2009 Legislative Session: First Session, 39th Parliament
HANSARD

The following electronic version is for informational purposes only.

The printed version remains the official version.

official report of

Debates of the Legislative Assembly

(hansard)

Tuesday, November 24, 2009

Morning Sitting

Volume 9, Number 3

[ Page 2707 ]

TUESDAY, NOVEMBER 24, 2009

The House met at 10:02 a.m.

[Mr. Speaker in the chair.]

Prayers.

Orders of the Day

Hon. M. de Jong: I call in Committee A, Committee of Supply — for the information of members, the continued estimates of the Ministry of Finance; and in this chamber, Committee of Supply, continued discussion of the estimates of the Ministry of Health.

Committee of Supply

ESTIMATES: MINISTRY OF HEALTH SERVICES

(continued)

The House in Committee of Supply (Section B); C. Trevena in the chair.

The committee met at 10:05 a.m.

On Vote 34: ministry operations, $14,008,318,000 (continued).

A. Dix: I'm going to start by discussing the government's new program that was announced immediately prior to the election to provide and to cover treatment options for macular degeneration. In particular, when the government made the announcement, it said that annually they proposed to treat roughly 3,500 patients. To start with I have three very specific detailed questions, which I know the minister will have the answer to.

First, how many patients have been treated to date? Second, if it's 3,500 over the course of a year, approximately how many treatments do each of those 3,500 people get? Third and most precisely, in terms of the government-funded treatments to date, what share of those treatments have been Avastin and what share of those treatments have been Lucentis?

[1010]

Hon. K. Falcon: I apologize for the delay there, pulling up the very detailed information that the member's requesting.

For the benefit of those in the House here wondering what we're talking about, B.C. became the first province in Canada to offer three publicly funded medication options for those individuals suffering from the wet age-related macular degeneration medical issue.

This is something that, prior to the public funding that we introduced for wet age-related macular degeneration, individuals were seeing, in the vast majority of cases, retinal specialists, who are ophthalmologists that receive additional training of the eye, and paying for their injections, usually to the tune of about $300 per injection. So the introduction of this new program funded by government is certainly something that has been widely welcomed by those individuals that suffer from this very serious issue.

So the member is right. We estimated that there would be 3,000 to 3,500 patients per year that could potentially be treated under the new program or, to put that another way, about 20,000 treatments per year. Those would be injections into the eye to treat the macular degeneration.

I can inform the member that between June 1 and October 5 — so that's just four months — there have been 6,330 total injections. That is certainly putting us well on track to exceed our 20,000 injection treatments per year.

As I mentioned, there are three potential drugs. There's Visudyne. There's Avastin and there's Lucentis produced by Novartis. In the case of the injections, the overwhelming majority of them are undertaken through either Avastin or Lucentis. The split is about 68 percent utilizing Avastin and 32 percent, Lucentis. I think it would be safe to say there would be some that would be utilizing Visudyne, but a very small, almost insignificant, number.

A. Dix: So 68 percent — of those, roughly 4,300 with Avastin and roughly 2,000 with Lucentis. The minister will know that the drugs, and what's unique about what British Columbia did…. We're not the first people to cover the injections, but we're the first people to do what might be described as an innovation in offering Avastin as well as Lucentis.

My question to the minister is this. For Lucentis, as has been established, the cost per treatment — the drug cost of it — is about $20 a treatment. So for those roughly 4,000 treatments that have been done so far…. And we can extrapolate forward out of the 20,000, if it continued at that rate: roughly 14,000 treatments annualized. If you look at it at $20 a treatment, the drug costs would be roughly $280,000.

Of course, that's not the case. In fact, the minister has decided to pay roughly 20 times the drug cost for those treatments involving Avastin. Those kinds of markups one associates more with other kinds of drug policy. So I want to ask the minister why it makes sense, because clearly it costs more money to overpay doctors, retinal specialists, dramatically for Avastin.

[1015]

The $398 figure roughly covers the $1,575 for Lucentis divided by four. So the $398, I assume, is for the drug. The $132 involved in the treatment is for the doctor's services and administrative costs.
[ Page 2708 ]

I just want to ask the minister. This seems like an extraordinary waste of public money, that as a matter of policy the government is wasting money. If the government gave Avastin to the doctors free, the program would be millions of dollars cheaper, based on the numbers the minister just gave me. Can the minister provide any explanation why the government in a time of constrained health budgets would be overpaying for Avastin?

Hon. K. Falcon: Firstly, I think that it's important, Member, to know that when you say that the minister makes these decisions…. Obviously, I myself as a minister am not about to make those kind of decisions. Those are made by professionals within our ministry after reviewing much of the medical evidence around the drugs and also in consultation with a retinal specialist.

I think the important thing for the member to know is that many of these decisions are decisions that are appropriately made by medical specialists, these ophthalmologists that have additional training of the eye, particularly with respect to age-related macular degeneration — the wet version.

What they will tell you, if you speak to these retinal specialists, is that Avastin can be very effective in many cases for the treatment of age-related macular degeneration, but not all cases. Lucentis, in some cases, is the preferred drug for the treatment of this particular disease of the eye.

[1020]

In fact, I can tell you that I met with one of the well-regarded retinal specialists who heads up the ophthalmology division of Dalhousie University, and we had a very wide-ranging discussion predicated on some patients groups concerned that the use of Avastin, they believe, could be unsafe for patients. Obviously, that's a very serious allegation to make and something that you have to look at very, very carefully.

In a wide-ranging discussion with the retinal specialist out of Dalhousie, he acknowledged that both of these drugs can work. Most retinal specialists would agree that they both can be effective, but different patients will require different treatment. It's why in British Columbia we have made available three different publicly funded drugs to allow the retinal specialists to look at all three of those drug options and make an appropriate clinical decision based upon the eye health of their particular patient.

Now, the member talks about why we are paying this fee. He implied that for some reason the staff in the ministry have just apparently lost their senses and are now paying an unnecessary fee. Well, I can tell you that we certainly don't look to pay unnecessary fees in the ministry. Fees are always a subject of ongoing review, but I can tell you that when the program was being set up, it was determined to put the fee in place for the AMD program of $530 for the diagnostic procedures and/or the injections.

The member should know that the fee covers the cost of the drug, which includes the pharmacy procurement and processing costs as well as a range of administrative activities such as developing the clinical practice guidelines; monitoring program safety and effectiveness, which is very important because we do want to have an ongoing monitoring program in place; monitoring the budget and developing management strategies as required; implementing a provincial plan for AMD coverage by retinal specialists, including travelling to centres which are not currently served by retinal specialists.

Part of what we are asking them to do to ensure that there can be coverage available throughout the province is to travel to regional centres, which will make it easier for those with the wet version of age-related macular degenerative eye disease to have access to retinal specialists and injections and to participate in program quality assurance and research activities. The original fee was based upon the best estimate that staff was able to make as to what the program assumptions would be, based on the initial design of the project.

We start the project, and as the project is underway and as it's being implemented and as we start to see more evidence of how the project is working for patients, the fee will be subject to ongoing review — in fact, I believe it is the subject of an ongoing review right now — to ensure that the fee level is appropriate for meeting the needs of the patients and also appropriate for taxpayers in ensuring that it is meeting the needs of the payer. That is the delicate balance that the professionals within the ministry continually look at.

A. Dix: How do I put this delicately, hon. Chair? The minister didn't even come close to answering the question. He didn't even seem to acknowledge that the only question I asked exists. He answered other questions that I didn't ask, but he didn't answer the question.

If in fact you assume, and there are differing views on this…. Let's set $20 as the cost of a dose of Avastin for the purposes of our discussion here. It could be anywhere, I've heard, from $15 to $30, depending on how you view it. Then what we're doing, what the ministry is doing is…. The minister says: "I don't make these decisions." The minister's name is on the press release. Presumably his name or his predecessor's name was on the Treasury Board submission in this regard.

They're buying $280,000 worth of Avastin for $5.5 million. That's the policy. I mean, it would be $5 million cheaper for the minister to give the retinal specialists the Avastin. This is a complete and ludicrous waste of money. Just so we know how much money we've wasted, because 4,200 patients so far on Avastin at $20 a dose…. I think we're talking in the range of $80,000 that that should cost. Instead, it's costing in the millions of dollars.
[ Page 2709 ]

Why is this deemed acceptable by the minister? This isn't the health care part of it. I understand that it's the doctor's decision, and it's between Lucentis and Avastin. We'll get to that issue in a second.

[1025]

I might even say that the approach of the ministry was somewhat imaginative to this question, since as the minister knows, it's the same company that produces both drugs. One of the reasons there have been challenges with the licensing of Avastin is that the company hasn't sought a Health Canada approval or a U.S. government approval for the use of Avastin for macular degeneration. There are all those issues over that. The minister touched on that. I'm not interested, and I'm not even challenging that.

I'm asking why anybody would pay $5 million plus for $280,000 worth of drugs in a tight health budget.

Hon. K. Falcon: The member has to be careful. Again, in health you always have to be careful not to try and overly simplify an issue that is a little more complex than that and try and make a connection that may not be there.

It's important to know that Lucentis is a lot more expensive than Avastin, as the member knows. Some patients require Lucentis. The patients that may require Lucentis is a decision that should be appropriately made by the retinal specialist, the individuals that understand their patient health and patient needs, and they should have the option to make that decision.

[1030]

Now, we're not going to take away the option, as the member would suggest, by denying them the ability to choose Lucentis as one of the options and by saying, "Well, gee, it's cheaper to just use Avastin. So we should just have everyone be utilizing Avastin," which would strip away the ability of retinal specialists to be able to be involved in making that decision.

The member is getting close…. I'm concerned when I hear people suggesting that retinal specialists would make their decisions based on financial incentives. These are highly trained medical professionals. They are specialists in a very complex disease of the eye. I think we have to be careful not to suggest that they make their clinical decisions on the basis of financial reward.

Having said that, I do not want to pretend that the fee that the medical experts within the ministry…. On looking at the rollout of a new program, it's always contemplated that that's something you review on an ongoing basis. But the fee itself does not just cover the injection into the eye.

I read through, to the member, the list of all of the other costs that are included in a single fee for the retinal specialist, to cover things like cost of travel, to cover the ongoing monitoring programs, to cover their cost of the drug, including their pharmacy procurement and processing costs. All of those are wrapped into the fee that we discussed earlier — the $530 specific fee.

That is a fee that is constantly under review. In fact, I'm informed that they are having a review of the fee tomorrow with the Provincial Health Services Authority and the retinal specialists to do an update on how the program is performing, what the utilization has been and how the fee relates to that.

We should never be afraid to constantly examine these things, as they had always planned to do in the first place. But I do think we have to be careful not to arrive at a simplistic "A must mean B" when the situation can be a little more complex than that.

A. Dix: Again, the minister is answering an attack that I haven't made. I understand why you pay $398 out of the $530 fee for Lucentis, because that's what it costs if you take the Lucentis dose and you divide it in four — $1,575 divided by four. That's how that fee was set. I understand that — right? I'm not proposing in any way taking away the right of Lucentis. In fact, there's an argument for many patients that that's a serious situation.

The minister is trying to hide this perplexing policy, this decision to dramatically overpay, to waste precious government dollars. Let's be clear how much has been wasted; $1.713 million, according to the minister's numbers this morning, is what the government is paying out for this drug — a drug that costs $86,000.

So we understand that the retinal specialists are getting part of the fee for their services and for the administration and all the things the minister is talking about. He has wasted $1.6 million already. Annualized, if we continue down this path, at a time of precious health revenues….

