Cost-Benefit Analysis: Regulations Amending the Food and Drug Regulations - Good Manufacturing Practices for Active Ingredients

Executive Summary

The purpose of this analysis is to estimate the costs and benefits of the proposed Regulations to amend the Food and Drug Regulations - extending Good Manufacturing Practices (GMP) to cover all active ingredients (AIs) for human drugs as well as the traceability requirements. The analysis will compare the scenario under the proposal against the current environment where the regulations do not exist.

As active ingredients for biologics are already regulated in Canada due to their higher risk nature, the focus will primarily be on active pharmaceutical ingredients (APIs).

According to one estimate, the APIs market could be worth as much as $91B in 2009, of which the United States and Europe would account for at least 60% of the share.

Because Canada does not regulate APIs directly at present, there are no specific Canadian data available. Nevertheless, there is evidence to support APIs-related problems being responsible for an estimate 2-8% of the drug in final dosage form recalls in this countryFootnote 1.

The quality of APIs has increasingly become a concern internationally.

In a 2011 letter published at Canadian Medical Association Journal (CMAJ), Oxfam Canada suggested that in some countries, close to half of the common medicines on sale do not meet World Health Organization (WHO) quality standards. Pills may contain the wrong type or concentration of active ingredient, they may have deteriorated during distribution, or they may simply be fakesFootnote 2.

In 2010, the European Directorate for the Quality of Medicines & HealthCare conducted 34 API onsite inspections and reviewed 25 reports for the work done by others. As a consequence, there were 16 suspensions and 8 withdrawal of the Certificate of Suitability (CEPs). 10 were re-instated after re-inspection. The initial failure rate of 40% is significant.

During October of the same year, a pharmaceutical company in the United States agreed to pay $750 million in a civil plea agreement for, among other things, some of its drugs contained the wrong amount of active ingredient, and some were possibly exposed to contamination by microorganismsFootnote 3.

Before the World Health Organization (WHO) established the Pre-Qualification program (PQ) of APIs in 2008, its program applied only to final formulations and required final formulators to use GMP procedures to acquire APIs for United Nations (UN) tenders - a similar approach currently taken by Canada that theoretically ensures a quality API.

The WHO became concerned about API quality following an incident in 1995 and 1996 when more than 100 children died in Haiti following ingestion of cough-and-cold syrup containing a counterfeit excipient glycerin, an ingredient that is often used as an API in other medicationsFootnote 4. Other cases were also identified in Australia, the U.S., and United KingdomFootnote 5.

Subsequent to the implementation of PQ program for APIs, the WHO conducted 31 inspections of which 6 failed because of GMP compliance. The 19% failure rate in this case would need to take into context that the sample represents companies volunteered for the inspections and likely to be at the higher echelon in the quality department.

Because Canada would be among the last industrialized countries to formalize GMPs for active ingredients in accordance with the international guideline, the industry is expected to incur minimal incremental cost to comply with the regulatory requirement for licensed activities of this global product.

It is expected that there would be miscellaneous administrative and clerical time incurred by the affected parties for filing the applications. This should account for less than $100,000 annually, assuming it is less than 5 hours of work. A one-time training cost, including employee time may also be required for a minority of companies that are not currently in compliance, particularly those under the category of API packagers, labellers, or DIN (Drug Identification Number) holder distributors. Using ISO 9001 and the on-line U.S. Food and Drug Administration (FDA) cGMP trainings as proxies, it is estimated the first year cost would be at around $966,000Footnote 6.

On the other hand, the benefits would far exceed the additional burden to stakeholders. Quantifiable benefits include savings from the cost of foreign inspections paid by Canadian manufacturers and reduction of wastage and recalls because of earlier detection of problem APIs.

As shown in the Cost-Benefit Statement (Section 4.0 of this document), the net present value of this Proposal is estimated to be around $35.3MFootnote 7 over a 10 year period, in addition to other non-quantified benefits.

