Health Committee on Oct. 30th, 2023

[Aaron Skelton, President and Chief Executive Officer, Canadian Health Food Association]

Thank you very much, Mr. Chair.

Thank you, Adam, CHFA member and former director general of the NHPD, for joining me today.

I want to begin by saying thank you for the opportunity to speak to you today on the regulatory and legislative approach to natural health products by the Government of Canada.

I would also like to express my gratitude for the significant achievements of this committee. In 1998, your diligent work on the 53 recommendations led to the creation of a world-class regulatory system. Back then, the vision was clear: to ensure the safety, efficacy and accessibility of natural health products for all Canadians. The regulations that emerged from your dedication were seen as a model for the world—a shining example of how to strike the balance between consumer protection and industry growth.

However, it is with a heavy heart that I must emphasize this once world-class regulatory system is now facing substantial challenges. The very achievements that were celebrated in 1998, and then in 2004 when the regulations came into force, have become mired in inefficiencies, complexities and a lack of stakeholder engagement. The promises of a robust and responsive regulatory framework have given way to uncertainties, barriers and mounting concerns for businesses and the 71% of Canadians who rely on natural health products for their well-being.

[Luc Thériault, Bloc, Montcalm, QC]

Mr. Chair, my apologizes to the witness, but she is speaking too quickly for the interpretation to be intelligible.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Thériault.

Mr. Skelton, I expect you may be trying to race through your statement to make sure you get in all of it in five minutes, but it's causing us some problems with the translation. You can have an extra minute if you slow down a bit to make sure we all get it.

Go ahead.

[Aaron Skelton]

Health Canada has now simultaneously implemented and proposed multiple regulatory changes for natural health products under the self-care framework, which was initiated in 2014 and was intended to bring together low-risk products such as cosmetics, natural health products and over-the-counter drugs. Many initiatives linked to this overarching, incomplete framework are now being pushed through at the same time in a piecemeal approach that does not consider how regulatory and policy changes interact with each other.

These changes are cost recovery, new labelling regulations and Vanessa's Law. Health Canada has stated that the regulatory changes are intended to protect Canadians by ensuring the safety and effectiveness of health products. While admirable, the unintended consequences of these changes are becoming alarmingly apparent. Small local businesses, which have been vital in providing Canadians with access to a wide range of natural health products, are grappling with the anticipated burden of compliance and increased costs. This, in turn, raises concerns about the affordability and accessibility of these products for the very Canadians the regulations aim to protect.

While we agree that regulations are vital for product safety and efficacy, the new proposed over-regulation will have the opposite effect. It will drive consumers toward unregulated, international online markets that offer lower-cost products, risking consumer safety.

This is not a theoretical risk. Canadians are currently allowed to bring in natural health products via personal importation rules from the U.S. and around the world with zero Health Canada labelling requirements or premarket approvals.

U.S. state governments, like Arizona, are currently pitching tax incentives for Canadian NHP companies to set up in their state and sell back into Canada using personal importation rules. I ask you this: How does this better protect Canadian consumers or, truthfully, benefit Canada in any way?

This committee needs to send a strong and formal message to Health Canada that the proposed cost and regulatory burden needs to end here. We need a formal reset. We need to ensure that the NHP framework is well-informed, balanced and in the best interests of Canadians.

Finally, I need to speak out to protect the reputation of our sector. In 2021, an audit by the Canadian environmental and sustainable development commissioner alleged some startling statistics, including findings that 88% of products had misleading advertising and 56% of those products were mislabelled.

It is essential to set the record straight. Subsequent scrutiny of the CESD report revealed that these numbers were not, nor were ever intended to be, representative of the Canadian market. Specifically, “Purposeful samples were used since it was not possible to do audit/statistical sampling given the population was not available“.

Efforts to review the methodology used for the audit were also refused by the Auditor General's office, claiming it was not appropriate to release statistical methodology, further limiting the ability to comprehensively examine and validate these allegations. As a result, the reliability of the statistics in the CESD report must be viewed with caution. A more in-depth and transparent examination is needed to assess the accuracy of these assertions.

