THE COMPETITIVENESS IMP ACTS OF CANADA'S AGRICULTURAL PRODUCT REVIEW REGULATIONS Cher Brethour, Larry Martin, Al Mussell, Kate Stiefelmeyer and Terri-lyn Moore George Morris Centre Guelph, Ontario INTRODUCTION Regulations are necessary for the organization of society. A good regulatory framework protects the health and the environment of its citizens, contributes to economic growth, and promotes investments that will improve a nation's productivity and thus improve the standard of living. A dysfunctional regulatory system, however, hinders investment, productivity and innovation and reduces competitiveness of job opportunities. The intent of Canada's regulatory framework has been to protect Canadians, and some would add "while keeping its industries competitive through promoting investments and increasing productivity", although that is not in the legislation. The system is not functioning well. The perceived result is a loss in growth opportunities and competitiveness across many sectors, including biotechnology, agri-food and financial services. In early 2000, the Public Policy Forum illustrated this increasing Canadian concern. The article stated that industry participants believe the federal government's regulatory regime continues to put Canadian enterprises at a significant competitive disadvantage and if the current system is not reformed, there is a risk that investment and employment will relocate outside of Canada. One particular example of how the regulatory system hinders the growth for an industry occurs in the animal health sector, where the product registration system causes new animal health and companion animal products to be registered at a slower rate in Canada · than in competitor countries. Given the concerns regarding the product registration in the Canadian Animal Health sector, the George Morris Centre approached the Canadian Animal Health Institute with a proposal to conduct an economic analysis of the approval process. The resulting study has two underlying purposes: I. To identify the impact of Canada's product registration system on companies operating in the animal health products industry in Canada, and ultimately, estimate the magnitude of the economic cost to the agri-food sector and the Canadian economy imposed by this system; and 2. To offer some alternative, potentially "optimum" solutions to the system and identify the costs/benefits of such a system. Three different objectives fall out of these purposes. • . To describe, compare and contrast the agricultural product approval systems in the United States, Australia, the European Union and Canada with respect 1 to governing authority, structure and responsibility, marketing approval, applicant tasks, fees, time to approval and performance indicators. • To estimate the direct loss to companies, downstream losses to the agricultural industry and losses to the Canadian economy resulting from delayed product review for five case study products submitted to the Veterinarian Drugs Directorate (VD D) for approval in Canada. • The third objective is to develop recommendations based on the above analysis for improvements to the Canadian system. AGRICULTURAL PRODUCT APPROVAL SYSTEMS: UNITED STATES, AUSTRALIA, EUROPEAN UNION AND CANADA An extensive review of the product approval systems in the United States, Australia, Canada and the European Union was undertaken. This section provides a brief comparison of the governing authority, structure and responsibility, marketing approval and applicant tasks, fees, approval time and performance indicators for each of the indicated countries. Structural Responsibility The Food and Drug Administration's Center for Veterinary Medicine (CVM) is responsible for assuring that animal drugs and medicated feeds are safe and effective and that food from treated animals is safe to eat. A new drug must be approved by the FDA for quality, safety and efficacy in the United States before it is marketed. The priority of the CVM is in assuming safety of the food supply. The regulatory system in Australia which is responsible for the assessment and regulation of agricultural and veterinary chemicals is the Australian Pesticides and Veterinary Medicines Authority (APVMA). The APMV A administers the National Registration Scheme for Agricultural and Veterinary Chemicals (NRS) in partnership with the States and Territories. The role of the APVMA is to independently evaluate the safety and performance of chemical products intended for sale, while ensuring the health and safety of people, animals and the environment. The registration of veterinary drug products in the European Union falls under the authority of the European Medical Evaluation Agency (EMEA). The EMEA is in charge of coordinating scientific resources existing in Member States 1 with a view to evaluating and supervising medicinal products for both human and veterinary use. The EMEA emphasizes the importance of pre-submission meetings, 4-6 months prior to the anticipated date of submission. These meetings are a vital opportunity for the applicant to obtain procedural, regulatory and legal advice from the EMEA. 1 The Member States includes the 15 Member Countries of the European Union (United Kingdom, Ireland, Germany, Austria, Spain, Portugal, Italy, Greece, Netherlands, Sweden, France, Belgium, Luxembourg, Denmark and Finland) as well as the European Free Trade Association states (Norway, Iceland and Liechtenstein). 