We get lectured every day in these estimates about money and how we always want money. Here's a case where the government has a strategy that's going to cost money. Just to give you a sense, 18 retinal specialists…. If you annualize the cost, that's $280,000 — the cost of Avastin — that they're going to use if it maintains its 68 percent share of this program.

Annualized, the cost that the government will be paying out for $280,000 — this is the drugs — is $5.5 million. I mean, that is an enormous markup. By the way, the profit on that, the cost of the drug versus what the government is paying for the drug per retinal specialist, is about $300,000.

I'm not criticizing the retinal specialists, all of whom are doing a good job. I'm criticizing the government for doing something that…. I think it's fair to say that paying $5.5 million for $280,000 worth of drugs is…. What's the word I'm thinking of? It doesn't make sense. It's wrong. It's silly. It's the wrong policy. It's working just as the government suggests.

Even if you take away this issue of conflict of interest and whether this is an incentive, doesn't the minister agree with me that paying $5.5 million for $280,000 worth of Avastin is ridiculous?

[1035-1040]
[ Page 2710 ]

Hon. K. Falcon: Again, before the government of British Columbia, our government, started providing public coverage for this wet version of age-related macular degeneration, it's important to recognize that retinal specialists…. These are the individuals that did the vast majority of the retinal injections that were being done and were being privately paid for by the individuals receiving them. That was before our government stepped in and said: "No, we're going to cover that cost so there is no cost to the patients."

Prior to that, what happened is that the retinal specialists were charging patients between $300 and $375 for the Avastin injections. Now, the professionals within our ministry said: "Okay, we have to figure out a fee arrangement for the drugs Avastin and Lucentis." I'll just use those two for now, because Visudyne is really out of the picture in terms of its use and its pickup by the retinal specialists.

In the case of Avastin and Lucentis, the member is right to point out that Avastin is a cheaper drug — absolutely no question. In fact, we know that Lucentis is much more expensive. It can cost between $650 and $800 per treatment. We also know that we want to make sure that the retinal specialists, when receiving their fee schedule, are able to make the appropriate treatment for each of their clients depending upon what the evidence and the eye health of that particular client requires.

Now, as I said to the member earlier…. The member believes that Avastin will deal with all of the problems. That appears to be the assumption that the member makes. As I have tried to impress, there are, I am advised, some cases where Lucentis is the appropriate treatment, and those are decisions that are appropriately made by the medical specialists.

So when the fee was being contemplated by the experts and the professionals within the ministry — obviously not by this minister but by the people within the ministry — they advised me that they determined what the fee per treatment should be, based upon assumptions of use for each drug, developed in consultation with the specialist. The idea was that there was likely going to be, I think — or they thought, perhaps initially, that it might be likely that there would probably be — a 50-50 kind of split between the usage of each of those drugs.

As the member knows and as we pointed out, the usage, in fact, is different. It's 68-32 in favour of Avastin, which appropriately informs, again, those in the ministry that have some expertise in this area, where they are now sitting down with the retinal specialists and the Provincial Health Services Authority to look at the fee use, in terms of the evidence now of utilization and what is happening out in the real world, to ensure that the fee is appropriate for its use.

[1045]

But, Member, I think that, again, you must recognize that Lucentis is a much more expensive drug, but it is an appropriate drug for many of the individuals that suffer from the wet version of age-related macular degeneration. You want to make sure that you have a fee schedule that will allow retinal specialists to make the appropriate decision based upon the individual situations, and often the unique situations, that present to these retinal specialists in their offices.

A. Dix: I know that being obtuse is sometimes an advantage for members of the executive council. But, really, I have said repeatedly that I think Lucentis should be covered. I've said that repeatedly. I'm asking the opposite set of questions, and the minister, I think, knows that. We'll just move on through that.

He says that we should set the appropriate fee schedule. What you do is you pay for the service, which is the injection. The ministry's policy is that they pay equally for an injection of Lucentis and an injection of Avastin — that you pay the same for the administrative costs that are associated with that. That's covered by the 132, according to the ministry. Then you pay the cost of the drug. I mean, what's complicated about that? If you pay the cost of the drug, then you're leaving it to the retinal specialist to make the decision.

The minister is suggesting that there's no incentive, no financial incentive, being given here — that the decision of retinal specialists to choose the drug approved for this purpose by Health Canada 32 percent of the time and to use the drug not approved by Health Canada 68 percent of the time has nothing to do with the fact that the government is paying $5 million over the value of the drug to retinal specialists to use Avastin. That's what they're saying.

I'm saying to the government that they should absolutely maintain Lucentis — that, absolutely, that option should be…. I've met with several patients all over British Columbia who say that they've had bad experiences with Avastin. Now, that may or may not be true. I'm not quarrelling with the expert decision by the doctors to offer both. I'm just saying that you don't….

I'd like the minister just to explain to me what logic there is behind overpaying for this drug so dramatically, what logic there is in a time of scarce resources.

If you take the 20,000 injections the minister talks about and you multiply that by $530 per injection, you get approximately $10.6 million for the program. That's what you get. Of that $10.6 million — believe it or not — half of that, according to what the government is doing, is overpayment for Avastin. Can you believe it? Of a $10 million program — half of the money they're doing. I'm just asking why that would make any sense to anybody — this decision by the government to dramatically overpay for the one drug. That's what they're doing, to the tune of….

There are only 18 retinal specialists. We'll come to this question in a second, because many other people in the province actually get reimbursed for giving these
[ Page 2711 ]
injections but aren't qualified to be part of this government program — ophthalmologists in Vernon and other places. We'll get to that in a second.

Can the minister provide a single explanation as to why half of the cost of this program — $5.5 million minus the $280,000 cost of the Avastin, so $5.22 million of a $10.6 million program — would be overpayment for the drug Avastin and why that would make any sense? Why would any government do that? Can the minister provide any defence for what seems to be a ludicrous public policy that wastes money?

If you didn't do this, you'd be able to use that $5 million, potentially, to even provide more injections. Why not simply pay the cost of the drug and then pay the cost of the service to inject the drug, which is what you would do in every other business?

Hon. K. Falcon: Again, here's the member trying to oversimplify something and missing the whole point — totally missing the whole point. You know, I've tried to patiently explain to the member that the cost of the Lucentis drug is much more expensive than the Avastin. Now, the member will say: "Well, that doesn't care…. Just use Avastin."

But we've been trying to say to the member that we want to preserve the ability of the retinal specialists, these highly trained medical professionals that have a lot more knowledge than that member, to provide options for their patients that are dealing with the wet version of age-related macular degeneration.

[1050]

Member, I'll try and explain it as simply as I can. When they use the Lucentis under the fee schedule, they lose money. When they use the Avastin, they can make money. So you try to have a blended fee that provides the options for both drugs to be utilized as appropriate, depending on the individual patient, to ensure that the retinal specialists are going to be held whole overall — particularly given, as I mentioned to the member, that part of their fee includes them absorbing additional costs.

The costs of procuring the drug through the pharmacy, the processing costs, the costs of their travel to go up to these regional centres to make sure that the retinal specialists can provide this service for patients right across the province of British Columbia — all of that is reflected in that fee.

It is not a waste of money to ensure that retinal specialists can provide the appropriate level of care and the appropriate medicine for their patients as they deem clinically appropriate. That may be a waste to that member. Maybe in the communist world they say: "You only get one choice, and that's all you're going to get, Doctors, and that's it. Go service, and do what you can." But that's not how it's going to work in our world.

Our world will be driven by appropriate medical foundation to the drugs that are being used and an appropriate fee, a reasonable fee, that may need to be adjusted as evidence comes in. I said from the beginning to the member that we don't pretend, and the professionals in our ministry don't pretend that they get everything perfect right from the get-go. It has to be informed by the usage and by what they're learning through the program.

The member is trying to suggest that we should have a fee schedule that will ensure that Lucentis is never utilized. That's really what the member is suggesting. That would go against what the retinal specialists are advising us. As the Minister of Health, the defining question will be…. According to that member, I should step in and say: "Stop that fee payment right now. We want them to have a fee schedule that ensures that they're not using Lucentis."

That's the reality, Member. Whether you want to admit it or not, that is the reality.

The Chair: Minister, through the Chair.

Hon. K. Falcon: That is the reality. What we are saying, based on the medical professionals within our ministry, is that we will try to come up with a formula that reflects the fact that the retinal specialists are advising us that they need to have the option of both of those drugs available for their patients.

The one drug is very expensive, dramatically more expensive than the Avastin, and the fee schedule has to reflect not only the fact that they lose money when they're utilizing the Lucentis option but also the fact that there are a number of other costs that are going to be involved for them — the travel costs; the procurement costs that I talked about; all the other costs associated with monitoring the program and making sure that as we monitor the program, the staff have the appropriate information to judge on a go-forward basis, as the information comes in, whether that fee needs to be adjusted or not.

I just mentioned to the member that they're having a meeting as early as tomorrow to speak with the retinal specialists and the PHSA to review that to determine whether that fee can be tweaked based upon what we now know on the utilization of the drug. But for the member to suggest that it is as simple as just making sure that we have a fee that incentivizes the use of Avastin and eliminates the prospect of the use of Lucentis is wrong…. We won't be doing that.

A. Dix: Well, that is ludicrous and, frankly, distasteful. What I am saying is that the minister is incentivizing Avastin by dramatically overpaying for it. That's what he's doing, so for him to suggest that it's somehow the other way around is ludicrous. The minister is saying….

Interjection.

The Chair: Minister.
[ Page 2712 ]

A. Dix: Sorry. The minister had his share. I'm….

Interjection.

The Chair: Minister, you will have the opportunity to respond again when the member has finished his statement. If we can just continue with the question.

A. Dix: Well, the minister is funding Lucentis, and I support that. I'm saying that the $398 fee schedule was set up to cover the costs of Lucentis, so why not have a system where you pay for the actual cost of the drug? That would mean….

What the minister has is a system where he is, essentially, dramatically overpaying for Avastin to have people use Avastin. He's doing the opposite of what he's suggesting in this House. He's trying to reduce the use of Lucentis. That's the purpose of this.

[1055]

What other possible reason would you have for paying $398 for a drug that costs $20? That's their policy. That's the policy that if you're against it, the minister calls you a communist. That's the policy. It is absurd what the minister is doing, and no amount of bluster will get away from the fact that he's paying 20 times the price for this drug. It is absurd.

It's very simple. To the minister: why not pay the price of Lucentis for Lucentis and pay of price of Avastin for Avastin and pay the same price for the service for both? That's how you stop the incentivizing of the process. That's how you let retinal specialists make the right decisions for the right patients. You pay for the cost of Lucentis. You pay for the cost of Avastin. You pay the same fee schedule for both. That's the way you do it. That's logical.

What's not logical, as I say…. The minister hasn't responded to this, because he can't respond to this. It's not logical to pay $5.5 million for $280,000 worth of drugs. It's not logical. It's not logical no matter what your ideological world view is, since the minister seems to be sent off on a cavalcade of discussion of that.

It's very simple. A $10.6 million program based on 20,000 injections — $10.6 million program. Why is $5.2 million of that going for a subsidy to encourage people, the opposite of what the minister is accusing me of, to use Avastin?

Hon. K. Falcon: Again, the member doesn't get it at all. I love the member's sort of, you know, communist world where you take away all choice. You take away all choice and just say, "This is what you must use" — because that's what the member is talking about. I'll try and break it down even more….