Assessment of Costs and Benefits

1.0 Approach and Methodology

According to the Cabinet Directive on Streamlining Regulation issued by Treasury Board of Canada Secretariat (TBS), departments and agencies are responsible for assessing the costs and benefits of regulatory and non-regulatory measures, including government inaction, when determining whether and how to regulate.

The objective of this analysis is to estimate the costs and benefits of the proposed Regulations to amend the Food and Drug Regulations - extending Good Manufacturing Practices (GMP) to cover all Active Ingredients (AIs) for human drugs as well as the traceability requirements. The analysis will compare the scenario under the proposal against the current environment where the regulations do not exist.

As active ingredients for biologics (known as bulk process intermediates, or BPI) are already regulated in Canada due to their higher risk nature, the focus this exercise will primarily be on active pharmaceutical ingredients (APIs).

Although the Regulatory Affairs Sector (RAS), Treasury Board of Canada Secretariat (TBS) requires high impact proposals to assume a comprehensive and detailed quantitative cost-benefit analysis, a qualitative analysis of costs and benefits for each stakeholder may be appropriate for those proposals with a lesser degree of impact.

For the purpose of calculating the present value, 8% discount rate would be used as recommended by TBS guidelinesFootnote 8.

Whenever conflicting data are encountered or insufficient information is available, assumptions made will be stated.

2.0 Sector Overview

Active Ingredients (AIs) used in human drug dosage form possess therapeutic value and their quality are key to the manufacturing of effective and safe medications.

Pharmaceutical manufacturing occurs in a number of steps. First, raw materials are converted into APIs. Second, the APIs and other non-active ingredients called excipients are mixed together based on formulations; press into tablets, fill into capsules or prepare as solutions. Then, they are packaged for the consumers and patients.

APIs are either sold on the open market, the so called "merchant market", or are used by a fully integrated entity to produce its own drugs in final dosage form.

According to a studyFootnote 9 carried out by the World Bank's Human Development Network, only a few large manufacturers of finished pharmaceutical products (dosage form manufacturers) have API manufacturing capabilities, and none could produce enough to meet their required APIs in-house. Many dosage form manufacturers have to buy all their APIs in the open market.

Research by Health Canada indicates that API industry is fragmented and very competitive, while its key branded name and generics customers in Europe and the United States are consolidating and outsourcing their API productions. API manufacturers often need to specialize and target their market to be financially viableFootnote 10.

Because of cost, the API manufacturing has been shifting from historical leaders in North America and European Community to AsiaFootnote 11.

In 2005, it was estimated that the total world market for APIs was worth about $76 B and was growing at an annual rate of 8.2%.Footnote 12 By 2009, the value was revised upward to as much as $91B, of which the United States and Europe would account for at least 60% of the share.

Based on information from Industry Canada, the Health Products and Food Branch Inspectorate of Health Canada (the Directorate in charge of health products compliance and enforcement activities) estimates that about 262 to 533 establishments in Canada are engaging key activities in the supply chain of active ingredients for medications and drugs, and employ between 26,000 and 30,000 individuals.

The key API activities include basic processes (chemical synthesis, fermentation, distillation and solvent extraction), grading, grinding and milling, packaging, and labelling.

Importation accounts for about 85% of the Canadian market, with China and India being identified as the major suppliers.

3.0 Parties affected by the Regulatory Proposal

Canadian Consumers and Patients

Contaminated and substandard active ingredients in a drug could cause negative health outcomes or even deaths to those consuming it.

Without the proper active ingredients to provide the appropriate therapeutic affect, patients could suffer prolong illness or discomforts despite the right diagnosis. This, in turn, could translate into unnecessary lost productivity and wages as well as other economic costs.

Worse, drug resistance could be developed as a result that would render existing treatments ineffective.

Drugs with inferior quality of active ingredients may be subject to recalls. In cases where there is no compatible substitutions (e.g., rare diseases), it could potentially jeopardize access of life-saving drugs.

