Tag Archives: Canada

Branding of Pharmaceuticals and Medical Devices: What You Need to Know about the Latest Developments in Canada

July 23, 2015Articles, Food/Drugs/Healthcare/Life Sciences, Latest NewsBranding, Canada, PharmaceuticalsSangeetha Punniyamoorthy

The pharmaceutical regulatory field in Canada has seen a host of legislative and administrative developments in recent months. Many of the changes were introduced to provide Canada’s drug and health product watchdog, Health Canada, with greater powers to deal with public health risks associated with drugs and other health care products currently on the market or to be introduced to the market in the future. If you or your client manufactures, markets and/or sells pharmaceuticals (whether brand or generic), medical devices or other health care products in Canada, it is important to be apprised of two recent developments and their potential impact on your client’s business.

The first development is Health Canada’s revised guidance on the Look Alike Sound Alike policy for brand names for pharmaceuticals, released last month. Although the guidance clarifies the drug name approval process at Health Canada aimed at reducing medication errors, the revised process is more onerous on manufacturers and requires more detailed information to be provided to Health Canada. The second development is the enactment of Vanessa’s Law, which amends the Food and Drugs Act to give the Minister of Health expanded powers to assess the post-marketing safety risks of pharmaceuticals and medical devices and their associated advertising and marketing. This article examines the impact of both of these developments in the Canadian pharmaceutical regulatory field and recommends how best to brand and protect pharmaceuticals and medical devices in view of these changes.

Drug Brand Guidance: Look Alike Sound Alike Policy

In Canada, the importance of a pharmaceutical’s brand name goes well beyond its role in a successful marketing campaign. It is one factor, amongst many, that Health Canada assesses as part of the comprehensive safety and efficacy review in the regulatory approval process.

In order to sell a drug on the Canadian market, the manufacturer (or “sponsor”) must obtain a Drug Identification Number (“DIN”) and a Notice of Compliance (“NOC”) for the product. The Food and Drug Regulations outline the requirements to obtain a DIN and NOC, and also mandate submissions concerning the safety implications associated with the proposed brand name for the product[1]:

(o) in the case of a new drug for human use, an assessment as to whether there is a likelihood that the new drug will be mistaken for any of the following products due to a resemblance between the brand name that is proposed to be used in respect of the new drug and the brand name, common name or proper name of any of those products:

(i) a drug in respect of which a drug identification number has been assigned,

(ii) a radiopharmaceutical…in respect of which a notice of compliance has been issued under section C.08.004 or C.08.004.01, and

(iii) a kit…in respect of which a notice of compliance has been issued under section C.08.004 or C.08.004.01.

If Health Canada determines that a proposed drug name has similarities and is likely to be confused for the brand name, common name or proper name of another health product, Health Canada has the discretion to refuse to issue a DIN or a NOC. Although the Food and Drug Regulations stipulate that an assessment of the potential causes of confusion must be conducted and submitted, nothing more is provided on the matter. To give direction, Health Canada introduced in 2006 an administrative statement of its policy on brand names for pharmaceuticals. The Guidance, formally called the “Guidance Document for Industry – Review of Drug Brand Names” but more commonly referred to as the “Look Alike Sound Alike” (“LASA”) Guidance was revised in July 2014.[2] On June 13, 2015, the revised LASA Guidance came into effect.

The LASA Guidance applies to proposed brands for drugs for human use (whether innovator or generic), including biologics, pharmaceutical prescription drugs, radiopharmaceuticals, kits, drugs sold directly to professionals for professional use (e.g., anaesthetics), and drugs sold to the public with the intervention of a healthcare professional (e.g., insulin). The Guidance currently does not apply to submissions for non-prescription over-the-counter drug products or natural health products, but Health Canada expects to produce brand name assessment guidelines for these products in the future.

The purpose and aim of the LASA Guidance is to prevent medication errors resulting from misleading or confusing product names. Medication errors related to confusing names can occur at several points along the path from prescriber to patient, including: prescribing errors, transcription errors, dispensing errors, administration errors and self-selection errors. The result of these errors is that the patient receives the wrong medication potentially depriving them of the intended therapeutic benefit, or resulting in serious harm from contraindications or adverse effects.

