ARCHIVED — Natural Health Products (Unprocessed Product Licence Applications) Regulations

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Vol. 144, No. 17 — August 18, 2010

Registration

SOR/2010-171 August 3, 2010

FOOD AND DRUGS ACT

P.C. 2010-958 August 4, 2010

Her Excellency the Governor General in Council, on the recommendation of the Minister of Health, pursuant to subsection 30(1) (see footnote a) of the Food and Drugs Act (see footnote b), hereby makes the annexed Natural Health Products (Unprocessed Product Licence Applications) Regulations.

NATURAL HEALTH PRODUCTS (UNPROCESSED PRODUCT LICENCE APPLICATIONS) REGULATIONS

Application

1. These Regulations apply to a natural health product in respect of which

(a) a product licence application has been submitted to the Minister in accordance with section 5 of the Natural Health Products Regulations and has not been withdrawn; and

(b) the Minister has not issued a product licence under section 7 of those Regulations nor sent a notice under subsection 9(1) of those Regulations.

Exemption number — assignment

2. (1) The Minister must assign an exemption number to a natural health product to which these Regulations apply before the later of

(a) 15 days after the day on which these Regulations come into force; and

(b) 180 days after the day on which the product licence application for the product was submitted in accordance with section 5 of the Natural Health Products Regulations.

Exemption number — notice

(2) The Minister must, before the deadline imposed under subsection (1), send to the person who submitted the product licence application for the product a notice that sets out

(a) the exemption number; and

(b) the fact that the person has 60 days after the date indicated on the notice to submit to the Minister, in the form established by him or her, the following documents, failing which the person will not be deemed to have been issued a product licence for the product under subsection 3(1):

(i) a consent to the posting of their name, the exemption number and the brand name of the product on the Health Canada website, and

(ii) a statement by the person confirming that the product is not described in any of subparagraphs (3)(a)(i) to (v) nor, to the best of the person’s knowledge, in paragraph (3)(b).

Information — posting on website

(3) The Minister must post on the Health Canada website and keep up-to-date the information referred to in subparagraph 2(b)(i) for each natural health product for which a consent and statement are submitted in accordance with paragraph (2)(b), unless

(a) the product is

(i) a sterile product for ophthalmic use,

(ii) a drug referred to in any of sections C.01.036, C.01.036.1, C.01.040 or C.01.040.1 of the Food and Drug Regulations or a drug that is adulterated within the meaning of section C.01.038 of those Regulations,

(iii) recommended for use as a treatment, preventative or cure in respect of a disease, disorder or abnormal physical state referred to in Schedule A to the Food and Drugs Act,

(iv) recommended for use in children under 12 years old, or

(v) recommended for use in pregnant or breast-feeding women; or

(b) the Minister has reasonable grounds to believe that the product contains an ingredient that is likely to result in injury to the health of a purchaser or consumer and whose presence in a natural health product or other drug has led to

(i) a recall of that product or other drug, or

(ii) the sale of that product or other drug being stopped under section 17 of the Natural Health Products Regulations or section C.01.013 of the Food and Drug Regulations, respectively.

Information — non-posting

(4) The information referred to in subparagraph (2)(b)(i) in respect of a natural health product may be posted on the Health Canada website only if

(a) the documents referred to in paragraph (2)(b) were submitted to the Minister in accordance with that paragraph;

(b) the product is not described in any of subparagraphs (3)(a)(i) to (v); and

(c) the Minister has no reasonable grounds to believe that the product is described in paragraph (3)(b).

Application for product licence

(5) A statement referred to in subparagraph (2)(b)(ii) that is submitted to the Minister in respect of a natural health product is, for the purposes of the Natural Health Products Regulations, deemed to be part of the product licence application for the product.

NHPR — licence deemed issued

3. (1) As of the time the information referred to in subparagraph 2(2)(b)(i) is posted on the Health Canada website in respect of a natural health product, the person who submitted the product licence application for the product is deemed, for the purposes of the Natural Health Products Regulations, to have been issued a product licence for the product.

No longer deemed

(2) The person is no longer deemed to have been issued a product licence for the natural health product as of the time

(a) the person withdraws the product licence application;

(b) the Minister issues a product licence for the product under section 7 of those Regulations or sends a notice in respect of the product under subsection 9(1) of those Regulations; or

(c) these Regulations are repealed.

NHPR — greater certainty

(3) For greater certainty, in respect of a natural health product for which a product licence is deemed to have been issued,

(a) the prohibition on sale set out in subsection 4(1) of the Natural Health Products Regulations does not apply; and

(b) subsections 4(2) and (3) of those Regulations apply.

NHPR — non-application

(4) The following provisions of the Natural Health Products Regulations do not apply in respect of a natural health product for which a product licence is deemed to have been issued:

(a) section 11;

(b) paragraph 12(2)(b);

(c) section 13;

(d) paragraph 18(1)(b);

(e) section 22;

(f) paragraph 62(c);

(g) subparagraph 93(1)(a)(ii); and

(h) subparagraph 94(1)(a)(vii).

