Canada: Cross-Border Issues Relevant to the Dietary Supplements Industry

This article first appeared in the Jan /Feb 2005 issue of Update. Reprinted with the permission of the Food and Drug Law Institute (FDLI) © 2005.

Canadian and U.S. regulators have been busy recently. Health Canada’s Natural Health Products Directorate (NHPD) is overseeing the implementation of the Natural Health Product Regulations, introduced on January 1, 2004.1 "Natural health products" (NHPs) are Canada’s equivalent of U.S. dietary supplements. On November 4, 2004, the U.S. Food and Drug Administration (FDA) introduced "Major Initiatives for Dietary Supplements." 2 FDA heralds these initiatives as significant steps in implementing the Dietary Supplement Health and Education Act (DSHEA),3 a statute that is now a decade old.

This activity is a reminder of the substantial differences between the U.S. and Canadian approaches. The most important difference is that NHPs require a license, whereas dietary supplements do not. Conversely, it may be possible for a licensed Canadian product to make more aggressive claims than its unlicensed U.S. counterpart; the NHP Regulations permit "drug" claims, but DSHEA does not.

These differences create challenges for those operating on both sides of the Canadian/U.S. border including ensuring multijurisdictional regulatory compliance and navigating transnational product liability and enforcement issues. Governments, too, may not be immune, with future North American Free Trade Agreement (NAFTA) or constitutional challenges not inconceivable.

NHPs: Background

NHPs are an addition to the scheme of the Canadian Food and Drugs Act, which governs foods, drugs, medical devices, and cosmetics.4 Previously, natural health-type products were not recognized under this legislation. Despite being unlicensed drugs, however, many natural health-type products were sold in Canada with the tacit approval of Health Canada.

Health Canada set out a relaxed approach to enforcement in the Interim by Michael Penny and Conan McIntyre DIN Enforcement Directive,5 a 1998 policy document. This policy created Products Subject to Special Measures (PSSMs), which are natural health-type products not referenced in any legislation or regulation. If Health Canada discovered a PSSM marketed without a Drug Identification Number (DIN), it would take no enforcement action other than sending a letter to the manufacturer, advising of this deficiency.

Transitional Provisions

On December 5, 2003, the NHPD announced its plan to phase in the new licensing6 regime and replace the Interim DIN Enforcement Directive. This transitional program classifies NHPs into six risk-based categories. If a product application is fi led before a deadline established for that product’s priority class, it may be sold pending a complete review of the license application. In the meantime, the NHPD says that compliance will be "based on risk." Applications for the riskiest class—identified by Health Canada—were required by summer 2004 to obtain the benefi t of the program. Current deadlines for the remaining product classes are staggered from January 2005 to June 2007. This approach is understandably troubling for companies that would be reluctant to sell an unlicensed product for which approval might not be forthcoming.

Products currently licensed as drugs have until December 31, 2009, to obtain NHP licenses. For products manufactured, packaged, labeled, or imported before January 1, 2004, there is a transition period until December 31, 2005, for the regime’s good manufacturing practices and site-licensing requirements.

NHPs Defined

Unlike medical devices, cosmetics, foods, and drugs, NHPs are not mentioned in the Food and Drugs Act. They are identified only in the NHP Regulations, which were issued under the authority of the Food and Drugs Act. By implication, NHPs necessarily are drugs;7 dietary supplements, on the other hand, are considered a type of food.

The definition of NHP in the Regulations (like the definition of dietary supplement) has a "functional component" as well as a "physical component." The functional component covers substances manufactured, sold, or represented for use in the following:

  • the diagnosis, treatment, mitigation, or prevention of a disease, disorder, or abnormal physical state or its symptoms in humans;
  • restoring or correcting organic functions in humans; or
  • modifying organic functions in humans, such as modifying those functions in a manner that maintains or promotes health.

The physical component includes homeopathic medicines, traditional medicines, and substances set out in a schedule to the NHP Regulations. That schedule includes the following:

  • plant or plant material, alga, bacterium, fungus, or nonhuman animal material;
  • extracts or isolates of any of the above substances having identical molecular structure, along with their synthetic duplicates;
  • certain vitamins, amino acids, and essential fatty acids, along with their synthetic duplicates;
  • minerals; and
  • probiotics.

Excluded from the defi nition are, most notably, prescription drugs, substances administered by puncturing the skin, and specific substances (e.g., blood and blood derivatives, insulin, interferon, and monoclonal antibodies).

