HEAL Committee Report
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- CHAPTER 8 - IMPORTATION OF HUMAN-USE DRUGS FOR PERSONAL USE
- CHAPTER 9 - COST RECOVERY
- CHAPTER 10 - APPEAL PROCESS
PART III: POLICIES
It is currently prohibited to import for sale into Canada drug products that do not meet the requirements of the Food and Drugs Act and its Regulations. These products would not receive approval from Health Canada and would not be granted a DIN number. A DIN is required for a drug product to be legally sold in Canada.
Health Canada's policy is to permit individuals to import a three-month supply of a drug product for their own personal use, even though the product has not been approved in Canada. Similar policies are found in other countries. NHPs imported for personal use, but for which commercial imports are prohibited, are thus not subject to the same review with respect to safety, quality and efficacy as are approved NHPs.
It is important to note that the Bureau of Drug Surveillance at Health Canada has responsibility for the Controlled Drugs and Substances Act, which regulates the importation of controlled substances (narcotics, controlled and restricted drugs). Drugs that fall under the authority of this Act cannot be imported for personal use.
The Committee has heard that many NHPs that are prohibited for sale in Canada are available in other countries, particularly the United States, and are imported into the country for personal use. We have been told that this has resulted in a vast underground economy in which Canadians are purchasing hundreds of product lines direct from foreign suppliers, through cross-border shopping and mail order catalogues. Cross-border advertising and easy access to information on the health benefits of products through magazines and the Internet fuel demand.
Many consumers and industry representatives expressed concerns with this policy. They were of the view that this imposed a double standard whereby products were permitted into the country pursuant to the personal importation policy while these same products were not available for sale from Canadian suppliers. Consumers stressed that the present regulations limit their access to products of their choice that are available in other countries. They were concerned that they could be considered as "drug dealers" for importing NHPs not commercially available in Canada. Industry representatives (retailers, distributors and importers), meanwhile, were mainly concerned about a significant loss of sales to foreign (largely American) suppliers. They stated that the customer base of Canada's NHP suppliers is continually eroding, as consumers import both products not legally available here as well as other legal products. Industry representatives, along with consumer groups, argued that the restrictions over the sale of products, particularly those available in the United States and other countries without any evidence of harm, should be lifted. Many other witnesses told the Committee that there is no mechanism to ensure that products being personally imported and consumed by Canadians are safe and of high quality.
The Committee was reminded that Health Canada does not have legislated jurisdiction over the importation for personal use. The Food and Drugs Act gives the department the power to intervene and regulate only when the importation is for the purpose of sale. Legislative changes to the Act would be needed in order to regulate the importation for personal use of NHPs.
The Committee was also told that other countries also allow importation for personal use of unapproved products. For example, Australia allows such importation but there are some restrictions on certain products such as narcotics. Individuals can import up to three months' supply at any one time and up to five shipments per year. The United Kingdom and Germany also allow importation for personal use with restrictions on certain products.
The Committee feels that most of the concerns raised with respect to the personal importation policy are related to the fact that certain products are not available in Canada rather than to the policy itself. We have adopted the principle that controls on NHPs must not unduly restrict access to consumers and believe that many of the concerns will be alleviated when more NHP products gain access to the Canadian market. In many cases, consumers will no longer need to obtain their products from foreign suppliers. In addition, this should remedy many of the disadvantages faced by the Canadian industry.
Keeping in mind the Committee's objective of enhancing access to NHPs, we do not feel that any change to the personal importation policy is required at this time.
The Committee is concerned, however, that Canadian consumers will continue to import from other countries products for personal use that do not satisfy Canadian requirements for safety, quality and efficacy even when these products become available in Canada. The Committee feels that the policy should be revisited when more NHP products are available on the Canadian market from domestic suppliers. We believe that it is in the best interest of Canadians to obtain products that are safe and of high quality. We believe that it is necessary to provide an appropriate balance among safety, quality and access to products.
Therefore, the Committee recommends that:
When the new regulatory framework is implemented, the personal importation policy be reviewed by Health Canada and the Expert Advisory Committee to determine if it is still appropriate and to outline permissible changes.
Health Canada currently charges three types of fees to manufacturers whose products, including NHPs, are classified and regulated as drugs:
- Firstly, since January 1995, the department has charged manufacturers annual Authority to Sell Drug Fees for all products for which they hold DINs. In general, these annual fees are $500 for a non-prescription product generating $20,000 or more in gross sales; they amount to $250 for a homeopathic preparation. The fees are reduced to $50 per product for which related gross sales amount to less than $20,000.
