Legal & Regulatory > Canada > Regulatory, Pricing and Reimbursement

A brief overview of the situation regarding regulation, pricing and reimbursement of drugs in Canada. Prepared in association with Fasken, a leading global law firm, this is an extract from The Pharma Legal Handbook: Canada, available to purchase here for USD 99.

1. What are the regulatory authorities with jurisdiction over drugs, biologicals, and medical devices in your country?

Health Canada is the federal authority responsible for regulating pharmaceutical drugs, biologicals, and medical devices for human use. Health Canada’s Health Products and Food Branch (“HPFB”) is the body responsible for reviewing, assessing, regulating and monitoring health products in Canada.

2. What is the regulatory framework for the authorization, pricing, and reimbursement of drugs, biologicals, and medical devices?

• Authorization

The Food and Drugs Act forms the legislative framework for the marketing and manufacture of drugs, biologicals, and medical devices in Canada. The Food and Drug Regulations, Natural Health Products Regulations, and Medical Devices Regulations make up the general regulatory framework. The law and its regulations are supplemented by policies and guidelines published by Health Canada.

• Pricing

Created under the Patent Act, the Patented Medicine Prices Review Board (“PMPRB”) is a judicial body that acts in a regulatory capacity to ensure that patented medicine prices are not excessive. To be covered by the PMPRB’s jurisdiction, the manufacturer must be a patentee of the invention, the invention must pertain to a medicine, and the patentee must sell the medicine in Canada. Drugs manufactured by generic companies are not subject to the medicine price control provisions of the Patent Act, as they are marketed and sold once the patent is expired.

• Reimbursement

In Canada, reimbursements of drugs, biologicals and medical devices are governed under federal and provincial jurisdiction and also provided for by the private sector. Under the Health Act, all necessary drug therapy administered within a Canadian hospital setting is insured and publicly funded. Outside the hospital setting, provincial and territorial governments are responsible for the administration of their own publicly funded prescription benefit programs. Provincial drug benefit plans are not harmonized, and a miscellany of different private and public drug plans for reimbursement are available across Canada. To be reimbursed by one or more provincial drug insurance plans, manufacturers will have to ensure that their drugs appear on the provincial formulary list.

Certain eligible groups are also covered under specific federal or provincial drug benefit programs. First Nations and Inuit, members of the military, veterans, members of the Royal Canadian Mounted Police, and inmates in federal penitentiaries are covered by federal programs. Seniors, recipients of social assistance, and individuals with diseases or conditions that are associated with high drug costs are covered by provincial programs. Some provinces include income-based universal programs.

3. What are the steps to obtain authorization to develop, test, and market a product?

• New Drugs

New drugs cannot be marketed unless they have been granted authorization. Applicants must submit a New Drug Submission (“NDS”) that demonstrates the new drug’s safety and efficacy. The NDS includes the results of the preclinical and clinical studies regarding the production of the drug, packaging and labelling details, and information regarding therapeutic claims and side effects. The drug’s name must be provided and approved to ensure that drug names are not similar and thus likely to be confused with one another. Applicants must then submit a Drug Identification Number (“DIN”) application. The applicant further submits specimens of the labelling to be used for the new drug as well as a statement indicating the proposed date on which those labels will first be used. Once authorized, the new drug is issued a Notice of Compliance (“NOC”) and a DIN.

Additionally, no Canadian pharmaceutical establishment may manufacture, fabricate, perform any tests on, package, label, distribute, import, or sell a drug without a Drug Establishment Licence (“DEL”). To acquire a DEL, applicants must provide information concerning their activities and each category of drug for which the licence is requested. The application must also include information about the building in which the activities will be performed, as well as evidence that these buildings, equipment and proposed practices and procedures meet applicable Good Manufacturing Practices (“GMP”) requirements.