Interjections.

The Chair: Member.

Minister.

Hon. K. Falcon: I'll try and break it down even more for the member.

The Chair: Minister. Minister.

Member, you have the opportunity to make comments when you pose your questions. Please listen to the answer. Thank you.

Hon. K. Falcon: As I mentioned, the original fee that was put together for the treatment of AMD was based on the assumptions of use for each drug, the assumption being that the retinal specialists…. Again, informed by discussions with the retinal specialists, it was that there would be approximately a 50-50 use of the drugs.

Having said that, let's look at what it costs on a per-injection basis for each drug. For Avastin the administration cost is $300, the drug and the processing costs per injection are $45, and the total is $345. The fee, of course, of $530 would cover that cost for the retinal specialist with some extra. For Lucentis the administration fee, again, $300; drug and processing costs, $415. So the total, Member, is $715.

You've got a total cost on the Avastin side of $345 per injection and a total cost on the Lucentis side of $715. The fee of $530 was a blended fee to cover off two different fee schedules.

On one, we know that based on the fee we're paying, they would be losing money. Obviously, if it was just on that basis alone, they would never use the Lucentis option, even though many of the retinal specialists believe, in their professional experience and their considered judgment as experts in the field, that Lucentis is an important option for the treatment of this disease for many of their patients. We are not going to eliminate that option for them.

The $530, as I say, was predicated on the best estimate by the medical professionals within the pharmacy division of the Ministry of Health, based on consultation with the retinal specialists as to what the appropriate fee would be to ensure the fair utilization of these two options for the treatment as recommended by retinal specialists.

As I said to the member, they are now reviewing that based on the actual utilization. That is appropriate because, again, it is informed by the experience that we now know in terms of the utilization, and it will be further informed by the discussions and the meetings that we have with the retinal specialists.

That is a very important point that the member keeps ignoring. The Lucentis costs more, and they will lose money by just using it based on the fee schedule we're paying them.

[1100]
[ Page 2713 ]

If they want to do the Lucentis option under the fee schedule we're paying them, the retinal specialists will lose money, particularly when you add in all the other costs that I've talked about and explained in detail to the member — the travel, the monitoring programs, all the rest of it.

You've got to have a fee schedule which fairly recognizes that where they will lose it in providing the appropriate medical treatment — i.e., using Lucentis — to some of their clients, they also, on using the Avastin for some of their other clients, will receive extra to reflect the fact that they're losing money on the Lucentis side of the equation.

Admittedly, when they come up with that figure, that figure is their best estimate based upon the assumptions they made that were predicated on consultations with the retinal specialists. Now that we're informed by what the actual utilization is, they have another meeting, as appropriate, with the retinal specialists and the Provincial Health Services Authority to determine whether or not the fee needs to be adjusted based on the utilization as we now know it.

At the very, very core of this, where I disagree fundamentally with the critic, is the fact that the Lucentis option needs to be available for those retinal specialists. Why? Not because the minister says it needs to be made available and I'm telling the professionals within the ministry to make it available, but because the retinal specialists believe that in some of their patients that is the appropriate treatment — more appropriate than the Avastin.

You certainly don't want to deprive them of the ability to have that choice by ensuring that the financial disincentive is so great that no reasonable person could reasonably consider doing that when you factor in all the other costs that they also have to consider as part of delivering this service to British Columbians across the country.

The Chair: I'd remind both the member and the minister that while both are passionate about this subject, to temper their language in their discussion.

A. Dix: Well, hon. Chair, I think it's clear. What's unique about British Columbia's policy, contrary to what the minister says, is that British Columbia's policy is a policy, and the effort to do this is not problematic.

At the very beginning — my first question, then my second question, my third question, my fourth question — I talked about Lucentis and its value. I think, clearly, if these drugs were offered equally, then retinal specialists would choose the drug offered by Health Canada more than the one not approved by Health Canada. I think that's clearly the case.

[L. Reid in the chair.]

Because the government has decided in its wisdom to dramatically incentivize Avastin, we've gone the other direction. Most other jurisdictions in Canada just cover Lucentis. This is the fact of the matter. It is the height of nonsense for the minister to suggest that his policy, which is all about making people use Avastin…. We can argue whether that's good or bad. There are lots of groups out there, including the CNIB, who don't like what he's doing, but we can argue about that.

His whole policy is about using Avastin. That's his whole policy. That's the purpose of all of this — to get retinal specialists to use Avastin. In fact I understand, and this may or may not be the case, that the overall usage of Lucentis in B.C. has gone down since they started the program, which is fascinating.

We don't want to get stuck on the fact, because the minister is obviously not pleased with the fact that overspending is happening in his ministry on this question. He's embarrassed, I guess, by the fact that his whole policy is to drive people away from using Lucentis, so he wants to accuse other people of denying people the right to Lucentis, which is, of course, the opposite of what is the case.

We'll move on and just ask the minister about the decision to limit access to the drug to the 18 retinal specialists. The minister will know — and this is a real problem; this is why there are clinics around the province — that the retinal specialists…. I believe there's one in Kamloops if I'm not mistaken. Almost all the rest were in the Lower Mainland, with maybe one or two on Vancouver Island in the Victoria area.

I just want to ask the minister. It's my understanding that if an ophthalmologist in Vernon or in Cranbrook or somewhere who is not a retinal specialist performs the injection, he would be reimbursed for that by MSP — I may be wrong on that — but the cost of the drug wouldn't be reimbursed.

I guess I want to ask the minister that if these controls exist around the overall usage, why it doesn't make sense…. Why would a doctor in Vernon, who has been providing these services to people in Vernon for years, not be allowed to offer the drug under this program?

[1105]

Hon. K. Falcon: First, on the member's first point with regard to the previous discussion we were having, the answer is no. It is actually to get the retinal specialists to use the appropriate drug — the appropriate drug that the retinal specialist believes is appropriate for their patient — whether that be Lucentis or Avastin.

I just want to get that on the record to make sure that the member doesn't in any way, as he attempts to always do, misconstrue or, at least, provide his own interpretation of what government is doing.

With respect to the utilization of the subspecialty of ophthalmologists called the retinal specialists, the ori-
[ Page 2714 ]
ginal program, which was the Visudyne program, was also undertaken by retinal specialists. We are asking to have the specialists make sure that they're current in this — what is, I think, a rapidly evolving field. A retinal specialist provides expertise to perform retinal angiographies for diagnosing and monitoring the wet version of age-related macular degeneration.

It is the position of the experts within the ministry that these are very expensive drugs, and we want to ensure that the delivery of these drugs and the ongoing monitoring of the patient cohort is being undertaken and overseen by the subspecialists within the ophthalmology field.

In terms of where the retinal specialists are located, the member is correct that there is a preponderance of the retinal specialists in the Lower Mainland. It's one of the reasons why, as part of the program, there's a requirement for the specialists to travel to regional centres throughout the province, to provide, essentially, clinics for the patients that have the wet version of age-related macular degeneration. It makes the transportation of those patients to these retinal specialists easier — for them to receive those injections.

That is the information that my staff have advised me as to why it continues to remain in the purview of retinal specialists.

A. Dix: Just to take the case of the doctor in Vernon. The minister will know it, because he's received a 2,000-name petition from people in Vernon on this question.

We're talking about people who have, obviously, visual impairment issues. I mean, that's why they're getting the injections. Wouldn't it make more sense from a cost perspective if the government is in fact reimbursing the service, in that case by Dr. Fellenz, to have the program? I'm sure that all of the informational parts of the program could be attained.

Wouldn't it make sense, for example, for the Kelowna-Vernon area to have someone, one doctor, in the area — since the government obviously thinks that ophthalmologists are qualified — to do the injections? Wouldn't it make sense to have a doctor in that region and doctors in other regions available to do that?

[1110]

Wouldn't that make financial sense, and wouldn't that make sense in terms of the program? You would ensure that the very significant group of people in Vernon who need access to the drug, who got access to the drug beforehand and had to pay, don't have to travel to Vancouver or even Kelowna to get access to care that they could get in Vernon. And since the quality of care, by all accounts — and I think the minister would agree with that — is excellent in Vernon, why wouldn't that happen?

Hon. K. Falcon: Well, first of all, to the member's essential point. Yeah, that would certainly be politically…. I can tell you, that politically it would be much more popular for me to overrule the decision, in this case, of requiring retinal specialists to provide the service for that very reason. Then I could satisfy the people that wrote me letters and said: "Gee, we got an ophthalmologist, and we'd like to have them provide the service. Wouldn't that be great?"

I get the political pull of wanting to try and please the folks. But as Minister of Health, I do feel a sense of responsibility to try and listen to some of the expertise — and there is a fair chunk of it — within the ministry and be cautious about overruling decisions they've made in terms of what is the appropriate way of providing the treatment.

One thing that might help the member is that we expect that the same number of patients who were travelling to receive their injections prior to us implementing the program will need to do the same amount of travelling under the new program. It was designed in a way to minimize and limit the change for this patient cohort in terms of the requirement to receive their injections. For example, retinal specialists are travelling to the communities of Cranbrook, Kelowna, Nanaimo and Terrace to provide that opportunity for their patients to receive the injections.

Again, as to why we require retinal specialists to implement the program, the retinal specialists are a subspecialty of ophthalmologists that have additional training specific to the treatment of the eye. That includes the age-related macular degeneration issues. They also have expertise to perform retinal angiographies for diagnosing and monitoring the ongoing wet age-related macular degeneration disease in the eye.

It is the belief of the experts within the ministry that that is the appropriate way to inform and continue to operate the program. Does that mean it will never change? No, it doesn't. I think, as I said at the beginning, that this is a rapidly evolving field. Perhaps as we learn more about the disease, it may be that the experts within the ministry determine that it is appropriate to expand it beyond the subspecialty group of retinal specialists.

But at this time the information they provide me is that it is appropriate to continue to have the injections delivered by the retinal specialists in spite of, I know, the desire of many to have their own ophthalmologists deliver that service.

As I say, the retinal specialists are travelling on a regularly scheduled basis to regional centres throughout the province to ensure that it is made as easily available as possible — certainly consistent to the travel norms that people were undertaking prior to the public funding of the drug, which our government introduced.

A. Dix: I just want to clarify, because the minister is not saying that, say, Dr. Fellenz in Vernon shouldn't be allowed or isn't qualified to do the injections. I presume the minister agrees with me, because Dr. Fellenz in B.C.,
[ Page 2715 ]
consistent with his duties as an ophthalmologist, has been doing these injections for a number of years.

I have one patient here who has, in fact, received nine such injections from Dr. Fellenz. So the minister agrees, I presume, that Dr. Fellenz is qualified to make that determination to provide the injections, but not sufficiently qualified to qualify for payment by the government for the cost of that.

[1115]

I guess I wanted to ask him, because I asked him this question to begin with, if I go to Dr. Fellenz in Vernon…? Just so I understand it correctly, I have an appointment with Dr. Fellenz in Vernon, and as part of that appointment I get an injection of Avastin or Lucentis. Dr. Fellenz will be able to bill MSP for the cost of the visit.

Am I correct to say that the government is okay paying for the cost of the visit and okay paying for Dr. Fellenz's services, but their view is that he's not sufficiently qualified…? He's qualified to do the injections. He's qualified to prescribe the injections. He's qualified to do the injections for a number of years. He's just not qualified to receive the money. Is that the position of the government?