Suspension — additional power

4. (1) In addition to the power set out in paragraph 18(1)(a) of the Natural Health Products Regulations, the Minister may also, subject to subsection 18(2) of those Regulations, suspend a product licence that is deemed to have been issued if the Minister has reasonable grounds to believe that

(a) the person to whom the licence is deemed to have been issued has contravened these Regulations; or

(b) the natural health product to which the licence relates is described in any of subparagraphs 2(3)(a)(i) to (v) or in paragraph 2(3)(b).

Suspension under subsection (1)

(2) A suspension under subsection (1) is deemed to be a suspension under section 18 of the Natural Health Products Regulations.

Site information — sale not yet commenced

5. (1) A person who is deemed to have been issued a product licence for a natural health product must provide the Minister with the information referred to in subsection 22(1) of the Natural Health Products Regulations before commencing the sale of the product under the deemed product licence.

Change of information

(2) If the person makes a change to any of the information provided under subsection (1) in respect of the product, the person must notify the Minister of the change within 60 days after the day on which the change is made.

Recall

6. In addition to the information set out in section 62 of the Natural Health Products Regulations, every manufacturer, importer or distributor referred to in that section who commences a recall of a natural health product for which an exemption number is posted on the Health Canada website must provide the Minister with the exemption number for the product within three days after the day on which the recall is commenced. The same rule applies to a person who is deemed to have been issued a product licence for a natural health product and who commences a recall of the product.

Labelling — exemption number

7. (1) A person who is deemed to have been issued a product licence for a natural health product must ensure that the product’s exemption number, preceded by the designation “EN”, is shown within a reasonable time on the label for the product in accordance with

(a) section 88 and, if applicable, section 89 of the Natural Health Products Regulations; and

(b) the requirements that apply to product numbers in section 93 and, if applicable, section 94 of those Regulations.

Prohibition — label

(2) A person must not display an exemption number on the label of a natural health product unless the number is posted on the Health Canada website in accordance with subsection 2(3).

Repeal

8. These Regulations are repealed on the day that is 30 months after the day on which they come into force.

Coming into force

9. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue: When the Natural Health Products Regulations (NHPR) came into force in 2004, an industry-led survey estimated that approximately 40 000 natural health products (NHPs) were already on the market that did not comply with the new NHPR. As of June 14, 2010, there remain an estimated 11 170 NHPs for which a product licence application has been filed with Health Canada but has not yet been fully processed. Many of these products are already for sale on the market. These products include traditional and non-traditional medicines, food-like NHPs, homeopathic medicines and personal care products. As a result of recent stakeholder feedback, a temporary solution was developed to allow Canadians access to products that meet certain safety criteria, to make sure safety measures are in place to monitor products on the market, and to support the orderly transition of product licence applications that have been awaiting a full assessment by Health Canada.

Description: The Natural Health Products (Unprocessed Product Licence Applications) Regulations (the Regulations) will provide a temporary instrument to permit NHPs for which a product licence application has been filed with Health Canada but for which a decision to issue or refuse a licence has not been made to be sold on the market, with an exemption to the prohibition on sale in the NHPR. The Regulations will make the sale of these products legal. The exemption must be provided by Health Canada through a process that is initiated no later than 180 days from the filing of a complete application, if the Minister has not within that time made a decision to issue or refuse a licence, and is satisfied that the product meets certain safety criteria. For those product licence applications filed with Health Canada before the coming-into-force of these Regulations, the 180 days may have already passed, and therefore an exemption number may be issued in less than 180 days. The exemption, granted by the Minister in the form of an exemption number, will stay in effect until the application(s) is withdrawn and processed and a decision to issue or refuse a licence is made, or until the Regulations are repealed. The Regulations will also assert key safety oversight measures such as adverse reaction reporting, site licensing, and the authority to suspend or stop sales if a safety issue is identified. The Regulations will be repealed 30 months after coming into force.

Cost-benefit statement: The cost-benefit analysis describes two theoretical scenarios that could have arisen in the absence of these Regulations. Depending on the scenario, the Regulations could preserve $245 million or more of product sales for the affected products in the first year of their implementation, while introducing a more appropriate level of safety oversight for these products. This benefit would dwindle to $0 in 30 months as the full assessment of applications for the affected products is expected to be completed and the Regulations are repealed. In addition, the Regulations would provide improved transparency regarding the roles and responsibilities of both the regulator and industry, for example, the 180-day performance standard established for Health Canada for the review of product licence applications, as well as the on-market safeguards that are in place to protect the health and safety of Canadians.

Business and consumer impact: As the intent of the Regulations is to provide regulatory formality to enable the status quo, there will be no additional cost to consumers and retailers as a result of its implementation. The manufacturers and producers may potentially incur some incidental costs, including the administrative cost of providing consent to the disclosure of information and having the Regulations apply to their products, and the costs of labelling.

Domestic and international coordination and cooperation: It is not anticipated that the Regulations will affect international competitiveness.

Performance measurement and evaluation plan: The Regulations will be repealed 30 months after coming into force. The desired outcome of the Regulations is to provide a temporary solution for the approximately 11 170 unprocessed product licence applications and to meet the 180-day performance standard for all new product licence applications. Product review performance will be monitored and reported on a quarterly basis.

Issue

When the NHPR came into force in 2004, an industry-led survey estimated that approximately 40 000 NHPs were already on the market that did not comply with the new NHPR. Rather than taking immediate enforcement action to remove these products from the market, Health Canada used a risk-based approach for prioritizing compliance action for non-compliant products.