For the reasons above and others, consumers and patients should have key interest in the system and practices that would minimize the risk of quality of active ingredients being compromised.

Public and Private Drug Plan Insurers and Payers, Government and Taxpayers

The Canadian Institute of Health Information estimated that Canadians spent approximately $31.1B on drugs outside of hospital in 2010. Disbursement for drugs with substandard or tainted active ingredients could represent, at a minimum, precious financial resources that could have been spent on drugs meeting the quality standard and without unexpected negative health outcome.

Historically, public payers such as provincial drug plans cover around 44% of the drug expenditure while private insurers cover slightly more than 35%. The out-of-pocket drug expense for Canadians is about 19%Footnote 13.

API Manufacturers

According to the Discussion Paper published by the World Bank Development NetworkFootnote 14, API manufacturers for the supply chain of pharmaceutical industry are evolving because of the changing demands from their customers and the pressures from globalization.

For example, innovators would traditionally depend on a small number of suppliers that they have established a trusting relationship. The innovators would perform the final stages of API synthesis themselves and in some cases, the production of late stage intermediates may be outsourced. In recent years, innovators have looked beyond such partnerships.

Because of cost, API manufacturing has slowly been shifting from historical producers in Europe and North America to newer firms in Asia.

According to Bumpas and Betsch, commodity API manufacturing tends to be a high volume, low margin business where economies of scale play an important role. It has been suggested that the average commodity API profit margin is less than 10% and many large bulk API exporters from India would work with as little as 3% margin on exported productsFootnote 15.

The rising costs of pharmaceutical products and increased competitions have led Asian API manufacturers to look toward regulated markets for growth.

Approximately 80 percent of the APIs used in the US and the European Union (EU) to manufacture finished pharmaceutical products come from Asia, with China and India accounting for much of the supply. As noted earlier, the percentage of import for APIs in Canada is estimated to be around 85%.

The Inspectorate anticipates about 40 manufacturers to be affected by the Proposal.

API Testers

API used in the manufacture of a dosage form drug is tested to establish specifications and an impurity profile. This quality control process ensures that the product meets the minimum requirements and standards.

Generally, API testing is performed by both the API manufacturer and the dosage form manufacturer (prior to using the API in their product). It is also possible for the work to be contracted out to laboratories or specialists that conduct solely API testing. However, such scenario is uncommon.

The Inspectorate expects 10 API testers will be licensed under the proposed regime.

API Packagers, Labellers, and Distributors

APIs are subject to a great deal of handling after manufacturing.  For generics, the manufacturing of APIs usually occurs in a facility other than the one where the dosage form product is produced.  They often pass through several agents or traders and could be repacked and relabelled at any stage, with many mishaps could take place by the time that the APIs reach the final destination; including events affecting the product quality and inaccurate information being transcribed.

Currently, many companies involved in trade and distribution may not be specialized in handling pharmaceuticals or knowledgeable of GMP; nor perform inspection when goods are received, to provide proper storage, transportation, and distribution conditions.

A more rigorous regulatory regime could provide for traceability of APIs throughout the supply chain, and the responsibility of sharing that information.

The Inspectorate anticipates about 30-40 packagers, labellers and distributors would be affected by the Proposal.

API Importers

Most APIs that are included in dosage form drugs on the Canadian market are manufactured outside of Canada. These APIs enter Canada through API importers. APIs can either be imported directly for further use in drug product manufacturing, or they may enter Canada as part of dosage form drugs that were manufactured at foreign sites.

Under the new regulatory framework, API importers will be required to have establishment licences. The importer of the API will be responsible for obtaining evidence that the foreign sites where the API was fabricated, packaged, labelled, tested for meeting the GMP requirements. In addition, the API importer will also be responsible to retain records for purpose of conducting recalls.

The Inspectorate estimates that 250 to 300 importers will be affected by the Proposal.

Dosage Form Drug Manufacturers

Dosage form drug manufacturers are brand-names or innovators and generics who manufacture prescription, non-prescription, or over-the-counter (OTC) drug products.