Hon. K. Falcon: The member is referring to a specific physician. Certainly, as I understand the nature of the member's question, I think he's asking me if I am therefore ipso facto saying that that individual doesn't have appropriate qualifications. Of course, that's not the case.

I'm sure the doctor is eminently qualified in many areas of ophthalmology, but the issue, Member, is that…. Maybe a step back is appropriate.

Before government ever brought in this program, 97 percent of the treatments were being provided by retinal specialists. When we decided that we were going to provide coverage for this and not have a situation where British Columbians were, as they were prior to government bringing in this program, paying out of their own pocket for these injections to take place, we also made a decision to enhance the program to now include three drug options.

The decision of the professionals within the ministry was that we wanted to have the very best individuals, the highest-quality specialists, to operate that program. We were going to be asking these retinal specialists to make decisions as to what the appropriate treatment and the appropriate drug were for that particular treatment. The staff advised me that in determining that, they determined that the subspecialty group of the ophthalmologists, the retinal specialists, were the appropriate group, given their additional and higher level of training, to oversee those decisions.

Now, as I say, Member, that doesn't mean that that will always be the case. Again, I do think it's something that…. You know, this is a field that continues to evolve. New evidence, no doubt, will continue to come forward, and that may in the future change how the program gets delivered.

Again, the experts within the ministry determined that for the expansion of our program we wanted to ensure that retinal specialists were the…. It was believed and is still believed that they are the appropriate highly trained individuals to make the decisions as to the appropriate treatment for these particular patients and the appropriate drug for the treatment of these particular patients.

[1120]

A. Dix: My question was just technical. If you go to Dr. Fellenz in Vernon and you get an injection of Avastin — which has been going on for a number of years — as many of his patients do, or Lucentis, in fact…. There are patients who have talked to me in Vernon, when I met with them there, who have received both from Dr. Fellenz. Does the government pay Dr. Fellenz for the cost of the visit under MSP?

Hon. K. Falcon: The answer is yes.

A. Dix: I just want to make this case to the minister. Here we have a doctor, an ophthalmologist, who is highly qualified — for what it's worth, his patients speak very highly of him — who has been providing the drug before this program and after this program, who is paid to do these injections for his services, as are the doctors who are in the program, the 18 retinal specialists.

The Ministry of Health has no issues — because there are regulators in this field, with the college and everyone else — with him getting paid for providing the services, for prescribing the drug.

I think this is the case I want to make to the minister. The case of someone, especially someone who has shown a wide experience over a period of years with these drugs…. That would be an innovation, because I know that the minister is not against change, that the minister might consider in this case. Here we have a case where the ministry is effectively supporting that.

I don't know if the minister needs to respond to that. I was going to move on to another topic. I know that the minister will be disappointed, but unless the minister wants to respond to that….

I'm just making the case that it is, I think, illogical. If the government really thinks these injections should be limited to the retinal specialists in the way they suggest, then they should take that action. If they don't, they should consider — especially in the case of doctors such as Dr. Fellenz, who have an extensive experience with this — that change in approach. That's what people in Vernon are asking the Minister of Health.

Perhaps the Minister of Health could consider that in connection with my next set of questions to him. They're around the Alzheimer's drug study that was launched by
[ Page 2716 ]
the government in October 2007 and is continuing on, obviously, in the budget year that we are considering. In particular, I wanted to ask the minister whether the takeup of the study is more or less than what was anticipated in the government's opening press release.

[1125]

Hon. K. Falcon: The Alzheimer's drug therapy initiative was launched, as the member correctly notes, in October 2007 to provide us with some evidence-based coverage of three drugs that we were now going to be publicly funding for the benefit of Alzheimer's patients — Aricept, Reminyl and Exelon, for individuals with mild to moderate Alzheimer's disease.

The initiative included both a physician education component and a research component along with, obviously, the Pharmacare coverage of those three Alzheimer's medications.

The initiative arose as a result of a collaboration between our ministry, the Alzheimer Society of British Columbia and experts in dementia and geriatric care — researchers, clinicians and individuals that are affected by Alzheimer's disease. I'm informed that the results of this unique drug coverage with evidence development will inform Pharmacare coverage policy, and they expect to be completed in March of 2012.

A. Dix: My question to the minister was in terms of participation in the study, because the experience that many patients and their families have had, I think, is that it is difficult to get doctors to participate in the study. My understanding is that originally, initially it was hoped that 300 doctors would be enrolled in the study. Currently significantly less than that are enrolled.

I wanted to ask the minister how many are enrolled and whether the difficulties in the paperwork of the study are limiting people's access to the drug in this case. That's the question. Is the study doing what it's expected? Is the government spending what it would have expected to spend? My understanding of the study is that many people who are in the lowest income categories of Pharmacare still end up paying for the drug because they are having difficulty getting into the study.

I'm just asking the minister: what's the rate of participation by doctors in the study? What is the expenditure on the drugs, and is it more or less than the total expenditure expected when the government committed $70 million to the drug study on October 4, 2007?

[1130]

Hon. K. Falcon: Currently, I'm advised, we have 8,741 individuals who are granted initial coverage and are part of the pilot program, I guess we would call it. And 6,000 of those were approved for renewed coverage.

The cost of the initiative was budgeted at $77 million over three years — $2.4 million dedicated to research; $400,000 awarded to UBC to deliver physician education. Industry was expected to provide $8 million in drug rebates.

Actual drug costs to date for the initiative are below budget. Expenditures in '08-09 were $4½ million against a drug budget of $23.4 million. I asked my staff about that. They advised me that there was not a strong uptake from physicians initially in the program. So enhancements to the initiative were added.

These enhancements included a 15-month extension in the coverage period — from December 2010 to March 2012. Coverage was expanded to include extended care hospitals, so that we get more patients from the extended care hospitals. An additional drug was added. It's a very long name. Rivastigmine transdermal patch was also added in compensation to physicians participating in the initiatives research program. The cost of all those enhancements will be covered under the existing budget.

[1135]

A. Dix: I just recommend to the minister, and I want to make the suggestion…. One of the problems I see…. I've talked to patients that are characterized under the rules of Pharmacare as low income who are having difficulty getting access to the drug. I guess my request, since clearly, it's being underspent….

My sense, my understanding is that only a minority of the amount of money spent on the drug in B.C. — remember, it's primarily, though not exclusively, seniors — is being covered under the program. That suggests that there are many people who are just buying the drug, getting it prescribed by their doctor, being told, "Go out and deal with it," and they go out and buy the drug.

Given that this is a highly reviewed program — I'm very pleased to hear that changes have already been made — I would just like to ask the minister to consider looking into this, especially the low-income people whose families, I think, may be…. The minister will know that this can be heartbreaking — you know, the reasons why people have to take the drug. I wonder if the minister just would agree to take another look at that subgroup of people, especially low-income people who are buying the drug, who are not in the program because they can't seem to get access to the program.

Hon. K. Falcon: In speaking to my staff, although we have communicated the clinician information to practitioners, apparently on numerous occasions, obviously if there are still people out there having that experience, that's not good. I think the first thing we should all do is, if any of us in this chamber are aware of individuals that are wanting access to this drug, we need to make sure that they contact their physician and let them know they want to be part of the research program that's underway, because we would like them to be part of it, actually. I appreciate the member raising that issue.
[ Page 2717 ]

We certainly don't want them to go an alternative route when they've got a route available and when we're actually looking for more people so that we can clinically determine the efficacy of the drugs that are being covered. I will speak to staff, once we're done here, a little bit more about whether we can find other ways to make sure that GPs know that that is an option available and that they try to make sure their clients are aware of that. I thank the member for bringing that to my attention.

A. Dix: I agree. I think this kind of study is one way to deal with really challenging issues around whether drugs should be approved or not. I don't suggest, by the questions, that I'm opposing the study. What I'd like to see are more participants in the study. I'd be happy to join the minister with any effort to do that.

I think what's happened with the study is that there's a little bit of…. For many doctors, these are issues that are often part of the discussion and even the fee negotiation. Many doctors feel that the paperwork involved in the study is onerous. I think some of those patients, perhaps people who have gone to their doctor and have just been prescribed and felt discouraged…. That group of people is the group maybe we need to talk to and see if we can't find a way around that.

[1140]

I want to ask the minister about a program near and dear to my heart: the insulin pump program. I just want to ask him, really, the same question. What's the takeup? He will know that in Ontario the takeup was less than anticipated. Now, we had the Ontario experience when we went ahead in B.C., but what happened in the Ontario experience was that the takeup for children was less than anticipated, and that allowed the government to offer it to adults. I know — and the minister would have been contacted as well — many adults who would like to see similar access.

I just want to ask the minister what the takeup has been and whether that opportunity within the existing budget for the program might be available in the case of the insulin pump program.

Hon. K. Falcon: I appreciate the question from the member. The great thing about this ministry is that I learn a lot as I go along too. This is in an area that I had virtually no knowledge, and now I'm learning, so that's great.

In '08-09 the Ministry of Health Services spent more than $61 million on diabetes medication and supplies throughout the Pharmacare program, up from $38½ million in '03-04 — so a 58 percent increase. That suggests that we continue to see a growing population, which obviously is a concern.

I'm advised that Pharmacare covers 12 effective therapies for the treatment and management of diabetes, including nine oral therapies and three classes of insulin — short-acting, intermediate-acting and long-acting. The insulin product coverage consists of vials, cartridges and pens. Pharmacare also provides coverage for supplies, including needles, syringes, blood glucose test strips, insulin pumps for children and insulin pump reservoirs for children and adults.

I understand we introduced the insulin pump program for children in November of '08. I'm advised that the insulin pump costs range from $6,000 to $7,000. That's for each pump, and they last for approximately five years.

Staff don't have the takeup. At least, we don't have that with us. We're going to try and get that by the end of estimates, but we don't have it here.

[1145]

A. Dix: I won't belabour the point. I think it's a really important program. I gave the government full credit when they introduced it. I was there. It was myself, the Premier and several hundred other people. He was at the front; I was at the back, but it still was good. It was still good because we had been working for that coverage for a number of years, as with the minister's predecessor.

What I'm suggesting to the minister, when he reviews that, is that the process was children first. That's appropriate, and it's also appropriate from a diagnostic perspective. I don't want to overstate my knowledge, but I'm a diabetic, and I take these drugs, so I have a feel for that. I think it's really important to offer it for children. That was important too.

There are some adults, a smaller category of adults…. Those of us doing it one way for decades are less likely to change, but there is a category of adults for which this would be very helpful. So if there's underutilization in the children's program…. That's what happened in Ontario. They were able to offer it more, and that's what I'm suggesting that the minister consider as he looks at these issues over the next little while.

The other issue that I want to talk to the minister about…. I just put it forward because the minister will know there's an epidemic primarily of type 2 diabetes. Type 1 diabetes, which is my kind, is also increasing, but those costs have been there a long time, and the increases are small.

I wonder if the minister would consider and think about advocating to his cabinet colleagues a committee discussion on those questions, a committee referral, because there are significant questions. One of the specific questions that concerns me is that it's very costly to the Pharmacare budget, probably in the $30 million to $40 million range, to cover insulin test strips.

It's less costly, but I would argue — at least, from my perspective — more useful to have hemoglobin A1c tests, which tend to be underutilized in the system. They provide, essentially, a three-month average of blood sugar levels. They're incredibly useful in terms of adjusting insulin levels.
[ Page 2718 ]

So those kinds of questions, I think, are really important questions to the health care system, because we're talking about hundreds of millions of dollars overall in expenditures. Is that something that he might consider putting out — those kinds of discussions — to a committee or recommending to his cabinet colleagues that they be the subject of a discussion of a select standing committee?