As of June 14, 2010, Health Canada has received 51 777 product licence applications and has completed more than 40 500. However, there remain an estimated 11 170 products for which applications have been filed with the Natural Health Products Directorate, but for which a decision to license or refuse has not been made. Many of these products are already for sale on the market. These products are categorized as

  • traditional medicines including traditional Chinese medicines, Ayurvedic and herbal medicines;
  • non-traditional medicines including herbs, digestive enzymes, vitamins or minerals, and essential fatty acids;
  • homeopathic medicines;
  • personal care products (e.g. shampoos with health claims); and
  • NHPs in food format (e.g. energy bars and juices with vitamins).

As a result of recent stakeholder feedback regarding the sale of unlicensed NHPs, Health Canada is of the opinion that a temporary solution is needed to allow Canadians access to products that meet certain safety criteria, while also making sure safety measures are in place to monitor products on the market, and to support the orderly transition of product licence applications that have been awaiting a full assessment by Health Canada.

Objectives

The Regulations will advance a temporary instrument for NHPs that have a product licence application awaiting review by Health Canada by expressly exempting them from the prohibition against sale in the NHPR.

The key objective of the Regulations is to introduce a more appropriate level of safety oversight to these products. Products that meet certain safety criteria will be permitted to be sold lawfully while the applications are being processed. At the same time, key safety oversight measures will apply, including adverse reaction reporting, good manufacturing practices, and site licensing. In addition, the Regulations will maintain Health Canada’s ability to suspend a licence or to direct sales to stop. The Regulations will also meet the objective of introducing greater stability and credibility in the regulatory environment for NHPs.

Description

The proposed Regulations were pre-published in the Canada Gazette, Part I, on May 8, 2010. During the 30-day comment period, Health Canada received questions of clarification from 20 individuals or organizations. Health Canada also received comments and recommendations from 82 individuals or organizations.

Comments and recommendations received during and after the close of the 30-day comment period were used to refine the Regulations. Changes have been made to the Regulations as a direct result of stakeholder input. All changes made to the Regulations are outlined in the Consultation section of this Regulatory Impact Analysis Statement.

Overview of Regulations

The Regulations were made under the authority of the Food and Drugs Act and will apply to NHPs for which a product licence application was filed but a decision to issue or refuse a licence has not been made. The Regulations will exempt these products from the prohibition of sale of the NHPR, if certain safety criteria are met. While these products are exempt from the prohibition of sale, key on-market safeguards — such as having to file safety information upon request from Health Canada, report adverse reactions, maintain proper labelling and stop sale upon direction from Health Canada — still apply. As the application is processed, the NHP will be issued a product licence (represented by a natural health product number (NPN) or Drug Identification Number for Homeopathic Medicine (DIN-HM) on the product label) or refused one under the NHPR, and will therefore no longer be subject to the exemption.

Application

The Regulations will only apply to NHPs (as defined in the NHPR) for which a product licence application was filed with Health Canada and has not been withdrawn by the applicant, and until a decision to issue or refuse a product licence has been made by Health Canada.

Health Canada must assign an exemption number to any NHP to which these Regulations apply, before the later of 15 days after the Regulations come into force, or 180 days from the date the application was submitted, if Health Canada had not made a decision to issue or refuse a licence in that time.

Product licence applicants will be notified in writing of the exemption number and the fact that the number will be posted on the Health Canada Web site, along with the product brand name, and the applicant’s name, represented by the company name.

Applicants will be given 60 days to consent to the posting of this information and to provide a statement confirming that the product meets specific safety criteria. These will include confirming that the product is not

  •  a sterile product for ophthalmic use;
  •  a product that contains an ingredient that is prohibited from being sold in a drug under the Food and Drug Regulations (e.g. arsenic, mercury);
  •  to the best of the applicant’s knowledge, a product containing an ingredient that is likely to result in injury to the health of a consumer or purchaser, and whose presence in a natural health product or other drug has led to a recall or stop sale under the NHPR or the Food and Drug Regulations;
  •  recommended for use to treat, prevent or cure a serious disease (as listed in Schedule A of the Food and Drugs Act); or
  •  recommended for use in children under 12 years of age, or pregnant or breastfeeding women.

If the consent and statement are provided, and Health Canada is satisfied that the safety criteria were met, the exemption numbers will be posted on the Health Canada Web site, in addition to the product brand name and applicant’s name.

Once an exemption number is posted on the Health Canada Web site, the product licence applicant will be deemed to hold a product licence. The prohibition in subsection 4(1) of the NHPR against the sale of a product without a product licence therefore will not apply. This will allow the product to be sold subject to the provisions in these Regulations and other key provisions in the NHPR.

If the applicant does not provide the statement regarding the safety criteria or consent to posting the information referenced above, or the products do not meet the safety criteria, the applicant will not be deemed to hold a product licence and will be subject to the prohibition of sale and all other requirements of the NHPR.

On-market requirements

Although exempted from the prohibition to sell without a product licence, these products will be subject to most of the remaining requirements in the NHPR.