Active ingredients can constitute a significant portion of the total cost for a drug. For example, it is estimated that the cost of APIs represents 40-50% of the total cost for a generic oral solidFootnote 16.

Nevertheless, dosage form manufacturers locate or with market in the U.S. or EU should already meet the requirements under this Proposal in order for them to conform to the regulations of the respective jurisdictions.

Health Canada

The Health Products and Food Branch Inspectorate is responsible for branch-wide compliance and enforcement activities, which assures consistency of approach across the spectrum of products regulated by the Health Products and Food Branch of the Department. The Inspectorate core functions are compliance monitoring, and compliance verification and investigation, supported by establishment licensing of drugs and medical devices, and laboratory analysis.

It administers the drug and medicinal products Good Manufacturing Practices Compliance Program. The Proposal would likely add about 400 prospective licensable parties under its administration. 

4.0 Baseline Case and Analysis

Good Manufacturing Practice (GMP) has been recognized internationally as an essential element in ensuring the overall quality and consistency of marketed human drug products.

In 2000, the International Conference on Harmonization (ICH) developed and adopted a guideline (ICH Q7) concerning Good Manufacturing Practices (GMP) for APIs. It was adopted and subsequently implemented by many international regulators, including the U.S., E.U., Japan and Australia.

In 2000, the International Conference on Harmonization (ICH) developed and adopted a guideline (ICH Q7) concerning Good Manufacturing Practices (GMP) for APIs. It was adopted and subsequently implemented by many international regulators, including the U.S., E.U., Japan and Australia.

Currently, Health Canada regulates the quality of drugs in dosage form and some higher-risk active ingredients (e.g., biologics). For pharmaceuticals, the Department has managed it on a voluntary basis following its issuance of the Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients (ICH Q7)Footnote 17 in 2002. Meanwhile, the Government has informed the public of its intention to establish a regulatory framework to ensure the Guidance would be properly implemented.      

Contaminated or substandard active ingredient in a drug could cause negative health outcomes or even deaths to those consuming it, which in turn translates into lost productivity and wages as well as other economic costs.

For example, there was a voluntary recall in the United States due to a dramatic increase in reported adverse reactions (ADRs) of Heparin in 2008. Heparin is a widely used anticoagulant (blood thinner) for many medical procedures, including surgeries and dialysis. It was subsequently determined that impurities found in heparin sodium, an API of the drug, was the cause. 81 deaths were attributed to the contaminationsFootnote 18.

No Canadian deaths were linked to Heparin in this case due to a series of fortunate eventsFootnote 19. In particular, the affected American lots were not shipped to this country. Nevertheless, the Department requested the distributors to test their samples for contamination following the U.S. reports, which led to a Canadian recall on March 20, 2008Footnote 20.

The quality of APIs has increasingly become a concern internationally.

In a 2011 letter published at Canadian Medical Association Journal (CMAJ), Oxfam Canada suggested that in some countries, close to half of the common medicines on sale do not meet World Health Organization (WHO) quality standards. Pills may contain the wrong type or concentration of active ingredient, they may have deteriorated during distribution, or they may simply be fakesFootnote 21.

In 2010, the European Directorate for the Quality of Medicines & HealthCare did 34 API onsite inspections and reviewed 25 inspection reports of other regulators. As a consequence, there were 16 suspensions and 8 withdrawals of the Certificate of Suitability (CEPs).  Ten were re-instated after corrective action and re-inspection. However, the initial failure rate of 40% is significant.

During October of the same year, a pharmaceutical company in the United States agreed to pay $750 million in a civil plea agreement for, among other things, some of its drugs contained the wrong amount of active ingredient, and some were possibly exposed to contamination by microorganismsFootnote 22.

Before the World Health Organization (WHO) established the Pre-Qualification program (PQ) of APIs (a variation of ICH Q7) in 2008, its PQ program applied only to final formulations and required final formulators to use GMP procedures to acquire APIs for UN tenders - a similar approach currently taken by Canada that theoretically ensure a quality API.

