Aligning regulatory incentives for innovation in the consumer health products industry
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- Millicent Hawkins
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1 Aligning regulatory incentives for innovation in the consumer health products industry Canada-European Union Comprehensive Economic and Trade Agreement Regulatory Cooperation Forum Submitted to the Treasury Board of Canada Secretariat April 2018
2 Table of Contents 1.0 Who we are Canadian Context Overview of the Regulatory Issue: Lack of data protection for new uses for existing drugs in Canada Objectives and time frames for a solution Benefits Canadians and the healthcare system Support For CHP Canada s proposal Conclusion
3 1.0 Who we are CHP Canada is the industry association that represents the companies that make evidence-based overthe counter medicines (OTCs) and natural health products (NHPs) (See Figure 1). These are the products you can find in every Canadian home. From sunscreens and vitamins, to pain relievers and allergy medications, people use consumer health products to maintain their health and manage their minor ailments. This is a fundamental part of self-care, which is vital to the health of Canadians, to the sustainability of our healthcare system and the strength of our economy. Figure 1: CHP Canada s Active Members 3
4 2.0 Canadian Context The Canadian consumer health product industry is valued at $5.6 billion dollars and has grown significantly over the past 10 years. From 2004 to 2014, total retail sales across the country grew at an average annual pace of 3.8 per cent while consumer health products sales increased by 4.2 per cent per year. Also during this time, exports of these products nearly doubled almost three-and-a-half times the growth in overall exports 1. Figure 2: Size of the Canadian Consumer Health Product Market Switch drives industry growth The most impactful driver of growth in the consumer health product industry is when prescription drugs are switched to over the counter (OTC) status, creating new options for Canadians to practice self-care. This is called prescription to non-prescription switch or Rx-to-OTC switch. Rx-to-OTC switches have evolved over decades. Some switches create new OTCs for the treatment of self-diagnosed minor ailments (e.g. pain relievers) or could require an initial diagnosis by a doctor (e.g. antifungals for the treatment of vaginal yeast infections). Many of these products are for a limited duration of use, while others, like nicotine replacement therapy and corticosteroid sprays for the treatment of seasonal allergies, have indefinite durations of use. Figure 3 maps potential self-care indications according to conditions that are short term vs. long term use and conditions that are suitable for self-diagnosis vs. conditions that require prior consultation and diagnosis by a health care practitioner 2. 1 Conference Board of Canada Healthy Growth: Estimating the Economic Footprint of the Fast Growing Consumer Health Products Industry (2015) 2 WSMI, Switch: Prescription to nonprescription medicines switch (2009) 4
5 Figure 3: Conditions mapped according to self-care potential and chronicity 3 Indications that are currently suitable for self-care are in the top half of the chart in Figure 3, and future indications for considerations are located in the bottom half of the chart. This chart was developed in the Framework of a study lead by the Association of the European Self-Medication Industry (AESGP) that was supported by the European Commission entitled Development of an information Policy for medicinal products by representatives of the European umbrella organizations of medical doctors, pharmacists and consumers as well as national associations of medical doctors, pharmacists and regulatory authorities. In Canada, federal and provincial governments can collaborate to ensure regulatory frameworks can enable a collaborative care setting can adapt to this increasing consumer demand for access to innovative and progressive switch options for self-care. Barriers to switch Manufacturers of OTCs and NHPs innovate primarily by investing in research that supports both new evidence-based claims for existing products and creating new self-care options Rx-to-OTC switch. 3 WSMI, Switch: Prescription to nonprescription medicines switch (2009) 5
6 However, investments in product development and research do not guarantee an opportunity to recuperate business costs, as 75% of proposed consumer health products never proceed to launch (See Figure 4). Figure 4: Path to market Global companies prioritize new product development in countries where innovative products are most likely to succeed. While in the early 1980 s Canada had among the broadest selections of self-care options globally, the country has lost its leader status and is lagging significantly on Rx-to-OTC switch compared to its major trading partners largely due to two main barriers: 1) A lack of data protection for innovators, and; 2) Administrative red tape that creates uncertainties and causes significant delays to market. Innovators seek product approvals in multiple jurisdictions to offset the high costs associated with developing new products. Not providing incentives for innovators in Canada has resulted in certain switches never entering Canada- or doing so long after they have been introduced elsewhere. Data protection Unlike the E.U. and the U.S., Canada does not offer any data protection for the proprietary clinical data to support regulatory approval of a switched product. In the US the Hatch/Waxman Act establishes a period of 3-year of market exclusivity for new claims on existing products where new clinical data was essential for the approval the application. These additional 3 years have been a major driver of the Rx-to-OTC switch process in the United States, by providing an incentive for manufacturers to conduct research on potential consumer uses for established prescription drugs. In the EU, an additional consecutive 1-year of market exclusivity is provided for new clinical data to support new claims on existing products after the 10-year exclusivity period typically available for prescription drugs. An additional one-year standalone period of data exclusivity is available 6