2 The Canadian Animal Health Product approval registration system for both food animal and companion animal drugs is subject to approval of the Veterinary Drugs Directorate of Health Canada. The aim of the VDD is to enhance the efficiency of operations and to streamline the review of veterinary drug submissions and experimental studies certificates. Fees and Timeframe The following table outlines the fees collected in each of the countries for specific applications, as well as the timeframe required to assess particular applications. Table 1 UNITED EUROPEAN CANADA STATES .AUSTRALIA UNION FEES: $25,660- 70,200 $17,857 New Druo CON I CON ~157,000 CON Major Formulation $10,900 Chanoe I I CON I Vaccines I I ~78,000 CON Application $720 CON I $546 CON I TIMEFRAME: 180 days - New Drug NA orovisional onlv 15 months 210 workino days Major Formulation Change NA I 3 months I Minor Changes NA I 3-5 months I The CVM signed "The Animal Drug User Fee Act" (ADUFA) in November 2003. This allows for the US to collect fees for animal drug applications and establishments. For FY 2005, the fee is $119,300 per application for an animal drug application and $59,650 for a supplemental animal drug application for which safety or effectiveness data are required. The annual product fee is $3,085, the annual establishment fee is $42,600, and the annual sponsor fee is $32,150. FDA will not accept an application for filing unless the sponsor has paid all the fees it owes. A review of the CVM review times for FY2002 was undertaken by the Animal Health Institute. This review shows that the CVM standard of 180 days for New Animal Drug Applications was overdue 83% of the time. This however, is an improvement over FY2001 where NADA applications were overdue 90% of the time. 3 Legislation governing the APVMA allows for 15 months for the worst-case scenario of an application for new active constituent products. According to an APVMA spokesperson2, the APVMA meets their legislative timeframes 97-98% of the time. In 2001, the average number of calendar days required to finalize an application by the EMEA was 678 days. Of this, 678 days, 210 days were the assessment phase, 30 days were post opinion phase, 94 days were the decision process and 344 days were company stop time days. The Canadian performance standard for a new drug submission is 180 days, but this is only an administrative standard and not a performance goal that must be met. SUMMARY Despite improvements in the Canadian regulatory system, there are several issues that still remain: • Canada has a new drug application fee that is among the highest of the countries compared, particularly when the size of the Canadian market is considered • The time frame for an approval decision in Canada is too long • Total elapsed time until a decision made is slowest in Canada by a wide margin • There are no mandatory pre-submission meetings for applicants to get a better understanding of what is required prior to submission. REGULATORY APPROVAL SYSTEM: CASE STUDIES OF PAST PRODUCTS George Morris Centre researcher:s conducted five case study interviews and analyzed the economic impacts to the company and to the agricultural industry as part of this research. The case studies selected were examples of product submissions that were delayed in the Health Canada 'queue' for approval. The analysis was done comparing Canada's performance against Australia's 240-day standard. Costs resulting from delays were categorized into direct costs to the company sponsoring the application, indirect costs to the downstream industries, which are unable to source the product and its health benefits, and opportunity costs to the economy because of the foregone economic activity. 2 A note on Australia's registration system in comparison with Canada and other countries from Peter Raphael at the NRA: "Australia has participated in an international benchmarking study of pesticide registration conducted by consultants. Canada also participated and it's possible that the PMRA may let the George Morris Centre have access to the report. There have been several independent Australian reviews that have concluded that the NRA is at 'world's best practice'. Companies with worldwide experience usually do not complain about the Australian system with much conviction and acknowledge that is both cheaper and quicker than comparable countries". 4 The estimated economic impacts by category of approval delays beyond 240 days in Canada for the five cases are as follows: • Approximately $76 million in direct losses to the participating companies o Examples of direct losses include potential sales, a safety study requested by the VDD, additional data requests by the VDD and facilitation costs • Approximately $91 million in indirect costs to the down stream agricultural industry • Approximately $1.8 million in losses to the economy. Throughout the case studies, there were consistent problems identified by several of the case study companies. These are the opinions of the case companies, and not the authors of the report. Problems encountered include and lack of communication between VDD divisions, lack of accountability by reviewers, inconsistent requirements for data or information requests, Canadian product approvals are often considered a last resort after all other country approvals have been obtained, there has been a significant reduction in research and development within the Canadian divisions of the companies, Canada's product approval process and personnel are risk adverse to product approval and technological advancement, and finally, Canada is not spending enough time updating their Maximum Residue Limits. DESIGNING AN OPTIMAL SYSTEM Given the background above, a focus group session was designed to develop the desired characteristics of a stringent, yet timely product registration program for Canada. Members from the industry and government personnel were invited to attend. The group came up with a lengthy and detailed set of characteristics organized around the following headings: • Objectives of the Legislation • Procedures for Market Approval • Applicant Tasks • Costs and Incentives • Transparency • Consistency • Perceived Costs and Benefits While the focus group arrived at the conclusion that it was not necessary for the underlying legislation to change, subsequent work by Rainnie