- Secondly, Health Canada has charged, since September 1995, Drug Evaluation Fees in order to process DIN submissions. These fees must be paid before the products are sold in Canada, and vary depending on the quantity of data to be evaluated by the department: $720 for herbal medicines and homeopathic preparations supported by traditional herbal references; $310 for vitamin and mineral supplements (and for other Category IV products, for which monographs or labelling standards exist); and over $143,000 for new drugs containing new chemicals. Unfinished products or raw materials, such as bulk herbs, sold for further processing, do not require DINs. Therefore, no DIN fees apply to them.
- Lastly, since July 1997, Health Canada has charged Establishment Licensing Fees. Licenses are issued not only to manufacturers, but also to packagers, labellers, importers, distributors, wholesalers, and testing laboratories that respect GMP standards; establishment licenses are not required for retailers. These annual fees, which are based on the costs of the inspection and product analysis activities performed by the TPP, vary with different firms but must not exceed 1.5% of an establishment's annual drug gross sales. Establishments handling only NHPs are currently exempt from these fees. Establishments handling a mixture of NHPs and other drug products are exempt from fees related to NHPs. Health Canada estimates that, if these exemptions were lifted, revenue from Establishment Licensing Fees on NHPs could amount to $2 million annually.
Cost recovery for services rendered by the government to the NHP and drug industries is not a policy unique to Canada. Australia has moved to full cost recovery since the summer of 1998. As in Canada, there are fees for applications, for product assessment, as well as an annual product fee. Fees may be waived, however, when sales volume is low. In the United States, all drug manufacturers must be registered and all drug products must be listed unless they are specifically exempt. Legislation in 1992 set out fees for the approval of certain drugs. However, most NHPs in the United States are sold as dietary supplements and, therefore, are not subject to any drug related fees.
Many witnesses stated that drug related fees were too high for NHPs. It was explained that these fees, which are currently charged on a per product basis, are cumulatively more onerous for NHP suppliers who carry extensive product lines to meet consumers' needs. Some witnesses contended that fees should reflect the higher safety nature of NHPs. Others indicated that annual DIN fees should be based on a schedule of fees for certain services, rather than on a percentage of gross sales. They contended that a percentage of sales is indeed a tax and would prefer a fee-for-service scheme. Industry representatives pointed out the fact that they were at a disadvantage to their American counterparts who do not face any fees at all.
With respect to Establishment Licenses, a few witnesses were of the view that the current exemption of NHP establishments should be lifted as it is unfair to other manufacturers in the drug sector. They explained that, if meeting GMP standards increases NHPs' quality and safety, then it is a small and normal price to pay for doing business within the Canadian health environment. They recommended that Establishment Licensing Fees be applied across the board to all manufacturers of drug or therapeutic products in Canada. Many other witnesses, however, stressed that, at their current level, Establishment Licensing Fees could eliminate many of the NHP companies, particularly the small segment of the industry with a gross annual income less than $ 2 million. They explained that the cost of licenses and inspections and the demanding requirements in terms of manufacturing conditions threaten the survival of these companies and could eventually cause harm to the regional economy in which they are located. They asserted that many small companies are well established in their communities, provide jobs, create new outlets for agricultural products, help diversify crops, and develop local expertise concerning the cultivation and the processing of herbal products. While some witnesses suggested that these fees should not apply to NHPs, others recommended that they be lowered and made more flexible.
The Committee was told that, since NHP practitioners import NHPs for the purpose of sale, they would be subject to establishment licensing requirements and the related fees if the moratorium was lifted. These practitioners explained that the primary reason to maintain extensive in-office dispensaries is to ensure that the NHPs they recommend are readily available to their patients and, accordingly, they requested that they be exempt from licensing fees.
Many witnesses contended that the overall cost recovery policy could have a significant impact on both the availability of NHPs, as many small companies would go out of business, and on the final price to consumers. Therefore, this would limit the access to NHPs.
The Committee acknowledges that cost recovery, which implies the transfer of costs from the general taxpayer to those who most directly benefit from government services, may result in higher cost for the NHP industry and, therefore, higher prices for NHP consumers. However, the Committee considers that any cost recovery program for NHPs should be fair and reasonable and not result in unnecessary restriction of access to NHPs. Further, we believe that the right balance must be established between the cost to be borne by the government and that of the final consumer. On the one hand, appropriate levels or structure of fees must not unduly restrict access to products by consumers. On the other hand, the industry must participate in the cost of public services that enhance the safety, quality and image of its products on the market.