The excluded items—and particularly the catch-all prescription exclusion— are safety checks on the new system. The regime’s intent, described in the Regulatory Impact Analysis Statement published with the NHP Regulations, is "to regulate substances that are safe for over-the-counter use. It was not the intent of the Regulations to take substances off Schedule F [i.e., prescription drugs] or to regulate substances that require a prescription or have a narrow margin of safety."8

Comparing the U.S. and Canadian Regulatory Regimes

The classification of NHPs as drugs is a major point of departure between the DSHEA and the NHP Regulations. Many differences flow from this distinction, including product license requirements (required for NHPs, but not dietary supplements),

and the scope of permissible product claims (drug claims are permitted for NHPs, but not for dietary supplements). Thus, although similar claim substantiation requirements apply, there is no Canadian equivalent of the FDA labeling disclaimer (i.e., "This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease."). Once the Canadian scheme is fully operational, Health Canada will have officially reviewed and approved the claim prior to marketing.

Regulatory and Private Enforcement

Policing the industry traditionally involves government regulatory agencies (e.g., FDA or the Federal Trade Commission in the United States, and Health Canada or the Competition Bureau in Canada). Increasingly, an important element of regulation is through civil action. Civil proceedings may be instituted by regulatory agencies themselves or by private interests (e.g., consumers, competitors, and interest/ lobby groups).

Regulatory Enforcement

Regulators’ activities increasingly include crossborder coordinated efforts by U.S., Canadian, and Mexican authorities. This kind of cooperation reflects the recognition of the crossborder nature of modern advertising (e.g., print, television/radio, Internet) and is exemplified by the Mexico-U.S.- Canada Health Fraud Working Group,9 which involves cooperative investigation and enforcement work by agencies from all three jurisdictions.

Product Liability and Class Actions in Canada

Although class actions are a fact of life in the United States, they are a new and growing phenomenon in Canada. Currently, the provinces of Ontario, British Columbia, Manitoba, Newfoundland and Labrador, Quebec, and Saskatchewan, as well as the Federal Court of Canada, allow for class proceedings.

We know of no class action relating to the current NHP regime being implemented in Canada, but the Canadian policy rationale for permitting class actions will apply as much to NHPs as to any other drug, cosmetic, device, or food in this context. The Canadian policy rationale for permitting class actions is similar to that in the United States: 1) increased access to justice; 2) judicial economy; and 3) behavior modification. Product liability claims, lack of efficacy claims, false advertising, and statutory breach are all theories on which an action conceivably might be launched. The possibility of contingency fees—which seek to balance legal counsel’s risks with financial rewards if the claim is successful—add a further incentive for the use of class proceedings.

A key element in any class proceeding, and what takes a class proceeding out of the realm of the typical civil claim, is certification. Certification enables one plaintiff (or a small group of plaintiffs) to represent potentially thousands, or even millions, of class members in asserting a claim—a claim that, due to its relatively small size individually, might never be brought in the absence of a class proceeding. Certification is available only by means of court order. To succeed in a certification hearing, the plaintiff must satisfy five criteria: 1) there is a reasonable cause of action; 2) there is an identifiable class of two or more persons; 3) there is a common issue (or issues) of law or fact; 4) the class proceeding is the preferable procedure; and 5) there is an appropriate representative plaintiff (or plaintiffs).

Although the second criterion—an identifiable class—is typically met in cases involving consumer goods and mass markets, the common issue and the preferable procedure requirements are signifi cant hurdles in many cases. With respect to the requirement for a common issue, the test is that success for one plaintiff must be success for all. The common issue need not be determinative, however, of each member’s claim. Ultimately, the court asks whether the resolution of the common issue will "materially advance" the litigation.

In determining whether a class proceeding is the preferable procedure to resolve the dispute, the court will consider the action as a whole—namely, 1) the extent of individual issues, and 2) the manageability and cost of the litigation. If the individual issues tend to dwarf the common issues, creating what one court referred to as a "monster of complexity and costs,"10 the court will decline to certify the class.

Class proceedings in Canada have rapidly become a significant factor in the mass consumer products marketplace. They represent a powerful— albeit private—form of market regulation. As in the United States, class proceedings often follow adverse regulatory rulings, so corporations that are investigated, disciplined, prosecuted, or that otherwise run afoul of regulatory authorities face an increased risk of such civil claims.

