Explanatory note for safeguarding drug supply interim order

(This note is not part of the Order)

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Proposal

The Interim Order Respecting Drug Shortages (Safeguarding the Drug Supply) (the interim order) made by the Minister of Health on November 27, 2020, introduces new measures to help safeguard the Canadian drug supply by ensuring that bulk importation frameworks, such as the one recently established by the United States, do not cause or exacerbate a drug shortage in Canada. The interim order also enables the Minister to require a seller to provide information that could help Health Canada take steps to assess or alleviate an existing or potential drug shortage.

The Minister may make interim orders under subsection 30.1(1) of the Food and Drugs Act, if the Minister believes that immediate action is required to deal with a significant risk, direct or indirect, to health, safety or the environment. Such an order ceases to have effect 14 days after it is made unless it is approved by the Governor in Council.

Objective

The objective of the interim order is to help safeguard the Canadian drug supply by ensuring that bulk importation frameworks, such as the one recently established by the United States, do not cause or exacerbate a drug shortage in Canada.  

Background

Drug shortages are a growing global problem with particular implications for vulnerable markets like Canada. Since 2017, approximately 10-15% of drugs have been in shortage at any given time. Canada is a small market representing 2% of global drug sales that sources 68% of its drugs internationally.

The COVID-19 pandemic has made this situation worse by disrupting the availability of drugs and due to the growing the demand for certain medicines used to treat and manage COVID-19 infections. By October 20, 2020, Canada had experienced 42 Tier 3 (highest impact) shortages, compared to approximately 10 such shortages in all of 2019. While the supply and demand levels for many drugs are stabilizing, the need for vigilance in maintaining the national drug supply continues and the Government remains focused on preparing a strong response to a future resurgence of COVID-19.

Drug shortages have a real impact on Canadians. Health care providers rely on access to needed drugs to provide proper and timely treatment. Drug shortages can contribute to adverse patient outcomes, such as delayed or cancelled surgeries, less than optimal care because of the need to use alternative treatments, discontinued treatment where there is no alternative, and drug rationing.

Drug shortages affect all gender and sociodemographic groups in Canada and can have serious impacts on the healthcare system causing harm to Canadians. Already vulnerable populations, such as children, older adults, and Indigenous populations may be disproportionately affected by a drug shortage. Canada requires access to a diverse supply of drugs to protect the health and safety of Canadians.

Health Canada (the Department) plays an active role in mitigating the impact of drug shortages on Canadians. The Department works closely with provinces and territories, manufacturers, and others in the drug supply chain to ensure that Canadians have access to the prescription drugs they need. Regulatory requirements for manufacturers to report drug shortages came into force in March 2017 and require manufacturers to report certain drug shortage and discontinuation information on a third-party website. There are no other existing requirements in legislation or permanent regulation directly related to drug shortages.

To date, the federal government has put in place a number of temporary measures to support efforts to alleviate shortages that occur and to help prevent new shortages. For example, the Interim Order Respecting Drugs, Medical Devices and Foods for a Special Dietary Purpose in relation to COVID-19, made by the Minister of Health (the Minister) on March 30, 2020, permits the exceptional importation of specified drugs that may not fully meet Canadian regulatory requirements, but are manufactured according to comparable standards, to help alleviate a shortage. Second, the Interim Order Respecting the Prevention and Alleviation of Shortages of Drugs in Relation to COVID-19, made by the Minister on October 16, 2020 provides the Minister with additional tools to address drug shortages. These tools include, but are not limited to, the ability to request specific shortage-related information from those who sell drugs to help prevent or alleviate drug shortages that may be caused or exacerbated by the COVID-19 pandemic. Both of these interim orders were approved by the Governor in Council and are in effect for one year from the date they were made.

These measures provide additional tools to help the Minister address drug shortages. However, they can be used only within the context of COVID-19. New tools are needed to address additional pressures to the Canadian drug supply that increase the risk of drug shortages.

On October 1, 2020, the United States (U.S.) published the final rule on the Importation of Prescription Drugs. The rule comes into effect on November 30, 2020, and creates a pathway to allow licensed U.S. pharmacists or wholesalers to import in bulk certain prescription drugs intended for the Canadian market. There has been significant state-level support for the bulk importation of drugs from Canada. The implementation of importation programs would worsen the existing problem of drug shortages in Canada and put the health of Canadians at risk.

Urgent action is required to put in place tools that help ensure that any participation in bulk importation programs in the U.S. or in other countries do not cause or exacerbate drug shortages.

