Complexity of Issues Regarding the Regulation of the Natural Health Product Industry Likely Tied to Basic Issues

This Wednesday’s segment of the PI Window on Business “Doing What Comes Naturally: Are Natural Health Products Being Held to a Higher Standard,” in which I interview NHPPA President Shawn Buckley regarding the controversial Bill C-6 that poses two potential threats to the industry’s survival in Canada, promises to be one of the most thought provoking.

As is my usual practice, I spend a good deal of time researching the subject matter being covered to make certain that every show provides listeners with a unique insight into a particular topic or issue.  In essence, to present perspectives that create a better level of understanding while still being entertaining in the process.  The preparation for this particular segment was no exception.

With health care being one of the primary issues on both public and personal agendas including questions surrounding the prescription of anti-psychotic drugs to children between the ages of 3 and 16 through Medicaid in the US, and the introduction of the aforementioned controversial legislation in Canada, I felt that it would be a good idea to make the unusual move of equipping you with the questions I will be asking Mr. Buckley in advance of the actual show.

I am doing this for several reasons, the most important of which is to help to create a point of reference or context by which the bigger picture can become a bit clearer.  Especially as it relates to influencing factors such as the economy and the potential impact on health care in general.

Once again, the live broadcast will air on January 6th between 12:30 and 1:30 PM EST on the Blog Talk Radio Network.  Simply click on the following link (Doing What Comes Naturally: Are Natural Health Products Being Held to a Higher Standard) to “tune in” directly through your PC.

In the meantime, here is Shawn Buckley’s bio, and of course the questions that will be asked:

Shawn Buckley

About Shawn:

Shawn Buckley is lawyer with expertise in the Food and Drugs Act and Regulations. Mr. Buckley acts primarily for manufacturers of Natural Health Products and has an enviable track record in protecting companies charged by Health Canada. Some of the more notable defences have included:

  • obtaining the acquittal of TrueHope Nutritional Support following a protracted Health Canada prosecution (click here to see the decision );
  • obtaining the acquittal of the Strauss Herb Company from 73 charges brought by Health Canada;
  • having charges against the Nutraceutical Company (Biomedica) withdrawn after Constitutional Challenges to the New Drug Regulations and the seizure power under the Food and Drugs Act were filed.

The Questions:

Segment 1 (Creating Context: A Financial Perspective)

Host Comment: In a recent conversation with a representative from the NHPPA, when I had asked for their thoughts as to the reasons for Bill C-6 amongst the variety of responses the one that stood out the most was the suggestion to “follow the money,” as it relates to the pharmaceutical industry.  Against this comparative backdrop we will attempt to create a point of reference on three key areas starting with financial impact, health care impact and finally the role you envision relative to Natural Health Products both today and in the future.  In this first segment we will look at the financial aspects.

As a starting point for our listening audience, the first pharmaceutical company in Canada was established in Toronto in 1879 by E.B. Shuttleworth.  In the 1940s, the Canadian pharmaceutical industry underwent a dramatic transformation which saw the transfer of pharmaceutical preparation from the drugstore to the factory where economies of scale could be achieved through sophisticated technological processes.  Unable to compete on the scale required by the new technology, small domestic companies fell under foreign control.  This leads to a number of interesting questions:

  • To begin, and in particular with the reference to the transformation of pharmaceutical preparation from the drugstore to the factory, is this where the proverbial fork in the road began in terms of the utilization of natural health products and pharmaceutical industry products?
  • If not, what impact did this “transformation” have on the natural health products industry?
  • What, if any influence did and does the prevalence of foreign ownership of pharmaceutical companies have on the Natural Health Product industry?  Is it an important factor or element that the Natural Health Product industry is predominantly Canadian-owned and managed?
  • Based on a 1995 study, the Canadian Pharmaceutical Market was at the time the ninth largest in the world accounting for 2% of global pharmaceutical sales.  According to the current “Invest in Canada” web site, the annual growth rate for the Canadian Pharmaceutical Market is 8%, making Canada the 4th fastest growing market in the world for pharmaceuticals.  How does the corresponding growth of the Natural Health Product industry in Canada compare?
  • According to a study from Canada’s Research-Based Pharmaceutical Companies, they employ 22,000 Canadians, inject $4.5 billion in the Canadian Economy each year and invest $1 billion in R&D annually.  What are the comparable numbers for the Natural Health Products industry?

