Health Canada’s proposal on cost recovery for Natural Health Products raises questions

The proposal sets out mandatory fees for:

1. NHP Product License Applications (PLA).
2. NHP Site License Applications (SLA).
3. Annual Right to Sell (RTS) NHPs.

Canadian consumers, businesses and Health Canada need to consider many important questions through the consultation process, including whether these proposed fees will reduce Canadian's access to marketed NHPs and cause significant harm to the industry as a whole.

Based on the proposal, there is risk that small and medium-sized businesses will not be able to afford the fees and it remains to be seen how companies will manage the costs. As a result, the proposal may result in Canadian consumers ordering more non-compliant product from outside of Canada, making it more difficult or impossible for companies who currently invest into Canadian compliance to continue to doing so.

There are also questions around the incentive to pay almost $60,000 to apply for an NHP approval, when most formulas cannot be patent protected.

This cost recovery proposal is in addition to the implementation of significant labelling changes for NHPs which come in force June 21, 2025 and the associated costs to industry. The combined impact of these regulatory changes is likely to result in increased prices for NHPs, less new and innovative products and existing products being taken off the market.

Proposal highlights​

A Canadian NHP manufacturer of non-sterile product would have to pay Health Canada $23,071 each year for a site license. An importer, importing from as few as a single foreign site, will pay $20,035 each year for a site license.

Site amendments, for actions as simple as adding a single warehouse, would pay an additional $4,784.

Applicants submitting a Class III PLA would pay a minimum of $7,209 and could cost as much as $58,332 depending on the type of application and whether a product would fall under a new, mystery category of application deemed a "Class III novel application."

Product license amendments for something as simple as modifying a daily dose, adding an age group or modifying a test tolerance would start at $7,209 and range up to $23,333.

License holders will be charged an annual right to sell fee of $542 for every single NPN they hold.

The proposal is open for consultation as of May 12, 2023 and will remain open for only 75 days to provide comments.

Health Canada is targeting an implementation date of April 1, 2025 to begin charging these fees.

Proposal overview​

NHP Product Licenses​

Health Canada's proposal indicates that all NHP applications or applications to amend existing products are subject to a fee depending on the class of PLA, see Table 1 below.

While this proposal is positioned as a consultation on proposed fees for NHP, Health Canada is proposing to create an entirely new class of NHP called a "Novel Class III." A Novel Class III product is defined as: a product with novel active ingredients, a novel combination of active ingredient, a novel use or purpose, or a novel physical form. The price tag that comes along with this new class of NHP applications? $58,332.

This new application class suggests that any PLA using an innovative ingredient, a new health claim, or even a combination of approved ingredients that have not been used in combination before, will be subject to nearly $60,000 in licensing fees. However, it is unclear whether this fee will only be applicable to the first product of its kind, because there is no data exclusivity – once a Novel Class III application is submitted, any subsequent NHPs using the same novel ingredient, new health claim, or combination of ingredients, could arguable be met with a fee of only $7,209.

Not only is a $58,332 fee a challenge to innovation in the Canadian NHP market, but with a lack of data exclusivity, this leads to unfair market advantages to those who can leverage an existing Novel Class III application. With a barrier to innovation, there is an added risk that the number of Novel Class III applications will decrease, which may in turn cause an increase to Class I and Class II PLA fees to subsidize the lack of cost recovery.

Health Canada expects that only 1 per cent of PLA will be categorized as a Novel Class III application. However, it remains to be seen as to how Health Canada arrived at this position, given that under the current proposal, existing Class III PLAs are at risk of being reclassified as Novel Class III PLAs.

Table 1: Proposed NHP product license fees and performance standards (existing standards included where applicable)

NHP site licenses​

Site license fees will be charged to review applications and amendments, see Table 2 below.

In addition to fees for assessing new NHP site license applications or amendments, Health Canada proposes an annual site license fee based on the most expensive fee category conducted at the site. This is a one-size-fits-all fee, whether a license holder has one site with one product, or 20 sites with hundreds of products.

Table 2: Proposed NHP site license fees and performance standards (existing standards included where applicable)

Right to sell​

An annual fee of $542 per NPN or DIN-HM, will be charged to allow companies the exclusive right to sell their NHPs in Canada. The proposed performance standard is up to 60 days to update the licensed NHP database.

Small business and publicly funded health care institution mitigation

Health Canada is proposing a small business fee reduction in an effort to minimize the impact on small business in Canada. A small business is proposed as a company, including its affiliates, that has fewer than 100 employees, or between $30,000 and $5 million CAD in annual revenue. The qualifying business would be eligible for the following fee remissions:

• 100 per cent for pre-market evaluation fees for the business's first-ever NHP product submission.
• 50 per cent for pre-market evaluation fees for all subsequent product submissions.
• 25 per cent for site license fees and the annual right to sell fee.

Health Canada has also stated that a fee for NHPs will not apply to health care institutions that receive public funding, or any branches of the federal, provincial or territorial government. This includes any institution that is licensed, approved or designated by a province or territory to provide care to persons or animals suffering from disease or illness.

Fee remissions would be available for unmet performance standards but would be capped at 25% of application fees regardless of the length of delay. There would be the possibility to "pause-the-clock" on regulatory reviews, allowing the performance standard to be paused for specified circumstances. Fee remissions would not be available to applications that are withdrawn or refused.

Conclusion​

While Health Canada's stated goal is to promote access to safe, effective, and high-quality NHPs for Canadian consumers, it remains to be seen how this proposal will accomplish this goal, given the proposed fees have the potential to create unintended effects.

Health Canada is proposing an implementation date of April 1, 2025. The discussion about cost recovery for NHPs has been on the table for some time, and now it is here. 

This article was originally published HERE​ by Gowlings and is reproduced here with permission.​​