7 when new clinical data is provided to support the change of authorization of a prescription to non-prescription status. Ingredient based-switch Canada's current system for switching prescription drugs to OTC status is ingredient based, rather than product based. The result of this is that the "switch" applies to all competing products with the same formulation at the same time. Because Health Canada has determined that the act of switching an ingredient is considered a technical regulation as per the World Trade Organization's (WTO) Technical Barriers to Trade Agreement, Health Canada must notify the WTO and its member countries and delay the finalization of the switch for at least 6 months in order to give enough time for competitors to adapt to the change. This is not the case in countries where switches are product-based, affecting only one manufacturer, and therefore do not require WTO notification. In the absence of any form of data protection, this six-month delay, combined with the delays associated with drug scheduling and the shorter federal approval time for second entry products, means that competing products often hit store shelves before the innovator s product has had time to establish itself, and sometimes even get there first. Canada lags in switch These regulatory and policy incentives provided in other jurisdictions have resulted in Canada lagging behind in switch. For example, after a new switched product is introduced into the U.K, Canadians wait an average of seven years until it is introduced in Canada (See Figure 5). Figure 5: Canada is losing the innovation race Generally, Canada is one of the top 10 OTC markets in the world, however, when global multinational companies are prioritizing the countries in which to launch innovative switch products, Canada doesn't make the cut due to regulatory barriers and a lack of incentives that support innovation. However, when the Federal government does take action to reduce barriers to switch, 7
8 the consumer health products industry responds. In 2013, the Federal government took measures to streamline the switch process to make it faster and more efficient, which triggered a dramatic increase in switch activity (See Figure 6). Figure 6: Recent prescription-to-non-prescription switches in Canada Since 2013, there have been 13 switches the same number of switches observed in the previous 13 years in Canada. Canada's lag in Rx-to-OTC switch has resulted in an industry with enormous growth potential (See Figure 7). Moreover, the adoption of regulatory and policy incentives similar to the U.S. and UK are expected to have a similar impact on industry growth and switch in the future. Figure 7: Graph showing the prescription to non-prescription switch history in Canada Opportunity 8
9 Health Canada is currently consulting with stakeholders on a proposed new self-care framework that aims to introduce a consistent, risk-based set of new regulations for non-prescription drugs, natural health products and cosmetics. To implement this Framework, Health Canada will be introducing amendments to the Food and Drug Regulations in early 2019, which provides a unique opportunity to harmonize regulatory incentives for data protection. 9
10 3.0 Overview of the Regulatory Issue Global multi-national companies will invest in countries that reward innovation. Canada is a small market and a lack of a harmonized regulatory incentives for innovation discourages investment in Canada relative to the U.S. and EU. United States In 1984 the US introduced the Hatch-Waxman Act, which includes a five-year data exclusivity period for new molecular entities (NMEs), similar to our prescription drug data protection provision for new chemical entities. The Act provides for a period of exclusivity such that once an NME is approved, a generic version cannot be approved for five years. That generally is referred to as "data exclusivity" or market exclusivity. However, more importantly to the consumer health product industry, the Act also calls for a three-year market exclusivity period for supplemental submissions requiring clinical trials, which would include new indications for existing products. The Act is as follows: (iii) If an application submitted under subsection (b) for a drug, which includes an active ingredient (including any ester or salt of the active ingredient) that has been approved in another application approved under subsection (b), is approved after September 24, 1984 and if such application contains reports of new clinical investigations (other than bioavailability studies) essential to the approval of the application and conducted or sponsored by the applicant, the Secretary may not make the approval of an application submitted under this subsection for the conditions of approval of such drug in the subsection (b) application effective before the expiration of three years from the date of the approval of the application under subsection (b) for such drug. (iv) If a supplement to an application approved under subsection (b) is approved after the date of enactment of this subsection and the supplement contains reports of new clinical investigations (other than bioavailability studies) essential to the approval of the supplement and conducted or sponsored by the person submitting the supplement, the Secretary may not make the approval of an application submitted under this subsection for a change approved in the supplement effective before the expiration of three years from the date of the approval of the supplement under subsection (b) 4 As a part of the ongoing negotiations on the North American Free Trade Agreement, we are recommending harmonizing with the US approach of regulatory incentives to grant a period of market exclusivity for new indications on existing consumer health products or prescription to consumer health product switches where proprietary clinical data was needed for approval. Europe In 2004 the European Union passed an amended Directive granting the member states 18 months transpose the provision into national legislation. Originally the data protection period was proposed at 3 years and was dropped to 1 year at the final stages of approval. The Directive is as follows: 4 Hatch-Waxman Act (1984): 21 USC 355 (j)(5)(d) 10
