Medical Device Establishment Licence Fees Remission Order (Expedited Examination of Applications During the COVID-19 Pandemic): SOR/2023-36

Canada Gazette, Part II, Volume 157, Number 6

Registration
SOR/2023-36 February 28, 2023

FOOD AND DRUGS ACT

The Minister of Health makes the annexed Medical Device Establishment Licence Fees Remission Order (Expedited Examination of Applications During the COVID-19 Pandemic) under section 30.63footnote a of the Food and Drugs Act footnote b.

Ottawa, February 22, 2023

Jean-Yves Duclos
Minister of Health

Medical Device Establishment Licence Fees Remission Order (Expedited Examination of Applications During the COVID-19 Pandemic)

Interpretation

Definition of Regulations

1 (1) In this Order, Regulations means the Medical Devices Regulations.

Other words and expressions

(2) Unless the context otherwise requires, other words and expressions used in this Order have the meanings assigned to them by the Regulations or the Fees in Respect of Drugs and Medical Devices Order, as the case may be.

Remission

Establishment licence

2 (1) Subject to subsection (2), remission is granted to a person referred to in subsection 71(2) of the Fees in Respect of Drugs and Medical Devices Order of the amount of the fee that is paid or payable under subsection 71(1) of that Order — or, if applicable, that amount adjusted to account for the remission set out in subsection 6(1) or section 74 of that Order — and any interest on it, for the examination of one of the following applications:

Conditions

(2) The remission is granted if the following conditions are met:

Coming into Force

Registration

3 This Order comes into force on the day on which it is registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Order.)

Issues

There is a debt to the Crown associated with a policy decision implemented by Health Canada in response to the COVID-19 pandemic. A debt to the Crown is incurred when an activity for which a fee is payable is completed. Health Canada cancelled or did not issue invoices for certain medical device establishment licence applications after the examination of the application was completed but before payment was received to support providing much-needed medical devices during the pandemic (e.g. face masks, gloves, COVID-19 testing devices). These establishment licences were all ultimately cancelled by the Minister. However, the debt for examination of the application still exists, even if the licence was cancelled. Health Canada is seeking to resolve this debt using existing authorities under the Food and Drugs Act to introduce the Medical Device Establishment Licence Fees Remission Order (Expedited Examination of Applications During the COVID-19 Pandemic) [the Remission Order].

Background

Health Canada is responsible for helping Canadians maintain and improve their health, and its mandate, under the Food and Drugs Act, includes oversight for medical devices, and human and veterinary drugs. Health Canada performs scientific evaluations of products before they are authorized for sale, monitors these products once made available to Canadians, verifies compliance, and acts when non-compliance is identified. Health Canada charges fees for these regulatory activities.

In general, any person who manufactures a Class I medical device or imports or sells medical devices in Canada must hold an establishment licence issued under the Medical Devices Regulations. Those submitting applications are charged a fee for the examination of the licence application. The applicable fee is specified in subsection 71(1) of the Fees in Respect of Drugs and Medical Devices Order (the Fees Order).

The medical device establishment licence fee is a flat fee regardless of when in the fiscal year the application is received by Health Canada. The same fee applies to the two following types of applications that are relevant to this Remission Order:

On April 1, 2020, new health product fees came into force under the Fees Order. The new fees included a revision to the amount payable for a licence and the timing of the fee payment changed from being at the time of application to being upon notice to the applicant that the application had been accepted for further examination. At an operational level, Health Canada was to implement a new procedure where the examination of a medical device establishment licence application would only occur after payment had been received.

Health Canada informed stakeholders of the new Fees Order and the change in the operational process in broad stakeholder communications and in guidance that was published around the time the Fees Order came into force on April 1, 2020.

During the COVID-19 pandemic, Health Canada took a series of measures to accelerate access to health products, including regulatory flexibilities for importation, expedited product authorizations, and remitting or not applying certain fees. Between April 2020 and December 2021, Health Canada delayed the implementation of the new operational process for the review of medical device establishment licences to support ensuring a sufficient supply of medical devices in the Canadian market. As a result, Health Canada processed medical device establishment licence applications before invoices were issued or payments were received, which differed from what had previously been widely communicated.

Between April 1, 2020, and December 31, 2021, Health Canada processed a total of 6 950 applications for new medical device establishment licences and annual licence review applications. Licences for 2 439 (35%) of these applications were cancelled by the Minister before February 1, 2022. The main reasons for cancellation included

Health Canada decided not to collect fees for the cancelled licences, which was communicated to most COVID-19 and some non-COVID-19 medical device establishment licence holders to allow them the opportunity to avoid the fee if their licence was cancelled. Health Canada did not seek payment for the fees owing and either cancelled or did not issue invoices for 1 615 of those 2 439 applications. However, a debt is incurred once the examination of an application is completed, regardless of whether an invoice was issued to the applicant.

Section 30.63 of the Food and Drugs Act allows the Minister of Health to remit, by order, all or part of any fee fixed in the Fees Order. The Remission Order relies on this authority to resolve the debt to the Crown and to lessen the financial impact on the eligible applicants, including COVID-19 and non-COVID-19 licence holders.