The Minister will have the authority under sections 17–21 of the NHPR to direct an applicant to stop sales of product and to suspend or cancel a deemed licence to prevent injury to health. In addition, the Minister will have the authority under these Regulations to suspend a deemed licence if there are reasonable grounds to believe the person has contravened the Regulations or it is later confirmed to be a product that does not meet the described safety criteria.

The on-market safety requirements in the NHPR for licensees to file safety information (section 16), to maintain records (section 23) and to report adverse reactions (section 24), still apply.

In addition, the site licensing and good manufacturing practices requirements in Part 2 and Part 3 of the NHPR apply. This will ensure that all NHPs subject to the Regulations are manufactured, packaged, labelled, imported or stored in a licensed facility and in accordance with good manufacturing practices.

The requirements (sections 93 and 94) to include an NPN or a DIN-HM on the product packaging and labelling do not apply, as such numbers would not have been assigned in respect of these products. Instead, product licence applicants are required to include the assigned exemption number on the label in a reasonable time, and when applicable, in accordance with the requirement for product numbers in these sections. In addition, the numbers must be shown on the label in accordance with sections 88 and 89 of the NHPR, to ensure that exemption number is clearly and prominently displayed, and readily discernible to consumers and retailers. It is prohibited for an exemption number to be displayed on a label unless the exemption number is posted on the Health Canada Web site.

Sections 11 and 13 of the NHPR permit product licensees with an NPN or DIN-HM to make post-market changes by filing an amendment. These provisions apply to licensed NHPs and therefore they do not apply to products to which an exemption number has been issued. Minor changes to an NHP which do not impact safety or efficacy of the product are permitted under section 12 of the NHPR. Persons deemed to have been issued a product licence (i.e. holders of an exemption number) should notify Health Canada in writing of the administrative changes outlined in this section, such as change of address, the addition or substitution of a non-medicinal ingredient, or a new brand name. Such changes would be made under section 12 (“Notification”) of the NHPR and would be reflected on Health Canada’s Web site.

Site licence information (information regarding importation, distribution, manufacturing, packaging, labelling or storing) is required before commencing sale of the exempted product.

For the purpose of compliance and enforcement activities, such as a product recall, applicants would be required to inform Health Canada of the licensed site that is conducting the regulated activities in relation to their product.

As well, the deemed licence holder, manufacturers, importers, or distributors who initiate a product recall would be required to provide the exemption number to Health Canada within three days of initiating a recall, in addition to the requirements set out in section 62 of the NHPR.

Sunset

These Regulations will be repealed 30 months after they come into force.

Regulatory and non-regulatory options considered

The options outlined below were considered in the development of the regulatory framework.

1. Low compliance and enforcement priority for products for which a product licence application has been submitted

When the Natural Health Products Directorate receives a product licence application, a submission number is issued. A submission number is not a market authorization. According to section 4 of the NHPR, a product licence is required to sell an NHP in Canada. Once a full assessment of a product licence application is completed, a product is either licensed or rejected.

Since the coming into force of the NHPR, Health Canada’s compliance approach to NHPs which had not received market authorization by way of an NPN or DIN-HM meant that, in general, products for which a product licence application had been submitted to Health Canada were considered a low priority for enforcement action unless a risk to human health had been identified. This approach is described in the Compliance Policy for Natural Health Products. Under this policy, compliance action would be taken when products present an immediate risk to health. Maintaining this approach would not address stakeholder concerns regarding the sale of unlicensed NHPs and the uncertainty regarding their safety.

2. Exemption from prohibition to sell without a product licence for products with a product licence application filed before February 1, 2010

A second option which was considered was to exempt natural health products — for which a product licence application was filed before February 1, 2010, but not processed or withdrawn — from the prohibition of sale in subsection 4(1) of the NHPR. Under this scenario Health Canada would assign and publish exemption numbers to each product. Manufacturers would be required to display the exemption number on their product label. In addition, these products would be subject to most of the remaining provisions of the NHPR, including

  • Sections 15 (additional information or samples), 16 (safety information), 17 (direction to stop sale), 18–21 (suspend or cancel a licence), 23 (records), 24 (adverse reaction reporting);
  • Part 2 (site licences);
  • Part 3 (good manufacturing practices); and
  • Part 5 (general), with the exception of sections requiring that the NPN or DIN-HM be listed on the NHP label.

The Regulations would no longer apply to a product when a decision is made to grant or refuse a product licence, when an application is withdrawn by the applicant or when the Regulations were repealed.

Product licence applications received after February 1, 2010, would not be granted an exemption, and would be required to obtain a product licence before being sold in Canada.

This option would have provided benefits to Canadians by making sure key safety measures were in place to monitor products currently being sold on the market while the product licence applications were being processed by Health Canada, and to product licence applicants who had filed applications before February 1, 2010, by supporting an orderly transition of the applications that are awaiting a licensing decision from Health Canada. However, the proposed use of a cut-off date as the only basis for establishing which products would be eligible for an exemption was viewed as unfair treatment based on targeted consultations with key stakeholders.

