the dispensing fees is.

Mr Fraser: I think it's important to note that across the provinces it's very difficult for us to compare dispensing fees. Each of the provinces has its own set reimbursement structure. In Ontario, for example, we have a drug cost, a markup, and a dispensing fee. Other provinces may lump that together as one continuous cost, so it's hard to break it out. We have looked at the fees across Canada. I would say that Ontario is in line with the dispensing fees of the other provinces. I don't think there is a significant difference between each of the provinces -- maybe at the upper end and the lower end, but we all tend to be, I would say, around the $6 to $8 mark. But again, there are these other reimbursement structures that are applied.

The Chair: The deputy said we were the second-lowest in generics. The only one doing better than us is Saskatchewan, and that's who the auditor signalled on. So what I really would like from you is a comparison with Saskatchewan for, let's say, the 10 most common generic drugs given out. What is the total package costing their drug plan and our drug plan? I'm not sure the $54 million was a correct conclusion in terms of potential savings back then. If in fact what we have done is mix two compensation schemes and therefore -- the $54 million might be what the auditor has done, but he's been very selective in doing what he has done. So the real question is, what is the dispensing fee for generic drugs here and what is it in Saskatchewan? If you could provide that to me in writing, I would appreciate it.

Mr Fraser: We would be happy to provide it at a later date.

The Chair: The other question the auditor asked me to ask you was, if we increase the number of inspectors, what would the payback be to the ODB?

Mr Jim McCarter: If I could expand, [inaudible] every 10 years to the pharmacies or the agencies, and sometimes if you look, say, at tax auditors, if you hire more tax auditors, you recoup their salaries about the first month they work. I'm wondering, do you think if you increased your inspection resources to 10 or 15 that you'd more than make that up in terms of payback either through education or the claims verification process?

Mr Fraser: Based on our current staff, I think we can show that for the number of inspectors we have and the amount of recoveries that are identified through the inspection process, they do recoup their own salaries. So that could potentially be extended beyond the current five. What's happening, though, is that we are conducting a review of the inspection resources in conjunction with another branch in the ministry fraud programs branch. It's those types of pieces of information we're looking at in order to complete this review so we have further information.

The Chair: Mr Zimmer, the last question.

Mr Zimmer: Just briefly, on page 325 of the report at the bottom, the last point, "Another jurisdiction, using a competitive acquisition process, was able to obtain prices for certain drugs that were, on average, 60% lower than those obtained by Ontario. Annual potential savings to the ministry could have been as much as $140 million if it had been able to obtain the same prices for these drugs."

Can you tell me what that jurisdiction was and then what competitive process that jurisdiction used and how the process they used was able to achieve significant savings?

Dr McCutcheon: I don't know the specific comparator. The audit was done quite some time ago, so -- please, Brent.

Mr Zimmer: Just the name of the jurisdiction, the process they used and some thoughts on how they were able to generate those kinds of savings.

Mr Fraser: I think one of the comparisons they did when they reviewed the program is that they looked at the federal supply schedule in the United States. The federal supply schedule is the listing schedule for reimbursing drugs for beneficiaries such as the Department of Veterans Affairs. Because of the size of that particular pool of individuals, the States is able to apply a lot of leverage to the pricing of the products reimbursed on that particular schedule. That's really why you see such a distinct price difference between the Ontario drug benefit pricing and the pricing for those schedules in the States.

Mr Zimmer: Thank you.

The Chair: OK. We are finished. Thank you very much.

Dr McCutcheon: Thank you, Mr Chairman.

The committee adjourned at 1216.

CONTENTS

Thursday 12 February 2004

2003 Annual Report, Provincial Auditor: Section 4.09, drug programs activity P-95

Ministry of Health and Long-Term Care P-95
Mr Phil Hassen, deputy minister
Dr David McCutcheon, assistant deputy minister, health services division
Mr Brent Fraser, associate director, phamaceutical services coordination unit,
drug programs branch
Ms Sharon Berman, associate director, administration, finance and eligibility,
drug programs branch

STANDING COMMITTEE ON PUBLIC ACCOUNTS

Chair / Président

Mr Norman W. Sterling (Lanark-Carleton PC)

Vice-Chair / Vice-Présidente

Mrs Julia Munro (York North / -Nord PC)

Ms Laurel C. Broten (Etobicoke-Lakeshore L)

Mr Jim Flaherty (Whitby-Ajax PC)

Mr Peter Fonseca (Mississauga East / -Est L)

Ms Shelley Martel (Nickel Belt ND)

Mr Bill Mauro (Thunder Bay-Atikokan L)

Mrs Julia Munro (York North / -Nord PC)

Mrs Liz Sandals (Guelph-Wellington L)

Ms Monique Smith (Nipissing L)

Mr Norman W. Sterling (Lanark-Carleton PC)

Mr David Zimmer (Willowdale L)

Substitutions / Membres remplaçants

Mr John R. Baird (Nepean-Carleton PC)

Mrs Donna H. Cansfield (Etobicoke Centre / -Centre L)

Mr Bob Delaney (Mississauga West / -Ouest L)

Also taking part / Autres participants et participantes

Mr Jim McCarter, assistant Provincial Auditor

Clerk / Greffière

Ms Anne Stokes

Staff / Personnel

Ms Elaine Campbell, research officer,

Research and Information Services