All of this needs to stop. As an industry, we continue to support regulations and legislation that protects Canadians, with transparency and developed in a responsible and appropriate manner.

It is imperative that we find a balance between regulatory goals and their real-world impact on the livelihood of these small businesses and the well-being of Canadians.

Please, let's hit reset and let's get this right. Thank you very much.

[The Chair, Liberal, Sean Casey]

Thank you very much, Mr. Skelton.

Next, representing Food, Health and Consumer Products of Canada, we have Gerry Harrington.

Welcome to the committee. You have the floor for the next five minutes, sir.

[Gerry Harrington, Senior Vice-President, Consumer Health, Food, Health & Consumer Products of Canada]

Thank you, Mr. Chairman and members of the committee, for this opportunity to provide our industry's perspective on the Department of Health's regulatory changes for natural health products.

FHCP members account for more than half of the NHPs sold in Canada. This includes familiar products like vitamins, minerals and herbal remedies, but also some things you may not necessarily think of as natural health products, such as nicotine patches for smoking cessation. Along with OTC medicines like pain relievers, cough and cold medicines and so forth, these self-care products are used by Canadians to prevent or manage health conditions, thereby relieving some strain on our heavily stressed health care system.

That's why Health Canada has been consulting with stakeholders since 2016 on the development of a self-care framework that would apply a consistent risk-based approach to these products, regulating both NHPs and OTCs.

The self-care framework was proposed as a three-phase project. First, NHP labels would be updated. The second phase was to reform the regulations governing OTCs, which have not been significantly revamped since the 1960s. The third and final phase would be to update the NHP regulations to better balance premarket and postmarket oversight, make these products subject to the authorities under Vanessa's Law and then, finally, apply cost recovery across this whole regulatory framework.

From the beginning, FHCP has been a strong and vocal proponent of this logical approach to the framework. The updated labelling regulations were passed last year, and their very costly implementation is something that we're working very hard with Health Canada to accomplish as the implementation deadlines approach.

We support cost recovery. We support the application of Vanessa's Law. We do all this because we believe that self-care's contribution to alleviating strain on our health care system is more important than ever. However, with this NHP cost recovery proposal, Health Canada has abandoned that logical three-phase sequence and is, frankly, putting the cart before the horse.

Last month, Health Canada told this committee that the current cost recovery proposal was necessary to respond to the audit conducted by the commissioner of the environment and sustainable development. The CESD report was clear that the current shortcomings of the program, as we've heard previously today, are with respect to postmarket enforcement and inspections of facilities.

The CESD clearly endorsed the premarket product evaluation process. Health Canada's cost recovery response is not consistent with the CESD report or the self-care framework discussions that we've been having for the last seven or eight years. Instead, what we have is a cost recovery proposal in the form of a ministerial order, and that is no substitute for a fully consulted Governor in Council regulatory process.

Further, the cost recovery proposal itself revealed several core issues of process and analysis. I'll outline three of them for you.

First, in their testimony last month, the department said that there are 200,000 NHPs on the market. The proposal itself says there are 50,000, and the survey of industry that Health Canada conducted arrived at 11,000. These are very basic metrics that are vital to accurately identifying the activities and costs associated with the program.

Second, the costing analysis shared with us after the proposal was released seeks to more than double the overall size of the program. Specifically, the cost of premarket product evaluations for the lowest-risk products more than tripled under this proposal. This was the very part of the program that CESD said is not a problem, that it is fine, nor is there any kind of backlog in that category. We have no idea why or how that money is to be spent, but it's clear that it's not going to be spent addressing the issues raised by the CESD.

Third, the department stated that, consistent with Treasury Board guidance, the fee ratios used in this proposal—the fee ratios represent the share of the total cost of the program that the industry must bear—would be exactly the same as for prescription drugs. That completely ignores the fact that the federal government alone collects over $500 million a year in GST revenues from OTCs and NHPs. Do these revenues not count as a public benefit, and if so, how did we arrive at fee-recovery ratios that are exactly the same?

