Inspection Strategy for Licensed Dealers of Controlled Substances and Class A Precursors (CS-POL-002)

Effective Date: 2019/12/09

Table of Contents

• 1. Purpose
• 2. Scope
• 3. Inspection Types
• 4. Inspection Process
  • Inspection frequency
  • Before an inspection
    • Notice of inspection
  • During an inspection
    • On-site inspection
    • Risk observations
  • After an inspection
    • Writing the inspection report
  • Post-Inspection Activities
    • Administrative Enforcement Actions
• Appendix A - Glossary
  • Acronyms
  • Definitions
• Appendix B - References

1. Purpose

Health Canada inspects Licensed Dealers (LD) that possess, produce, package, import, export, sell or send, destroy, transport and deliver controlled substances against requirements in the Controlled Drugs and Substances Act (CDSA) and its associated regulations. This activity verifies that appropriate safety and security measures are in place to minimize the risk of diversion of controlled substances to illegal markets.

This policy describes the inspection strategy and process for the effective and uniform delivery of the inspection program of stakeholders that require a Dealer's Licence for controlled drugs and Class A precursor chemicals.

2. Scope

Inspections are conducted under section 31 of the CDSA to assess compliance with the Narcotic Control Regulations (NCR), Parts G and J of the Food and Drugs Regulations (FDR-G or FDR-J), the Benzodiazepines and Other Targeted Substances Regulations (BOTSR) and the Precursor Control Regulations (PCR).

3. Inspection Types

The following are different types of inspections:

Initial Inspection

The first full inspection of an LD conducted for the first time after the issuance of the dealer's licence.

Cyclical Inspection

An inspection of an LD conducted on a regular basis while the licence is valid to ensure continued compliance with the CDSA and its associated regulations.

Pre-licence Inspection

An inspection conducted prior to the issuance of the licence and before the commencement of any activities, with a focus on internal controls and procedures for handling regulated substances.

Security inspection

An inspection of an existing LD to verify changes made to their security measures against the amendment submitted to the Office of Controlled Substances (OCS).

Targeted Inspection

A focussed inspection of an LD to determine compliance with the CDSA and its associated regulations for a specific compliance issue based on a signal received by OCS.

4. Inspection Process

Inspection frequency

Health Canada is responsible for developing an inspection schedule and selecting which sites will be inspected. The guiding principle in the selection process is the real or perceived risk to public health and safety, including the risk of diversion to illegal markets. The compliance history of the establishment is one source of information that would determine the inspection frequency.

Health Canada's inspections of LDs are based on defined frequencies, which in turn are based on the LD's overall risk. Using this approach, LDs where the potential risk of diversion is higher will be inspected on a more frequent basis.

Before an inspection

Notice of inspection

Health Canada is not required to provide advance notice of inspections and the majority of cyclical inspections are unannounced. However, for specific inspection types, such as Pre-licence or Security inspections, notice may be given in order to help facilitate the inspection. In these cases, an inspector would contact the establishment directly to schedule the inspection. A communication will then be sent to the establishment confirming the date and time of the inspection. Requests for changes to dates of scheduled inspections may be accepted at Health Canada's discretion, and with proper justification from the establishment.

During an inspection

On-site inspection

During an inspection, Health Canada inspectors observe and discuss the processes and systems in place to comply with the regulations and minimize the risk of diversion.
Inspectors look carefully at different areas, including, but not limited to:

• inventory records, including amount of products received and stored,
• physical inventory checks and reconciliations,
• storage of controlled substances / precursors,
• security measures,
• transportation,
• destructions,
• losses or thefts, and
• verbal or remote input device orders for relevant controlled substances.

Risk observations

Inspectors make observations when they note areas where the establishment is not adequately meeting its regulatory requirements. Each observation is classified by level of risk:

Critical Observation

An observation that identifies a significant and immediate and/or imminent risk to public health and safety, including risk of diversion, and prevents the detection of diversion, or involves fraud, misrepresentation, or falsification of information.

Major Observation

An observation of activities/procedures that may increase the risk to public health and safety, including risk of diversion, impairs the detection of diversion, or impairs the LD from taking actions to address the potential risk for diversion.

Minor Observation

An observation of activities/procedures that could increase the risk of diversion. The LD is generally able to prevent, detect and take actions to address potential risks for diversion.

Findings are communicated to the establishment during the course of the inspection. It may be possible for the establishment to correct the observations during the inspection itself; if not, the establishment must take corrective actions after the inspection to address the observations.

After an inspection

Writing the inspection report

After completing an inspection, the inspector writes an inspection report that:

• documents the observations, and
• issues an overall inspection rating to the establishment.

The overall rating indicates whether the establishment is compliant or non-compliant with the requirements of the CDSA and its associated regulations, and is based on the number and severity of observations noted at the time of the inspection.