Hon. K. Falcon: In discussing that with staff, they would certainly agree with the member that that's something we'd be very open to looking at. It seems sensible to me, certainly on the face of it. So, yes, we would be very open to having that discussion and actually looking more deeply into what the benefits are. I suspect that the member's sense of what the benefits are…. They ring true to me. So that's something we will definitely look into.

A. Dix: The minister will know that we lost really a great British Columbian a couple of weeks ago in Don Rix. I think all of us in this House, regardless of our point of view, understand his many contributions to B.C. society. He was very generous with members on all sides of the House with both his time and his ideas.

The minister will know that Dr. Rix and his company had made a number of proposals to government with respect to diabetes. I just want to know, because I think some of those proposals were quite imaginative…. Perhaps, because maybe they hadn't heard, we could leave the minister to answer it later.

Just to say that I think it's appropriate, in the Health estimates taking place a few weeks after, to acknowledge the remarkable role that Dr. Rix played in both public and diagnostic testing and in health care in general in B.C. and how much all of us will miss him in this House.

[1150]

He had a specific proposal that I think he made to government. He briefed me on it the last time I saw him, strangely enough, which was in June at his offices. I don't know if the government could maybe get back to me — it wouldn't be something that would be in the estimates book — to see where the government is at in its thinking. Part of it was insuring the hemoglobin A1c tests and other things, to increase uptake on those tests so that patients would have better control of their diabetes.

I have a question for the minister about the therapeutics initiative. As the minister will know, the initiative gets funding from the ministry. I wanted to ask the minister what that grant was this year and whether the government continues to plan to maintain and increase that grant as may be appropriate, especially given — we've seen it again and again recently — the remarkable accuracy of the TI's assessment of drugs in British Columbia.

I want to ask the minister where he envisioned the state of the funding today and where he envisioned it was going to be. I understand that the minister or the minister's staff is meeting with groups on December 1 as the next phase of the pharmaceutical task force. Perhaps the minister, in the few minutes remaining to us before the noon hour, could tell us where he was at on the TI, where we're at on the TI's grant and where he is on the pharmaceutical task force initiative.

Hon. K. Falcon: As the member knows, back in the spring government launched a pharmaceutical task force which made a series of recommendations. Among those recommendations was the establishment of a different process for having rigorous review and approval of drugs. I'm sure that's something that after lunch we will probably spend some more time having a discussion about.

Noting the time, I move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The committee rose at 11:54 a.m.

The House resumed; Mr. Speaker in the chair.

Committee of Supply (Section B), having reported progress, was granted leave to sit again.

Committee of Supply (Section A), having reported resolutions, was granted leave to sit again.

Hon. I. Chong moved adjournment of the House.

Motion approved.

Mr. Speaker: This House stands adjourned until 1:30 this afternoon.

The House adjourned at 11:55 a.m.

PROCEEDINGS IN THE
DOUGLAS FIR ROOM

Committee of Supply

ESTIMATES: MINISTRY OF FINANCE

(continued)

The House in Committee of Supply (Section A); H. Bloy in the chair.

The committee met at 10:10 a.m.

On Vote 29: ministry operations, $85,227,000 (continued)

The Chair: Before we start, I want to remind everyone in the gallery that there's no use of any hand-held cellular
[ Page 2719 ]
telephone device while you're there. It's an honour system, and it's the same rules that apply in the big House.

At no time, for everybody in this committee room, is there allowed to be voice use of a cellular phone. Private members and ministers may use BlackBerrys and hand-held devices while they're in their seat, along with their staff that are accompanying them.

Hon. C. Hansen: Yesterday the opposition Finance critic asked some questions about the financial hardship property tax deferment program, and I undertook to get some of that information back to him for today.

The program is a two-year program running for the calendar years of 2009 and 2010 — property tax years — and it was estimated at the outset that up to 20,000 homeowners might apply for this program. That was an estimate, and there was really no experience that we've had with comparable programs like this or, indeed, comparable programs in other jurisdictions that we could look to, to base an estimate on. But that was the estimate that we had at the outset.

To date the province has received 1,040 applications. The member is correct in his comments about additional software work being done to facilitate this program. There was over this last year about $1.1 million of work that was done by EDS. It was an extension to their existing contract.

That work was for changes not just to accommodate the tax deferment program, but also changes to the property tax deferment program for seniors that has been in place for some time and will continue long after the economic hardship program terminates. So the software changes in total affected both programs, and only a portion of the software changes were to facilitate the financial hardship property tax deferment program.

B. Ralston: Thank you to the minister for those responses.

The minister mentioned in his response that only a portion of the $1.1 million, approximately, in costs to develop the software necessary to administer the program was required for this specific hardship deferment program. Can the minister give an estimate of an allocation between the previous continuing program and this new two-year program?

Hon. C. Hansen: No, we do not have a breakout of what was specific to the financial hardship program. The work that was done for the software pertaining to the seniors program, while it would not necessarily have had to have been done last year, was something that was felt needed to be done at some point in order to fix some of the glitches and to ensure that the software was operating as effectively as possible.

So the total amount for all dimensions of the project was $1.1 million, but I don't have numbers that separate out what was specific just for the financial hardship program.

B. Ralston: Could the minister undertake to request that allocation and report back in writing within, say, 14 days?

Hon. C. Hansen: That would be a very extensive piece of work. It would actually involve going back through all of the work orders and all of the changes and trying to make an assessment as to what particular element of that work pertained to the financial hardship program. So I guess it technically could be done, but it would be very expensive to do.

B. Ralston: Well, obviously I don't want the government to incur unnecessary expenditure, but I suppose the point is that I think it would be useful in assessing the program to know what cost was required to develop the software to administer the program. So it seems that if the billing methods of EDS in this respect are opaque, the taxpayer is the loser in that respect.

[1015]

Having said that, I'll move on. Perhaps, if the minister has a further comment, I'll await it in response to my next question as well.

The ministry, or this section of the ministry, also developed a carbon tax program, a carbon tax application program. Can the minister advise us who was hired by the government to develop the software for this tax revenue–related program? How much did it cost to create?

Hon. C. Hansen: There were some software changes and changes to the existing system as a result of carbon tax issues. That is administered by EAS as well, and the changes that pertain to carbon tax were part of other software changes. It was part of more comprehensive software changes that were made to our tax collection software systems that they administer for us.

B. Ralston: I gather from what the minister is saying that neither the changes to the existing seniors property tax deferment program, the new hardship program, nor the revisions to the carbon tax program…. None of these contracts were put out to competitive tender. They were all part of the EDS Advanced Solutions ongoing relationship. Is that correct?

Hon. C. Hansen: That is correct. The original relationship with EDS Advanced Solutions was part of a competitive process that led to that contract. In the contract are provisions for changes that government may need to commission from time to time. These software changes were done in that context.

B. Ralston: Were there any additional costs required to operate the software in any of the three cases that we've spoken of?
[ Page 2720 ]

Hon. C. Hansen: There were some operating cost impacts. They were very minimal.

B. Ralston: By "minimal," in the context of a $39 billion budget, what are they, please?

Hon. C. Hansen: On the property tax deferral programs, I understand that we're talking about less than $100,000.

B. Ralston: In November 2007 there was a major privacy breach, and data was sent out of the province to the United States by an EDS subcontractor. The agreement requires in section 15.12 that either party notify the other when a breach has occurred.

[1020]

Given that, have there been any further breaches since November 2007? If so, were these violations that put the privacy of British Columbians' personal information at risk?

Hon. C. Hansen: There have been other very minor incidents, all of which have been reported to the Office of the Privacy Commissioner. These are reported in the Ministry of Finance's annual report of the revenue services of British Columbia, which is on our website.

If I can just quote from the report that is on the website, it says: "Out of 2.8 million customer contacts, seven incidents where personal information was misdirected due to human or technology error were fully addressed in 2008. The ministry notified affected individuals and the Office of the Information and Privacy Commissioner."

B. Ralston: I thank the minister for that. Did those incidents trigger any penalty provisions under the agreement?

Hon. C. Hansen: No, as it was not a material breach.

B. Ralston: Can the minister advise where EDS Advanced Solutions is storing records, software and work applications? I understand that they're operated out of the province, in Alberta.

Hon. C. Hansen: There are two places where data is stored: Victoria and Calgary.

[1025]

B. Ralston: Is there a requirement that the government give written authorization for all of this move of data outside the province? Can the minister confirm that, and if so, has the ministry given its written authorization to make that move?

Thirdly, are those moves of data in compliance with the Document Disposal Act?

Hon. C. Hansen: Yes, there are written agreements as to where data can be stored. There is no restriction in terms of where in Canada data can be stored, but there are restrictions on data being stored outside of Canada.

B. Ralston: Pursuant to the contract and the programs that EDS Advanced Solutions is operating, is there any data at present stored in the United States?

Hon. C. Hansen: No.

B. Ralston: Can the minister provide a list — and I appreciate that the minister may not be able to respond here immediately, but something that may be provided in writing after estimates are concluded — of capital projects that EDS data services has undertaken on behalf of the government that flow from its revenue collection contract?

Hon. C. Hansen: There's no time like the present. I will share with the member now in terms of the approved capital projects with EDS for the 2009-2010 fiscal year.

There is the oil and gas net profit royalty program, $625,000. We've got the carbon tax rate change, $150,000. The TACS, which stands for the tax audit and compliance system, is $300,000, and the ASD contract management is $425,000. The property tax deferral project, $950,000. I know that I mentioned earlier the number of $1.1 million, I believe it was, but we believe that this $950,000 would have been the portion of it that would have applied specifically to this fiscal year that we're in currently.

B. Ralston: Can the minister advise — I think I know the answer to this question, but just for the record — if any of these contracts were awarded to EDS Advanced Solutions as a result of a competitive bidding process, or did they all flow from the ongoing contract?

Hon. C. Hansen: The master contract, the original agreement with EDS Advanced Solutions, was subject to a competitive tender process. These projects flow from that contract and are changes that were requested that are consistent with the master contract.

[1030]

B. Ralston: Speaking of the contract in general terms, were there minimum staffing levels agreed to when the agreement was first negotiated?

Hon. C. Hansen: I believe that there are minimum service levels, but we do not believe that there are specifically minimum staffing levels.

B. Ralston: Can the minister explain that choice? Is that simply a desire to leave that to the prerogatives of the management of EDS Advanced Solutions, or is there some other reason why that wasn't done?
[ Page 2721 ]

Hon. C. Hansen: Well, I guess basically what we contracted for was the delivery of a service. It is the service provider that needs to determine the most effective and efficient way of meeting the service requirements that government expects, and that's what's written into contracts.

B. Ralston: Then, given those service requirements that the minister speaks of, are there any government staff who are responsible for oversight compliance and enforcement of the agreement? If so, who are they, and which section of the ministry do they belong to?

I understand that the contract has been the subject of an audit by the Auditor General, but obviously that's in pursuit of his own independent authority. I'm interested in the ongoing monitoring of compliance with the contract, targeting service levels and other contractual performance issues that should be addressed, given the dollar value of the contract.

[D. Hayer in the chair.]

Hon. C. Hansen: There are 25 individuals in the corporate solutions branch of the Ministry of Finance who have responsibility for overseeing this contract. There are also an additional five individuals in the corporate services branch who have specific responsibilities with regard to oversight of this contract. In addition, there is an annual audit that is being undertaken by KPMG at a cost of about $250,000 a year to review the work and the services provided by EDS Advanced Solutions.