The revised LASA Guidance provides sponsors with direction on the processes to be followed and information to be submitted to Health Canada as part of the brand name assessment. Although the revised Guidance is more onerous than in the past and requires more detailed information, it is essential that the sponsors comply with Health Canada’s requirements since failure to satisfy the naming requirements will bar regulatory approval.

Assessment by Health Canada of Brand Name

The first step of the brand name review process outlined in the LASA Guidance is an Initial Brand Name Review, which is conducted by Health Canada, not the manufacturer/sponsor. However, it is recommended that sponsors review the criteria for the Review prior to conducting the assessment of the proposed brand name to Health Canada. There are seven factors that are considered:

Does the name/modifier suggest/imply an unsubstantiated unique effectiveness/composition, superiority claims, exaggerated product efficacy, broadening product indication or minimizing the risk of the product (e.g., making superiority claims such as ‘CureAll’)?
Does the name/modifier include or imply an ingredient that is not included in the drug product?
Is the name identical to an authorized product in Canada containing a different medicinal ingredient(s) (e.g., ‘Podium’ contains the medicinal ingredients ‘XY’ and a sponsor proposes the identical name ‘Podium’ for medicinal ingredient ‘Z’)?
Does the proposed name contain a letter sequence/stem that is in the same position designated by USAN (U.S. Adopted Name) or INN (International Nonproprietary Name) for the same or different pharmacological/chemical trait?6,7,8
Does the proposed brand name contain or suggest an exclusive composition of only one ingredient in a multi-ingredient product?
Does the name suggest an unsupported route of administration or dosage form?
Does the name conflict with Schedule A of the Food and Drugs Act[3] (e.g., DiabeticCare^TM Acetaminophen Tablets)?

An affirmative response to any of the above questions will result in an automatic rejection of the proposed name. Additional factors are considered by Health Canada, however they will not result in an automatic rejection. These include, for example, whether the proposed brand name is the same or similar to a name for a product no longer on the market, or whether part of the proposed brand name represents or implies a medical or scientific term or acronym.

(b) Assessment by Sponsor of Brand Name

If the proposed name passes the Initial Brand Name Review, the sponsor is required to conduct a LASA brand name assessment. This assessment is the responsibility of the sponsor to conduct. It is a comprehensive, multi-step review of the proposed brand name which assesses the likelihood that the proposed brand name will be confusing with the names of approved drug products. The process consists of three steps: search, simulate, and synthesize.

i) Search

This first step involves a search of the Drug Product Database[4] and the Licenced Natural Health Products Database.[5] The search query will compare the proposed name against the database according to orthographic and phonetic similarities. Results of the searches are listed according to a computed similarity score and results scoring 50% of higher are to be included in the sponsor’s submissions to Health Canada. If the proposed brand name is already marketed in another country, addition searches are required. For sponsors considering a potential brand name, it is important to search the Drug Submission Tracking System for pending submissions.

ii) Simulate

The simulate step consists of simulation experiments to assess the confusability of the proposed name by using the name in a variety of prescribing, transcribing, dispensing and administration scenarios. The sponsor must consider the world in which the drug associated with the proposed brand name will exist and conduct simulations against this. For example, the drug may be used in the hospital setting, therefore the sponsor must detail every step of the process by which the drug gets to patient and conduct simulations against this. Some drugs would have more complicated routes than others (e.g., oral prescription drug vs. drug for injection by emergency physician) or have multiple routes (e.g., oral prescription drug in hospital and community). The sponsor must conduct at least five simulations, which altogether, involve at least one hundred healthcare professionals.

iii) Synthesize

The sponsor’s final step in the LASA assessment is to synthesize the results from the search and simulate steps by completing a failure mode and effects analysis (“FMEA”). As a preliminary step, the sponsor must consider the names generated in the search and simulate steps for their inclusion or exclusion from the FMEA. The sponsor must then provide rationale for the inclusion or exclusion of each name.

