Canada: Files Exhibited, Fines Unlimited: Health Industry Risks Under The New Bill C-17

Last Updated: February 18 2015
Article by Emily Larose and Jeremy Martin

The Minister of Health and Health Canada have bulked up with new powers over the holidays, and the medical products community needs to take notice. On November 6, 2014, Bill C-17 ("the Bill") (also referred to as the Protecting Canadians from Unsafe Drugs Act or Vanessa's Law) received Royal Assent. The Bill amends the federal Food and Drugs Act, R.S.C. 1985, c. F-27 (the "Act") and imposes stricter regulations, reporting requirements, and penalties on the industry. The Bill was named after the daughter of MP Terence Young, who passed away following an adverse drug reaction.

The name of the Bill is a bit of a misnomer, as pharmaceuticals are only one of the regulated products affected. The Bill as a whole is concerned with the safety of "therapeutic products," which includes both pharmaceuticals and medical "devices,"1 but excludes natural health products.

Generally speaking, the changes compel the industry to operate with more public transparency and responsiveness to the regulator, and set out a series of penalties that can go so far as to target individuals for prosecution if they cause a company to step out of line.

Companies should obviously be implementing compliance reviews in light of these amendments, but thought should also be given to the potential implications of these amendments for product liability claims faced by industry.

Key Features of Vanessa's Law

The key features of Vanessa's Law are set out below. For a more comprehensive overview of the new amendments, please consult our previous alert on this topic.

1. Increased Powers of the Minister

Under Vanessa's Law, the Minister of Health ("the Minister") has broader authority to undertake investigations and to require reporting and study from the industry. Under the new law, the Minister may issue orders requiring industry participants to:

a) Provide specified information about a product;

b) Modify packaging or labelling;

c) Ship products to a specified location;

d) Undertake a recall, product assessment or other corrective action; or to

e) Conduct test, studies or monitoring.

The prerequisites for these orders will vary from situation to situation, but generally will require the Minister to have a reasonable belief that a product presents a serious or imminent risk of injury to human health.

2. Broadened Mandatory Reporting

The amended Act now provides for mandatory incident reports by "institutions." The definition of "institutions" has not yet been determined by regulation, and the threshold for and scope of those incident reports are still an open question. We expect, however, that these "institutions" will likely include hospitals, which may be required by future regulation to report adverse reactions to prescription medications to the Minister of Health. This is already a requirement in some European countries, and may be on its way to Canada.

3. Disclosure of Confidential Business Information

The amended Act gives the Minister the power to unilaterally disclose otherwise confidential business information about a product without the consent of that product's manufacturer where the Minister believes that the product may present a serious risk of injury to human health. In some cases this can be done without notification either prior to, or after, the disclosure.

4. Additional and More Severe Penalties

Contraventions of the Act are now much more serious offences. The Act formerly set the punishment for an indictable offence at a maximum $5,000 fine and a jail term of three years. That maximum has now been raised to $5 million and a term of two years.

The amendments also introduced an offence of knowingly or recklessly causing a serious risk of injury to human health, which carries a maximum penalty of an unlimited fine and a five year term of imprisonment. These offences can apply to individuals (officers, directors, agents, employees, etc.) as well as to the company itself.

These new penalties are compounded by the new Section 31.7, which causes each day in which the industry participant continued the breach of the Act to constitute a new and separate chargeable offence, meaning that the penalties under the Act can be assigned, up to their maximum amount, again and again for each day the regulated company was not in compliance.

In addition to the existing obligations under the Food and Drugs Act, the amendments make it an offence to make a false or misleading statement about a therapeutic product to the Minister, although due diligence constitutes a defence.

5. New Regulation Making Powers

The amended Act also permits the making of regulations relating to post-marketing activities. These new regulations may include a requirement that any industry participant may have to provide information with respect to its activities outside of Canada; permitting conditions to be placed on product authorizations; and requiring further transparency and disclosure with respect to clinical trial and investigational test information.

Product Liability Implications

It remains to be seen how Health Canada will use these new powers, and the extent to which that will change the landscape of product development and marketing in Canada. We will also be carefully tracking whether there is an impact on the number and type of product liability claims brought against our clients.

Depending on the nature of the regulations still to be released and the manner in which Health Canada chooses to implement them, we can foresee some likely changes in the legal landscape of the industry with respect to product liability:

  • If the new regulations result in an increase in recalls, there may well be a correlative increase in class action claims, which in Canada frequently follow any significant recall of a pharmaceutical product.
  • Similarly, if these amendments result in prosecutions (which are currently quite rare under the Food and Drugs Act), a finding that an offence has been committed in respect of a therapeutic product is also likely to attract the interest of plaintiffs' lawyers.
  • We also predict that there will be numerous issues involved with the disclosure of confidential business information under these amendments, if the Minister were ever to exercise those powers. Although litigants are entitled to production of the documents relevant to the matters at issue in a product liability claim, these are not provided until after they have pleaded and are sometimes provided on the basis of certain confidentiality protections. Release by Health Canada of a company's confidential business information could provide potential claimants and their counsel with access to such information at a pre-litigation stage; and may in fact give rise to litigation that might not otherwise have been contemplated.

For the time being, compliance personnel should proactively take steps to ensure that they are onside the new regulatory framework.

Protecting Yourself

Given the potentially increased product liability exposure and the drastically increased liability for fines and punishment under Vanessa's Law, industry participants should take all possible steps to review their compliance programs and document their compliance with the Act.

Especially now that the law permits the Minister to provide third parties with confidential business information without advising the author of that information, it is crucial that all communications with Health Canada be clear and complete. A regulated party may not have the opportunity to explain the context of any given communication to Health Canada to the third party conducting a review or investigation.

Regulated companies should consider the following augmentations to their existing compliance protocols:

  • Take this opportunity to review compliance programs, procedures and internal training to ensure that the company's steps to cultivate a culture of compliance by reinforcing standards are thoroughly documented;
  • Take all possible steps to address potential risks and to confirm the truth of communications to Health Canada, and then ensure those steps are themselves recorded, including minutes of meetings and transcripts of internal interviews;
  • In providing any form of report to Health Canada, budget time for final fact-checking so that the ultimate signatory of the report can be briefed and satisfied that all representations (s)he is making are well founded, ideally leaving time for that individual to make further inquiries if (s)he is not completely satisfied as to the accuracy of his or her report;
  • Co-ordinate communications between jurisdictions to ensure that any communication to Health Canada contains and is consistent with information provided to other regulators globally; and
  • Review each draft communication to Health Canada with an eye to whether it contains all necessary context and revise as necessary to ensure that any potential misinterpretation can be avoided.

The biggest news with respect to Vanessa's Law, however, is yet to come: in the form of further regulations and the policy direction of Health Canada once it has the opportunity to exercise its new powers. We will continue to follow these developments and report in this newsletter as events warrant.


1. "Devices" is an exhaustively defined term under the new amendments: see Section 2 of the Food and Drugs Act, as amended.

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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Emily Larose
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