and the Environmental Commissioner reveals that the problems are not just in approvals of animal health products. The problems are widespread in preview of plant health products and in reviews of consumer (companion animal) products. There is no - or very little - reference to any economic or trade objectives of the legislation. Thus, product reviewers do not balance the narrow concept of risk prevention with the promotion of innovative advancements in health methodologies and products. There is also very little in the legislation that allows the public, through Parliament and its organizations, to hold regulators accountable for the economic consequences of their 5 decisions, or non-decisions. Thus, the following recommendations were made regarding changing the system. Changing the System Parliament needs to change the legislative intent to include a goal of enhancing industry competitiveness as well as protecting animals, people and the environment. As well, Parliament needs to extend this change across all product approval legislation, at least in the agri-food sector. The ideal regulatory system should have the following characteristics: • Transparency - applicants must be able to understand from the beginning what information is required to obtain an approval. • Consistency - the same things should be expected from a certain type of registration every time • Well-understood timelines - they should be measurable and enforceable • Clearly defined gates - it should be clear what the procedures and decisions · are for trade issues separately from efficacy, heath, the environment • Function on fact-based processes • Properly resourced by government, including optimum use of appropriate outside expertise • Include independent appeal mechanism(s), and • Develop appropriate benchmarks to measure its performance against objectives and compare to best in class It is evident that a process for change needs to be undertaken in the Agricultural product approval process. Most fundamentally, CAHI needs to join forces with other segments of the agri-food sector to effect change since all are negatively affected by the larger system. This coalition needs to get some form of consumer support for the principles and it needs to develop a united front to convince elected government officials to effect the changes. 6 REFERENCES Animal Health Institute (AHi). Review of Time Survey for FY2001 by Division. 2001. Animal Health Institute (AHi). Review of Time Survey for FY2002 by Division. 2002. Animal Health Institute (AHi). US Animal Drug User Fee Program. 2004. Bank of Canada. Website for Exchange Rates. 2003. http://www.bankofcanada.ca/en/exchange.htm Canada Gazette Website. http://canadagazette.gc.ca/index-e.html Commissioner of Environment and Sustainable Development. Report to the House of Commons: Managing the Safety and Accessibility of Pesticides. 2003. European Agency for the Evaluation of Medicinal Products. Timetable for the Evaluation of MAA. 1995-2004. http://www.emea.eu.int/htms/vet/presub/ q2 7 .htm European Agency for the Evaluation of Medicinal Products. Explanatory Note on Fees Payable to the EMEA. 1999. · http://www.emea.eu.int/pdfs/general/direct/fees/711499en.pdf European Agency for the Evaluation of Medicinal Products. 2001. Seventh Annual Report, 2001. http://v,.,1ww.emea.eu.int/pdfs/general/direct/emeaar/005201en.pdf European Agency for the Evaluation of Medicinal Products. The new product information linguistic review process for new applications in the centralized procedure. 2002. http://www.emea.eu.int/pdfs/human/regaffair/554202en.pdf European Agency for Evaluation of Medicinal Products Website. 2003. www.emea.eu.int http://www. emea. eu. int/pdfs/ general/ direct/fees/71 14 99en. pdf National Registration Authority for Agricultural and Veterinary Chemicals. NRA Facts. Website. 1999. http://www.nra.gov.au/publications/nrafactl 99.pdf National Registration Authority for Agricultural and Veterinary Chemicals. 2002. Annual Report 2001-02. http:/ /www.apvma.gov.au/pub1ications/annualreport0102.pdf National Registration Authority for Agricultural and Veterinary Chemicals (NRA) 7 Website - Australia. 2003. www.nra.gov.au National Registration Authority for Agricultural and Veterinary Chemicals (NRA). Legislation Governing the NRA. 2003. http://www.nra.gov.au/about_us/legislat.shtml Office of the Auditor General. Report of the Commissioner of the Environment and Sustainable Development to the House of Commons. 2003. www.oag-bvg.gc.ca Bureau of Veterinary Drugs Strategic Review: Final Report. Public Policy Forum - Striving for Excellence in Government. 2000. Managing Regulation: Policy, Practice and Prognosis, Public Policy Forum, February 4, 2000. http://www.ppforum.com/english/publications/publications/exsummary.html Rainnie, D.J. A Comparison of the Regulatory Requirements and Processes of the Center for Veterinary Medicine and the Veterinary Drugs Directorate as Applied to Veterinary Drugs for Use in Companion Animals. 2002. http:/ /v-vww .hc-sc. gc .ca/vetdrugsmedsvet/rainni e _report_ cp _ e.html Raphael, Peter. Communication. National Registration Authority for Agricultural and Veterinary Chemicals (Australia). 2003. United States Food and Drug Administration- Centre for Veterinary Medicine Website. 2003. www.fda.gov/cvm Fees: http://www.fdagov/cvm/index/updates/adufa05.htm Veterinary Drugs Directorate (Health Canada). Communique to Stakeholders. Volume III, N-0.4, December 2003. Veterinary Drugs Directorate Website. 2003 & 2004 http://www.hc-sc.gc.ca/vetdrugs-medsvet/mrl_e.html Doin_g Business with VDD. www.hc-sc.gc.ca/vetdrugs-medsvet/e_doing_business.html Appeals: http://wVvw.hc-sc.gc.ca/vetdmgs-medsvet/blueprint_appeal_vdd~e.html VICH: http://,\'WW.hc-sc.gc.ca/vetdrugs-medsvet/vich_e.html http://w,\w.hc-sc._gc.ca/vetdrugs-medsvet/vich_guidelines_e.html MRL: http://www.hc-sc.gc.ca/vetdrugs-medsvet/mrl_e.html 8