3. Exemption from prohibition to sell without a product licence if application is not processed 180 days after it was submitted, and product meets certain safety criteria

Natural health products for which a product licence application was filed but not processed or withdrawn would be exempt from the prohibition of sale in subsection 4(1) of the NHPR. The exemption must be provided by Health Canada through a process that is initiated no later than 180 days after the application was submitted, if the Minister has not within that time made a decision to issue or refuse a licence and is satisfied that the product meets certain safety criteria. Note that some product licence applications will have been waiting for 180 days by the time the Regulations are adopted. The exemption numbers would be assigned and would be published on the Health Canada Web site. Manufacturers would be required to display the exemption number on their product label within a reasonable time. In addition, these products would be subject to most of the remaining provisions of the NHPR, including

  • Sections 15 (additional information or samples), 16 (safety information), 17 (direction to stop sale), 18–21 (suspend or cancel a licence), 23 (records), 24 (adverse reaction reporting);
  • Part 2 (site licences);
  • Part 3 (good manufacturing practices); and
  • Part 5 (general), with the exception of sections requiring that the NPN or DIN-HM be listed on the NHP label.

These Regulations would no longer apply to a product once a decision is made to grant or refuse a product licence, when an application is withdrawn by the applicant or when the Regulations were repealed.

This option was chosen for the following reasons:

1. Allows for fair treatment across all product licence application types;

2. Offers benefits to industry by providing an orderly transition to full compliance with the NHPR;

3. Ensures Canadians have access to a full range of NHPs that are legally for sale; and

4. Allows Health Canada to more effectively manage the product licence application workload.

Benefits and costs

Health Canada’s priority is the health and safety of Canadians, acting through a stewardship role that involves both protecting Canadians and facilitating the provision of products vital to the health and well-being of our citizens. Notwithstanding the importance of Health Canada’s mandate, there are also theoretical economic impacts for the natural health products industry that may have resulted in the absence of these Regulations. For that reason, and in respect of the analytical requirements of the Cabinet Directive on Streamlining Regulation, the Department has undertaken the following analysis of the benefits and costs of the Regulations.

The cost-benefit analysis is based on data as of March 15, 2010.

Cost-benefit statement

Base Year

Final Year

Total (PV)
(i.e. after
30 months)

Average Annual

A. Quantified impacts ($)

Benefits

Industry

196 million

21 million

308 million

102 million


Cost

Industry
(sponsors)

< 1 million

0

< 1 million

< 500,000

Government
of Canada

0

0

0

01

B. Quantified impacts in non-$

Positive impacts

On Canadians: May prevent potential employment loss of some 500 full- and 350 part-time positions depending on the scenario.

On industry: Applicants filing a product licence application will have the benefit of a 180-day performance target following which an exemption would be required if a decision to issue or refuse a product licence had not been made.

C. Qualitative impacts

1. Consumers will benefit from continued access to NHPs that are on the market for which product licence applications have been filed but not yet fully processed by the Department.

2. Consumers will be assured explicitly that key on-market safeguards will be in place for those products affected by the Regulations, and will have a mechanism to verify the regulatory status of the products.

3. The Regulations will reduce any potential legal liabilities of retailers that sell the affected products.

4. Health Canada will be able to provide additional regulatory formality and safety oversight to the NHPs that are currently sold on the market in technical non-compliance and managed with a compliance policy.

1 This will be possible through the re-allocation of internal resources to process the approximately 11 170 unprocessed applications that have been filed with the Health Canada and to meet the 180-day performance standard for all new product licence applications.

Baseline case and options for the analysis

In January 2010, the National Association of Pharmacy Regulatory Authorities (NAPRA) issued a position statement advising pharmacists not to sell marketed health products without a Drug Identification Number (DIN), an NPN or a DIN-HM. A DIN is a number assigned by Health Canada to a drug (prescription and non-prescription) when it is authorized under the Food and Drug Regulations to be sold in Canada. An NPN (or a DIN-HM for homeopathic medicines) is assigned to an NHP when a product licence is issued under the NHPR. These numbers on product labels indicate to consumers, retailers and health professionals that the product has been assessed by Health Canada and has been found to be safe, effective and of high quality under the recommended conditions of use. The NAPRA position statement has also been adopted by some provincial colleges of pharmacists and is being implemented through the removal of products at the retail level and the cancellation or discontinuation of product purchases.

It is estimated that the NHPs affected by the Regulations could represent a market value of approximately $935 million. These products are currently made available to Canadians through a number of retail channels, with an estimated 26% of the sales distributed by pharmacies.

There are at least two theoretical economic outcomes that could have arisen in the absence of the Regulations:

In the first scenario, the potential impact was assumed to apply only to chain and independent pharmacies and their suppliers. In this case, individual pharmacists would likely have considered the perceived health risks to their customers and the legal risks to themselves in following the position statement of their governing body. As a retail channel, a pharmacy may have also considered potential loss of market share to other retail channels.

The overall economic impact under this scenario could have ranged from $0 to $245 million for the initial year, depending on the degree to which market discontinuation is implemented and the ability of other retail channels to pick up market shares.

A second possible scenario would have seen the removal of unlicensed products extended to retail channels other than pharmacies. In this scenario, the impact without government intervention could have been $245 million and upward, with the full compliance of pharmacies. For example, if the whole retail sector decided to remove such products, approximately 34% of the products currently on the market could theoretically have been removed, with an estimated market value as high as $935 million being taken out of the economy.