Finally, it's worth remembering that, unless a proposed fee or service charge meets the requirements of the Service Fees Act or, as in this case, the relevant portion of the Food and Drugs Act, that fee is, essentially, a tax, and I don't need to tell this group that taxes are the unique purview of Parliament.

Ultimately, we don't see this proposal as a substitute for the full self-care framework. This isn't the time for shortcuts. It really is time to get this job done.

Thank you, Mr. Chairman. I look forward to the questions.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Harrington.

We'll now begin rounds of questions, starting with the Conservatives for six minutes.

Dr. Ellis.

[Stephen Ellis, Conservative, Cumberland—Colchester, NS]

Thank you very much, Chair.

Thank you to our witnesses for being here and presenting this very important and informative information.

We've heard a lot about misinformation and disinformation, etc., although I would suggest to folks around this table that what we have just heard presented is incredibly well informed and also shows an industry that is ready, willing and able to work with government to ensure it goes forward in a safe and effective manner, so that we can have a regulatory framework where everybody wins.

If I might, Mr. Skelton—through you, Chair—you talked about a system that is world class with respect to safety and accessibility. We know very clearly that other jurisdictions would like to have that. Have you ever been part of those discussions, talking with folks around the world, saying, what you have we would like to have. Could you talk a little bit about that, please?

[Aaron Skelton]

We have.

One of the roles we play as the representative for this industry in Canada is liaising with groups around the world. In those discussions, I will convey that we are, undoubtedly, seen as a standard for how to balance consumer interests and the interests of businesses in this country.

What has been startling for me over the past few years is how disillusioned our international groups have become at the changes or the proposals that are being made. To the point, I think, that has been made multiple times to this committee, this is something that other countries, other regulators, have looked to emulate. There are discussions that we've had with European regulators. There are discussions we've had with Australia, with New Zealand. They continue to ask and look for guidance on how we got here, because they'd like to get here as well.

The concerns over the last few years have been “please don't dismantle something that was working so well”, because we were seen as a leader globally.

[Stephen Ellis, Conservative, Cumberland—Colchester, NS]

Thank you very much, Mr. Skelton.

Again through you, Chair, to Mr. Harrington, we heard very clearly, when you talked about these changes and the nature of how they have been proposed, or as some of us might say, rammed through, that it amounts to another tax by virtue of the way the Liberal government has done this and forced its acceptance upon Canadian small and medium-sized businesses.

I wonder, for the benefit of people out there watching—and I know there are many out there from this industry who are very concerned about this—if you could review that with us, the unfair nature of it and, perhaps, the illegality thereof.

[Gerry Harrington]

Sure.

When cost recovery was first introduced in Health Canada's health products area in 1994, I was an active participant at that point. We saw a second revision of the cost recovery regime in the decade just past. In each of those cases, the Government of Canada set down very clear rules that distinguish between cost recovery fees, regulatory charges, service fees, etc., and created very clear rules for how they have to be constructed.

For example, the costing exercise is something that Health Canada was supposed to share in advance of releasing a cost recovery proposal with industry on multiple touchpoints. That did not happen. We did not see the costing analysis until after the proposal was reached.

There's the whole matter that I raised in my testimony around the fee ratios. If it's a public versus private benefit equation, we're having a really difficult time understanding how the fee ratios can be the same for the prescription drug program, where there are no taxes and where, in fact, almost 50% of all expenditures are by government or out of the public purse, yet we wind up with exactly the same cost recovery ratios.

This proposal does not meet those requirements, in our view. According to Treasury Board's own guidance on this, that means it is, effectively, a tax and outside the scope of the Service Fees Act, or in this case, because cost recovery is now done by a ministerial order, it's not even subject to Treasury Board review before approval.