The WHO became concerned about API quality following an incident in 1995 and 1996 when more than 100 children died in Haiti following ingestion of cough-and-cold syrup containing a counterfeit excipient glycerin, an ingredient that often used as an API in other medicationsFootnote 23. Other cases were also identified in Australia, the U.S., and United KingdomFootnote 24.

Subsequent to the implementation of PQ program for APIs, the WHO conducted 31 inspections of which 6 failed because of GMP compliance. The 19% failure rate in this case would need to take into context that the sample represents companies volunteered for the inspections and likely to be at the higher echelon in the quality department.

5.0 Benefits and Costs

Cost-Benefit Statement
A. Quantified Impacts $ Base Year Final YearTable 1 footnote 1 Total (PV)Table 1 footnote 2 Annual Average
Benefits - Industry Canadian manufacturers selling aboard - "Foreign" inspection fees savingsTable 1 footnote 3 $0.7M $ 1.6MTable 1 footnote 4 $9.2M $ 1.4M
Cost savings due to timelier removal of drug products at APIs stage instead of Dosage in final formTable 1 footnote 5 $2.4MTable 1 footnote 6 $5.6M $34.6M $4.9M
Total Benefits   $3.1M $7.2M $43.8M $6.3M
Cost -
Industry
Training and administration costs for prospective licensable parties - manufacturers, testers, packagers, labellers, importers and distributorsTable 1 footnote 7 $1.0M <$0.1M $1.3MTable 1 footnote 8 $0.1MTable 1 footnote 9
Cost -
Health Canada
Administration $0.1MTable 1 footnote 10 $1.7M $7.2M $1.1M
Total Cost   $1.1M $1.8M $8.5MTable 1 footnote 11 $1.2M
  Net Present Value (NPV)     $35.3MTable 1 footnote 12  

Table 1 footnotes

Table 1 footnote 1

Year 2021

Return to table 1 footnote 1 referrer

Table 1 footnote 2

Discount rate of 8% as recommended by Treasury Board

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Table 1 footnote 3

It is a conservative figure. Based on the assumption that there are a minimum of 310 firms selling aboard (FDA data) and EDQM inspections are done at least once every three years (HPFBI); no U.S. fees are taken into account. The amount reflects the transition period, or 50% of the full year cost that could be charged by the EDQM.

Return to table 1 footnote 3 referrer

Table 1 footnote 4

Assumption of annual increase 2% in fees

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Table 1 footnote 5

It is a conservative figure based on the assumption that there are an average 193 recalls of drug in dosage form where 2-8% (5% being the average) of these recalls are APIs related. Assuming the recall cost to industry is $1M per recall, which is likely to be on the low end of the spectrum, there should be savings if the recalls were to be triggered earlier by APIs inspection, before further investments are made to incorporate the substandard products into the final dosage form. The calculation uses generic oral solids as the baseline, which would have a lower rate of saving as APIs constitute a higher proportion of its total cost (40-50%). Alternatively, one could argue GMP of APIs could prevent these recalls from occurring, which provide a benefit between $3.8M and $15.4M annually

Return to table 1 footnote 5 referrer

Table 1 footnote 6

The amount reflects the transition period, or 50% of the full year savings

Return to table 1 footnote 6 referrer

Table 1 footnote 7

Base year includes estimated upgrade cost to some companies as a result of Proposal. ISO 9001certification and on-line FDA cGMP training costs are being used as proxies. Assuming a majority of 400 firms is already in compliance. Subsequent years cover administrative and clerical cost for regulatory filing only.

Return to table 1 footnote 7 referrer

Table 1 footnote 8

$1.0M was shown in the Cost-Benefit Statement of RIAS

Return to table 1 footnote 8 referrer

Table 1 footnote 9

<$0.1M was shown in the Cost-Benefit Statement of RIAS

Return to table 1 footnote 9 referrer

Table 1 footnote 10

Information provided by Inspectorate. The forecasted number is $95K. Assuming the Proposal is approved at the later half of Year 0 (FY 2011-2012) and the Base Year is the transition year.

