Regulating Prescription Drugs @ The Limits of Legal Authority

Matthew Herder explains why Health Canada’s “life cycle” approach to drug regulation may be beyond the regulator’s mandate.


On Friday, December 6, 2013, Bill C-17, also known as the Protecting Canadians from Unsafe Drugs Act (Vanessa’s Law), was introduced into Parliament. The proposed law gives the Minister of Health a number of new powers that are critical to ensuring patient safety. Bill C-17 is long overdue, not just for reasons of patient safety, but also because, arguably, Health Canada has been operating outside the law, beyond its mandate, for quite some time.

Since 1998, Health Canada has been issuing drug manufacturers with a “Notice of Compliance with conditions” (NOCc). In this way, Health Canada has been granting market authorizations for the sale of potentially therapeutic drugs on the basis of limited clinical evidence because, in theory, the drugs fulfilled an unmet patient need. Manufacturers would be granted an NOCc provided they agreed, by way of contract, to meet certain conditions in the post-marketing phase (for example, conduct additional effectiveness studies). This practice was later translated into a set of NOCc guidelines.

The number of drugs approved on the basis of an NOCc has grown over time. This is symbolic of Health Canada’s steady shift to a “life cycle” approach to drug regulation, whereby the safety and efficacy of drugs is assessed both pre- and post-market approval. The problem is that the NOCc guidelines and the move to a life cycle approach have little basis under current law.

pills_colourUnder Canadian law, all forms of regulation must conform to the legislative scheme under which they are enacted. In the case of “hard” regulation, like the Food and Drug Regulations created pursuant to the Food and Drugs Act, any provision that is deemed inconsistent with the purpose of the overarching legislation and its specific terms will generally be ultra vires and thus regarded as having “no force or effect.” In the case of “soft” regulation, such as guidelines, there is more leeway: “regulators may, as a matter of sound administrative practice, and without any specific statutory authority for doing so, issue guidelines.” According to the Ontario Court of Appeal, guidelines “are an administrative tool available to the regulator so that it can exercise its statutory authority and fulfill its mandate in a fairer, more open and more effective manner.” By necessary implication, though, guidelines that prevent the regulator from fulfilling its mandate are beyond the regulator’s authority to issue.

Arguably, this is precisely what has occurred with Health Canada’s move to a life cycle approach to drug regulation through its increasing use of NOCcs to approve drugs. Remember, an NOCc requires the drug manufacturer to perform post-market studies. However, Health Canada’s statutory powers to regulate drugs are decidedly limited in the post-market phase. Health Canada has the power to police fraudulent advertising, and the Governor in Council can make regulations regarding the “sale or the conditions of sale” of any drug in order to “prevent injury to the health of the purchaser or consumer.” But there is no provision in the current legislation that gives Health Canada the authority to enforce the conditions of an NOCc. Moreover, Health Canada is not empowered to revoke a manufacturer’s NOCc, just as it cannot issue drug recalls because, as tragically illustrated of late, no such power exists in the Food and Drug Act or accompanying regulations.

Legally, NOCcs are premised upon a Memorandum of Understanding (MoU) between the manufacturer and Health Canada. If the manufacturer fails to fulfill the conditions set out in the MoU, at present, the only apparent legal remedy immediately available to Health Canada is to sue the manufacturer for specific performance of the MoU (i.e., conducting the contracted post-market studies).

Health Canada’s apparent inability to enforce the terms of an NOCc is—like the absence of the authority to force a drug recall—an absurd situation. Administrative bodies have broad discretion to issue non-binding guidelines. But if the guidelines set up a system where the regulator cannot fulfill its central mandate of protecting consumers from unsafe and/or ineffective drugs, because it lacks the requisite legal powers to enforce the conditions of an NOCc or rescind market approvals, then it seems fair to say that the guidelines are in tension with the overarching legislative scheme.

Importantly, this argument is different from the argument that pharmacy chains like Shoppers Drug Mart recently made to the Supreme Court of Canada in an (unsuccessful) attempt to undo Ontario’s efforts to curb the price of generic drugs through regulations enacted under two provincial statutes. The pharmacy chains argued that the regulations were invalid, in part, because they would not actually reduce generic drug prices. The Supreme Court of Canada was not persuaded: whether the regulations “will ultimately prove to be successful or represent sound economic policy is not the issue,” the Court said. Rather, the issue is whether the regulations are connected to the purpose of the legislative scheme (in this case, reducing drug prices), which the Supreme Court of Canada said they were.

In contrast, if, as many courts have said, the overarching purpose of the Food and Drug Act and Regulations is, above all else, to protect health care consumers from harm, the NOCc guidelines essentially open up a regulatory pathway to market that is disconnected from, or in direct conflict with, that purpose.

Bill C-17 offers a corrective for this fundamental legal flaw in Health Canada’s move to a life cycle approach to drug regulation. It gives the Minister the power to recall drugs, enforce any conditions associated with a market authorization, and create stronger penalties for violations of the legislation including fines of up to $5 million (see proposed sections 21.1, 21.3, 21.31, 21.32, 21.7, 30(1.2)(b), 31.2, and 31.4 of the Food and Drug Act contained in Bill C-17). In my view, Parliament should legislate these critical measures.

This endorsement notwithstanding, Bill C-17 does not do enough to ensure that Canadians have access to safe, effective, and, ultimately, sustainably priced drugs. To achieve this larger goal, many more changes to drug regulation are required.


Matthew Herder is an Assistant Professor in the Faculties of Medicine and Law at Dalhousie University, Halifax, Canada.

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