B. Ralston: Is the KPMG audit a public document?

[1035]

Hon. C. Hansen: The reports that have been done by KPMG have not been made public. They've certainly been shared with the Auditor General. I think staff just had an interesting discussion about that and whether or not this is a report that could be in the public domain, and we will certainly look at that when the next report is submitted to us.

B. Ralston: I thank the minister for that comment. Can the minister advise, then, when the next report is anticipated and when that decision might be made? In addition, on this point, as part of the ongoing monitoring, I understand that EDS Advanced Solutions is required to submit annually a strategic plan on how they're going to achieve the service levels that are in the contract. Have those strategic plans been submitted regularly, and if so, when was the last one submitted?

Hon. C. Hansen: In regards to the first part of the member's question — the KPMG report — they are undertaking that work now, and it will be undertaken over the coming months. We anticipate that that report would be finalized probably in the spring.

With regard to the service plans. The plans and forecasts that are developed by EDS in terms of how they meet their service requirements are the subject of quarterly meetings that involve the Deputy Minister of Finance and senior executives from the Ministry of Finance meeting with the senior executives from EDS Advanced Solutions. Those take place on a quarterly basis.

B. Ralston: I suppose the EDS Advanced Solutions contract gives rise to a broader question. At a time when the government is, through its budgeting process, seeking economies and reducing staff and program requirements, what is the opportunity with this particular contract to reduce spending, find economies and generally save money on behalf of the taxpayers of British Columbia?

Hon. C. Hansen: The objective of this contract is to assist in consolidating the various revenue programs of the provincial government. The goal is to make sure that we maximize the benefits that we get from these contracts.

[1040]

For example, there has been a big focus on the accounts receivable of the province, trying to ensure that the province collects the various tax revenues that are owed to it in a timely manner.

The focus is more on ensuring that we benefit the fiscal plan with realizing the revenues that are due to the province through the work that is done by EAS, as opposed to trying to find cheaper ways to do it. Sometimes if you want to maximize revenue, you've actually got to spend the money in order to ensure that the revenue materializes. That is really what the focus of these contracts is about.

B. Ralston: Well, I understand the wish and the desire of the government to pursue money that's owed to it. That only seems reasonable. But given that many areas of government, many programs across the spectrum, as the minister is obviously well aware, having had many meetings with Treasury Board on just how to achieve that….

What is the opportunity in this contract to actually achieve cost reductions to get the same results or better by spending less? This is certainly a theme that will be familiar to the minister, I'm sure, in internal discussions and some of his public statements over the last while. So what is the opportunity in this contract to achieve cost savings and yet achieve the same or better service levels?

Hon. C. Hansen: As the member knows, we have really looked across government in the various areas of discretionary spending to find cost savings wherever
[ Page 2722 ]
that was possible, to reduce the cost of government. The area of revenue collection is not an area where we have gone after cost savings, because what we want to go after is actually revenue maximization.

So we have — not just with the contracts with EAS but, indeed, across all aspects of government on the revenue side — focused our efforts on ensuring that government revenues materialize. They have not been specific targets of budget reductions.

Like everything else in those parts of the ministry, we're looking for efficiencies, whether it's on travel budgets or other administrative costs. Where those can be saved, we're saving them, but overall, we are not cutting back on the amount of money that's spent on revenue collection.

B. Ralston: I thank the minister for that comment. Is the minister saying, then, in effect, that although he would like to achieve cost savings with this contract, the contract is sufficiently bulletproof that there's no possibility in the contractual language to save money and that the government is required to continue to pay at the same level, regardless of the fiscal state of the province's finances — that there is no opportunity to make savings here, whereas other ministries or other parts of his own ministry or other ministries across the spectrum of government are being required to make some very tough choices, as the minister is aware, about cutting programs and reducing services and laying off employees?

Hon. C. Hansen: There is flexibility within the contracts that would allow us to reduce the overall cost of the contracts, but in doing so, we would also compromise our ability to realize the revenues that the province depends on. As we go through difficult economic times, those revenues are even more important than they might otherwise be.

Having accounts or taxes that are owed to the province that are sitting as accounts receivable simply exacerbates the need for us to borrow money on the markets in order to fund the necessary expenditure tracks, even though those accounts receivable may sit there as an asset.

In our view, we made a business decision that we were not going to cut back on the cost of the contracts that drive the revenues of the province, because we believe that those revenues are critical.

B. Ralston: As I understand the contract, there is an incentive built into the contract for EDS to collect the moneys owing. It's a variable, depending on their success in achieving it.

[1045]

As I think everyone would be aware, there's a marginal cost to collecting outstanding debts. As banks and other financial institutions recognize, there's a point at which one writes things off and no longer pursues them because the marginal cost of spending money to pursue them isn't worth the ultimate result.

Is that kind of analysis taking place? Is there an opportunity to reduce that, or is that left entirely to the discretion of EDS, who can continue to bill, regardless of cuts, layoffs and service reductions that are taken broadly across government? EDS is sheltered from those kinds of hard decisions.

Hon. C. Hansen: In terms of the meetings, the business case that is put forward by EAS with regard to collections…. There are approaches that are used for collections that are discussed and are mutually agreed to. But when it comes to writing off a bad debt, that is something that we will do only if the debt becomes totally not collectible.

There are very few bad debts. There are actually some industrial loans, for example, that go back to the 1990s that I recall we've had to write off recently because they proved to be totally uncollectible. There are also, for example, from time to time, collections on penalties that are assessed around illegal tobacco sales and things like that that do get written off. But that is only because it gets to the point where it is obvious that those are totally not collectible.

We certainly do not want to establish a culture whereby if someone delays paying their taxes long enough that government will finally give up on collecting it. We do believe that if someone owes taxes, it is our obligation and duty to ensure that those taxes are collected.

B. Ralston: Well, I certainly wouldn't want to be seen as encouraging that kind of attitude. But however morally offensive it may be to write debts off, at a certain point the cost of collecting them far exceeds the return on actually collecting the full amount, including interest. Financial institutions make that kind of decision all the time. Certainly, in the recent downturn, that's a very common practice among financial institutions. Whether it's mortgage foreclosures or other credit card debt or whatever else, it becomes uncollectible.

Who makes the final decision on when to write off a debt? Is it the EDS Advanced Solutions, or do they just continue billing as they chase an ever-diminishing return, or does the ministry or its agents who monitor the contract make that decision? I suppose that would be the question. Who makes the ultimate decision to write off or not to write off?

Hon. C. Hansen: Decisions to not collect a debt are made by the province and not by EDS, based on the evaluation of that debt by the respective ministry that would have responsibility for those programs.

B. Ralston: Can the minister advise approximately — and this may not be something that can be measured
[ Page 2723 ]
with precision — how frequently that decision is made? Is that part of the decision made at quarterly meetings when the deputy ministry meets with representatives of EDS Advanced Solutions, or is that made more at an operational level, and how frequently is that done?

[1050]

Hon. C. Hansen: They would make a submission quarterly, and the point at which the decision would be made would depend on the level of the debt involved. In some cases it may be made by the EFO in the ministry. Other times it may go to the deputy minister. Other times it may go actually to the comptroller general, depending on the type and the size of the debt involved.

B. Ralston: Does the minister have available to him a broad estimate of the total amount outstanding that EDS is currently pursuing? And as a measure of the write-off policy, the dollar amount of the write-offs approved at the last quarterly meeting?

Hon. C. Hansen: The total accounts receivable being managed by EAS as of March 31, 2009, was about $600 million.

B. Ralston: The second part of the question — the quarterly write-off, or the write-off that was approved at the last quarterly meeting, to give some idea of the scale of write-offs?

Hon. C. Hansen: I apologize for forgetting the second half of that. It fluctuates quite considerably quarter to quarter. We will endeavour to get the number for the member for the latest quarter, and I will send that to him.

B. Ralston: Thanks very much. If that figure is being retrieved, perhaps the quarterly figures for the previous fiscal year would be helpful. I want to thank the minister for his answers on that area. I'd like to switch topic areas to the next area that we had discussed, which was questions of Partnerships B.C. and the P3 questions.

While the minister is changing staff, I do have some written questions that I just want to table. I'm not seeking answers for these now, but these are questions that arose in other estimates where the minister referred the response to the Ministry of Finance. They are set out here in writing, so what I'm going to suggest, if the minister agrees, is that I simply table them, and answers could be provided at a later opportunity.

[1055]

If I could briefly list them just for the record: Tuesday, November 3 — Small Business, Technology and Economic Development estimates; Monday, November 2 — Ministry of Tourism estimates; Thursday, October 29 — Ministry of Tourism estimates; Thursday, October 22 — Advanced Education estimates; October 20 — Healthy Living and Sport estimates; October 5 — Forests estimates; and September 22 — Citizens' Services estimates.

This written document contains the question and the reference to Hansard where the minister concerned referred it to this minister. If I could just pass that over to the minister through the Clerk, I'd appreciate it. Understand that I'm not expecting answers forthwith, but if the minister could provide those, if the minister deems them within his jurisdiction, within the next 30 days — if that's a reasonable period of time to compose answers to those questions.

Perhaps the minister might want to introduce the staff person who's now attending, and then I can begin my questions.

Hon. C. Hansen: We're joined by Sarah Clark. She is the vice-president of Partnerships B.C.

B. Ralston: I thank the minister for the change in staff, and I welcome Ms. Clark to the process.

Various reports in the international business media suggest that Partnerships B.C. is using a different model of financing public-private partnerships for the Fort St. John Hospital from that which has been used in other projects. Could the minister explain what change has been made and why it was done?

Hon. C. Hansen: That particular project was a slight variation, basically as a result of the circumstances that we faced at the time and what the consortium faced at the time with regard to international financial markets. Normally under a partnership, a P3 arrangement, the proponents would provide all of the financing, or at least most of the financing. There are certainly other examples around the province where there is co-financing that comes in — for example, on a hospital project, from the regional hospital district.

In this particular project, what we agreed to was that the proponent would increase the equity position, their equity that they were putting into the project, and that government would provide some of the secondary financing. Given where we were at in the financial markets at the time, we were able to access financing easier than the consortium was able to do at that particular stage during the economic downturn.

B. Ralston: The minister describes it as a "slight" change. Can the minister advise what percentage of this project will be financed privately and what will be the financial participation by the province in this particular project?

In an article published in an international journal — I think it was in Infrastructure — Mr. Blain was reported as saying that he was calling it "broad equity," and he seemed to characterize it as a substantial change from previous practice.

Perhaps the minister could explain his reference to a "slight" change.
[ Page 2724 ]

Hon. C. Hansen: In this project, 40 percent of the funding is coming from the regional hospital district. Of the remaining 60 percent, 20 percent is equity that is being put in by the proponent, and the province is providing the loans for the remaining 80 percent of that portion.

B. Ralston: The calculation is, then, that the private partner is contributing 12 percent of the total equity of the project?

Hon. C. Hansen: That's correct.

[1100]

B. Ralston: Obviously, in the present economic climate there's a gap between the cost of borrowing publicly and the cost of borrowing privately. Can the minister advise what the cost of private borrowing would have been for the project and what the cost of public borrowing is anticipated to be for the project, and explain the difference?

Hon. C. Hansen: I don't have those precise numbers nor would they be shared publicly, because that's part of the commercial proprietary information that the proponents would expect us not to share.