Return to table 1 footnote 10 referrer

Table 1 footnote 11

$8.2M was shown in the Cost-Benefit Statement of the RIAS

Return to table 1 footnote 11 referrer

B. Quantified Impacts in Non- $

Positive Impacts:

  • Potentially reduction in the number of recall incidents due to API quality issues; as well as lessen the impact of recalls should they occur by helping to narrow down the scope, through problem identification and record-keeping requirement that allow isolation of problem lots.

C. Qualitative Impacts:

  • Consumers and patients, as well as our international regulatory counterparts are assured explicitly that APIs in dosage form drugs sold in Canada are meeting international safeguard standard (GMP)
  • As the number of jurisdictions requiring APIs to meet the international Q& standard continues to expand, the implementation of the proposed amendment would prevent Canada from the increased risk of becoming a destination to divert Q7 non-compliant products, which in turn could translate into health costs to Canadians and sales and economic costs to business.
  • The proposed regulatory framework will allow the Department to establish regulatory equivalence with our international counterparts.  It will allow Health Canada to reciprocate in international regulatory work-sharing to ensure the safety of the global active ingredient supply. 
  • The possibility of reducing duplicative oversight by various regulators internationally and compliance cost of Canadian manufacturers is also consistent with the Government's Red Tape Reduction Initiative.

Benefits - Good Manufacturing Practices

Canadian Consumers and Patients

Although no Canadian data is currently available, the Proposal should lesser the future risk of human pharmaceuticals with substandard active ingredients to be on the Canadian market given the experience with the WHO, Europe and countries that have implemented the regulations. This in turn, could reduce the health hazards for the consumers and patients.

Furthermore, as the number of jurisdictions requiring APIs to meet the international Q7 standard continues to expand, Canada will increasingly run the risk of becoming a destination to divert non-compliant products without the proposed amendment. This in turn, could translate into health costs to Canadians and sales and economic costs to business.

At a minimum, the proposed regulations would provide additional assurance that the patients are actually paying for products with the appropriate quality. Given Canadians spent about $31.1B on drugs outside hospital settings in 2010Footnote 25, the prevention of a miniscule percentage of drugs with substandard active ingredients in the market place could translate into a significant amount in dollar terms.

Industry

If the proposed GMP for APIs in place, it could reduce wastage, save costs and minimize impact by being timelier and better pinpointing the specific troubling areas, rather than later during the manufacturing of dosage form process or after the drugs have been on the market when additional investment has been made. This could range from a minimum of 50-60% for generic oral solidFootnote 26 to a possible higher percentage for those products still under patent protection, where APIs represent a lesser percentage of the total cost.

Because Canada does not regulate APIs directly at present, there are no specific Canadian data available. Nevertheless, there is evidence to support APIs-related problems being responsible for an estimate 2-8% of the drug in final dosage form recalls in this countryFootnote 27.

There were informal suggestions from industry that it costs the sector about $1M per recall in Canada. There were between 135 and 241 recalls in Canada during the last 4 years. The annual average is 193.

If the proposed GMP could prevent 2-8% of the API-related recalls, the savings could range between $3.8MFootnote 28 and $15.4MFootnote 29 annually. At the very least, the savings could be worth about $1.9MFootnote 30 and $7.7M if the recalls were triggered at an earlier stage of development cycle - at the APIs instead of the final dosage form level.

The alignment with international standards could also facilitate participation by Canadian manufacturers in the international market, and levelling the playing field between domestic and international manufacturers in the Canadian market. For instance, some companies would pay for inspections at their target market and the European Directorate for the Quality of Medicine (EDQM) charges $9,000 Euros or C$13,050Footnote 31 in such cases.

In the U.S., there are 310 Canadian companies identified by the U.S. Federal Drug Administration (FDA) to be subject to its inspections. The FDA compliance statistics regarding these Canadian companies is not known.