The FMEA is an analysis conducted by a panel of various health care professionals, each representing an individual who would be involved in the delivery of the drug at issue. The panel considers the drugs names from the search and simulate steps that were included by the sponsor against the process maps developed in the simulate step. The principal consideration is determining what can go wrong in the case of a medication error (i.e. failure modes) and the effects. The FMEA panel is also required to answer various questions addressing the effects of the potential confusing drugs, the effects of omitting the proposed drug, the effects of administering the wrong drug therapy, and the effects of combined drug therapy.

Once the results of the complete LASA assessment are submitted to Health Canada, it will review the submissions and decide on the acceptability of the proposed name. Health Canada can request further information or material (including raw data) or make its own inquiries. If a proposed drug brand name is rejected by Health Canada, the sponsor can submit an alternative name for review[6], use the proper/common name alone, or seek to formally reconsider the decision of Health Canada if it results in a withdrawal notice.

Given the more stringent and involved brand name approval process in Canada, it is recommended that innovator and generic companies consider the LASA Guidance well in advance, and preferably at the time of choosing and clearing a brand, in order to avoid unnecessary delays or unfavourable results. It is also recommended that pharmaceutical companies that perform global development and testing processes with respect to proposed brand names include Canadian respondents and give consideration of the use of the product in Canada. Otherwise Health Canada is unlikely to consider (or give sufficient weight) to the brand name assessment completed in another jurisdiction. Alternatively, the sponsor may be asked to conduct an additional assessment to reflect the Canadian context, which both delays the approval process and incurs more expense. Sponsors should also have regard to non-name attributes, such as formulation, strength and indication, when considering the use of a performance study from another jurisdiction for the purposes of the Canadian brand name approval process.

Vanessa’s Law – Increased Oversight of Drugs and Medical Devices

The second key development in Canada is the Protecting Canadians from Unsafe Drugs Act (Vanessa’s Law), which received Royal Assent in November 2014, but has not yet come into force. Through amendments to the Food and Drugs Act, Vanessa’s Law aims to further protect the Canadian public from the risk of injury from “therapeutic products” (defined as a drug, device, or any combination of drugs and devices) currently on the market. Overall, the law provides the Minister of Health with greater powers to assess and manage risks associated with drugs and medical devices. Much debate around Vanessa’s Law concerns the newly created powers of the Minister to compel any information from sponsors (including confidential business information, which is defined to include information that has actual or potential economic value to competitors, or the disclosure of which would result in material financial loss) and the power to disclose the confidential business information without notice to, or consent from the person to whose business or affairs the information relates. Although these powers are to be employed only where a drug or device “may present a serious risk of injury to human health”, the potentially far-reaching and invasive nature of the amendments are controversial.

Vanessa’s Law will also impact the marketing and oversight of already approved pharmaceutical drugs and devices. First, where the Minister believes it is necessary to prevent injury to health, he or she may compel the sponsor to modify or replace the label or packing of a drug or device. Second, the Minister may order a sponsor to conduct an assessment of the drug or device’s effects on health and safety. While the latter change does not specifically mention the effects of the product’s brand name, this is well-known to be an important aspect of Health Canada’s safety analysis (as described in the LASA Guidance) and is likely encompassed by these new provisions. The Minister may also recall the drug or device at issue in order to respond to a serious or imminent health risk, or seek an injunction. Furthermore, the penalties for contravention of the new provisions can be severe, resulting in some cases in fines up to $5,000,000 and imprisonment for those who contravene the Food and Drugs Act (including Minister’s orders under Vanessa’s Law).

To assist with the implementation of Vanessa’s Law, Health Canada recently released a draft guide titled “Amendments to the Food and Drugs Act: Guide to New Authorities (power to require and disclose information, power to order a label change and power to order a recall) seeking comments.[7] The guide sets out principles to govern all decisions by Health Canada, and covers when, how, and what triggers the Minister’s ability to make use of the powers and explains to whom the powers apply. The guide also contains a non-exhaustive list of elements that should be considered as the starting point for making a determination of “serious risk” of injury.

