On June 8, 2022, amendments to the Food and Drug Regulations relating to the export and transhipment of drugs (the “Amendments”) were published in the Canada Gazette, Part II. The Amendments, which come into force on December 8, 2022, extend the drug establishment licence (“DEL”) and Good Manufacturing Practices (“GMP”) requirements under the Food and Drug Regulations (the “Regulations”) to drugs that are manufactured or prepared in Canada solely for export. Currently, section 37 of the Food and Drugs Act (the “Act”) provides a broad exemption from the application of most of the requirements of the Act and Regulations for drugs manufactured or prepared solely for export, as long as a certificate is issued attesting that the drug does not contravene any known laws of the country to which it is exported.
The change is intended to strengthen Health Canada’s oversight of drugs that are solely for export, thereby aligning Canadian regulation of exported drugs with the practices of international partners and fulfilling commitments made by Canada to the European Union under the Comprehensive Economic and Trade Agreement.
The Amendments also clarify that a drug must be in bond to be subject to the exemption from the application of the Act and Regulations for transhipped drugs (drugs imported solely for the purpose of export) set out in section 38 of the Act.
Current Exemption to DEL and GMP Requirements for Exports
The Regulations generally require that an establishment engaged in fabricating, packaging/labelling, testing, importing, distributing or wholesaling drugs hold a DEL. A DEL authorizes an establishment to perform one or more of these regulated activities in respect of one or more categories of drugs (e.g., pharmaceuticals, vaccines, biologics, etc.).
The Regulations further require that drugs be fabricated in accordance with GMP, which ensure that drugs meet appropriate quality standards. An establishment that holds a DEL is subject to inspection by Health Canada to verify compliance with GMP.
Application of the DEL and GMP requirements can be avoided by invoking section 37 of the Act, which states:
37 (1) This Act does not apply to any packaged food, drug, cosmetic or device if
(a) it is manufactured or prepared in Canada;
(b) it is intended for export and is not manufactured or prepared for consumption or use in Canada nor sold for consumption or use in Canada;
(c) a certificate that the package and its contents do not contravene any known requirement of the law of the country to which it is or is about to be consigned has been issued in respect of the package and its contents in prescribed form and manner; and
(d) the packaged food, drug, cosmetic or device meets any other prescribed requirement.
While the Act’s prohibitions on adulteration, manufacturing under unsanitary conditions, and false, misleading or deceptive labelling, selling or advertising apply to exported drugs, DEL and GMP requirements are not currently prescribed requirements. As a result, an establishment can manufacture or prepare a drug in Canada if intended for export, without being authorized to do so by a DEL and without having to comply with Canadian GMP requirements.
The Amendments designate the Regulations’ provisions relating to DEL authorizations and GMP compliance as prescribed requirements for the purposes of paragraph 37(1)(d) of the Act, thereby foreclosing the use of section 37 to avoid these requirements.
The Amendments come into force on December 8, 2022. However, the transitional provisions of the Amendments provide a three-month grace period to allow establishments to take steps towards complying with the DEL and GMP requirements. Establishments currently relying on the section 37 exemption to export drugs will therefore have until March 8, 2023, to apply for a DEL (or amend an existing DEL) to authorize the activity that they have been conducting in respect of the drug exports. Provided that the drug continues to otherwise meet the conditions of subsection 37(1), an establishment with a pending DEL application will continue to be exempt from the DEL and GMP requirements, until such time as the licence issues or the application is rejected or withdrawn.
The Amendments also make changes to Appendix III of the Regulations, which is the form for the Export Certificate required by paragraph 37(1)(c) of the Act, and require that a copy of such certificate be kept for five years after the day on which a drug is exported.
Finally, the Amendments clarify the conditions under which a transhipped drug will be exempt from application of the Act. Section 38 of the Act provides:
38 This Act does not apply to any packaged food, drug, cosmetic or device if
(a) it is manufactured or prepared outside Canada;
(b) it is imported solely for the purpose of export and is not sold for consumption or use in Canada; and
(c) it meets any other prescribed requirement.
The Amendments provide that, for the purposes of paragraph 38(c), all drugs must be in bond. This amendment clarifies that the Regulations’ requirements are consistent with the Customs Act, which requires that all goods transhipped through Canada be in bond.