Health Canada

Implementation of the proposed regulatory framework would allow the Department to establish regulatory equivalence with our international counterparts.  It would also enable Health Canada to reciprocate in international regulatory work-sharing to ensure the safety of the global active ingredient supply, and to reduce duplicative oversight. From this perspective, Canada would help protected its credibility as a regulator in the global environment by playing an active role in enforcing the standards of this important commodity, where WHO and EDQM GMP inspections of APIs have revealed high failure rates.

In addition, it would also reduce the domestic and international compliance obligations of Canadian manufacturers by having the same set of rules, which is consistent with the Government's Red Tape Reduction initiative.

Benefits - Traceability

Canadian Consumers and Patients

The increased ability of the system to trace problematic active ingredients would allow authority to remove these products from circulation more rapidly, which in turn, could reduce the risk of their consumptions by consumers due to timing of discovery.

Industry

The traceability requirement in the Proposal ensures drug manufacturers in Canada could identify active ingredient problems more specifically and possibly earlier in the supply chain; a process that should be considered as best business practice anyway.

The benefits of traceability could be best illustrated by a recent case in which the active ingredients of at least two biologics for the treatments of a couple rare maladies were found to be contaminated by the U.S. Federal Drug Administration (FDA)Footnote 32. It should be noted that traceability requirements for active ingredients for biologics already exist in Canada.

These active ingredients are manufactured in a single plant and the drugs are priced at around US$200,000 a year. The ability to trace allows the company to identify the problem lots, and salvage the rest. Because the active ingredients are for rare diseases and their production is small to begin withFootnote 33, there could be huge health consequence to the patients if the supply of active ingredient from the whole plant has to be disposed.      

According to the drug manufacturer, the supply constraint due to the manufacturing problems adversely impacted its bottom line by about $451 millionFootnote 34. However, the situation could be much worse if the entire production was to be shut down and the inventory was to be deemed contaminated - one active ingredient alone could reduce its revenue by an additional $793 millionFootnote 35.

Health Canada

The traceability requirement would allow the Department to carry out more rapid and targeted investigation and recall of problematic active ingredient.  It would also make the introduction of illegitimate, substandard active ingredient into the supply chain more difficult as verification of an active ingredient's provenance would be simplified.

Costs

Consumers and Patients

It is not expected that Canadian consumers and patients would bear any significant cost as a result of the Proposal.

Industry

Because Canada would be among the last industrialized countries to formalize GMPs for active ingredients in accordance with the international guideline, the industry is expected to incur minimal incremental cost to comply with the regulatory requirement for licensed activities of this global product.

It is expected that there would be miscellaneous administrative and clerical time incurred by the affected parties for filing the applications. This should account for less than $100,000 annuallyFootnote 36, assuming it is less than 5 hours of work.

A one-time training cost, including employee time may also be required for a minority of companies that are not currently in compliance, particularly those under the category of API packagers, labellers, or distributors. Using ISO 9001 and FDA cGMP trainings as proxies, it is estimated the cost would be in the $966,000 range with certain assumptionsFootnote 37.

Health Canada

Health Products and Food Branch Inspectorate has estimated that there would be approximately 400 prospective licensable parties in Canada and its administrative cost would start at about $95,000 during the transition year, assuming the Proposal would be approved in the latter half of the year (fiscal) before. The cost would increase continuously for the next 3 years until it reaches $1.5MFootnote 38 when the Program is fully implemented. Anticipated increase after that simply reflects cost of inflations or other similar items.

Conclusion

The Proposal would provide a net benefit to Canadians, with a quantifiable Net Present Value (NPV) of about $35.3MFootnote 39 over 10 years.

In addition, the Proposal would, at the minimum, further assure the quality of health products that Canadians consume and the value of which they pay for these products. It would also be in-steps with the Government's Red Tape Reduction Initiative, by aligning the regulatory requirements internationally.

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