NAFTA Challenges

No discussion of crossborder trade and regulation would be complete without consideration of NAFTA, which may apply where unequal or unfair government regulation is creating barriers to trade. Certain NAFTA provisions (e.g., those relating to intellectual property and data protection, technical trade barriers, and investor protection) are potential sources for a challenge. The following provisions may be of particular interest.

  • Intellectual Property and Data Protection. Articles 1711(5) and (6) protect the confi dentiality of fi lings required for regulatory purposes.
  • Technical Barriers. Article 905(1) requires each party to "use … relevant international standards … except where ineffective or inappropriate … to fulfill its legitimate objectives, for example … [the] scientific justification of the level of protection that the party considers appropriate."11
  • Conformity Assessment. Under Article 906(6), parties are required to accept the results of another party’s assessment procedures, where possible, if they offer equivalent protection.
  • Investor Protection. One of the unique features of NAFTA is the provision relating to investor protection. Unlike most trade treaties and agreements, NAFTA provides remedies that are available directly to private entities, not just through government action. The investor protection provisions set out in Chapter 11 dictate that each party must afford as favorable treatment to foreign investors as to the party’s own. Export quotas, purchasing requirements, and restrictions on technology transfers and on the nationality of executives are prohibited. Most significantly, rights can be invoked in binding arbitration directly by the investor, without the need for state-to-state involvement.

Constitutional Challenges

Both the U.S. and the Canadian constitutions protect freedom of speech from unwarranted government interference. In both countries, these constitutional protections have been extended to commercial speech and advertising. The legal issues in this area tend to involve a balance between the right of manufacturers/distributors to advertise and make (truthful) claims about their products, on one hand, and the protection of the public from adverse health or safety consequences, on the other. Proportionality is a big issue—have government-imposed restrictions been tailored to create the least impairment to the freedom of expression required to advance the legitimate public interest? These constitutional protections have been invoked to strike down regulations prohibiting advertising by certain "drug compounding" pharmaceutical services in the United States and regulations requiring certain warnings to be printed on the packaging of tobacco in Canada. Future challenges may well involve issues such as the total prohibition on certain drug advertising, which is currently the law in Canada.12


1. SOR/2003-196.

2. Press Release, Food and Drug Admin. (FDA), FDA Announces Major Initiatives for Dietary Supplements (Nov. 4, 2004), available at topics/news/2004/NEW01130.html (last visited Nov. 23, 2004).

3. Pub. L. No. 103-417, 108 Stat. 4325 (1994).

4. R.S.C. 1985, c. F-27.

5. Health Products and Food Branch Inspectorate, Health Canada, Interim DIN Enforcement Directive, issued January 1, 1998.

6. The NHPD’s website provided in early 2003 that for "products that have already been on the Canadian market prior to the coming into force, individuals would have two years … to obtain a product licence." Notes accompanying the draft NHP Regulations suggested that a two-year transition period would be in place. In Canada, draft regulations/legislation often are introduced in draft form for public comment. Draft NHP Regulations were fi rst produced for public review in the Canada Gazette Part I on Dec. 22, 2001. The notes accompanying the final regulations made no reference, however, to the sale of unlicensed NHPs (as published in the Canada Gazette Part II on June 23, 2003).

7. Given the definitions of "food," "drug," "medical device," and "cosmetic," and given the specific functional limitation imposed on NHPs, they cannot be foods, medical devices, or cosmetics.

8. Natural Health Products Regulations, 137(13)CANADA GAZETTE PART II, at 1577 (June 18, 2003), available at cg2.pdf (last visited Dec. 3, 2004).

9. See FDA, Trilateral Cooperation Charter between the FDA, Health Canada, and the Federal Commission for the Protection of Sanitary Risks (Mexico) at http:// (last visited Dec. 3, 2004). A related news release is posted at http://www.

10. Lacroix v. Canada Mortgage and Housing Corp. (2003), 36 C.P.C. (5th) 150 (Ontario Superior Court of Justice).

11. Although FDA has mentioned that good manufacturing practice (GMP) standards specific to dietary supplements will be forthcoming, none have issued yet. Could Canadian requirements become the standard for companies operating in Canada and the United States?

12. Subsection 3(2) of the Food and Drugs Act provides the following: "No person shall advertise any food, drug, cosmetic, or device to the general public as a treatment, preventative or cure for any of the diseases, disorders, or abnormal physical states referred to in Schedule A." Schedule A presently lists 40 conditions, including arthritis, glaucoma, heart disease, and obesity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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