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Comment: The other shoe is about to drop on livestock drugs

Increased fees for veterinary product registrations is likely to result in higher prices

In case you missed it April 1 was the day the revised Compendium of Medicating Ingredient Brochures or CMIB was posted online by the Canadian Food Inspection Agency to conform to Health Canada’s plan to combat antibiotic resistance in these vital drugs.

The release of the revised CMIB starts the clock on bringing all antimicrobials important to humans that are injected or fed to livestock under the control of a veterinary prescription on December 1 of this year.

This isn’t news to anyone. I only mention it because one year hence, in April 2019, Health Canada proposes to drop the other shoe on livestock drugs by raising the fees companies must pay to have new products reviewed, or renew existing registrations.

According to a recent report by agriculture economists Douglas Hedley and Al Mussell at the Guelph-based Agri-Food Economic Systems, higher fees could result in fewer products coming onto the Canadian market, and may squeeze some of the current ones out.

The report was prepared for the Canadian Animal Health Institute, the lobbying group for the veterinary pharmaceutical industry in Canada.

Under the proposed fee schedule, the cost to annually renew a veterinary product registration will increase by 37 per cent for bovines, hogs, chickens or turkeys while a range of new drug submissions would increase by 500 per cent by the second year. Health Canada proposes to phase in the increase over two years. After that annual increases will be tied to the Consumer Price Index.

To be fair, Health Canada last updated the fees for registering veterinary drugs from 1995 to 1998, and new legislation does require government departments to work toward cost recovery for services. This newest proposal is targeted to return 90 to 100 per cent of the costs involved. Even so, it is hard to imagine a 500 per cent increase is warranted.

Again, to be fair, the proposal does allow a small business as defined by the government to receive its first pre-market submission for free, if the fee goes over $10,000, but that is a one-time deal.

The proposal also establishes timelines for the different tests needed to licence a new drug, and the fee will be rebated by 25 per cent, if the department fails to meet the performance standard.

While Health Canada implies that these increases are in line with fees charged in the U.S., Australia, New Zealand and the EU, the report notes these countries are often able to spread these costs over larger livestock populations. That’s a significant consideration for the companies involved.

In the case of niche species such as sheep where, “Canada essentially represents the rounding error” on sheep populations in the EU, Australia or New Zealand, these additional costs could be enough for a supplier to drop out of this market with little loss in sales as a result.

We are a significant exporter of beef but when it comes to herd numbers, Canada at 12.9 million head is only above New Zealand. Australia has 27.7 million head, the EU clocks in at 88.6 million and the U.S. has 104.8 million. So when you look at similar fees to introduce or maintain a drug in these markets the economic incentives look lopsided in favour of our competitors.

Again we’re a significant exporter of pork but still pale in terms of numbers compared to the U.S. and the EU.

Even with these differences in livestock populations, Hedley and Mussell have found Health Canada’s proposed fees would be in the range of $75,000 to $200,000 while Australia’s are rated at less than $75,000.

“Moreover, the proposed Health Canada service fees for animal drugs are required up front, before there is a return on investment, while in Australia the same fees would be collected over 10-15 years.”

The annual fee for the right to sell vet drugs (i.e. your local vet clinic) is also slated to jump by almost 400 per cent to $4,587.

In conclusion, the economists suggest such a fee increase could squeeze small- to medium-sized companies out of the Canadian market. They expect companies to delay registering new or reformulated drugs, if they are registered at all, and would likely set prices well above prices charged in the EU, Australia and the U.S. in order to recover the registration fees. Some drugs on the shelves today would probably be lost when they come up for renewal, which in turn would limit the choices to the most widely used products for the species with the largest populations.

In every respect it is a gloomy report. If Health Canada was determined to further limit the number of drugs available for vets to prescribe to livestock producers they appear to have found the way to do it.

At the very least you can look forward to rising prices within the year after the industry consolidates around veterinary prescriptions.

Along that line, if you haven’t already done so, it is never too early to begin establishing that veterinary-client relationship that will be a vital first step in assuring that you continue to have access to the drugs necessary to maintain the health of your herd and by extension the national beef industry after December 1.

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Gren Winslow is editor of Canadian Cattlemen.

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