In both situations, it is expected that there may have been a ripple effect on potential loss of employment over the next 30 months, from retailers through to manufacturers and producers, while Health Canada continued to complete its assessment of the product applications. For example, a 3% impact on employment could translate into job loss of approximately 500 full-time and 350 part-time positions.

The benefits and costs for specific stakeholders that may arise as a result of the Regulations are outlined below. The complete cost-benefit analysis, including the approach and methodology, the baseline scenario, assumptions and considerations made for the purpose of estimations, source of data, as well as the detailed calculations, can be found on the Health Canada Web site address: www.hc-sc.gc.ca/dhp-mps/prodnatur/legislation/acts-lois/gazette1/regul-regle_cba-aca-eng.php.

Benefits

Consumers

Consumers will benefit from the status quo of continuing to have access to the marketed NHPs. In addition, consumers will be assured explicitly that the products meet certain safety criteria, that key on-market safeguards will be in place for those products affected by the Regulations, and that they will have a mechanism to verify the regulatory status of the product.

Industry

Manufacturers, distributors, importers and retailers of products that are covered by the scope of the Regulations will be able to lawfully sell their products. The Regulations will also allow the product licence applicant to differentiate clearly their exempted products from those that are prohibited from being on the market as well as differentiating the exempted products from licensed products.

Applicants filing a product licence application will have the benefit of a 180-day performance target following which an exemption would be required if a decision to issue or refuse a product licence had not been made.

The Regulations will also reduce the risk to pharmacies of losing market share to other retail channels such as other NHP retail outlets, and should prevent a ripple effect throughout the NHP sector, with the potential for creating job losses from the retail level upward.

Health care professionals (e.g. pharmacists)

The Regulations should address the safety concerns that some health care professionals and their governing bodies have regarding public disclosure of product status, notification of final product licensing decisions, and on-market safety measures. In addition, the Regulations will reduce any potential legal liabilities or professional practice issues of health professionals should they decide to continue selling the affected products.

Health Canada

The Regulations will enable Health Canada to process the applications for these products and address the legal and safety concerns of stakeholders by providing access to products that meet certain safety criteria, while also making sure safety measures are in place to monitor products on the market.

Costs

Consumers

It is not anticipated that consumers will incur any costs, directly or indirectly, as a result of the Regulations as the intent is to provide a legal framework for a group of products that are currently available. No action or activity is required from consumers.

Manufacturers and distributors

Manufacturers and possibly distributors may incur some incidental costs, such as time spent to consent to the posting of the exemption number, product name and applicant name on the Health Canada Web site and providing the statement that the product meets the specified safety criteria. However, the amount is likely to be very minimal. There is also the cost of labelling of products to display the exemption number assigned by Health Canada. The labelling will provide transparency for consumers and will allow its manufacturers to differentiate their products from those that do not comply with these Regulations or the NHPR. Label statements such as “Health Canada approval pending” have currently been seen in business practice to promote a product. To keep the incremental cost and market disruption to a minimum, exemption numbers will appear on product labels within a reasonable time (this could be within a number of months or at the next printing of the product labels).

Retailers

It is anticipated that retailers, like consumers, will not likely incur any costs as a result of the Regulations. Since the intent is to provide a legal framework for a group of products that are currently being sold in the Canadian marketplace, no action or activity is required from the retailers.

Health care professionals (e.g. pharmacists)

As with consumers and retailers, health care professionals will not be expected to incur any additional costs following the implementation of the Regulations.

Health Canada

Health Canada expects to incur additional operational and administrative costs to implement the Regulations. In general, this includes managing and administering the additional exempted products. To address increased administrative pressures, Health Canada will have to re-allocate internal resources to address the unprocessed applications that have been filed with Health Canada and to meet the 180-day performance standard for all new product licence applications.

Activities such as ensuring on-market safeguards are properly executed or completing the unprocessed product licence applications would have occurred with or without the Regulations. Thus, they have not been included in the analysis.

Rationale

The Regulations will support the orderly transition of product licence applications awaiting full assessment while making sure key safety measures are in place to monitor products being marketed currently. The Regulations will allow consumers access to products that meet certain safety criteria and are subject to on-market safety measures, while avoiding significant market disruption.

The safety measures in the Regulations are equivalent to the measures to monitor and address safety issues for NHPs for which an NPN or DIN-HM has been issued. Adverse reaction reports have to be filed on a mandatory basis. Site licence requirements apply to ensure that all NHPs are manufactured, imported and distributed in compliance with good manufacturing practices. If a risk does begin to emerge, the application for the NHP could be re-prioritized. Site licences could be suspended or cancelled. If the risk is serious, other measures such as directing a manufacturer, importer or distributor to suspend or to stop sale of a product could be applied.

The transparency measures, such as issuing and posting an exemption number, will allow retailers, consumers and health professionals to identify which products are subject to the exemption. This will improve the current administrative approach that does not overtly indicate which NHPs are being sold within the compliance policy.

Consultation

Prior to pre-publication in the Canada Gazette, Part I, stakeholders were given the opportunity to provide input that contributed to the development of the proposed Natural Health Products (Unprocessed Product Licence Applications) Regulations. In February and March 2010, the Natural Health Products Directorate (NHPD) conducted informal consultations with the Natural Health Products Program Advisory Committee, the National Association of Pharmacy Regulatory Authorities, and the Ontario College of Pharmacists. The advisory committee included representation from industry, consumers, patients, health care professionals and academic organizations.

