Cost Recovery - Frequently Asked Questions (FAQs)

1. What is cost recovery?
2. When were user fees established? What for?
3. Why did user fees need to be updated?
4. What process did Health Canada follow for updating its user fees?
5. What is the scope of the updated user fees?
6. Are service standards being changed?
7. Will updated user fees improve regulatory performance?
8. How does Canada compare to other countries?
9. Will increased fees place greater burdens on industry? What is Health Canada doing to help smaller companies?
10. How will additional revenues from updated fees be used?
11. How will updated fees benefit Canadians?
12. What is the earliest date for the implementation of the updated fees?

1. What is cost recovery?

Cost recovery is the practice of establishing and collecting user fees for services, including regulatory activities. In the 1990s, Health Canada established user fees for regulatory activities related to human drugs and medical devices. Along with fees, public sources of funding also support these programs.

User fees are commonly charged across all levels of government for services such as access to federal parks. Also, other countries charge fees to industry for regulatory services, such as the evaluation of therapeutic products.

2. When were user fees established? What for?

User fees were first established in 1995 for regulatory services related to human drugs, such as product evaluation. Following that, user fees for medical device activities began being charged in 1998. These fees were introduced to cover a portion of the costs of delivering core regulatory services. Along with fees, public funds also support these programs.

3. Why did user fees need to be updated?

Since user fees were established in the 1990s, the costs of doing business have increased. Several factors have affected the way program activities are performed, including the growth and complexity of product submissions, increasing requirements for surveillance and compliance verification. Other countries charge fees for similar services and update their fees, but Canada was alone in not updating its fees to reflect growing costs.

Updated fees for human drug and medical device regulatory activities came into effect on April 1, 2011. These updates were required to provide stable funding for the delivery of important regulatory services for Canadians and the industry, such as product reviews, post-market surveillance, and inspections.

4. What process did Health Canada follow for updating its user fees?

In 2004, the Health Products and Food Branch (HPFB) undertook a significant project to update its cost recovery framework. Consultations were undertaken with industry, health professionals, patients and consumers, and independent advisory panels reviewed complaints that had been raised. The culmination of this work has resulted in Health Canada's Proposal to Parliament for User Fees and Service Standards for Human Drugs and Medical Devices Programs. The proposal sets out updated fees, as well as fee mitigation measures and provision for an annual adjustment of fees.

On April 12, 2010, the Minister of Health tabled Health Canada's proposal in the House of Commons. The proposal was tabled in the Senate the following day.

In May 2010, the Senate Standing Committee on Social Affairs, Science and Technology reviewed the proposal. The Committee provided a report to the Senate indicating their support for the proposal with no observations or modifications. The Senate subsequently adopted the report of its committee, thereby concluding the Parliamentary review of Health Canada's proposal.

As user fees are set in regulations, any changes to update them were required to go through the Canada Gazette process. The regulatory proposal was published in Canada Gazette Part I for a 75-day consultation period, and in Canada Gazette Part II. The new fee regulations and updated fees came into effect on April 1, 2011.

5. What is the scope of the updated user fees?

The updated user fees apply to human drug (pharmaceutical and biologic) and medical device regulatory activities. It does not cover natural health products or veterinary drug products.

6. Are service standards being changed?

Health Canada's existing service standards for fee-related activities are well-established and internationally consistent. There are no changes to these standards. However, the costs of maintaining and meeting these standards have increased and fees have not been updated to reflect these costs. Updated fees will help support Health Canada's continued commitment to meet current standards.

7. Will updated user fees improve regulatory performance?

Yes, updated user fees will contribute to more stable funding that will allow Health Canada to deliver its core regulatory services within its well-established and internationally consistent service standards.

8. How does Canada compare to other countries?

The revised fees bring Canada in-line with other regulators of therapeutic products that have all kept their fees up-to-date.

Revenues from updated fees will cover 50 per cent of the costs of services in the first year of implementation, compared to the current situation where fees only cover about 25 per cent. This is more comparable to other countries that recover between 50 per cent to 100 per cent of their costs through user fees.

9. Will increased fees place greater burdens on industry? What is Health Canada doing to help smaller companies?

Fees are payable based on the service provided, regardless of a company's size. However, Health Canada recognizes that updated fees may have an impact on some companies, and as such, mitigation measures are included in the fee regulations to reduce the undesirable impacts of fees for qualifying companies.

10. How will additional revenues from updated fees be used?

Revenues generated by the updated fees will be reinvested into the specific activity for which the fees were paid. Such additional revenues will contribute to more stable funding for providing key regulatory services to Canadians and the industry, such as product reviews and post-market activities. The additional revenues will also assist in conducting scientific assessments within internationally comparable service standards.

11. How will updated fees benefit Canadians?

Revenues from updated fees will support key regulatory activities undertaken by Health Canada, including timely reviews of drugs and medical devices that benefit Canadians, and surveillance of the safety and quality of drugs and devices currently on the market.

The additional funds will better position Health Canada to conduct regulatory activities within established standards, and help ensure the availability of drugs and medical devices to Canadians.

12. What is the earliest date for the implementation of the updated fees?

The updated fees for human drug and medical device regulatory activities were implemented on April 1, 2011.