• Medical Devices

It is prohibited to market or import a Class II, III, or IV medical device unless the manufacture holds a medical device licence. To acquire a medical device licence, applicants must provide information about the device’s name and manufacturing as they appear on the label. Applicants must also meet safety, efficacy, labelling and investigational testing requirements with proof in the form of attestations and certificates. Applications also include the device’s purpose or intended use, place of use, history, identifier, compatibility with interdependent devices, compliance with recognized standards, and review documents.  Applicants must respond to any additional safety or efficacy information requests. Class I medical devices remain subject to and must comply with any requests of the Minister of Health (the “Minister”) to submit safety and efficacy information.

• Natural Health Products

Under the Natural Health Products Regulations, applicants must submit applications demonstrating safety and efficacy of the Natural Health Product (“NHP”) to acquire a Product Licence, and must also apply for a Site Licence instead of a DEL. For further information on NHPs, see Traditional Medicines and OTC Products.

• Exceptions: Emergencies and Orphan Drugs

As an exception, practitioners can obtain authorization for new drugs and medical devices intended for medical emergencies through the Special Access Program (“SAP”) even if a NOC has not yet been issued. Applications for orphan drugs are often processed under SAP. Applicants must provide information about the medical emergency, the names of all institutions that will use the drug, any possessed data regarding the drug’s use, safety and efficacy, and any other requested data. Practitioners must agree to inform the Minister and manufacturer of results as well as any adverse reactions. They must also agree to account, on the Minister’s request, for all drug quantities.  Once approved, a formal letter of authorization is issued, indicating the practitioner’s name, the medical emergency, and the quantity of the drug. The manufacturer may then sell the new drug to the practitioner on the terms and conditions stated in the letter of authorization, up to a maximum quantity equivalent to a six-month supply.

4. What are the approximate fees for each authorization?

The Fees in Respect of Drugs and Medical Devices Regulations, established under the Financial Administration Act, set out authorization fees for most drugs and medical devices. Fees are payable by the person who files the submission or supplement or who makes the application.

As at April 2018, the current approximate fees for the examination of a drug submissions and their supplements vary depending on the submission’s content, ranging in Canadian dollars from $350,000 for submissions concerning new active substances, and for submissions concerning previously approved drugs or medicinal ingredients that contain only:

• Clinical or non-clinical, chemistry and manufacturing data: $170,000;
• Clinical or non-clinical data: $80,000;
• Comparative studies: $50,000;
• Chemistry and manufacturing data: $23,000;
• Published data: $19,000; and,
• Labelling material: $3,000.

The approximate fees payable for the examination of a DEL application or for its annual review vary depending on the area of activity, and contain the following basic fees as well as additional fees for each additional category of drug for:

• Drug fabrication: $17,000, plus $4,500 per category;
• Packaging and labelling: $12,000, plus $3,000 per category;
• Importing and distributing: $7,500, plus $3,000 per category;
• Distribution and wholesale: $4,500;
• Testing: $3,000; and,
• Drug analysis: from $0 to $30,000, depending on the drug classification.

The approximate fees payable for the examination of an application for medical device licence varies by the class of licence and the type of device, and range from $400 for Class II, $5,000 for Class III, to $9,000 for Class IV medical device applications.

5. For how long are marketing authorizations/registrations valid? How are marketing authorizations/registrations renewed?

Market authorizations for drugs are valid indefinitely, subject to their compliance with the Food and Drugs Act and its regulations.

SAP authorizations are valid only for maximum quantities of up to a six month supply. Renewals can be ordered through the usual methods under the SAP.

Manufacturers of medical devices that are licenced for sale in Canada are required to inform Health Canada each year before November 1 that the information submitted with their licence application and any subsequent amendments has not changed. This is referred to as the licence renewal process. Manufacturers of licenced Class II, III and IV medical devices are charged an annual fee, payable at the time of licence renewal, for the right to sell their devices in Canada.