As the member knows, we do a value-for-money audit on all of the P3s. I think, as the member knows, one of the aspects of P3s is the higher interest cost, because government, obviously, can borrow at lower cost, even in the best of financial times. So there is a slight advantage on that side for public borrowing, but that is more than offset by the risk transfer and the efficiencies that we get from the private sector managing and operating these projects.

There is a value-for-money audit that is being done on this particular project, and it will show that this model is more effective and better value for the taxpayer than a traditional design-build model. So even though this was a hybrid compared to other P3 models, it is one that we look at as an exception. It's not one that is a new policy going forward.

As we look at all of these projects, we want to make sure that we're flexible, that we put in place the right arrangement that ensures the maximum of risk transfer to the private sector so that the taxpayer is not held vulnerable to increased cost pressures and that we do it in a way that ensures that we achieve the value for money.

B. Ralston: Well, the minister has acknowledged that there would be a lower cost to borrowing publicly. In fact, Mr. Blain, when speaking to the Surrey Leader on February 27, 2009, "estimated $200 million in financing costs will be saved by switching from private to public borrowing."

Given that this particular project is going to be funded 88 percent publicly, can the minister give an estimate of what the cost is of borrowing for the public sector and what the cost saving would be over borrowing that privately?

Hon. C. Hansen: What week would he like me to reference? I think, as the member knows, over the last 14 months the answer to that question would vary dramatically — never mind week to week, but day to day.

B. Ralston: Well, I appreciate that interest rates do vary and financial markets fluctuate. I think that's a given. But at the outset, when the decision was made or financing went ahead with this project — that's the point in time. There's obviously a point in time in which a decision was made and financing was obtained and secured — a commitment was made and letters were signed. I'm interested in that point. I don't think that this is a hypothetical question.

[1105]

Hon. C. Hansen: First of all, I think that the member's reference to a quote by Larry Blain of $200 million.... That reference was not pertaining to the hospital in Fort St. John. So I'm not sure what he's referencing there, but whatever his reference is, it's not a valid quote from Mr. Blain.

[N. Letnick in the chair.]

We do not have information as to what the private financing of the Fort St. John Hospital would have cost, because what was obvious is that at that particular stage, in the challenges that the financial markets were facing at that point, the cost of private financing would not have made the project viable. We would not have achieved the value for money that would have been necessary.

Therefore, the private financing was never finalized, was never pursued to close, and therefore, we can't tell you what it might have been had it proceeded to close. But we do know that at that stage in the financial history of the world, we were able to borrow the public funds less expensively.

What was looked at through the business case was to ensure that those benefits that flow to the project as a result of using public financing and government borrowing are flowed to the benefit of the taxpayer. So we have ensured that those benefits that are there also stay within the public domain.

B. Ralston: Mr. Chair, welcome to the chair.

I clearly omitted, in the quotation I attributed to Mr. Blain, to mention that he was commenting on switching from private borrowing to public borrowing on the Port Mann bridge project. The quote is: "He estimated $200 million in financing costs will be saved by switching from private to public borrowing." So it's a clear reference to the Port Mann bridge. I'm sorry I omitted that, because that did create a misleading impression there. I apologize for that.
[ Page 2725 ]

Can the minister advise, then, given that 88 percent of the Fort St. John Hospital is proposed to be financed publicly…? He has acknowledged that at this particular time in financial markets, public financing was cheaper and benefited…. Although he's not able to calculate the difference, those benefits, much as Mr. Blain said in the case of the Port Mann bridge, flow to benefit the public.

Could the minister estimate how much would be saved if 100 percent of the Fort St. John Hospital project was financed publicly and if risk transfer was obtained through contracts, such as a fixed-price contract, and other customary risk management techniques that are commonly used in construction and in public contracting generally?

Hon. C. Hansen: First of all, to go back to Mr. Blain's quote. Again, I don't know what the member is reading from, but that is not an accurate reflection of Mr. Blain's comments with regard to any project, even the Port Mann bridge project. So apparently, Mr. Blain has never said what the member attributed to him.

With regard to the savings, those are all quantified in the value-for-money reports. As the member knows, for P3 projects that we have completed previously, those value-for-money reports are done, and they're made public. That will be the case on this one as well. Once we have that finalized, that information will be made available publicly.

B. Ralston: The government, through its agency Partnerships B.C., has always taken the position that in order to achieve risk transfer and value for money, the private partner had to provide much greater levels of investment than we see on the Fort St. John project — 12 percent. It has varied historically between about one-third of the capital on the Canada Line to all of the capital on the Bennett Bridge.

Since this has always been considered to be necessary before, can the minister explain how he anticipates obtaining the same benefits with this much lower level of investment?

[1110]

Hon. C. Hansen: In fact, what happens with most P3 arrangements is that the equity partner has a small portion. It's actually the banks and other lenders to the consortium that would be the others who would be providing the financing that would make these projects viable.

In this particular project, it is unique in that it's actually the consortium that has taken a much higher equity position than would have been normal in a project like this. The consortium actually increased the amount that they were putting at risk with their 20 percent equity, the 20 percent of the province's share — their portion of the project. That 20 percent is higher than it otherwise would have been, which ensures that we can still maximize the risk transfer to the private sector and away from the taxpayer.

B. Ralston: Can the minister advise how many other projects are being looked at for this new kind of financing that I believe that Mr. Blain has called, in the article that he was quoted in, "wide equity"? If so, can the minister list those projects?

Hon. C. Hansen: As I indicated earlier, the Fort St. John project is very unique, and it has everything to do with the timing of the world financial markets at that time. We do not anticipate that any future P3 projects would have the approach that was taken with Fort St. John, particularly as we now see financial markets in the world returning to normal — whatever normal may be. We anticipate reverting to the more traditional P3 approach that we've taken in the past.

So the Fort St. John Hospital was, in that particular design of the financing arrangement, unique. Even then we actually have…. The portion of it that is being provided from the province is still structured in a way that when markets would be favourable to that, we would actually reserve the option of spinning off the province's financing to the private sector at some point in the future.

B. Ralston: Just if I could pursue that for a moment, then. If the minister could explain what he described as the option for the province to spin off or divest itself of its participation in the project. Can the minister explain that further?

Hon. C. Hansen: The P3 approach that we've taken in British Columbia we think maximizes the risk transfer to the private sector. That is a model that maximizes the private sector's responsibility in financing. Clearly, that varies from project to project given the involvement of other levels of government, including regional hospital districts, for example.

[1115]

But in this case, with the portion that the province has borrowed, we believe that we can maximize the risk transfer if that portion of the financing is also held by the private sector. We have reserved that option, and we'll look at the business case at some point in the future to determine whether that's a desirable option to pursue.

B. Ralston: Just again with pursuing this example, can the minister explain what type of financing the public portion is held in? Is it in long-term bonds or some other financial instrument?

Hon. C. Hansen: For the Fort St. John Hospital, the borrowing was not project-specific. It was part of our general bond issue from the province, and money was provided from that portfolio to this project, and it was not project-specific.

I should go back and indicate that one other project that may have some element of public financing is the northern
[ Page 2726 ]
cancer facility in Prince George. Some of the financing was being determined at about the same time, when the market was in the same circumstance, so there may be, at the end of the day, some elements of government financing as part of that project, as well, similar to the Fort St. John.

But on a go-forward basis, which I think was the member's question, we do not anticipate using this model.

B. Ralston: Just to pursue further, then. Given what the minister said about the financing of this particular project — part of the general financing and bond issue of the province…. The minister made reference to drawing in a private partner in reference to the financing, as I understood it. So can the minister explain how that might be affected? What would be the considerations in making that decision?

Hon. C. Hansen: That would become part of the review that would be done when that time comes and if that determination is made. At that time we would look at the cost of borrowing for the province. We'd look at the cost of outside financing that might come in to take out the province's financing, and we would look at the impact that that would have on the total borrowing responsibilities that the province would have to undertake at that time. So that's a decision that would be made when the time comes, based on some of those factors.

B. Ralston: I want to ask a more general question just about the process that Partnerships B.C. engages in, in order to assess whether a P3 arrangement or a public procurement is the preferred course.

In the Partnerships B.C. Value for Money report for the Kicking Horse Canyon, phase two, the following statement is made: "To compare the public sector comparator and the final contract, the cash flows for the term of the contract must be discounted to a common point in time so that a comparison that expresses the present value of money that will be spent or received in the future can be made."

I take it that the minister will agree that this is an accurate description of how costs are compared between the possible P3 and a possible public procurement.

[1120]

Hon. C. Hansen: That would be a very simplistic explanation of the value-for-money process. I would refer the member to the methodology that is outlined in the value-for-money reports. I think he'll appreciate that it is much more comprehensive and much more complex than the more simplistic statement that he just read.

B. Ralston: I thank the minister. I suppose that if it's simplistic, it's taken straight from the report. I think what the minister probably means by that is that it's not complete.

I just wanted to briefly interject…. The minister made a suggestion, attributing that a saving of $200 million by government financing the Port Mann bridge was not attributed to Mr. Blain. In fact, I have two sources for that, and I just want to put this on the record.

April 17, 2009, a story by Mr. Fowlie and Mr. Inwood of the Vancouver Sun. I'm reading and quoting directly. "The about-face will save about $200 million, in part because the government can get lower financing rates than a private partner could, Transportation Minister Kevin Falcon said." Pardon me, I mean that Transportation Minister Blank Blank said. I don't want to violate the rules of the House.

A different story by a different writer, Jeff Nagel, Abbotsford News. This is distributed, as the minister will be aware, through the Black chain of newspapers. This is a story, March 2, 2009: "Partnerships B.C. CEO Larry Blain said that was a factor in the decision not to proceed. He estimated $200 million will be saved by switching from private to public borrowing."

Those are two sources. Perhaps I can just table those with the Clerk and provide them to the minister, if he wants to confirm that for himself.

The Chair: You can't table in the committee, but we'd be happy to pass them on for you.

B. Ralston: Well, pass them over — as long as it gets there.

If I might continue, then. The minister has not agreed with the statement that appears in the Partnerships B.C. value-for-money report. I want to suggest that the way in which this procedure works is that one looks at the nominal estimated cost of public procurement over the life of the project and the nominal estimated cost of the P3 over the cost of the project, and then one discounts those costs to a single figure.

Again, that may be a bit simplistic for the minister, but I suggest that's essentially what the process is to make a comparison. Does the minister agree with that?

Hon. C. Hansen: The member is essentially correct, but I can say that the methodology we follow in establishing our value-for-money reports is following…. We rely on some of the best experts in this area. We follow international practices in calculating these value-for-money reports.

Some of the initial value-for-money reports that were done by Partnerships B.C. early on in the P3 process were, in fact, reviewed by the Auditor General. The Auditor General found that the methodology and the process that we used in calculating value for money is reasonable.

B. Ralston: I'm sure the minister agrees that as a necessary step in making this comparison, the estimates of the costs over the years that I've referred to are important. They're sometimes called raw data. I'm wondering if the minister is willing to share the raw data on those fig-
[ Page 2727 ]
ures, which is the comparable nominal annual costs over the life of the project, for the Bennett Bridge project.

[1125]

Hon. C. Hansen: I guess we're not entirely sure what the member is seeking. We're trying to oblige. I can tell the member that in terms of some of the underlying calculations that are done for the value-for-money reports, they have been FOI'd from time to time. I know that Partnerships B.C. tries to provide responses in response to those FOI requests for some of the calculations that go into the report. So depending on what it is he's looking for, that may be an avenue that could be pursued.

