In a Vancouver coffee house on May 29th, a group of about 20 gathered in anticipation for the first of what would become a series of meetings. They represented a cross-section of people interested in natural health products-retailers, manufacturers, distributors, health professionals,
and consumers.

This group didn't have an official name, but they were united in concern over the future of Canada's natural health products industry. Specifically, they'd come to discuss a spring 2007 proposal by the Health Products and Food Branch (HPFB). A proposal that, if left unchallenged, may have had a detrimental impact on the natural health products industry as we know it, and highlights a big disconnect between regulators and the industry they're attempting to oversee.

A healthy business
What everyone can probably agree on is that, at a consumer level, the natural health product industry is thriving. Seventy-five percent of Canadians bought supplements in the past year, according to a 2006 Ipsos Reid study commissioned by the Canadian Health Food Association. In Canada, we spend an estimated $2.5 billion per year on about 50,000 products. We purchase them from roughly 2,700 health food retailers, 650 traditional Chinese remedy stores, 7,600 pharmacies, hundreds of health practitioners, and the Internet.

All you have to do is stroll through a whole foods market or health food store like Capers or Choices to know there`s money to be made in health.

Recap of a regulatory regime
Behind the scenes, at a regulatory level, a similar amount of energy is being expended. Natural health products are considered a subcategory of "drugs" under the federal Food and Drugs Act, and Natural Health Product Regulations came into effect January 2004, although the process started in the 1990s.

To recoup federal finances, a 'cost recovery' program was suggested in 1996, with a $720 application fee and a $560 annual renewal fee for each natural health product. But the industry proved its strength by forming protest groups.

The fees were unjustifiably high given the low-risk nature of supplements, they pointed out, and the costs would drive an estimated 80 to 90 percent of small to midsized manufacturers with relatively low annual sales out of business.

Other effects, they argued, would have been fewer products for sale, and higher consumer costs. In late 1998, the new Minister of Health, Allan Rock, announced that the cost recovery program would be postponed.

Meanwhile, the regulatory machine pushed onwards, with a House of Commons Standing Committee on Health presenting 53 recommendations concerning natural health products to Minister Rock, which he accepted in full. In March 1999, the Office of Natural Health Products (now the Natural Health Products Directorate) was created.

In the years since, applications for site licenses and natural product numbers/licenses have rolled in. Many retailers and manufacturers have complied with this setting up of a federal system intended to assure consumer confidence and quality of product.

Regulatory rumblings
But rumblings have also grown. For one thing, the approval process for natural product licenses is seriously slow. In April 2006, the Natural Health Products Directorate (NHPD) reported a backlog of 10,000 applications and assured the industry that they are taking steps to fix this by March 2008.

Many manufacturers, in the meantime, find themselves stuck because the NHPD has also stated that manufacturers need product licenses to market their products legally.

"The rules and regulations have created a bureaucratic nightmare, especially for small and medium-sized companies like ours," says HANS member Klaus Ferlow of Ferlow Botanicals (www.ferlowbotanicals.com). The company applied for licenses in December 2005 and is still waiting.

"When it comes to the safety of our herbal products, we have sold thousands since 1993 and haven't received a single complaint from either our consultants
or consumers. Just the opposite."

At the May meeting, a representative for one well-known Canadian manufacturing company (that wished to remain unnamed) reported having had to pull products off shelves because no natural health product may be sold without a license. This rep also said that the company is now having their already long-delayed applications questioned in an unjust way according to original promises that federal regulators made in the 90s to promote industry compliance.

The specifics concern, among other things, the need for clinical trials and the "grandfathering in" of established products.

(A request for a phone interview with a Health Canada spokesperson to clarify these issues and more generated a tardy e-mail from a media liaison officer containing general information about natural health products in Canada.)

Added into this frustrated atmosphere was that April 2007 Cost Recovery Framework document, a wake-up call.

What is Cost Recovery?
Basically, cost recovery is the biggest issue to hit the natural health industry this year. In April, the Health Products and Food Branch requested feedback on a cost recovery framework with an original deadline of May 15. Compared to 1996, higher, new fees on natural health products were proposed ranging from $1,500 and $3,610, depending on the type of product, with another $920 for renewals and $1,260 for amendments.

With the industry still dominated by small and medium-sized manufacturers, the possible effects worried many. The Canadian Health Food Association (CHFA) e-mailed its members April 24, stating, "Members will see costs of doing business increase, product margins decrease, product innovation decline, product quality compromised, and access to products reduced. It is important that every CHFA member respond to the government's questionnaire and business impact test."

Anne Wilkie, CHFA Vice-President and Head of Regulatory Affairs met in Ottawa, May 1st, with members of the Cost Recovery Initiative and the NHPD, while a lot of other people in the industry started campaigning in their own ways.

Gaia Garden Herbals, a Vancouver-based herbal remedy manufacturer and retailer, started a petition and sent a letter to the HPFB stating that they could instantly be put out of business by the almost half a million dollars more a year in additional fees. "Perhaps the most trying aspect of this situation for us," the staff wrote, "has been our willingness to register all of our products with the NHP program since the regulations
were first proposed. We're in favour of sound regulations that protect consumers."

Eventually, the federal government cancelled its May 15 comment deadline but didn't state a new one. Meanwhile alternative media, such as Common Ground Magazine in Vancouver, published articles to raise consumer awareness. Representatives from HANS have attended meetings (and continue to do so) along with other media, strategizers, individuals, and national and international consumer groups.

On July 13, 2007, the HPFB announced its agreement to "delay cost recovery for natural health products until the current submissions backlog is eliminated and the full costs of compliance have been better identified."

While the industry may breathe a sigh of relief, cost recovery is merely postponed while the industry's other troubles roll on.

Whether or not cost recovery is justified, it may be inevitable. Is there a fair compromise that satisfies consumers, manufacturers, retailers and everyone else? One suggestion from a health product wholesaler contacted in relation to this article would be to charge, rather than flat fees, a one percent fee of annual sales. This would be manageable for consumers, budgeteable for manufacturers, and would still provide revenue to
fund the regulatory process.

As everyone works to maintain a healthy future for the natural health products industry, let's hope that the people in charge of regulation keep listening.

When Vancouver writer Michelle Hancock isn't at HANS, she's working on books or pulling weeds. She likes to hear from readers at enews@hans.org.
References are available upon request.

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