Persons holding an establishment licence (drug and device) also undergo a yearly review process, and must submit, to the Minister, the information required in their original application each year. The licence holder will receive prior notification, and failure to submit the review request will render the licence invalid.

6. How does the authorization process differ between brand-name products and generic products? Are there differences for local manufacturers versus foreign-owned manufacturers?

• Generic Products

Applicants for generic product authorization can submit an Abbreviated New Drug Submission (“ANDS”). The ANDS requires less information and is more expeditious than the NDS. However, generic products must still meet safety and efficacy requirements. Clinical trials for Phases I to III are not eliminated, but Phase I trials generally form the basis for the drug’s evaluation. The Minister issues a NOC only if the drug is deemed to be pharmaceutically and biologically equivalent to, and possesses the same administration route and conditions of route as, a Canadian Reference Product (i.e. a drug for which a NOC has been issued and which is marketed in Canada). Alternative reference products which have received a NOC but are no longer marketed in Canada may also be used if they demonstrate the same equivalencies as well as safety and efficacy requirements.

• Foreign Health Products

All health products commercially imported into Canada must meet all applicable requirements of the Food and Drugs Act and its regulations, including labelling, marketing authorization requirements, DEL requirements, authorizations to conduct a clinical trial, and GMP requirements.

Commercial importers of human drug products destined for retail, distribution, or other commercial activities must hold a DEL, upon which the foreign manufacturing site must be listed.

Importers of Class II, III, and IV medical devices require a medical device licence and a DEL, subject to specific exemptions.

7. How are combination products (drug + drug, drug + biologic, drug + device, biologic + device, drug + biologic + device) regulated?

Health Canada defines health products that do not readily fall within the definitions of drug, device, or cosmetic as combination or “interface” products. Combination products include Device-Drug, Cosmetic-Drug, and Food-NHP products.  Such products are subject to the same regulatory requirements as one of their two respective non-combination products, depending on the combination product’s nature and classification.  Classification depends on the combination product’s composition, characteristics, intended use, historical use, and public perception.

8. How is compliance with regulation monitored and evaluated? Is the regulatory regime comparable with the U.S. Food and Drug Administration or the European Medicines Agency expectations and requirements?

The HPFB has a pharmacovigilance program. Its Marketed Health Products Directorate monitors and collects adverse reaction and medication incident data, reviews and analyzes marketed health product safety data, and conducts risk-benefit assessments of marketed health products. Manufacturers, importers, and clinical trial sponsors of health products must provide the Minister with information concerning any adverse reactions, including medication and medical device incidents. Consumers, patients, and health professionals can also report adverse reactions on a voluntary basis.

In addition, HPFB has implemented a national inspection program to assess compliance with the Food and Drugs Act and its regulations, including pharmacovigilance and GMPs. Drug, DEL, clinical trials, medical devices, and good pharmacovigilance practice are each subject to inspection. Any deviation or deficiency is noted by an inspector in the form of an observation and confirmed in writing to the inspected company in a notice. The observations are assigned a risk classification.

Health Canada maintains databases of authorized drugs, biologicals, medical devices, and natural health products.  The Drug Product Database lists all authorized drugs for humans and animals, as well as disinfectants, radiopharmaceutical drugs, and biological drugs for humans. The SAP contains an internal database listing all drugs available under its programme. Inspection results are maintained and publically accessible online via the Drug and Health Product Inspection Database.

9. What is the potential range of penalties for noncompliance?

In the event of non-compliance with the provisions of the Food and Drugs Act or its regulations, Health Canada can suspend the authorization to sell or import a drug, recall products, and impose labelling and packaging modifications. Health Canada can also refuse an imported drug’s entry into Canada, require regulatory stop sales, and issue injunctions prohibiting or ordering specific activities. In addition, Health Canada can criminally prosecute violators where non-compliance creates a health risk, is continuing in nature, was premeditated, indifferent, reckless, of a marked departure from a reasonable standard of care, or if other enforcement activities have proven unsuccessful.