As of December 2021, all medical device establishment licence applications, including new applications and annual licence review applications, are examined only once payment is received. This prevents applicants from incurring debts to the Crown where payment was not obtained in advance of the service being rendered. This ensures applicants have the opportunity to decide whether to proceed with the application after receiving their invoice and being aware of the cost. Therefore, the fee remission is only needed for a limited time period to address the issue of the internal policy decision that formed part of Health Canada’s pandemic response.

Objective

The objective of this Remission Order is to resolve the debt to the Crown in a way that includes all medical device establishment licence holders impacted by the delayed implementation of the new operational procedure, including COVID-19 and non-COVID-19 medical device establishment licence holders. It applies to all medical device establishment licence applicants who submitted an application that was reviewed by the Department prior to fee payment and where the licence was cancelled before February 2022, regardless of whether the fee was paid. This fee remission resolves the existing debt in an equitable manner and ensures alignment with Health Canada’s legal authorities.

Description

This Remission Order remits fees for the application of a new medical device establishment licence or of annual licence review that meets the following conditions:

The Remission Order conditions are linked to the timing of the delayed implementation of the policy and Health Canada fully resolving the issue and cancelling all licences with unpaid invoices.

This remission applies regardless of whether an invoice was or was not issued, cancelled, or paid.

Regulatory development

Consultation

Health Canada did not consult stakeholders on this Remission Order directly. However, the Department did communicate extensively to medical device establishment licence holders its intent to wait for payment before the examination of a medical device establishment licence application through a training session and external communications prior to the onset of the pandemic. This was also explained in the guidance document — Fees for the Review of Medical Device Establishment Licence Applications, which took effect April 1, 2020. Further, most COVID-19 medical device establishment licence holders were told they could cancel their licence and would not have to pay the fees for examination. Non-COVID-19 medical device establishment licence holders were told they could cancel their licence and would not have to pay the fees for examination on a case-by-case basis if they contacted Health Canada. This fee remission is consistent with Health Canada’s messaging on fee payment and the process to collect payment for an application before its examination. The impact on stakeholders is expected to be minimal and will benefit stakeholders impacted by the decision to delay the timing of payment.

Modern treaty obligations and Indigenous engagement and consultation

The Remission Order is not expected to impact treaties with the Indigenous peoples of Canada. Health Canada conducted an initial assessment that examined the geographical scope and subject matter of the initiative in relation to modern treaties in effect and did not identify any potential modern treaty impacts.

Instrument choice

The Minister of Health has the authority to remit fees under section 30.63 of the Food and Drugs Act and thereby to resolve the debt to the Crown. Health Canada does not have the authority to forgive debt by policy.

The option to pursue debt collection was explored but the Department does not meet the threshold required to write off debt under the Debt Write-Off Regulations, 1994. Under those Regulations, a debt collection process would have to be undertaken for each application to determine that the debt is truly uncollectable.

Regulatory analysis

Benefits and costs

An analysis of the estimated costs and benefits determined that the Remission Order will have an overall high impact. This section provides a description of the methodology used in the analysis, a quantitative and qualitative depiction of costs, and a listing of potential direct benefits due to the regulatory package. There are no new costs expected for Canadians and industry; however, the Government of Canada expects to incur a one-time cost of around $10.3 million.

Costs
Canadians

The Remission Order is not expected to impose any new costs on Canadians.

Industry

The Remission Order is not expected to impose any new costs on industry.

Government

Health Canada expects to incur costs from this Remission Order through the total fees remitted and through processing the remission. Between April 1, 2020, and December 31, 2021, Health Canada processed a total of 6 950 applications for new medical device establishment licence and annual licence review applications. Of those 6 950 applications, a total of 2 439 (35%) licences were cancelled within the following year and a half. For cancelled licences during this time, Health Canada made the decision to not collect fees, which was communicated to most COVID-19 medical device establishment licence holders and, on a case-by-case basis, to non-COVID-19 medical device establishment licence holders to allow them to avoid the fee if their licence was cancelled. Of the 2 439 cancelled licences, 580 had paid their licensing fees, 244 have unpaid fees remaining, and 1 615 applications were not issued a fee invoice. These establishment licences were all cancelled by the Minister.

The Remission Order will remit fees for all licence applications received between April 1, 2020, and December 31, 2021, and where the licence was subsequently cancelled before February 1, 2022, regardless of whether Health Canada collected fee payments from the applicants. In addition, this Remission Order will also reimburse applicable licence holders where a fee was collected. The total fees remitted for cancelled licences is estimated to be around $10.2 million, of which approximately $2.4 million will be reimbursed to the 580 businesses that paid their licensing fees. To process the Remission Order and to update the existing program database, Health Canada expects to rely on existing resources to complete this work at an estimated one-time cost of $100,000.

The total one-time cost to Government is estimated to be approximately $10.3 million.

Benefits
Canadians

The Remission Order is not expected to provide additional benefits to Canadians.

