Pharmaceutical security for Canada

What is hindering pharmaceutical security in Canada?

The Canadian pharmaceutical market is small, comprising just 2% (US$18 billion) of global pharmaceutical revenue in 2019.3 The industry is dominated by large, foreign-owned firms that operate only small manufacturing facilities in Canada.3 With most firms being foreign owned, decision-making will not always reflect Canadian priorities, leaving Canada reliant on foreign decisions and susceptible to market forces and global conflicts.

During the last 10 years, imports as a percentage of total domestic drug expenditures increased from 74% to 93%.4^,5 Canada’s heavy reliance on pharmaceutical imports and global supply chains makes it vulnerable to disruptions in supply chains. Moreover, countries prohibit exports and prioritize the needs of their own citizens in times of emergency (e.g., the COVID-19 pandemic), leaving people in Canada with little recourse. Pharmaceutical shortages have negatively affected patients, health care professionals and the health care system for years. For example, shortages of epinephrine autoinjectors in Canada over the last 5 years have led many among the 2.6 million people who are at risk of anaphylaxis6 to experience stressful situations and possibly lead to severe, even life-threatening, consequences. Supplies of medications like hydroxychloroquine, used for years by patients with rheumatoid arthritis and inflammatory bowel disease, suddenly became scarce during the pandemic, as focus shifted to their use to treat COVID-19 infections.

In mid-June 2022, Health Canada listed 23 Tier 3 drug shortages on its website.7 Tier 3 drugs are those that have the greatest potential impact on Canada’s drug supply and health care system, with low availability of alternative supplies, ingredients or therapies for these drugs. Included on the list are iodixanol, an iodine-containing nonionic radiocontrast agent; sustained-release morphine capsules; moxifloxacin solution for injection; and propylthiouracil.

Although the final forms of some pharmaceuticals are domestically produced, active pharmaceutical ingredients (APIs) — the raw materials that give any medicine its therapeutic effect — are almost exclusively imported. Over the last several decades, API manufacturing has shifted from Western countries to newer sites in India and China,8 which now account for 65% of the world’s production by volume.9 Any disruption to these supply chains — for example, work interruptions, geopolitical upheavals or changes in export policies — can cause global shortages. Quality control can be another challenge with the offshoring of pharmaceuticals. 10 If quality issues lead to production slowdowns, supply disruptions can occur.

Canada-based pharmaceutical companies are generally small and serve only niche segments of the market.11 Moreover, after their success in the 1970s, Canadian-owned manufacturers of generic pharmaceuticals now comprise less than a third of the membership of the Canadian Generic Pharmaceutical Association. Consequently, increasing production within Canada to mitigate shortages is not a viable solution, at least at this time. Finally, shortages for generic drugs have also been attributed to their low price points, which have caused firms to exit the market. This becomes problematic when only 1 or 2 manufacturers of a generic drug exist, limiting redundancy in supply chains.2

What has been done to ensure pharmaceutical security in Canada and abroad?

A comparison between the approaches taken by Canada and some other high-income countries to bolster pharmaceutical security during the pandemic period is instructive.

What steps are required to ensure pharmaceutical security in Canada?

A proposed measure with widespread support is that Canada should develop a critical drugs list, similar to that in the US.13 Proponents argue that priority should be given to those drugs deemed essential to avoid mortality or major morbidity, and those manufactured by only 1 to 2 companies, as markets with a single generic manufacturer are most likely to experience shortages. 8 Drugs that require intervention to secure an uninterrupted supply should be identified in consultation among health professions, industry and government.

Essential drugs can be stockpiled in the NESS. Alternatively, drug manufacturers, wholesalers or importers can be mandated to store a minimum supply of critical drugs, as in Australia. Alternatively, APIs needed to manufacture essential pharmaceuticals domestically can be stockpiled within the NESS. A central inventory management system, tracking the details of all pharmaceuticals in the NESS (including expiration dates, holding locations and quantities), should be implemented to provide inventory visibility and tracking in real time.

Calls to strengthen domestic drug-manufacturing capacity within Canada have been numerous. Targeted research and development in manufacturing technology will be needed to ensure Canada has the capability to manufacture critical medicines domestically, including APIs. Technology to make API production more efficient and cost-effective is currently being developed. For example, University of Montreal researchers are investigating continuous flow processing for API production.25 This technique requires a substantially smaller plant footprint, is less hazardous and has faster turnaround time and better product quality than traditional API production techniques.26 Continuous flow processing is also less expensive than traditional methods, allowing for 20%–76% lower capital expenditure and between 9% and 40% lower operating expenditures.26 Investment in API and pharmaceutical manufacturing technologies should be integral to Canada’s strategy to become pharmaceutically self-sufficient.

Expanding domestic drug manufacturing capacity may take several forms: establishing a Crown corporation to manufacture essential drugs; subsidizing domestically owned manufacturers that commit to essential drug production; or creating a nonprofit consortium that manufactures or subcontracts for generic pharmaceuticals, similar to Civica in the US.27 Because most drug shortages in Canada have involved generic drugs from single-source suppliers, establishing a public manufacturer of generic medicines in tandem with current manufacturers will help curb future shortages. The entity chosen for domestic manufacturing could function as a small but fully scalable operation, or it could provide a constant supply of essential drugs. To incentivize Canadian production, public procurement could include reserving partial tenders for companies conducting production activities in Canada. To support constant production, public group-purchasing organizations should be mandated to purchase entirely from the entity. To further promote pharmaceutical industry growth in Canada, incentives for venture capital should be provided. Essential medications that ultimately cannot be manufactured in Canada should be included in NESS’s inventory and supply chains strengthened. This can be achieved by collaborating with reliable trading partners that are addressing similar challenges. For example, where manufacturing quality concerns may lead to shortages, Canada can enter into agreements with international partners to pool resources for conducting plant inspections. Another alternative is to proactively contract with existing commercial producers to produce pharmaceuticals, including vaccines, only in the event of shortages or other emergencies.28 Higher pricing may result, but society could likely accept a trade-off between pricing and a secure supply.

Conclusion

Shortages of essential medications pose a substantial threat to health systems and place the health of people in Canada at risk. Canada’s pharmaceutical supply has become highly dependent on foreign imports and vulnerable supply chains and recent Canadian investments for pandemic preparedness do not address the entirety of pharmaceutical shortcomings. A cohesive national policy is needed to address this problem.