All of those problems, essentially, make this I think a very tricky matter.

[Stephen Ellis, Conservative, Cumberland—Colchester, NS]

Thank you very much, Chair.

I'll turn back to you, Mr. Skelton, if I may. We've talked a lot about costs here, and I know that I mentioned in our motion, which was adjourned by the Liberal side, that we should get rid of these regulations. I did note that our team here tried to calculate the cost for businesses. Can you tell us a little bit about the efforts you've made on behalf of your industry to help those in the industry understand how much this might cost them?

[Aaron Skelton]

Thank you very much for the question.

Obviously, since we've been made aware—and as Mr. Harrington noted, that was very late in the process and I think counter to some of the commitments that we had received from the department—we've been working quite diligently. Obviously, it will impact every individual business uniquely depending on their piece, but I can give a few examples of specific members we have.

Regarding the labelling updates themselves—unlike, potentially, when they impacted the OTC industry—given that these are small businesses, many of them are copacks or some of them are sharing equipment and the updates to that machinery alone, never mind to label stock and things in inventories that will take time to work through, can be in the realm of hundreds of thousands of dollars.

We have one member who recently underwent it of his own accord. His is a small business that would fall into that category, and he estimated that it would cost an additional $250,000 to go through and make the labelling updates.

I can provide another example regarding cost recovery. Multiple members have now gone through the due diligence of calculating the costs on an annual basis, and they have examples of $450,000 a year or $560,000 a year. These are annual fees for these businesses. Given the competitive nature of the natural health product industry—this is not like the pharmaceutical industry—a lot of businesses have to carry a lot of different products to remain viable and these costs are simply not in their margins today. I think that was clearly articulated in the study we commissioned at the beginning of this year.

I'll remind the committee of our startling statistics. One in five of these businesses is saying that it won't be financially viable. That was only on the back of the labelling updates. That was prior to the cost recovery.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Skelton.

We're well past time. I'm sure you'll get ample opportunity to further elaborate on those points.

We're now going to Dr. Powlowski.

Go ahead, please, for six minutes.

[Marcus Powlowski, Liberal, Thunder Bay—Rainy River, ON]

Certainly I don't think anybody would question the fact that one of the roles of government is to protect the public, and certainly there are concerns about natural health products.

Between May 1, 2021, and April 30, 2023, the Canadian vigilance program received 772 domestic reports of serious adverse effects from natural health products. That was without Vanessa's Law, which requires hospitals to report severe adverse effects. Furthermore, between 2004 and 2023, the Canadian vigilance program had received 8,625 reports in which the suspected product was a natural health product. Over 5,000 of those 8,000 were identified as serious by the reports.

Certainly we know that a number of natural health products have potentially adverse effects. For St. John's wort, there's a whole bunch of things with that, including interactions with SSRIs, which are commonly used in the treatment of depression and can cause serotonin syndrome, which can be deadly. There are a number of drugs that are natural health products that cause hepatotoxicity—liver toxicity. For example, there are pyrrolizidine alkaloids, which include comfrey and echinacea. Ginkgo biloba has both anticoagulant and antiplatelet effects. I think there's very significant reasons for the government's wanting to protect the health of Canadians.

Now, when it comes to the cost recovery program—and I want to ask both Mr. Harrington and Mr. Skelton about this—apparently, and this goes back to between March 2021 and March 2022, there was a pilot project that looked at compliance with good manufacturing practices among natural health product manufacturers and found there were issues of compliance in 42% of those companies inspected. Does that not seem to you to be a significant number such that it would require better policing of good manufacturing practices among natural health product manufacturers?

Quickly on that, are you not impressed by those numbers? I'm certainly impressed by those numbers, and it certainly suggests to me that there ought to be more inspections.