We are strongly committed to avoiding the imposition of inappropriate costs on consumers, industry and government.
Therefore, the Committee recommends that:
Health Canada conduct a review analysing the impact of the overall cost recovery policy on the different segments of the NHP industry;
The NHP industry stakeholders be consulted in the establishment of the most appropriate fee structure and amount;
As a result of this review, the existing fee levels be re-examined if necessary.
A number of witnesses expressed concerns about what they described as arbitrary actions on the part of Health Canada and others involved in regulating NHPs. Their concerns applied to both regulatory and policy sectors and covered areas affecting manufacturers, importers, retailers, practitioners and consumers. They called for more appropriate, available and effective appeal procedures.
Witnesses offered various examples of actions that could be subject to appeals. Two key areas where an appeal procedure was deemed necessary related to product licensing and establishment licensing decisions. Different groups, however, had different views of problematic actions. For manufacturers, the issues related primarily to decisions that affected whether or not a product could be marketed as a drug or a food. If a product was deemed by the regulator to be a drug, decisions affected whether it could be licensed for marketing and if it could stay on the market after approval. Importers provided examples of NHP products that had been confiscated by Customs officials and left in storage, often resulting in goods that were unusable when retrieved. Retailers talked about raids on their stores where products were removed without explanation or compensation. Practitioners talked about the Special Access Program where they were refused access to products needed by their patients without adequate justification. Consumers were concerned about access to NHPs, asserting that the current system meant that changing guidelines and policies at the regulator's level often interrupted the availability of products in Canada. All groups argued that current processes to appeal such actions were unclear or weighted toward the regulator.
From Health Canada, the Committee heard that most such actions were related to non-compliance with existing regulations and policies that had been identified during an investigation. Departmental powers legitimately extend to monitoring compliance and to enforcing relevant legislative requirements. Officials at Health Canada asserted that anyone with a specific concern was encouraged to discuss it with staff at the regional offices. They also stated that many decisions could be appealed. For example, in their policy governing the management of drug submissions, TPP indicates that there are several levels of appeal to allow parties to discuss controversial issues. The first level allows appeal through the Bureau Director; the second allows appeal to the Director General and a three-person appeal committee. At both levels, particular procedures and time frames are established. The second-level three-person appeal committee consists of one member nominated by the sponsor and two by the TPP.
Questions of cost, convenience and complexity are significant to many participants. What the Committee did not hear clearly from either government officials or witnesses was how appropriate, accessible and effective the existing appeal structure or process currently is to NHP stakeholders. We would like to know when and where appeals would be appropriate. We also feel that it is important to understand whether such appeals are readily available on a variety of complaints through administrative routes as well as legal avenues. We would like some assessment of how effective existing avenues are in achieving outcomes desired by all parties. From the Committee's perspective, it appears that many of these concerns expressed by various stakeholders could be resolved by improved communication and increased information dissemination
One example of an appeal structure and process that may have useful characteristics for NHPs is outlined in the Canadian Environmental Protection Act, (Sections 89-97). The legislation states that, when a person files a notice of objection in respect of a decision or a proposed order or regulation, the Minister can establish a board of review to provide an impartial arbiter to inquire into the nature and extent of the danger. This board is to consist of not fewer than three members and is to have the powers of a commissioner appointed under Part I of the Inquiries Act. It may award costs and it aims to provide a reasonable opportunity, consistent with the rules of procedural fairness and natural justice, of appearing, presenting evidence and making representations. On conclusion of its inquiry, the review board is expected to report to the responsible minister or ministers with evidence and recommendations and the report is to be made public.
The Committee agrees with those witnesses who felt that there must be an appeal process for various decisions on NHPs outside the realms of either the department or the courts. The intention would be to provide an alternative avenue that is perceived to be neutral and objective and accessible. It would adhere to our guiding principle that calls for an open and transparent process of appeal available to NHP stakeholders. In addition, it would be established and operated in a way that would not place inappropriate cost on industry, consumers and government. As noted earlier, we expect that, with the expertise, knowledge and experience built into the new regulatory body, the possibility of decisions being taken for the wrong reasons will become very low and that the appeal of regulatory decisions will be greatly reduced.
Therefore, the Committee recommends that :
As part of the immediate process for NHPs, Health Canada work with stakeholders to establish appropriate, accessible and effective appeal processes for relevant policies and possible inclusion into a revised regulatory and legislative framework.