Shhh, can you hear that? That’s the stamp of approval on a new era in Canadian drug and device regulation.

On November 6, 2014, Bill C-17 (the Protecting Canadians from Unsafe Drugs Act, aka Vanessa’s Law) (the “Act”) received Royal Assent and came into law. This new Act represents the most fundamental reform of the Canadian Food and Drugs Act in over five decades, and should act as a wakeup call to industry.

The Act significantly ups the ante on regulatory compliance, and affords the Minister of Health a number of new powers, all in the name of improved safety and increased transparency in connection with the sale of “therapeutic products”, defined as drugs, medical devices and any combination of the two (but not natural health products).

The Minister now has the power to obtain injunctions, order recalls of therapeutic products, order the collection and provision of post-market safety information, and order that changes be made to the labels and packaging of marketed products. In addition, the Act provides for the disclosure of confidential business information, without notice or consent, and significantly increased penalties for violations of the Act.

This bulletin provides an overview of some key changes to the regulation of drugs and medical devices imposed by the Act, and suggests measures industry can, and should, take in response.

New Oversight

The Act provides the Minister of Health with a number of new powers, all aimed at strengthening the oversight of therapeutic products throughout their life cycle.

Under the Act, where the Minister believes a therapeutic product may present a serious risk to human health, the Minister can order the provision of information within the person’s control to determine whether the product presents such a risk. In addition, at any time, the Minister can order the holder of a therapeutic product authorization to conduct an assessment of the product, including tests or studies, and to provide the results of that assessment to the Minister.

New Remedial Powers

Presumably, the new oversight measures provided in the Act will be used by the Minister to determine when and how to use the new remedial powers provided therein. For example, the Minister can now order any party that holds an authorization for the import or sale of a therapeutic product to modify the product’s label or modify or replace its package.

In addition, the Minister can now order anyone who sells a therapeutic product to recall it, upon belief that the product presents a serious or imminent risk of injury to health. Similarly, if the Minister is concerned that a person has done, or is about to commit an offence under the Act (including the sale of a recalled product), the Minister can seek an injunction from the court.

Disclosure of Confidential Business Information and Stricter Penalties

Perhaps two of the most talked-about aspects of the new regime imposed by the Act are the provisions around the disclosure of confidential business information, and the increased penalties provided for violations.

Given that one of the Act’s fundamental goals is to improve transparency around therapeutic products, it is no surprise that it provides for the disclosure of information relating to product safety. However, what has come as a surprise to some are the broad powers given to the Minister under the Act, and the broad definition of “confidential business information”.

Where the Minister believes a product may present a serious risk of injury to human health, the Act permits the disclosure of confidential business without notice to, or consent from, the person to whom the information relates. The very definition of confidential business information in the Act contemplates the disclosure of information that has actual or potential economic value, and it acknowledges that the disclosure of this information could result in a material financial loss to the disclosing person and material financial gain to its competitors.

Without a doubt, this provision has caused (or should cause) industry to sit up and take notice. Until now, the Canadian pharmaceutical and device industries have understood that any information submitted to Health Canada in connection with a regulatory submission is confidential and will be maintained as such - this may no longer be the case.

The second eye-opening change in the Act is the significantly higher penalties it introduces for non-compliance. Every person (including a person other than an individual, i.e. a corporation) who contravenes the Act as it relates to a therapeutic product, or contravenes an order made regarding the provision of additional information, modification or replacement of labelling or packaging, or a recall, is guilty of an offence and liable:

  • On conviction by indictment for a fine of up to $5,000,000 and/or up to two years in jail; and
  • On summary conviction for a fine of up to $250,000 and/or up to 6 months in jail (first offence) and a fine of up to $500,000 and/or up to 18 months in jail (subsequent offence).

Where a violation of the Act is made knowingly or recklessly, the fine on conviction by indictment is at the discretion of the court, with up to five years imprisonment. Harsher still, the Act provides that each day on which an offence is committed or continued constitutes a separate offence.

Of particular interest to corporations, the Act provides that where a person other than an individual commits an offence, any of the person’s directors, officers, agents or mandatories who directs, authorizes, assents to or acquiesces or participates in the commission of the offence is party to the offence and is liable on conviction to the punishment provided by the Act, even if the person is not prosecuted for the offence.

So What Now? Proceed with Caution

The Act provides for new regulation-making powers to give effect to the provisions contained therein. Accordingly, as with most new regulatory regimes, we can expect significant details and insight into how the new Act will actually impact the oversight of therapeutic products as regulations are introduced in the months and years to come.

However, some of the provisions of the Act came into force immediately upon Royal Assent, including the ability to require changes to labeling and packaging, the power of the Minister to seek an injunction and order a recall and the more stringent penalty provisions.

Accordingly, it is strongly recommended that all pharmaceutical and medical device companies operating in Canada take immediate stock of their compliance programs: the time to cross your t’s and dot your i’s has come. Companies should ensure that existing compliance programs account for these new developments, and where they don’t, programs should be updated. Employees should be trained on the implications of the new Act and to the extent they don’t already have one, companies should consider the addition of a Compliance Officer to the team.

Documenting a substantial compliance program is especially important given that companies and their directors and officers may avoid or mitigate the harsh penalties of the Act if they are able to show they exercised appropriate due diligence to comply with the Act.

In addition, distribution and sales agreements should be reviewed and amended as needed to ensure they provide for the required sharing of information. This is particularly relevant to importers, who may previously have only acted as “feet on the ground” in Canada, but who may now be called upon by the Minister to modify a product label or packaging.

Finally, given the changes around the ability of the Minister to disclose confidential business information, all companies, and particularly global companies, should review reporting mechanisms to ensure consistency in disclosure to regulatory authorities. Companies should also have a communications plan in place to protect against any negative publicity resulting from the disclosure of Health Canada activities.

Given that many powers afforded to the Minister in the Act are new, and the reach of these powers has not yet been tested, companies should be extra cautious in responding to requests made by the Minister under the Act, and should involve legal counsel (internal and/or external) at the earliest stage.