Host Comment: Referencing the Clark and Fourastie “three-sector hypothesis” of industry (which is now four with the addition of the Quaternary sector), under a “general pattern of development,” a wealthy nation must progress through each phase to maintain and/or achieve what Fourastie referred to in 1949 as “the increase in social security, blossoming of education and culture, higher level of qualifications, humanization of work, and avoidance of unemployment.”

While the Primary and Secondary sectors, which are now more indigenous to developing national economies, are the extraction of raw materials and manufacturing respectively, it is the development of Tertiary and Quaternary sectors that are most critical to established economies such as Canada and the United States.

The Tertiary sector is services based while the Quaternary sector is generally viewed as the being the engine that drives both innovation and expansion which includes areas such as research & development which can involve the attraction of pharmaceutical and biotechnology investments.  In essence it drives the growth of our knowledge-based industries.

  • From an economic growth and impact standpoint, where and how does the Natural Health Products industry play a role?  Regardless of the degree or extent of the financial/economic impact, is the real issue in terms of your focus the ones centered on the NHPPA’s Charter of Health Freedoms?  In other words, is it your belief that the Natural Health Products industry in Canada provides Canadians with the freedom to choose their own course of treatment by offering an alternative that if not available would have a potentially negative effect on health care (re an absolute power corrupts absolutely mindset)?

Segment 2 (Creating Context: A Quality of Care Perspective)

Host Comment: In the same discussion that I had had with an NHPPA representative, I was provided with the statistic that 245,000 people have died as a result of the legal use of prescription medication.  On the other side, this same representative indicated that a Canadian has a better chance of dying from a “shark attack” than they do using natural health products.  Based on your research and subsequent findings I would like your thoughts relative to the above figures as well as a number of other questions relating to both the quality and effectiveness of treatment:

  • Right off the bat, and based on your understanding to what are the 245,000 deaths attributable?  Is it a matter of statistical pro-ration or is it a sign of increased risk associated with pharmaceutical products?
  • What does the corresponding reference to the “safety” of natural health products” reflect?  How was the statistical data compiled for natural health products versus those produced by the pharmaceutical industry?  By the way, what was your source for the death rate through the use of pharmaceuticals?
  • As you are probably already aware, I have been covering the alarming rate by which anti-psychotic drugs are being prescribed through Medicaid in the US to children between the ages of 3 and 16.  This has raised a few serious questions with regards to physician practice and perhaps even the influence of the pharmaceutical industry.  Based on your understanding, what role has questionable prescribing practices played in the 245,000 deaths – in essence it is not the drugs themselves but the distribution for lack of a better word that has been a contributing factor?

Host Comment: Referencing the Canada Research-Based Pharmaceutical Companies web site, it cites the fact that it’s sector creates; 1) a healthier Canadian economy, 2) more investment for Canadian University Research and, 3) enables 100,000 Canadians to go to work each day because of its contributions to health care.

According to 2005 statistics from OECD Health Data, between 1981 and 2001 a drop in death rate (per 100,000 population) for the following illnesses are attributable to pharmaceutical drug treatment; 1) Bronchitis, Asthmas and Emphysema – a 71% drop, 2) HIV/AIDS – a 78% drop, 3) Ischemic Heart Disease – a 64% drop, 4) Chronic Liver Disease – a 43% drop.

  • Do you have comparable data for the Natural Health Products industry?  If yes, what are the numbers?  If no, what do you believe is the best way to refer to natural health product effectiveness?