Industry

Under the current Fees Order, Health Canada charges fees for the examination of medical device establishment licence applications. These fees are payable once the application has been accepted for further examination. Since 2020, the timing of this fee payment is upon notice to the applicant that the application has been accepted for further examination.

During the COVID-19 pandemic, Health Canada processed medical device establishment licence applications before invoices were issued or payments were received, which differed from the new operational procedure. As a result, Health Canada has decided to remit fees for all applications that were received between April 1, 2020, and December 31, 2021, examined prior to receipt of payment, and for which the licence was subsequently cancelled before February 1, 2022.

Fees would have been otherwise payable without the Remission Order; therefore, industry will benefit from approximately $10.2 million in remitted fees.

Government

The Remission Order is not expected to provide additional benefits to Health Canada.

Small business lens

Around 35% to 45% of medical device establishment licence holders qualify as a small business.

Part 3 of the Fees in Respect of Drugs and Medical Devices Order requires medical device establishment licence applicants to pay a fee for their application to be reviewed by Health Canada. On April 1, 2020, a flat fee of $4,590 was fixed through the Fees Order. If an applicant is a small business, they are eligible for a 25% fee reduction ($3,442.50 instead of $4,590). The exact fee amount is subject to an annual adjustment following the consumer price index.

Through the Remission Order, Health Canada will remit businesses the fees for their medical device establishment licence application received between April 1, 2020, to December 31, 2021, examined prior to receipt of payment and for which the associated licence was subsequently cancelled before February 1, 2022.

Since large businesses generally have higher revenues than small businesses, the fee remission may represent a relatively higher benefit to small businesses since it accounts for a larger portion of their revenues. While the fee remission may represent a relatively higher benefit to small businesses when compared to their revenues, the 25% fee reduction lessens the absolute benefit.

One-for-one rule

The one-for-one rule does not apply, as there is no incremental change in administrative burden on business. Health Canada will process the remission without requiring applicants to undertake additional administrative work.

Regulatory cooperation and alignment

Fees are commonly charged across all levels of government for services. However, there is no comprehensive information about fee remission strategies adopted by other countries as a response to the pandemic. A remission is an extraordinary measure that allows the Government to provide full or partial relief when it can be justified.

Canada’s cost recovery approach is consistent with approaches taken by other countries in terms of fees charged to industry for regulatory services. For example, the Australian Therapeutic Goods Administration requires Australian sites that manufacture medicines to hold a manufacturing licence. The United States Food and Drug Administration charges fees for new submissions and the registration of establishments. Like Canada, the United Kingdom also requires manufacturers to hold a manufacturer licence issued by the Medicines and Healthcare products Regulatory Agency and charges fees for licensing at the initial issuance and renewal periods.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this Remission Order. An initial analysis was undertaken and indicated that there are no anticipated sex and gender-based considerations.

Implementation, compliance and enforcement, and service standards

Implementation

This Remission Order comes into force the day on which it is registered. Proceeding directly to final publication in the Canada Gazette, Part II, allows the Remission Order to come into force in a timely manner and allows Health Canada to resolve the debt to the Crown.

Fees will automatically be remitted for all qualifying applications. Health Canada will contact applicants directly if any additional information is required. Fees will not be remitted for medical device establishment licence applications that are outside of the scope of this Remission Order.

Health Canada intends to complete the remission process by spring 2023, including refunds, where applicable.

Compliance and enforcement

This Remission Order applies to medical device establishment licence applications that were reviewed during the early part of the COVID-19 pandemic and does not affect current or future application review and fee payment processes.

As of December 2021, Health Canada issues the invoice for an application before its examination. Payment is due upon issuance of the invoice and is outlined in the guidance document — Fees for the Review of Medical Device Establishment Licence Applications.

There are no compliance and enforcement considerations for this Remission Order.

Service standards

Service standards for medical device establishment licence application fees are not affected by this Remission Order.

The Performance Standards for the Fees in Respect of Drugs and Medical Devices Order and the guidance document — Fees for the Review of Medical Device Establishment Licence Applications continue to apply. The performance standard to issue a decision is 120 calendar days from the day a complete application is received for the following application types:

Contacts

General inquiries

Danny Lepage
Acting Director
Compliance Policy and Regulatory Affairs Division
Policy and Regulatory Strategies Directorate
Regulatory Operations and Enforcement Branch
Health Canada
200 Eglantine Driveway
Jeanne Mance Building, 7th Floor, Room 703A
Tunney’s Pasture
Ottawa, Ontario
K1A 0K9
Telephone: 873‑353‑3768
Email: hc.prsd-questionsdspr.sc@hc-sc.gc.ca

Questions related to the issuance of the fee remittances

Terry Jeans
Director
Planning and Accountability Division
Planning and Operations Directorate
Regulatory Operations and Enforcement Branch
Health Canada
200 Eglantine Driveway
Jeanne Mance Building, 4th Floor
Tunney’s Pasture
Ottawa, Ontario
K1A 0K
Telephone: 613‑710‑4381
Email: criu-ufrc@hc-sc.gc.ca