Conclusion

Successful branding of pharmaceutical products must consider the target audiences (patients, doctors, pharmacists), the associated therapeutic and disease awareness, and the global market in order to achieve greater market share and brand loyalty. Increasingly, the proposed brands of drugs and other health care products are subject to heightened government regulation. This is demonstrated by the recent regulatory changes in Canada, including Health Canada’s stringent new requirements and information disclosure relating to new drug names. As a result, manufacturers must be strategic when it comes to branding and have regard to both the regulatory approval process and the trademark registration process globally, especially in the key jurisdictions. Although the proposed drug name must pass Health Canada’s scrutiny to be used in the marketplace, the review by Health Canada does not grant positive rights to the pharmaceutical manufacturer to stop others who may be using a similar brand name. Therefore pharmaceutical branding must be considered strategically from all angles, including with reference to the recent changes in Canada, starting at an early stage of the brand selection and clearance process. This will ensure timely and successful approval and entry into the market and thereafter.

[1] Food and Drug Regulations, CRC c 870, C.08.002(1)(o).

[2] http://www.hc-sc.gc.ca/dhp-mps/pubs/medeff/_guide/2014-review-examen_drug-medicament_names-marques/index-eng.php

[3] In Canada there are certain diseases, disorders and abnormal physical states for which a food, drug, cosmetic or device cannot be advertised and sold to the public as a treatment, preventative or cure for. Schedule A of the Food and Drugs Act lists the prohibited diseases, disorders and abnormal physical states.

[4] Available from: http://webprod5.hc-sc.gc.ca/dpd-bdpp/index-eng.jsp

[5] Available from: http://webprod3.hc-sc.gc.ca/lnhpd-bdpsnh/

[6] A sponsor may submit two brand names for submissions of 180 days or longer.

[7] http://www.hc-sc.gc.ca/dhp-mps/consultation/drug-medic/unsafedrugsact-guide-lesdroguesdangereuses-eng.php

Finding The Right Buyer For Your Company

November 14, 2014Articles, Corporate/Commercial Law, Latest NewsCanada, M&AHoward Johnson

One of the first things that business owners and executives who are thinking about selling their company (or a division thereof) consider is who might be the right buyer for their company, where to find them, and how to get them engaged in meaningful discussions.

Characteristics of the Right Buyer

While it’s usually not possible to determine the single “right” buyer for a company, there are certain characteristics that make certain prospective buyers better than others.

Strategic fit. The seller should determine how their company fits with the buyer’s longer-term strategy and objectives. This is accomplished through a combination of research and a dialogue with the buyer’s representatives. Lack of a strategic fit will reduce the likelihood the buyer will be motivated to consummate a transaction, or that they will only do so at a low value. Conversely, a strong strategic fit will help the buyer in justifying a higher price and more attractive terms. In some cases, the buyer will reveal specific synergies that it expects to realize as a result of the transaction, which can help the seller in highlighting those benefits. Ideally, synergies should be in the form of incremental revenues rather than purely cost savings. As a general rule, buyers tend to be more amenable to paying a premium for revenue-based synergies.

Decision-maker involvement. If a buyer is committed to acquiring a company, they should be involving key decision-makers at a relatively early stage of the sale process, including during the course of management presentations and negotiations with the seller. This helps ensure that the proposed acquisition has the necessary internal support, and avoids a situation where those negotiating the deal are unable to influence senior management about the merits of the transaction. While it’s often necessary for the buyer’s representatives to obtain support from their senior management team or board of directors, the seller should be satisfied that those involved in the discussions have the necessary authority to recommend the transaction and influence the ultimate decision-makers.

Financial capacity to transact. Buyers should be able to demonstrate that they have the ability to consummate a transaction with available cash or credit facilities. A transaction that is contingent upon the buyer’s ability to obtain financing adds further risk to the seller that the deal may not close. Alternatively, a buyer that is not able to raise adequate financing may look for deferred payment mechanisms such as promissory notes and earn-out arrangements, which make the transaction less attractive to the seller from an economic value standpoint. If the seller is unsure about a buyer’s ability to finance a transaction (e.g. the buyer is a relatively small private company), the seller should request a comfort letter or similar documentation from the buyer’s financing sources prior to executing a letter of intent.