B. Ralston: Well, the minister correctly anticipates that that information has been sought by freedom-of-information requests. I'm told that the most common response to those requests is that the government will not release the information because it is a cabinet confidence.

These are the raw numbers, the raw data underlying the comparison that is made, and in order to verify the calculation and the choice that is made by Partnerships B.C. in the value-for-money reports, what is being sought is that underlying stream of raw data. Thus far the government has been unwilling to share that with anyone who has requested it through freedom of information, on the basis that it's a cabinet confidence.

I have a number of projects here where that has been sought. The Bennett Bridge; Kicking Horse Canyon, phase 2; Abbotsford Hospital and Cancer Centre; Golden Ears Bridge; Surrey out-patient hospital; Royal Jubilee Hospital; Kelowna and Vernon hospitals; and the Fort St. John Hospital.

Can the minister confirm from the representative of Partnerships B.C. who is present that those freedom-of-information requests have been received and that the information has not been provided on the basis that it's a cabinet confidence?

Hon. C. Hansen: In terms of FOIs, Miss Clark is not aware of what FOIs come in or don't come in to Partnerships B.C., so we do not have that information with us.

With regard to the reference the member made earlier — this reference to $200 million savings that was attributed to Larry Blain, apparently — I'm told that Mr. Blain was misquoted in that article and that that is not a valid stat to use.

B. Ralston: Well, I thank the minister for that clarification. I presume it flows that the Transportation Minister, who is reported in the Vancouver Sun story as making an identical statement, was wrong or was wrongly advised. Can the minister confirm that, please?

Hon. C. Hansen: As I understand it, that number was used as an order of magnitude of what the financial implications could be, but it was also based on what the financial markets would have cost at that time. As the member knows, the spreads on borrowing for the private sector were enormous at that particular time, so I think the reference to this $200 million may have been at an order of magnitude, given that stage in the world of economic challenges.

B. Ralston: I don't really intend to pursue this much further, but the minister does…. I'm not sure of the language that's being used, of "order of magnitude." The clear statement was that there was a $200 million spread, approximately, between the cost of public borrowing and the cost of private borrowing at that particular time.

[1130]

The way I read what the minister was saying, what Mr. Blain — although that's no longer being supported by the minister…. What the Minister of Transportation appeared to be saying was just expressing that difference, so I don't think it's a question of an order of magnitude; I think it's a question of real dollars. I wonder if the minister has any further comment?

Hon. C. Hansen: I think this is in the same vein as our discussion about the Fort St. John Hospital. Because the private sector financing was never closed, you can't really come up with a hard number as to what it would have cost had it proceeded to financial close with total private financing. So that's why order of magnitude is probably the closest you could get.

I think if the member wants to make an argument that at that particular time in the economic history of the world, during those few weeks, that P3 arrangements were more difficult, he may have an argument. If he's trying to make an argument that because of that particular unique circumstance at that particular time in the financial history of the world, no one should ever consider doing P3s, then I would totally disagree with him.

B. Ralston: I don't think that the minister is attributing fairly to me. I was simply trying to clarify the comments of the Minister of Transportation, who is a senior member of the cabinet and made those comments, attributed to him by two very reliable reporters in a newspaper of record, one of the leading journals in the province.

In any event, I want to move on. Just to return to what I've called the raw data. I've been advised that the technical term that might strike a chord with the staff here is life-cycle nominal cash flows, public versus private. To give an example, there was a report which looked at the Vancouver General Hospital Diamond Centre project, and the materials showed that the nominal cost over the life of the project for public procurement would have been $90 million. The nominal cost for the P3 was $203 million.

What is being sought through those freedom-of-information requests is access to the data which composes the life-cycle nominal cash flows. That's the basis on
[ Page 2728 ]
which the comparison is made between a public procurement and a P3 procurement.

Hon. C. Hansen: Hon. Chair, maybe I could seek some clarification from the member to more fully explain his question.

B. Ralston: I'm mindful of the time because I do have a couple of questions in two different topic areas before we close. What is being sought is access to the raw data that composed the basis for the comparison. They're formally called life-cycle nominal cash flows. So there's a stream of data on which the comparison is based. That has not been released, despite freedom-of-information requests for that data.

Hon. C. Hansen: I can't speak to the detail of an FOI request. There is a process for that, as the member knows. If someone receives a response to an FOI request that is not as fulsome as they would like, they've got the opportunity to take that issue to the commissioner. I would urge him to do that in this case if he so wishes.

[1135]

B. Ralston: In the brief time that remains I have a couple of questions on different areas. One I'm going to simply read and ask the minister to respond at a later date.

The member for Vancouver-Kingsway asked the Minister of Health: "Will the minister endeavour to ask the health authorities" — and I'm paraphrasing here — "what their best estimate is on the impact of the HST on them?" The minister's response was: "I do think in fairness that is a question…best directed to the Minister of Finance." So I'm asking the minister to provide an answer along with the other, what I've referred to as follow-up questions.

The minister today in the Vancouver Sun was speaking on the occasion of the meeting of the Federation of Labour here in British Columbia. One of the positions that's been taken by their parent body, the Canadian Labour Congress, proposes a doubling of the Canada Pension Plan benefits. Their plan is endorsed by Bernard Dussault, the chief actuary of the CPP and old age security program.

This would follow the model of increasing the CPP contributions over a seven-year period and would increase the benefits available to those who would receive those benefits. It would effectively double the average earning replaced by CPP pension benefits to a maximum of $1,635 a month.

I know that the minister has made some pronouncements and engaged in public discussion on the pension crisis that faces many Canadians, so I'm wondering if on this occasion, given his comments in the newspaper, he wants to endorse that proposal by the Canadian Labour Congress. It seems to be reasonable if he'd prefer to reserve his opinion and comment later. I can understand that.

Finally — I think I have about five minutes — I want to turn to the report of the Budget Process Review Panel, a report compiled by Mr. Enns. On page 72 of that report he has some suggestions which would make this sometimes arcane budget process more transparent and open to the public.

Basically, his recommendations in this area are that a reader or a citizen should be able to compare and follow a proposed expenditure in the estimates process through to the budget, through to public accounts, I suppose with the intervening step of supplementary estimates should they be required, although at the present they're not.

He suggests that this would "allow the reader to discern how budgeting and accounting information links to the strategic plan," to "allow the reader to gain a reasonable sense of the impact of key decisions" and "include various key performance indicators of the government's choosing designed to improve the usability of the reports and an additional suite of standard fiscal indicators to allow comparisons with other jurisdictions."

If I might go on, because there's not going to be a lot of time.

"Information in the estimates should be linked directly to the budget and cross-referenced in a way that allows the user to understand how the two documents are related. Ideally, a user with each of the estimates and budget in hand should see at a glance how specific financial information has been rolled forward from the estimates to the budget.

"The public accounts should be prepared in a way that allows ready comparison at a number of levels with the budget."

These are doubtlessly ambitious recommendations but, given information technology and its architecture, surely achievable over the longer run — say, three to five years.

I'm wondering if the minister at the senior level in the ministry is considering that aspect of the recommendations in terms of improving general transparency and openness of the budget process.

[1140]

Hon. C. Hansen: I will try to touch on the three points that the member raised.

First of all, with regard to the HST implications for the health sector, as I've indicated for all of the sectors that are primarily funded through the consolidated revenue fund, we will look at those costs as part of our budget process. So the member will have a full answer in that regard not later than March 2, when the budget is tabled.

With regard to the issue around pensions, British Columbia has become a leader in Canada when it comes to looking at the adequacy of pension incomes for Canadians. The Premier, last October, signalled that we wanted to look at options for a supplemental pension program that would fill that gap.

They talk about the three pillars of pension adequacy, one being the government programs such as the old-age security and the guaranteed income supplement. The second pillar is the Canada Pension Plan that we have in place today.
[ Page 2729 ]
The third pillar is savings and registered retirement savings plans as well as registered pensions that are provided.

When you have a situation that 75 percent of private sector workers in British Columbia — and that's true in Canada — do not have access to a registered corporate pension plan or an occupational pension plan, that is clearly leading to inadequate pensions for many, many British Columbians. Part of the work that the province of British Columbia is doing is looking at the various options that are available for meeting some of that shortfall.

The proposal that has been put forward by the former chief actuary for the CPP is certainly one of the options that are being evaluated, as are other options, including the one that was set out in the joint expert panel on pensions that was established between British Columbia and Alberta. Their report proposed a regional supplemental pension plan that would also fill that gap. We're looking at those options. I intend to take some of those options forward to my colleagues in other provinces.

We recognize the desirability of a national plan, one that would actually ensure that labour mobility in Canada is enhanced and not hindered by the structure of the plan. It's my hope that we're going to be able to achieve greater consensus among Finance Ministers with regard to a truly national plan that British Columbia could play an important part in implementing. But when it comes to the actual design of that, we are still looking at a range of options and want to be in a position to discuss those with other provinces before we try to narrow it down to any one particular option.

With regard to the Budget Process Review Panel report chaired by Doug Enns…. I know that we often refer to it as the Enns report, and I think Mr. Enns himself would be the first to say that it was a great team effort. He did enormous work, very good work. I congratulated him and thanked him personally, but I never overlook an opportunity to thank him personally publicly, as well as the work of the rest of the panel.

I think that one of the things that panel report stresses is how much of an improvement we've made over the last eight years in budget transparency in British Columbia and in the budget process. There was the report that was done by the previous panel, again chaired by Mr. Enns, in the late 1990s. We have implemented almost all of the recommendations that came forward at that time. This was an appropriate time to look back on the progress that's been made and receive suggestions as to how we can go even further in improving it.

We are looking at all of the recommendations and looking at how we can actually make even more progress. Even though we're a leader in Canada on budget transparency, it's our hope that we can actually go even farther, based on some of the recommendations of the panel report.

B. Ralston: Before the minister calls the vote, I just wanted to thank the minister and his deputy minister, Mr. Whitmarsh, and the other staff who have assisted in the process. I think it's been, for the most part, a relatively productive use of the time.

I did want, given the minister's comments on the Enns report, just to note — this may be a rare partisan note in our exchanges — from the report: "In a single broad stroke, government set the majority of the recommendations contained in the 1999 panel's…into action by the passage of the BTAA" — the budget transparency act — "in 2000." Just for the record.

[1145]

Hon. C. Hansen: Just in closing, I would like to thank the member and his colleague for their constructive questions. I look forward to working with him and the opposition in the months to come with issues that come up from time to time. We'd be pleased to try to accommodate answers to his questions, not just at the time of estimates but also throughout the year.

I know that we'll have an opportunity to be back doing Finance Ministry estimates in the spring.

Vote 29: ministry operations, $85,227,000 — approved.

Vote 30: Pacific Carbon Trust, $5,000,000 — approved.

ESTIMATES:
MANAGEMENT OF PUBLIC FUNDS AND DEBT

Vote 43: management of public funds and debt, $1,186,000,000 — approved.

ESTIMATES:
OTHER APPROPRIATIONS

Vote 44: contingencies (all ministries) and new programs, $500,000,000 — approved.

Vote 45: capital funding, $1,212,840,000 — approved.

Vote 46: commissions on collection of public funds, $1,000 — approved.

Vote 47: allowances for doubtful revenue accounts, $1,000 — approved.

Vote 48: B.C. family bonus, $8,758,000 — approved.

Hon. C. Hansen: I move that the committee rise, report resolution of the estimates of the Ministry of Finance and ask leave to sit again.

Motion approved.

The committee rose at 11:48 a.m.

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