Overall, stakeholders were supportive of the regulatory proposal as a temporary mechanism to create stability in the regulatory environment for these products, while also providing a more appropriate level of formality and safety oversight to the sale of these products. The consultations resulted in feedback on a number of issues. Specifically, stakeholders wanted some assurance that the products covered by the proposal would be subject to some form of initial assessment by Health Canada. Other stakeholders suggested that the proposal should allow regulatory authorities to respond to identified safety issues. Stakeholders stressed the need for retailers and the public to be able to identify the products that are exempt from those that are licensed, and to have the status of those products updated as reviews are completed. Stakeholders also wanted assurance that the compliance and enforcement approach for NHPs would be normalized to be more consistent with other products, and for enforcement action to be taken against non-compliant products. Finally, the majority of stakeholders wanted some assurance that the proposal would be temporary in nature and would have a formal sunset date.

The proposed Natural Health Products (Unprocessed Product Licence Applications)Regulations were pre-published in the Canada Gazette, Part I, on May 8, 2010.

During the 30-day comment period, Health Canada received 20 responses (18 from industry and two from government) seeking clarification of the proposed Regulations. In addition to the requests for clarification, Health Canada also received sets of comments and recommendations from 82 individuals or organizations (including 68 from industry, nine from health care professionals, three from consumer groups, one from government, and one from an unknown source).

Comments and recommendations received during and after the close of the 30-day comment period have assisted in the refinement of a number of provisions of the Regulations. And, with the exception of three health professionals or health professional associations and three NHP companies, there was general support for the Regulations from a broad range of stakeholders.

The reasons that Health Canada heard from those who do not support the Regulations can be summarized as follows: (i) no natural health product should be on the market without a full review for safety and efficacy; (ii) the Natural Health Products Directorate does not have sufficient resources; (iii) there should be more compliance and enforcement activities; (iv) a two-tiered regulatory regime is created where some products may be labelled inappropriately; and (v) many companies have worked to conform to the NHPR, while others worked around the NHPR. However, given the available options, Health Canada believes that these Regulations provide the best opportunity to allow consumers access to products that meet certain safety criteria and are subject to on-market safety measures, while avoiding significant market disruption.

Comments resulting in changes to the Regulations, as well as comments not incorporated into the regulatory framework, and the responses are outlined below. The majority of the comments received focused on the implementation and administration of the proposed Regulations.

Comments resulting in changes to the Regulations

Forty stakeholders indicated that 30 days is too short a timeframe to opt in to the regulatory framework. Health Canada recognizes that 30 days may be too short a timeframe for some companies, for example, to allow for sufficient time for internal discussions within the company, or when, for various reasons, the communication from Health Canada is misdirected. Therefore, 30 days has been changed to 60 days; companies will have 60 days to opt in to the regulatory framework.

Forty stakeholders indicated that minor changes to NHPs for which a product licence application has been submitted to Health Canada and which do not impact safety or efficacy of the product should be permitted. Health Canada acknowledges that minor changes to an NHP which do not impact safety or efficacy of the product should be permitted. Therefore, section 3 of the Regulations has been revised accordingly.

Five stakeholders commented on the issue of site licences. Some respondents indicated that more clarity was needed as to the relationship between site licences and exemption numbers. Consequently, section 5 of the Regulations has been revised to clarify the policy intent to mirror the requirements set out in section 22 and paragraph 12(2)(b) of the NHPR (i.e. that site information must be provided to Health Canada before the sale of an NHP begins — in this case an exempted NHP — and that Health Canada should be notified of any change to that information).

Comments not resulting in changes to the Regulations

Forty-three respondents commented on advertising. While some respondents indicated that advertising of products with exemption numbers should not be permitted, others indicated that it should be. In fact, natural health products, whether the subject of a product licence or the subject of an exemption number, are not directly prohibited from being advertised in the NHPR or the Natural Health Products (Unprocessed Product Licence Applications) Regulations. However, pursuant to section 9 of the Food and Drugs Act, they cannot be advertised or sold in any manner that is false or misleading. Compliance and enforcement action on advertising violations are on a risk-based approach. Since the health claim on an exempted product will not have been assessed, advertising that the claim has been authorized or approved by Health Canada would be considered false and could be subjected to compliance and enforcement action.

Fifty respondents commented on the repeal of the Regulations. The Regulations should not be repealed after 30 months: they should remain in place until performance targets for the review of product licence applications have been set by Health Canada and are being met. However, Health Canada has conducted an assessment that indicates that within the 30-month lifespan of the Regulations a final product licensing decision will have been made for each exempted product. It is anticipated that the Regulations will allow for the adoption and implementation of performance targets vis-à-vis product licence applications. As the quality of applications improves, the length of time to complete a full assessment will decrease.