Relative size. As a general guideline, the right buyer for a particular company is one that is between about 5x and 20x larger than the seller’s company, in terms of revenues and profitability. Where the buyer is not much larger than the seller, it can be difficult for them to raise sufficient capital to consummate a transaction without relying on promissory notes or other deferred types of consideration. Further, a buyer may perceive a relatively large acquisition as being high-risk, which could reduce the likelihood that they will transact, or that they will look for a lower price to compensate for that risk. On the other hand, a buyer that is much larger than the seller’s company may lose interest because the seller’s financial results will not “move the needle” for them on a consolidated basis, absent there being a highly strategic reason for undertaking the transaction (e.g. the seller’s company has proprietary technology that the buyer can significantly leverage in its existing operations).

Experience at completing transactions. It’s usually preferable to deal with a buyer that has a track-record of completed transactions. This is because buyers that have consummated one or more transactions in the past will have better established procedures and a better idea of what to expect. Conversely, dealing with a buyer that is looking at its first transaction will have a greater learning curve, which could cause delays and place the closing at greater risk.

Where to Find the Right Buyer

There are numerous possibilities for where the right buyer may be found. While direct competitors are obvious choices, they are often not the right buyer. This is because direct competitors normally focus on cost-reduction type synergies, which they are less likely to pay for. Furthermore, dealing with direct competitors provides them with access to sensitive information about the seller’s operations. While a non-disclosure agreement might protect the seller against blatant misuse of confidential information, there is still a risk that some confidential information may be exploited in more subtle ways (e.g. where it influences the buyer’s pricing strategy for common customers).

More often, the right buyer is one that views the seller’s employees, customers, or product and service offerings (e.g. brand name; technology; and so on) as a platform for revenue growth (so-called “platform buyers“). Platform buyers are more likely to retain the seller’s employees, and possibly offer them greater opportunities for career and personal advancement. This can facilitate the transition of the business and reduce the risk for both the buyer and the seller.

Complementary product and service offerings that offer cross-selling opportunities are a good example of revenue-type synergies that a platform buyer might perceive. From the buyer’s perspective, the ability to cross-sell can help entrench their relationship with both existing customers and new customers by offering a more diverse product or service selection.

In other cases, a platform buyer is attracted to the seller’s company because it offers geographic expansion, which can provide the buyer with both revenue growth and diversification (i.e. risk reduction). The ability to attract a buyer from another geographic region varies depending on the size and nature of the business. As a practical matter, most Canadian companies are sold to Canadian buyers (or a subsidiary of a foreign entity that has an existing presence in Canada). Given Canada’s vast geography, many buyers that have an established presence in one region of the country find that corporate acquisitions are the best means of inter-provincial expansion.

Not surprisingly, the most common foreign buyers for Canadian companies are those based in the U.S., who find that Canada is a natural extension to their U.S. presence. Attracting a buyers from Europe, Asia or other regions outside of North America (who do not have existing operations in Canada) typically is more challenging. In most cases, buyers from these regions are only interested where the seller’s company is a sizable entity or possesses proprietary technology or other assets that can be leveraged on a global basis. Furthermore, the seller should anticipate that buyers from far-reaching regions will proceed more slowly than those based in North America, due to the learning curve, internal logistics and possible cultural differences.

Finally, consideration should be afforded to platform buyers that are existing customers or suppliers of the company that may be looking to expand through vertical integration (sometimes referred to as “supply chain analysis”). Caution is warranted however to approach these parties carefully, so as not to disrupt the seller’s existing business relationship.

A helpful exercise for sellers and their investment banker to undertake when considering the right buyer for their company is to think about is as follows:

Engaging the Right Buyer

Engaging the right buyer for a company is somewhat of an art. Rarely are these organizations attracted by general mass media solicitations (e.g. email blasts). Rather, for each buyer, the seller and their investment banker to consider why that buyer might be interested in acquiring the company (i.e. the strategic fit and possible synergies). Advanced research is required in this regard, which includes publicly available information (e.g. the buyer’s website and news releases) as well as an analysis of previous transactions those buyers have undertaken.