Implications

The interim order prohibits a drug establishment licence (DEL) holder (for example, a fabricator, wholesaler, or distributor) from distributing certain drugs intended for the Canadian market to another person (i.e. individual or business) for consumption or use outside Canada, unless the DEL holder has reasonable grounds to believe that the distribution will not cause or exacerbate a shortage. This interim order applies to all distribution conducted by DEL holders and is focused on drugs for which a shortage would have the highest impact on patient health and safety (for example, prescription drugs, controlled substances and biologics). The prohibition does not apply to sales made by a person who is not required to hold a DEL (for example, consumer-level pharmacy) and does not include transfers of drugs within a company. Sales of products manufactured in Canada solely for export are also not included in the scope of the prohibition as long as the conditions in subsection 37(1) of the Food and Drugs Act are met.

A shortage is where, in respect of a drug, a manufacturer is unable to meet the demand for the drug in Canada. The interim order does not prohibit the distribution of a drug for consumption outside of Canada if the DEL holder is able to demonstrate that the sale will not cause or exacerbate a shortage. DEL holders are required to maintain a record of this determination. Information about making the determination of whether a sale will cause or exacerbate a shortage has been provided in guidance.

This interim order also introduces a new authority for the Minister to require specific information from certain companies to assess existing and potential shortages. This authority to require information has some degree of overlap with the authority in the Interim Order Respecting the Prevention and Alleviation of Shortages of Drugs Related to COVID-19, but there are three key differences. First, it is limited to regulated parties holding a drug product authorization or establishment licence issued by Health Canada, as opposed to all persons who sell a drug. Second, it applies to all shortages, not only those related to COVID-19 or bulk exportation. Third, the scope of this interim order does not include over-the-counter drugs. The authority within this interim order provides the Minister with the ability to gather information about a potential shortage when voluntary compliance with a request for information is not achieved. This information will better inform decision-making and federal interventions to help manage drug shortages.

A person required to provide information must do so electronically in a format acceptable to the Minister. The required information is to be submitted within the timeframe specified by the Minister. However, the Minister cannot require the information to be submitted with less than 24 hours’ notice, unless the Minister has reasonable grounds to believe that there is a serious or imminent health risk. Further information on the process for providing information and more details about the types of information that may be requested has been provided through guidance to industry.

Enforcement of this interim order takes place through inspection, compliance promotion, monitoring, and verification. Health Canada will continue to conduct compliance promotion sessions with DEL holders to increase their understanding of their new obligations and minimize non-compliance. Health Canada has a number of enforcement powers available to address non-compliance with the Food and Drugs Act, or to address an issue of public health and safety. Actions that could be taken against DEL holders violating the terms of the interim order include requesting a plan for corrective measures, issuing public advisories or other forms of communication, or suspending or cancelling of the DEL holder’s licence.

Health Canada will choose the most appropriate tool to achieve compliance and mitigate any risks to health informed by the specifics of each case and in alignment with the Health Canada compliance and enforcement policy framework and the compliance and enforcement policy for health products (POL-0001). In instances where Health Canada’s responses have been appropriately escalated, but have still not successfully achieved compliance, Health Canada may make a recommendation for prosecution to the Public Prosecution Service of Canada.

Consultation

Comments received from industry and health interest groups to date are supportive of the government of Canada taking immediate action to address the risk of drug shortages presented by the U.S. rule. Since the release of the U.S. Safe Importation Action Plan on July 31, 2019, Health Canada has heard from many Canadians who voiced their concern regarding foreign prescription drug importation proposals and their expectation that the Government take definitive action to safeguard Canada’s drug supply.

Stakeholder consultation on specific aspects of this interim order was not possible since the U.S. final rule was only recently published and the urgent nature of the risks to the Canadian drug supply. However, in 2019 and earlier in 2020, Health Canada consulted with industry and the broader healthcare community on the importance of preventing bulk exports of drugs that could cause or exacerbate drug shortages in Canada. Stakeholders in the medical, nursing, pharmacy, and charitable communities were strongly supportive of efforts to prevent bulk exports of drugs intended for the Canadian market.

Contact

Catherine Hudon
Director, Policy and Regulatory Strategies Directorate
Regulatory Operations and Regions Branch
Health Canada / Government of Canada
Address Locator: 1907A
200 Eglantine Driveway
Jeanne Mance Building
7th Floor, Room 705A
Tunney's Pasture
Ottawa, Ontario K1A 0K9

Telephone: 613-946-6220
Email: hc.prsd-questionsdspr.sc@canada.ca

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