Compliant (C)

At the time of the inspection, the regulated party has demonstrated that the activities it conducts are in compliance with the CDSA and its associated regulations. A 'C' rating does not mean that there are no observations or corrective actions required.

Non-Compliant (NC)

At the time of the inspection, the regulated party has not demonstrated that the activities it conducts are in compliance with the CDSA and its associated regulations. The observations taken together indicate a situation that would present a significant risk of diversion or a potential risk to public health or safety.

Generally, a C rating will be assigned in the following situations:

• In situations where few major observations focussed on isolated issues are noted.
• In all situations where only minor observations are noted.

Generally, an NC rating will be assigned in the following situations:

• When a critical observation is noted during an inspection.
• When numerous major observations are noted during an inspection, indicating that the company does not have adequate systems in place to minimize the risk of diversion.
• When major or minor observations noted during previous inspections have been repeated, indicating that the company did not implement the corrective actions submitted following the previous inspection.

When the LD is given a non-compliant rating, it must immediately address high risk deficiencies.

Post-Inspection Activities

If deficiencies are found during the inspection, they are brought to the immediate attention of the LD. Furthermore, at the end of the inspection, a meeting is held between the inspector(s) and the LD, wherein the inspector presents any deficiencies found during the inspection and verifies that the observations are accurate and understood by the LD.

A written inspection report, which includes the observations, will be issued to the LD. The LD must provide a written response to the inspection report, which should include:

• corrective actions taken to address the observation,
• preventive actions taken to prevent re-occurrence of the deficiency, and
• target dates for the completion of the corrective actions.

The LD must take corrective actions to fully comply with the CDSA and its associated regulations, which are subject to verification upon subsequent inspection.

The inspector(s) will review the corrective action plan sent by the LD to determine if the implementation or proposal for implementation of measures will address the noted deficiencies and prevent their re-occurrence in the future.

An inspection may be required as a follow-up to verify the implementation of the corrective actions.

Administrative Enforcement Actions

Health Canada may also consider administrative enforcement actions following an inspection. This can include, but are not be limited to:

• suspension or revocation of the dealer's licence,
• addition of Terms and Conditions to the Dealer's Licence at the time the licence is renewed or amended, or
• referral to law enforcement.

Appendix A - Glossary

These definitions explain how terms are used in this document. If there is a conflict with a definition in the Controlled Drugs and Substances Act or associated regulations, the definition in the Act or Regulations prevails.

Acronyms

BOTSR

Benzodiazepines and Other Targeted Substances Regulations

CDSA

Controlled Drugs and Substances Act

FDA

Food and Drugs Act

FDR

Food and Drug Regulations

LD

Licensed dealer

NCR

Narcotic Control Regulations

OCS

Office of Controlled Substances

PCR

Precursor Control Regulations

Definitions

Compliance Ratings

Compliant (C)

At the time of the inspection, the regulated party has demonstrated that the activities it conducts are in compliance with the CDSA and its associated regulations. A 'C' rating does not mean that there are no observations or corrective actions required.

Non-Compliant (NC)

At the time of the inspection, the regulated party has not demonstrated that the activities it conducts are in compliance with the CDSA and its associated regulations. The observations taken together indicate a situation that would present a significant risk of diversion or a potential risk to public health or safety.

Diversion

The transfer of substances listed in the schedules of the CDSA from the licit to illicit market

Inspection Types

Initial Inspection

The first full inspection of an LD conducted for the first time after the issuance of the dealer's licence.

Cyclical Inspection

An inspection of an LD conducted on a regular basis while the licence is valid to ensure continued compliance with the CDSA and its associated regulations.

Pre-licence Inspection

An inspection conducted prior to the issuance of the licence and before the commencement of any activities, with a focus on internal controls and procedures for handling regulated substances.

Security inspection

An inspection of an existing LD to verify changes made to their security measures against the amendment submitted to the Office of Controlled Substances (OCS).

Targeted Inspection

A focussed inspection of an LD to determine compliance with the CDSA and its associated regulations for a specific compliance issue based on a signal received by OCS.

Observation

A deviation or deficiency (i.e. non-compliance) to the requirements of the regulations noted by an inspector during the inspection that is documented in writing in the inspection report.

Critical Observation

An observation that identifies a significant and immediate and/or imminent risk to public health and safety, including risk of diversion, and prevents the detection of diversion, or involves fraud, misrepresentation, or falsification of information.

Major Observation

An observation of activities/procedures that may increase the risk to public health and safety, including risk of diversion, impairs the detection of diversion, or impairs the LD from taking actions to address the potential risk for diversion.

Minor Observation

An observation that may not likely lead to the risk of diversion. The LD is generally able to prevent, detect and take actions to address potential risks for diversion.

Appendix B - References

• Benzodiazepines and Other Targeted Substances Regulations
• Controlled Drugs and Substances Act
• Food and Drug Regulations
• Narcotic Control Regulations
• Precursor Control Regulations