Question Period Note: BULK IMPORT OF PRESCRIPTION DRUGS

• Drug shortages are a global issue that directly affect the health and safety of Canadians. Canada is particularly vulnerable to shortages because of our small market share and heavy reliance on imports.
• On November 30, 2020, a rule came into effect in the U.S. allowing state-sponsored programs to import drugs intended for the Canadian market in bulk as a means to reduce the price of drugs for American consumers.
• The Canadian market is too small to supply the U.S. and Canadian markets. The rule has the potential to create supply disruptions.

• Ensuring that Canadians continue to have access to the medicines they need is a top priority for our Government.
• Amendments were made to the Food and Drug Regulations to permanently establish measures prohibiting certain drugs intended for the Canadian market from being sold for consumption outside of Canada, if that sale could cause or exacerbate a drug shortage.
• We will continue to take steps to safeguard our drug supply and preserve access to needed drugs for Canadians.

IF PRESSED ON POSSIBLE INCREASED DRUG PRICES FOR CANADIANS DUE TO THE U.S. RULE
• We do not expect that the U.S. rule will lead to increased drug prices for Canadians. The Government of Canada is committed to improving Canadians’ access to, and the affordability of, necessary prescription medicines.
• Canadians are protected from excessive prices for patented medicines through the Patented Medicine Prices Review Board. This protection will remain in place and we will continue to work with key partners to ensure all Canadians have access to the medicines they need.

IF PRESSED ON POSSIBLE TRADE IMPLICATIONS AND THE CANADA-U.S. RELATIONSHIP
• The regulations respect international trade rules, and are not an export prohibition.
• Canada and the U.S. share a trillion dollar trade and investment relationship that contributes to millions of jobs in both countries and to increased North American competitiveness.
• The distribution of drugs intended for the Canadian market for consumption outside of Canada continues to be permitted in cases where the seller determines that the sale will not cause or exacerbate a shortage.

IF PRESSED ON IMPLEMENTATION OF THE U.S. IMPORTATION PROGRAMS
• We are aware that two proposals for State importation programs have been submitted to the U.S. Food and Drug Administration (U.S. FDA). However, these proposals have not yet been approved and there are no bulk importation programs running at this time.
• We are aware that the U.S. pharmaceutical industry is challenging the U.S. rule in court. We are monitoring the proceedings and will consider the impact of the decision when the outcome becomes known.
• The Government of Canada continues to work with the U.S. to understand its implementation plans and to mitigate any risks to the health and safety of Canadians posed by the U.S. rule.
• Drug establishment licence holders who violate the terms of the regulations will be subject to enforcement actions. This could include corrective measures, issuance of public communications, or the suspension or cancellation of their licence.

U.S. Rule on the Importation of Prescription Drugs

On November 30, 2020, the U.S. rule on the Importation of Prescription Drugs came into effect. The rule creates a pathway for licensed U.S. pharmacists or wholesalers, working within a state-sponsored program approved by the U.S. Food and Drug Administration (U.S. FDA), to import in bulk certain prescription drugs intended for the Canadian market. Under this plan, eligible drugs must be U.S. FDA and Health Canada-approved drugs labeled for sale in Canada, with exclusions for higher risk drugs. The Canadian seller must be licensed by Health Canada for wholesaling, be registered with a provincial authority, and must also be registered with the U.S. FDA. The importer must submit a pre-import request to the U.S. FDA at least 30 days in advance of product entry and arrival into the U.S. The program allows only a direct supply chain of one manufacturer, one Canadian seller and one importer for each imported drug.

If prescription drugs intended for the Canadian market were to be imported into the U.S. in bulk, it could further exacerbate the existing problem of drug shortages in Canada, putting the health of Canadians at risk. The Government of Canada does not consider the U.S. rule to be an effective solution to high drug prices in the U.S. It opposed the rule during the formal regulatory consultation process and in bilateral discussions with U.S. officials.

Industry and patient advocacy groups called on the Government to “act swiftly, firmly and publicly” in response to U.S. plans. The industry group Pharmaceutical Research & Manufacturers of America (PhRMA) is challenging the U.S. rule in court. As well, large industry players, representing 90-95% of pharmaceutical distribution in Canada, have indicated that they do not intend to participate in this program. However, there is the potential for smaller players in the market to participate, and any industry uptake could have an impact on the Canadian drug supply.

States are at various stages of readiness to implement bulk importation programs of prescription drugs from Canada. Florida, Colorado, Maine, Vermont, New Hampshire and New Mexico have enacted legislation to authorize such a program, and 12 other states have similar legislation in progress. Florida and New Mexico have submitted proposals for importation programs to the U.S. Department of Health and Human Services for review and approval. Florida has already identified a Canadian wholesaler and a vendor to manage its importation program, if approved. Colorado is actively researching a vendor to manage its program, if approved.

The Governor of Florida criticized the Biden administration on March 2, 2022 for acting too slowly to authorize its proposal. On March 31, 2022, the U.S. FDA met with the five states most advanced in the application process for the importation programs (i.e., Florida, Colorado, Maine, New Mexico, and Vermont) to answer questions about the importation programs. This is the first signal from the Biden administration of its intention to work with interested States towards the approval of importation programs, but there is still no timeline on when a decision could be made on any of the proposals.

Regulatory action to safeguard the drug supply

The Regulations Amending Certain Regulations Concerning Drugs and Medical Devices (Shortages) were made on August 11, 2021 and make permanent the provisions that were first introduced in the Interim Order Respecting Drug Shortages (Safeguarding the Drug Supply). These provisions help ensure that bulk importation programs, such as the one established by the U.S., do not cause or worsen a drug shortage in Canada. Similar to the interim order, these Regulations maintain the prohibition on selling for consumption outside of Canada certain drugs intended for the Canadian market if that sale could cause or worsen a drug shortage. The Regulations came into force upon expiry of the interim order on November 27, 2021.

The Regulations also authorize the Minister to require specific information from a manufacturer or drug establishment licence (DEL) holder that could help Health Canada take steps to prevent or alleviate an existing or anticipated drug shortage.

Distribution of drugs intended for the Canadian market for consumption outside Canada will continue to be permitted if the seller determines that the distribution will not cause or exacerbate a shortage. Drugs manufactured in Canada solely for export are not in the scope of the interim order.

Health Canada has published guidance on the new Regulations, conducted outreach to stakeholders, and established networks for signal detection and compliance verification and promotion. Health Canada will investigate any potential non-compliance with the new Regulations and take appropriate actions in accordance with the level of risk. Potential compliance and enforcement approaches that may be taken include: requests for corrective measures, on-site inspections, issuance of public communications and, as a last resort, DEL suspension or cancellation.

KEY FACTS
• The U.S. is seeking to reduce domestic drug prices by allowing for the bulk importation of lower priced drugs intended for the Canadian market.
• A rule facilitating bulk importation of drugs from Canada was established by the Trump administration and endorsed by President Biden through an Executive Order made on July 9, 2021.
• With Canada representing 2% of global drug sales, this is not a viable solution as the U.S. captures 44% of global drug sales.