Fifty-two respondents commented on the 180-day timeframe, stating that 180 days for a product licence applicant to be waiting for a licensing decision for a product not previously marketed before it is eligible for an exemption number is too long. It is important to note that the 180 days refers to calendar days. On average, a product licence application receives one or two information request notices (IRNs), to which the company has 30 days to respond. At the same time, Health Canada will ensure that sufficient time is provided to allow each exempted product to have undergone an initial safety review prior to the issuance of the exemption number. The clock for the 180 days begins when a Submission Receipt Acknowledgement Notice is sent to the applicant upon confirmation of a complete product licence application. Therefore, for products that are already on the market and for which product licence applications were previously submitted, as of the coming into force of the Regulations many NHPs will already have been waiting for a final licensing decision for more than 180 days and may be eligible for an exemption number.

Thirty-nine respondents commented on compliance and enforcement, many of them indicating their concern over compliance and enforcement once the Regulations are adopted. While suggestions for a delayed implementation of compliance and enforcement were heard, a new Compliance and Enforcement Policy for NHPs has been developed in consultation with stakeholders. The new policy continues to employ a risk-based approach to compliance and enforcement, clearly outlining the expectation for all NHPs to have been issued product licences or exemption numbers prior to sale. The new policy will be adopted around the time of the coming into force date of the Regulations. However, there will be an extensive period of compliance promotion and outreach over four to six months prior to implementation of the new policy.

Four respondents indicated that the posting of product information on the Health Canada Web site will be detrimental to business, and that posting of this information should be voluntary. However, Health Canada has determined the information that is posted is minimal and does not include details of a product’s formulation, for example. Companies are also free to choose not to opt in to the exemption number system and can choose instead to await a final product licensing decision. The information must be posted to the Health Canada Web site to allow NHP stakeholders, including consumers, health professionals and retailers, to know which products have received exemption numbers.

Forty-six respondents commented on the risk criteria. Some respondents felt that the risk criteria which would make an NHP ineligible for an exemption number were appropriate. Others felt that even when a product met the risk criteria, if it was a homeopathic medicine or a vitamin, it followed precleared information, it was sold directly to health care professionals or there was no known risk with the product, that it should be eligible for an exemption number. While many respondents made suggestions as to types of NHPs which should not be prohibited from getting an exemption number, including many recommendations that the Regulations refer to the Compliance Policy for Natural Health Products as a way of indicating which NHPs should be eligible for exemption numbers, it is not possible for a regulation to refer to a policy. A policy can be changed at any time and without Parliamentary oversight; therefore, such references are not incorporated into law. Health Canada has committed to prioritizing the review of product licence applications of NHPs which fall within the risk criteria included in the Regulations.

Forty-nine respondents indicated that labelling products with an exemption number is too costly, particularly when just a few months later, an NHP may be issued and labelling with the NPN will be required. Including the exemption number on the label should be voluntary. However, while Health Canada recognizes that there is a cost to re-labelling products, exemption numbers must be listed on NHP labels to allow for clear communication regarding the status of a product with consumers, health professionals and retailers. The Regulations recognize the cost to industry by allowing the re-labelling within a “reasonable period of time.”

Implementation, enforcement and service standards

Implementation of the Regulations will be supported by additional guidance for industry with respect to labelling requirements for the exemption number and enforcement strategies for the Regulations.

The Regulations will require that the exemption number be listed on the NHP label as soon as is reasonable. The intent of this requirement is transparency; it will enable consumers, retailers, health care practitioners, and others to determine which products are exempt from the prohibition against sale without a product licence. However, the addition of the exemption number to the label is not intended to be a significant burden to the NHP industry. Health Canada will take this into consideration in developing guidance for the implementation of this requirement. For example, current labelling practices require re-labelling, depending on the circumstances, within a 6–12 month period, or at the next printing of the label.

In order for NHPD to ensure that applicants have an opportunity to consent to the posting of the exemption number, product brand name and applicant name on the Health Canada Web site, NHPD will undertake an administrative process to notify affected applicants. Applicants will have 60 days to provide consent and the statement that the product meets the specified safety criteria. If an applicant does not provide this information within the 60 days or does not respond, the exemption number will not be posted and the product cannot be sold on the market until the product licence application is fully processed and a product licence is granted. Through this process, product applicants will in effect be given an opportunity to exclude themselves from the exemption, and to not have information regarding their product licence application disclosed publicly.

The Department employs a risk-based approach to ensure that the integrity of the regulatory system for marketed health products, including NHPs, is maintained through focusing compliance and enforcement activities on non-compliance that poses the greatest risk to the health and safety of Canadians. This non-compliance would include, for example, a product represented as an NHP, but which contains an undeclared prescription drug ingredient, an NHP making an unauthorized claim for a serious disease, or an unauthorized NHP that is marketed to children or pregnant women. Health Canada will continue to employ this risk-based approach.

Performance measurement and evaluation

The Regulations will be repealed 30 months after coming into force. The desired outcome of the Regulations is to provide a temporary solution for the estimated 11 170 unprocessed product licence applications and to meet the 180-day performance standard for all new product licence applications. Product review performance will be monitored and reported on a quarterly basis.

Contact

Kyra Paterson
Senior Policy Analyst
Natural Health Products Directorate
Health Products and Food Branch
Health Canada
Qualicum Tower A, 3rd Floor
2936 Baseline Road
Address Locator: 3303B
Nepean, Ontario
K1A 0K9
Email: nhp.exemption.psn@hc-sc.gc.ca

Footnote a
S.C. 2005, c. 42, s. 2

Footnote b
R.S., c. F-27