Canada acts to safeguard drug supply

Canada has taken measures to prevent the export of drug products through the issuance of an Interim Order Respecting Drug Shortages (Safeguarding the Drug Supply) (IO), with the aim of ensuring that drugs intended for the Canadian market are not diverted to another jurisdiction. The IO counters the recent changes under U.S. law that now permit the importing of Canadian drugs as a cost-containment measure under specified conditions.

What you need to know

• Export prohibition: The IO prohibits the exportation by a drug establishment licence (DEL) holder of certain drugs intended for the Canadian market, unless there are reasonable grounds to believe that the exportation will not cause or exacerbate a shortage of the drug in Canada.
• Excluded drugs: Over-the-counter (OTC) drugs, natural health products, and veterinary drugs are not covered under the IO.
• Excluded parties: The export prohibition does not apply to 1) consumer-level pharmacies that do not hold a DEL, 2) transshipment of drugs (i.e., drugs imported into Canada for the sole purpose of export), or 3) drugs manufactured in Canada solely for export purposes.
• Proposed F&DA amendments: Bill C-14 proposes to amend the F&DA to provide the government the authority to make regulations a) requiring persons to provide information to the Minister, and b) preventing drug shortages in Canada or alleviating those shortages or their effects.

Further Details and Implications

The U.S. Department of Health and Human Services published the final rule on the Importation of Prescription Drugs on October 1, 2020, which came into effect on November 30, 2020, creating a pathway for U.S. pharmacists or wholesalers to bulk import certain prescription drugs intended for the Canadian market. To safeguard Canada’s drug supply from the impact of the diversion from Canada to the U.S. or other countries, Health Canada acted by issuing the Interim Order Respecting Drug Shortages (Safeguarding the Drug Supply) (IO) on November 27, 2020. On December 2, 2020, the federal government introduced Bill C-14, which, among other proposed measures dealing with COVID-19, introduces amendments to the F&DA to provide the government additional regulation making power to prevent drug shortages in Canada. This is a concerted effort by the Canadian government to safeguard the drug supply in Canada for the health and safety of Canadians, particularly in view of Canada’s small market size as compared to the U.S.

The export prohibition imposed by the IO applies to the following drugs for which a Drug Identification Number (DIN) has been assigned by Health Canada:

• drugs listed in Schedule I, II, III, IV or V to the Controlled Drugs and Substances Act;
• drugs listed in Schedule C or D to the Food and Drugs Act (F&DA);
• prescription drugs on the Prescription Drug List; and
• drugs that are permitted to be sold without a prescription, but that are administered only under a practitioner’s supervision.

Authorized parties can continue to export OTC, veterinary drugs and natural health products, as long as the applicable requirements of the F&DA and Food and Drug Regulations are complied with.

A DEL is required by a Canadian entity that wishes to sell/distribute commercial supplies of drug products. This IO places an additional requirement on a DEL holder to ensure that the distribution of a drug product outside of Canada will not result in or worsen an existing shortage. If a DEL holder exports a drug covered under the IO after determining that there are reasonable grounds to believe that the exportation will not cause or exacerbate a shortage of the drug in Canada, the DEL holder must immediately create and retain a detailed record of the information relied on for such determination¹.

Further to the export prohibition, the IO also provides the Minister with the authority to require manufacturers and DEL holders to provide information to assess existing and potential drug shortages in Canada. The information must be provided electronically in a format acceptable to the Minister and within the time limit specified by the Minister, which can be shorter than 24 hours if the Minister has reasonable grounds to believe that there is a serious and imminent risk of injury to human health.

The regulation making powers introduced by Bill C-14 are in line with the measures of the IO a) requiring the provision of information to the Minister, and b) preventing drug shortages in Canada.

What’s next

The IO and Bill C-14 comes after the federal governments various temporary measures supporting efforts to alleviate and prevent drug shortages as a result of COVID-19. The IO now provides additional tools to help Canada address drug shortages beyond the COVID-19 context.

The IO will cease to have effect 14 days after it is made, unless it is approved by the Governor in Council. Bill C-14 is not yet law and is undergoing its First Reading in the parliament. If the proposed bill is ultimately passed into law (and the IO is approved by the Governor in Council), we expect that the IO will be replaced by regulations enacted under the F&DA for the safeguard of drug supply in Canada.

_________________________

¹ A list of factors to consider in determining the likelihood that the exportation could cause or exacerbate a drug shortage in Canada can be found in Interim Order Respecting Drug Shortages (Safeguarding the Drug Supply): Guidance document.

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

© 2024 by Torys LLP.

All rights reserved.