11 Article 74a Where a change of classification of a medicinal product has been authorized on the basis of significant pre-clinical tests or clinical trials, the competent authority shall not refer to the results of those tests or trials when examining an application by another applicant for or holder of marketing authorization for a change of classification of the same substance for one year after the initial change was authorized. The new clinical tests are significant if they are related to a new strength, route of administration, new pharmaceutical form or new indication that was not previously authorized for the prescription product. This one year of data exclusivity is a stand alone period of protection that covers only the data provided to substantiate the switch. Only two switches have been granted the 1 year market exclusivity in the EU (1) Tamsulosine (to treat benign prostatic hyperplasia in the UK) and (2) Ulipristal acetate (emergency contraceptive), which was switched via the Centralized Procedure. With the switch of Ulipristal, the oneyear protection was granted within the period of patent protection, so it did not create any additional benefit. Harmonization Strategy If harmonization with the U.S Hatch-Waxman three year period of exclusivity should fail to be adopted under the North American Free Trade Agreement negotiation, CHP Canada would seek harmonization with the EU s provisions for an additional, consecutive 1-year of market exclusivity is provided for new clinical data to support new claims on existing products. Despite the fact that one year of protection is too short the Canadian industry would be better served by harmonizing with these EU regulatory incentives for innovation than to remain with nothing at all. The Canadian switch process is long, cumbersome and challenging for innovators to navigate with predictability (See Figure 8). The combination of the lack of data protection and administrative red tape created by the overlap of the Federal/provincial processes in determining the conditions of sale and ingredient-based switch, it is common for second entry products to enter the market soon after the innovator. In some cases they are successful in getting a product approval within weeks of the innovator marketing their product. This practice completely discourages innovation with the end result being lack of access to Canadians of new and innovative health products found elsewhere globally. Figure 8: Graphic of the current Federal and Provincial switch and scheduling process (attached separately) Opportunity At the same time when the Treasury Board is consulting on mechanisms to align internal regulatory cooperation as a part of the Canadian Free Trade Agreement, Health Canada has launched consultations on a new self-care products regulatory framework. The proposal includes a vision for an integrated 11
12 governance approach to consumer health products that could be used to bring together the federal Health Portfolio, the provincial and territorial governments and relevant stakeholder associations to address point of sale issues for these products. 12
13 4.0 Objectives and time frames for a solution CHP Canada is proposing that the Treasury Board of Canada bring forward to the Regulatory Cooperation Forum (RCF) the need to align the Canadian Food and Drug Regulations with Article 74a to Directive 2001/83/EC to harmonize provisions for a standalone one year period of data exclusivity for new data to support the switch of prescription drugs to non-prescription status. The RCF is the ideal forum to facilitate collaboration between Health Canada and the European Medicines Agency about incentivising innovation in the consumer health products industry as Health Canada consults on changes to the Food and Drug Regulations in early 2019 to implement a risk-based approach to the regulation of over-the-counter medications as a part of the Self-Care Framework. Rationale: Align with all governments commitments to align and harmonize regulatory systems to promote regulatory cooperation. Align with Pharmacare objectives to improve access to affordable medicines Deliver on the Self-Care Framework objectives to eliminate unnecessary burden on industry. Canadians can access new safe and effective self-care products faster. Significant savings and benefits to Canadians, private drug plan sponsors, employers, governments Improve access to new consumer health products and reduce unnecessary doctor visits by eliminating the need to revisit the federal decision at the provincial level. Reduce unnecessary duplication and red tape, and produce more consistent and predictable outcomes for Canadians and for industry. 13
