NHP cost recovery: Canary in the coal mine?

On May 12, 2023, Health Canada published a cost recovery proposal for natural health products (NHPs). The dietary supplement industry’s response has been overwhelmingly critical of the proposal for a variety of reasons. In the meantime, many of our food clients have asked whether this proposal has any impact on the food industry, even if indirectly. The short answer is an overwhelming “yes”. The food industry should watch closely. If Health Canada successfully implements any or all of the elements of its proposal for NHPs, it is reasonable to expect that similar proposals by Health Canada may impact food companies in the future.

As background, cost recovery is “the practice of establishing and collecting user fees for regulatory activities,” as described by Health Canada. In the case of NHPs, the proposed fees have also been earmarked to pay for an oversight system that Health Canada does not yet have in place, and to recover costs of the review process itself. Therefore, while framed as a cost ‘recovery,’ Health Canada seemed to be proposing that industry pay for establishing an updated and far more expensive regulatory program.

In response to Health Canada’s proposal, industry engaged in a grassroots campaign that highlighted inconsistencies with the purpose, and disproportionality of the quantum of fees. Upon receiving thousands of comments, Health Canada has indicated its intention to reopen its consultation with stakeholders. These developments are important for the food industry; it’s critical that food companies appreciate the potential consequences if Health Canada proceeds largely as proposed, as well as the importance of active industry participation in the consultation process.

Cost recovery

The Canadian Food Inspection Agency (CFIA) imposes fees for certain services it provides to the food industry under the Safe Food for Canadians Regulations. Health Canada does not currently have a cost recovery framework for its activities related to foods, but it has the legal authority to impose cost recovery for services it provides the food industry, in a similar manner to those proposed for NHPs.

Certain foods and food ingredients require Health Canada approval, and thus could be subject to cost recovery in the future. Pre-market approvals by Health Canada’s Food Directorate are required for, among other things:

• supplemental food ingredients;
• novel foods and ingredients;
• food additives; and
• temporary marketing authorization letters.

Health Canada also provides industry with novelty opinions for foods, and letters of no objection for processing aids. Given the time and resources required to review the safety and acceptability of these sorts of products, it is not alarmist to fear that Health Canada could consider similar NHP-like cost recovery for food approvals and reviews and seek to both recover costs of providing approval services, and fund investments into regulatory programs not yet in place.

For finished food manufacturers, the impact of expanded cost recovery in the food industry may not be immediately evident. However, fees for approval of certain ingredients are likely to be passed on to food manufacturers, in the form of increased ingredient costs. Further, cost recovery for supplemental food ingredients, novel ingredients and food additives is likely to reduce ingredient innovation and availability, as it could further disincentive companies from seeking Canadian approvals, which do not grant exclusivity in the Canadian marketplace. Therefore, companies may think twice before spending additional resources on approvals that may also benefit competitors.

Ultimately, while we don’t yet know the final form that Health Canada’s cost recovery for NHPs will take, it is certain to have a direct impact on the NHP and dietary supplement industry in Canada. If the broader food industry does not pay attention and remains silent, it could face many of the same challenges the dietary supplement industry is facing today.

Lewis Retik is a partner and William Bjornsson is an associate in the Ottawa office of Gowling WLG, specializing in food and drug regulatory law. Contact them at lewis.retik@gowlingwlg.com and william.bjornsson@gowlingwlg.com.

This Food Law column was originally published in the February/March 2024 issue of Food in Canada.