Before approaching prospective buyers, it is important for the seller to ensure that their company is ready for sale, and that it represents an attractive acquisition target. Sellers only have one chance to make a good first impression. It is difficult (and the seller is in a less favourable negotiating position) where the seller must retract from the sale process to clean up their organization, and re-engage a prospective buyer at a later date.

It is also important to approach the right individual(s) within the prospective buyers’ organization. This should be an individual(s) who understands the strategic direction of their company, can champion the potential acquisition and who has the authority within their organization to consummate (or at least recommend) the transaction.

Finally, the seller and their investment banker must closely manage the sale process to ensure that the right prospective buyers remain engaged, and to convey information in a manner that will help the buyer realize the strategic value of the acquisition opportunity.

Tesco’s Accounting Scandal a Lesson for All Public Companies

November 6, 2014Accounting and Audit, Articles, Latest NewsAccounting, CanadaLawrence E. Ritchie

Britain’s biggest retailer faces a crisis situation two weeks after announcing that it overstated its first-half profit expectations by some £250-million. Tesco PLC, the multinational grocery and retail giant headquartered in England, reported on September 22, 2014 that its August 29 profit warning should have forecasted trading profit totalling £850-million, rather than the £1.1-billion that the company actually reported – an inflation of nearly 25%. The market reacted swiftly, and as of October 7, 2014 had knocked 20% (a total of about £4-billion) off the value of Tesco shares. On October 1st, Britain’s financial regulator, the Financial Conduct Authority, announced that it has launched a full investigation into the accounting scandal. As the company rushes to contain the situation and events continue to unfold, it is already clear that this is a classic example of the potentially explosive risks that public companies face every time they prepare and report their financial status to the market.

Tesco has been for years the world’s second largest retailer after Walmart, though in recent times it has faced stiff competition in Britain and Europe, together with declining profits. Its September 22 announcement was the latest and most impactful blow to Tesco’s market value and reputation. Tesco has stated that the profit overstatement was caused by apparent accounting errors – including the early booking of revenue and delayed recognition of costs – which were discovered during the preparation of its forthcoming interim results. Those results have now been delayed from October 1 to October 23. The company has already begun an independent investigation into the accounting irregularities. Four senior-ranking Tesco employees have been placed on leave while the investigation proceeds. The accounting error and misreporting, together with the precipitous drop in share value and subsequent investigations, have been widely reported in the business pages around the world.

The situation unfolding at Tesco is a prime example of how the public may react to adverse news in unpredictable ways. Even after the change to its reported profit, Tesco was still profitable. In that sense, the market’s reaction could be seen as disproportionate. However, the news has clearly shaken public confidence in the company. Commentators have suggested that in the context of the other challenges facing Tesco, it may be an indicator of deeper-lying and more serious problems. Tesco’s share price seems to have been punished so severely not because the profit in one quarter was overstated, but because people are now saying “I don’t know what I don’t know” about the company in light of the fact that this happened. The same scenario has been played out numerous times in Canada (Biovail, SNC Lavalin and others) and elsewhere. It is also likely that the market has factored in that this situation will inevitably engender other expensive and distracting consequences, including the freshly initiated regulatory investigation and rumblings of a possible class action.

Public companies must ensure that they have in place a strong corporate governance culture and robust internal systems designed to prevent accounting and other problems. Commentators have long held that the “tone at the top” is a key factor contributing to the integrity of the financial reporting process, and companies are well advised to have a careful look at the adequacy of their internal controls on a regular basis. It is always preferable to manage and minimize risk than to have to respond to a crisis. Having said that, no company, however well run, is immune to crises. Without knowing more, it is impossible to say whether the situation at Tesco could have been prevented. What is clear is that, as the Tesco case now demonstrates, a company cannot unring the bell once news of an irregularity has broken. Instead, Tesco must scramble to react to a growing crisis. People will continue to watch with interest to see how, and how well, Tesco is able to weather this storm.