14 5.0 Benefits Canadians and the healthcare system All Canadians benefit from enhanced self-care because it leads to better health outcomes and a more efficient and sustainable healthcare system. Impacts on Canadians practicing self-care Canadians have been taking on a bigger role in their own health care. This is particularly evident in the area of self-care where Canadians are making more decisions about how to improve and maintain their health with the use of products that they can chose and use on their own. Canada has a strong culture of self-care. A recent study shows three quarters of Canadians are confident about treating their minor ailments themselves. When faced with a minor ailment, 59% use an OTC medicine to help them get relief. 5 CHP Canada's 2010 survey shows that 42% of Canadians take consumer health products every day and 31% of Canadians use products a few times each week, or every few weeks 6. Of those who practice self-care, 41% actively seek out new OTC medications to get relief from their minor ailments on their own. This consumer driven demand for new safe and effective products will put pressure on regulatory systems to encourage innovation and enable greater access to new self-care options. Impacts on the healthcare system Self-care can be done independently or in collaboration with health professionals, the latter imposes a significant demand on limited healthcare resources (Figure 7). We estimated that one in seven Canadians with minor ailments visits a doctor as a part of a collaborative approach to selfcare. However, doctor consultations for three common minor ailments are estimated to cost the healthcare system almost a billion dollars annually. CHP Canada has shown that if only 16% of minor ailment suffers, who said their symptoms were mild, practiced self-care instead, it would free up enough physician time for 500,000 Canadians to gain access to a family physician who currently are without one. Given the cost-savings potential of self-care, federal regulators will be challenged to work collaboratively with provincial and territorial counterparts to recognize the direct and indirect benefits of self-care as an economic driver and a critical part of the healthcare system delivery. 5 Willemsen K, Harrington G "From Patient to Resource: The Role of Self-care in patient-centered care of minor ailments" Self-care (2012) Volume 3, Issue 3 (43-55) 6 Redfern, M., Consumer Views of Safety and Efficacy Issues Related to Consumer Health Products and Natural Health Products (2010). 14
15 Figure 7: Impact of self-care on the Canadian healthcare system Moreover, these savings quantified in a recent economic study by the Conference Board of Canada on the value of switch. The report showed that one billion dollars could be freed up in the Canadian healthcare system and broader economy by switching just three categories of products 7 (Table 4). The three prescription medication categories were (1) proton-pump inhibitors (PPIs) to treat frequent heartburn/indigestion (which has already seen some medicines switched in Canada) and two other potential switch candidates (2) oral contraceptives and (3) erectile dysfunction medicines. Table 4: Summary of results from the Conference Board of Canada report on the value of switch Stakeholder PPIs Oral Contraceptives Erectile Dysfunction Total Governments (cost of primary care visits + public drug plan coverage) $382.4 M $100.1M $41.4M $523.9M Employers (productivity) $239.1M $145.4M $45.1M $429.6M Private drug plans $169.8M $31.0M $19.8M $220.6M 7 Conference Board of Canada Value of Consumer Health Products: The Impact of Switching Prescription Medications to over-the-counter (2018) 15
16 Additional costs to individuals ($81.4M) ($54.3M) ($135.7M) Total savings $709.9 M $222.2M $106.2M $1.03 B The total savings would come from reduced drug costs, approximately 6.6 million fewer doctor visits and improved productivity/less time spent away from work. While switches transfer costs from governments and payers to consumers, it actually lowers costs for Canadians who need it most. Individuals with the best drug plan coverage would incur additional costs, while those with poorer or no drug coverage (who are also most likely to be of lower socioeconomic status) would have a decreased cost burden as OTCs are made available at lower costs. Figure 8: Economic Impact of prescription to over-the-counter switch Overall, this research shows that the switch lag in Canada is costing our healthcare system and economy billions of dollars (Figure 8). Taking measures to encourage innovation by addressing internal trade barriers created by the Federal/Provincial overlap in the switch process is expected to have a significant impact on health care system savings and efficiencies. 16
17 6.0 Support For CHP Canada s proposal When it comes to harmonizing regulatory incentives for data protection, the US Hatch-Waxman Act is the gold standard. CHP Canada is actively engaged with the North American Free Trade Agreement negotiations to seek 3 years of data protection, in harmonization with existing provisions under the U.S. Hatch-Waxman Act. However, should that not be successful, we would be seeking 1 year of data protection to align with the EU to protect data supporting new uses for existing substances. CHP Canada s proposal to amend the Food and Drug Regulations to harmonize data protection provisions with the EU is supported by the global consumer health products industry (World Self- Medication Industry, Association of the European Self-Medication Industry (AESGP)), the Canadian prescription drug industry (Innovative Medicines Canada), the Canadian cosmetics industry (Cosmetic Alliance Canada) and the Canadian Health Food Association. 17
18 7.0 Conclusion With Health Canada opening up the Food and Drug Regulations in early 2019 to implement the Self-Care Framework for OTC medicines, this creates the ideal opportunity to harmonize and align regulatory approaches with international jurisdictions and introduce regulatory incentives for innovation. CHP Canada is committed to working with Health Canada, the Treasury Board Secretariat and European industry colleagues to identify new opportunities to align regulatory frameworks with the EU where it makes sense. RCF could play an important role to ensure collaboration between Health Canada and the European Medicines Agency occurs each step along the way, without creating any new regulatory barriers to trade for the global consumer health products industry. 18
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