On June 16, 2014, the House of Commons passed Bill C-17, otherwise known as the Protecting Canadians from Unsafe Drugs Act (Vanessa's Law), after approving several amendments to the draft Bill presented by the Standing Committee on Health. The Bill has been referred to the Senate where it is awaiting a third and final reading, and is expected to receive royal assent this summer.  Bill C-17 will introduce the most substantial amendments to the Canadian Food and Drugs Act (the "Act") in over fifty years.

While much has been said about the new post-market powers to be bestowed upon Health Canada in Bill C-17, including the power to compel the production of information (including confidential business information), the power to order market authorization holders to conduct further tests and studies, and the power to unilaterally order a product recall, little has been said about the drastic changes to the "Offences and Punishment" provisions in the Act.

Under Bill C-17:

  • The maximum monetary penalty for a violation of the Act or its regulations will increase from $5,000 to $5,000,000 per day upon conviction, and to an unlimited amount at the discretion of the court where the violation involved false or misleading statements to Health Canada or a person knowingly or recklessly caused a serious risk of injury to human health.
  • Corporate officers, directors, agents and mandataries who direct, authorize, assent to, participate in or other otherwise acquiesce in the commission of the offence are individually liable and subject to the same punishment upon the conviction of the company, even if the person is not prosecuted for the offence.
  • A violation of the Act or its regulations is a strict liability offence.  Due diligence is a defence in a prosecution for an offence under the Act, other than where a person knowingly or recklessly caused a serious risk of injury to human health.

Whether these amendments signal a new approach to enforcement by Health Canada remains to be seen. In any event, if Bill C-17 is enacted, the potential monetary penalty for a violation of the Act or its regulations will become immediately significant - not only for drug and device manufacturers, but also for officers and directors who acquiesce to non-compliant activity.

The critical importance of the statutory due diligence defence in connection with the increased and expanded punishment provisions in Bill C-17 cannot be overlooked. Drug and device companies should view Bill C-17 as an opportunity to audit their current compliance program and update it to conform with the Act and its regulations. In particular:

  • Update (or implement) written company compliance policies to ensure that procedures related to all activities regulated by the Act or its regulations (including advertising/promotion, distribution, post-market reporting, recalls, product samples, GMP, etc.) are in place.
  • Conduct updated compliance training to ensure that all employees are made aware of the company's compliance policies and commit to following them.  Compliance training should be conducted regularly and properly documented.
  • To the extent not in place, appoint a responsible person (e.g Compliance Officer) to manage the company's compliance activities, including ongoing monitoring and detection, compliance audits, internal investigations and corrective actions.

Although a properly implemented and documented compliance program cannot alone prevent the occurrence of a violation of the Act or its regulations, it may be used as evidence of due diligence in the event that a violation occurs, which is consistent with the Canadian jurisprudence related to strict liability offences.