According to 2005 statistics from OECD Health Data, between 1981 and 2001 the following decrease in hospitalization rates (per 100,000 population) are attributable to pharmaceutical drug treatment of the following illnesses; 1) Ulcers – a drop of 66%, 2) HIV/AIDS – a drop of 67%, 3) Diabetes – a drop of 39%, 4) Respiratory – a drop of 44%, 5) Chronic Disease – a drop of 39%.

  • Do you have comparable data for the Natural Health Products industry?  If yes, what are the numbers?  If no, what do you believe is the best way to refer to natural health product effectiveness in terms of reducing hospitalization rates?
  • What do you cite as the top three benefits of treatment by Natural Health Products, and how can you substantiate the results?

Segment 3 (Creating Context: The Future of the Natural Health Product Industry)

Host Comment: There is no doubt that the Pharmaceutical Industry is a behemoth sector with incredible financial resources.  This is based on the fact that according to a 1995 study, in the 8 years ending in 1995 profits before taxes, or shareholder equity, was 29.6% for the pharmaceutical market compared to 10.2% for all other Canadian industries.

A December 7th, 2004 article titled “Excess in the pharmaceutical industry,” which appeared in the Canadian Medical Journal web site, as well as other articles by Marcia Angell disclosed the following:

“In 2002, as the economic downturn continued, big pharma showed only a slight drop in profits—from 18.5 to 17.0 percent of sales. The most startling fact about 2002 is that the combined profits for the ten drug companies in the Fortune 500 ($35.9 billion) were more than the profits for all the other 490 businesses put together ($33.7 billion).  In 2003 profits of the Fortune 500 drug companies dropped to 14.3 percent of sales, still well above the median for all industries of 4.6 percent for that year. When I say this is a profitable industry, I mean really profitable.  It is difficult to conceive of how awash in money big pharma is.”

Conversely, and according to Angell, ” Prescription drug costs are indeed high—and rising fast. Americans now spend a staggering $200 billion a year on prescription drugs, and that figure is growing at a rate of about 12 percent a year (down from a high of 18 percent in 1999).”  Angell went on to state that ” the prices of the most heavily prescribed drugs are routinely jacked up, sometimes several times a year.”

Against this backdrop, there are a number of interesting questions as it relates to the Natural Health Product industry:

  • Is a key benefit of the Natural Health Products industry tied to the fact that the sector provides a lower cost alternative to the drugs produced by the pharmaceutical industry?  What degree of savings are available to families?
  • Many pharmaceutical companies provide “natural health products.” Is this tied to the recognition that there is a demand for these kinds of products and, if it does what risk does their entry into the market pose to the indigenous Natural Health Industry?”

Host Comment: In my December 23rd article “Is the framework for an Avro Arrow type demise of the Natural Health Products industry in Canada being laid by Bill C-6?” I made reference to the Discussion Paper from the NHPPA web site regarding Bill C-6.  In particular, how the two ways in which the Bill poses a threat to the industry.  I am of course talking about either a simple regulatory amendment in which natural health products would be “reclassified” as a consumer product, or the extension of the Bill’s power to encompass the drug industry.

While some may argue that under the second scenario, even with the tighter controls, natural health products are being treated the same as pharmaceutical company products, the issue is one of having a sustainable business model within the existing Natural Health Products industry.  Specifically, there is a cost associated with increasing regulatory powers that will make it prohibitive for NHPPA members to compete (much like the 1940 transformation).  If this is indeed the case, there are a number of pressing questions that need to be answered including:

  • Are legislators aware of this ultimate impact on the existing Natural Health Products industry?  If no, what are you doing, and what more can you do to create the necessary awareness?  Do you believe that this is a move by the “powerful” pharmaceutical companies to gain control of an important market, while maintaining an air of innocence as it is the big bad government who is taking the action?  (Note: although different, the Avro Arrow comes to mind.)
  • Based on what you know today, what is the future of the Natural Health Products industry in Canada?  What about in other countries such as the US or the UK?”

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