[Gerry Harrington]

I would agree. I think the industry has, for a long time, had a concern with Health Canada's approach, which is very heavy on premarket activities and the licensing system, which is, quite frankly, in most categories, heavily backlogged right now, but they have not been enforcing in the field. The authorities were already there before Vanessa's Law. Personally, we don't have an issue with Vanessa's Law, but the authorities are there. The department has continued to emphasize the premarket activities, and that is the problem. In terms of enforcement and inspections, that has been part of the self-care framework discussions from the outset, and it's something we strongly support.

The thing is, we've been talking about that for seven or eight years, but what we have instead of that is a cost recovery proposal that doesn't spell out how that's going to happen. It hands the bill to industry but has not, again, put the program together to ensure that this is correct—

[Marcus Powlowski, Liberal, Thunder Bay—Rainy River, ON]

On the cost recovery program, I assume you're all businessmen, associated with businesses or you're here to promote the interests of businesses.

I think it was you, Mr. Skelton, who said this is a tax we're putting on natural health products. If we don't do it in terms of cost recovery, which is making the industry pay for it, then is that not making all the rest of us Canadians pay for it? That means increased taxes, which I would assume you're against. It would seem to me that we should let the producer bear the cost rather than people within the public.

Mr. Harrington, you're shaking your head, so I have the feeling you're going to give the answer I like. Are you—

[Gerry Harrington]

Either way, the consumer ultimately pays, so I don't think there's a question mark around that. You're right. Whether it's charged to industry or whether it comes in the form of a tax, the issue is getting the regulatory reforms in place so we have a comprehensive approach that deals with a rebalancing of this premarket versus postmarket and inspections issue.

[The Chair, Liberal, Sean Casey]

You have less than a minute for the question and the answer, Dr. Powlowski.

[Marcus Powlowski, Liberal, Thunder Bay—Rainy River, ON]

Mr. Skelton and Mr. Gibson, I'll give you a chance to reply.

[The Chair, Liberal, Sean Casey]

Do so in a minute, please.

[Adam Gibson, Member, Canadian Health Food Association]

One important thing is that it's been a long time that this industry has been looking for a stable inspection program. Even when I was director general, this was something we were trying to institute. There's a concern there.

I think one of the biggest challenges is that we're looking to charge for an inspection program that's not recognized by any other jurisdiction or within the Government of Canada. Many of these inspections will take place, but then you can be inspected again by the CFIA and then inspected again for the exact same thing by Health Canada for a drug licence at the same establishment. You'll have five different licences and five different government employees coming in to check the exact same documents. This particular inspection program, if we're going to do it, really needs to be recognized so we don't have duplication.

[The Chair, Liberal, Sean Casey]

Thank you, Dr. Powlowski.

Mr. Thériault, you have the floor for six minutes.

[Luc Thériault, Bloc, Montcalm, QC]

Thank you, Mr. Chair.

Ms. Vadacchino, according to Dr. Powlowski, 42% of the companies that were inspected were found to be problematic.

What can you tell us about that?

[Mackie Vadacchino]

Thank you for the question.

First, we tried to find out exactly where those statistics came from, but we were not really able to get that information.

Second, even when I was CEO of Bioforce Canada, we asked a number of times, as did the Canadian Natural Products Association, for the criteria or standards so that we could prepare for those inspections. We were never given any standards or any details about what they were going to come in and inspect.

It should be noted that a number of things are still very vague and subject to interpretation. At Bioforce, our regulatory officer even asked Health Canada several times to clarify certain aspects, and we never got an answer. When we say that 42% of businesses did not comply, what exactly did they have to comply with? If you don't know the rules you have to comply with, it's very difficult to do so. Companies that produce prescription drugs, for example, have very clear and specific criteria, and they know very well what to expect in an inspection. We don't.

Mr. Skelton mentioned the 53 recommendations made in 1998. That was long ago. We've been asking for these criteria for a long time. Those of us who follow all the rules and who already pay a lot of taxes are in favour of inspections and good regulations. We're not against inspections. What we are asking is that the authorities work with us, as they have done in the past, to come up with regulations that are good for the Canadian consumer but also allow us to stay in business.