Violators of the Food and Drugs Act or its regulations are guilty of an offence and liable on conviction by indictment to a fine of up to $5,000,000 per day of violation or up to 2 years imprisonment. They are also liable on summary conviction to a fine of up to $250,000 per day or up to 6 months imprisonment for first offenses, and up to $500,000 per day or 18 months imprisonment or both for subsequent offenses. In the case of a violation involving false or misleading statements to Health Canada or a person knowingly or recklessly causing a serious risk of injury to human health, the court may impose a monetary penalty of an unlimited amount at the discretion of the court. A violation of the Act or its regulations is a strict liability offence with the possibility of a due diligence defense.

Marketers, manufacturers, or distributors may be held liable depending on the degree of control and the extent of authority granted. Corporations may be held liable if an individual constituting a “directing mind” committed an offense. Corporate officers, directors, agents and mandatories who direct, authorize, assent to, participate in or otherwise acquiesce in the commission of the offence are individually held liable and are subject to the same punishment upon the conviction of the company, even though the person is not prosecuted for the offence.

10. Is there a national healthcare system? If so, how is it administered and funded?

Yes. Canada has a national healthcare system designed to ensure that all residents have reasonable access to medically necessary hospital and physician services without paying out-of-pocket.

Roles and responsibilities for health care services are shared between provincial and territorial governments and the federal government.

The provincial and territorial governments are responsible for the management, organization and delivery of health care services for their residents.

The federal government is responsible for setting and administering national standards for the health care system, providing funding support for provincial and territorial health care services, and supporting the delivery for health care services to specific groups.

11. How does the government (or public) healthcare system function with private sector healthcare?

In general, there are laws prohibiting or heavily restricting private sector healthcare for any physician or hospital healthcare services that are considered insured under the public plans. Private payments are common for other expenditures, including, for example, drugs, dental services, optometry, cosmetic surgery and home care.

12. Are prices of drugs and devices regulated and, if so, how?

The prices of innovative drugs are regulated by the PMPRB (see above Question 2b).

In addition, the provinces regulate the price of drugs in a variety of ways. For example, before a drug is listed on a provincial formulary and therefore reimbursed by the province, it must receive a positive recommendation as to its pharmacoeconomic value. Once it has been determined that the price submitted (“List Price”) is reasonable in relation to its therapeutic value, provinces may negotiate a listing agreement with the manufacturer that often provides for substantial discounts on the List Price.

To further increase their bargaining power with drug manufacturers, the provinces have come together to form the pan-Canadian Pharmaceutical Alliance (the “pCPA”). All 13 Canadian provinces and territories are members of the pCPA.

Through the pCPA, provinces conduct collective negotiations to obtain even greater discounts on the price of medicines, given the high volume that they represent.

13. How are drugs and devices used by patients paid for? What roles do public and private payers play?

See Question 2c above.

Persons not covered by the public plan typically have private insurance through group insurance contracts or employee benefit plans.

14. Who dispenses drugs and devices to patients and how are those dispensers compensated?

Dispensing drugs is an act reserved for pharmacists, subject to some limited exception for other healthcare professionals. Pharmacist fees are included in the total cost of a medication and are reimbursed by the public or private drug plans. Pharmacists must abide by the provincial rules governing the preparation and sale of medication. There are strict rules concerning ownership, control, and supervision of a pharmacy, as well as operations, retail prices, and the terms and conditions of sale of a medication, among others. Each province also has a code of ethics of pharmacists which outlines the ethical obligations pharmacists have to the profession and the public.

15. What are the professional and legal responsibilities of those who dispense drugs and devices? What role do they play in providing patient care, information, and safety?

Pharmacists are integral to patient care. They ensure the proper use of medications by identifying and preventing pharmacotherapeutic problems and in preparing, storing and delivering medications in order to maintain and restore health.