Audit of Drug Shortage Reporting, Monitoring, and Compliance Activities

Health Canada

Office of Audit and Evaluation
May 2024

Table of contents

• Executive summary
• Introduction
• Criterion 1 – Governance
• Criterion 2 – Risk management
• Criterion 3 – Compliance promotion
• Appendix A – About the Audit

Executive summary

Engagement objective

The audit objective was to determine whether drug shortages with potential and actual patient impacts are being identified and mitigated through adequate reporting, monitoring, and regulatory controls and processes.

Engagement scope

The audit scope included:

• the governance structure supporting drug shortage reporting, surveillance, and management;
• collaboration between internal and external stakeholders to support timely and effective communication and collaboration on shortages; and
• internal controls currently in place for identifying, assessing, monitoring, and mitigating risks associated with anticipated or actual drug shortages.

The period in scope for the audit was from July 1, 2021 to June 30, 2023. However, significant developments, initiatives, and activities after June 30, 2023, were taken into consideration. Initiatives and activities undertaken by the Drug Shortages Task Force (DSTF), which is a temporary entity, have been identified, but an assessment of their effectiveness and efficiency was beyond the scope of this audit. However, DSTF is discussed in relation to its impacts and connection to functions within the Regulatory Operations and Enforcement Branch's (ROEB) Drug Shortages Division (DSD).

What we found - Good practices

The Department has exercised a leadership, coordination, collaboration, and regulatory roles in addressing drug shortages, and has put processes and controls in place to identify and mitigate drug shortages. Health Canada (HC) has built a strong network of internal and external stakeholders and actively engages with Market Authorization Holders (MAH), Drug Establishment Licence (DEL) holders, drug shortage committees, and other stakeholders to identify and share signals of potential drug shortages, as well as to mitigate and prevent some of them.

When managing and mitigating drug shortages, the Department applies a risk-based approach that focuses on drug shortages that are critical, including those assigned as Tier 3 by the Tier Assignment Committee (TAC), that have the highest potential impact on the Canadian public, patients, and the medical community. For these shortages, DSD applies a case management approach to address them, including coordination and collaboration with stakeholders, monitoring the drug shortage and supply throughout its life cycle and applying regulatory tools to mitigate shortages where required. Many regulatory tools, such as adding drugs to a list for exceptional importation and amending the Food and Drug Regulations (FDR) to mandate certain reporting requirements, have been approved and implemented to increase supply sources for drugs in shortage to support HC in mitigating critical shortages. HC has used these regulatory tools effectively.

Note: Tier 3 drug shortages are those that could potentially have the highest impact on Canada's drug supply and health care system. A Tier 3 designation is determined by the TAC, which is composed of federal, provincial, and territorial governments, health care professionals, and industry stakeholders.

A key contributor in mitigating the impact of drug shortages is their timely reporting and communication to drug supply chain actors, the Canadian public, patients, and the medical community. In this regard, there is a regulatory requirement for MAHs to report anticipated and actual shortages, as well as discontinuations, on the third-party managed Drug Shortages Web Site. DSD conducts monitoring activities to support compliant and timely reporting of drug shortages. A process was implemented in the summer of 2023 to conduct a daily search of the Drug Shortages Web Site to identify shortages that could potentially require HC's attention.

HC has recognized that there are opportunities to strengthen and formalize the management of drug shortages, and the related processes and controls to address them. In this regard, they conducted extensive stakeholder engagement through the Multi-Stakeholder Steering Committee (MSSC) throughout 2022 in preparation for strengthening Canada's multi-stakeholder drug shortage mitigation and prevention systems. In November 2022, Health Canada created a temporary DSTF to look at how to better address health product shortages. This included consultations with Canadians that focused on identifying the challenges and possible solutions for building a resilient supply of drugs and other health products. Once DSTF ceases operations on March 31, 2024, ROEB will continue to advance and strengthen drug shortage management on behalf of HC.

Opportunities for improvement

When addressing drug shortages, DSD relies on a manual tracking system to track and communicate different drug shortage signals. The Department is aware of the need for an automated case management system to systematically track, collect information on, and analyze drug shortages, which would reduce the potential risk of critical signals being lost or overlooked.

Note: Shortage signals are brought to Health Canada's attention in several ways: through individual complaints, committee discussions, international regulators, media reports, shortage website notifications, company-reported supply chain issues, or quality issues requiring post-market regulatory action such as a stop sale or a recall.

DSD took action in 2022 to work with stakeholders and advance efforts in the area of drug shortage prevention. The audit identified complexities and challenges in being able to identify systemic weaknesses. Addressing these weaknesses could support the prevention of drug shortages before they occur. The Department is aware of the need for increased drug shortage prevention, as well as supporting data and analysis.

The following opportunities to strengthen and formalize processes were identified during this audit:

• Governance and Roles and Responsibilities: The establishment of DSTF resulted in some communication overlap and duplication among drug shortage committees with similar membership. It also resulted in some confusion regarding roles and responsibilities between DSD and DSTF, especially on policy-related files. This resulted in inefficient and ineffective use of time that had a particularly high impact in cases of human resource capacity constraints. These are expected to be alleviated once DSTF is wound down.
• Risk Management: There is an awareness of strategic risks related to drug shortages, and operational risks are being identified and managed through case management; however, there are opportunities to formalize and strengthen strategic and operational risk management to reduce the likelihood of key risks not being identified and mitigated.
• Sex and Gender-based Analysis Plus (SGBA+): There was evidence of SGBA+ being considered by the TAC in its assignment of drug shortages, but documentation could be strengthened, and SGBA+ should be used to proactively inform policy and decision making.
• Compliance Monitoring: DSD monitoring and promotion activities that support mandatory drug shortage reporting by MAHs could be strengthened and formalized to improve reporting timeliness.

Introduction

Ensuring that Canadians have access to the medicines they need is a top priority for the Government of Canada. HC plays an active role as the federal regulator in assessing drugs and other health products on the Canadian market for safety, efficacy, and quality.

A drug shortage occurs when a manufacturer or importer cannot meet the demand for a drug in Canada. The duration of a drug shortage varies, and there are a number of possible causes, including manufacturing problems or delays, product quality issues, difficulty obtaining raw materials and ingredients, an unexpected increase in demand, discontinuation of the drug, and major events such as natural disasters, geopolitical issues, or public health issues like a pandemic. Most shortages are caused by a decrease in supply, as opposed to an increase in demand. Drug shortages are a complex and global problem that is increasing, and involves many stakeholders across the drug supply chain, governments and the health care system. They can have a detrimental effect on the delivery of patient care and treatment, as well as on the availability of health care services across the country, thereby affecting public health, health care professionals, and the Canadian public.

In Canada, addressing drug shortages is the responsibility of many stakeholders, including HC, who regulates drugs. HC plays a leadership role by convening other federal government departments and agencies, provinces and territories, manufacturers, distributors, and health care professionals. HC's regulatory tools are an important part of the federal toolbox for mitigating or preventing shortages, and are governed by the Food and Drug Act (FDA) and FDR.

In 2019, drug shortages were identified as a ministerial priority for HC, and in mid-2020, capacity was expanded within ROEB with the establishment of the DSD.

The Office of Audit and Evaluation (OAE) conducted this audit as part of HC's Risk-based Audit Plan (RBAP) that was approved by the Deputy Minister in May 2022.

Note: During the 2022-23 fiscal year, over 2,700 drug shortages were reported.

Criterion 1 – Governance

Context

HC's role in the oversight and leadership in dealing with drug shortages in Canada can be challenging, due to the inherent complexity of drug shortage prevention and management, with factors beyond HC's control. This includes the number and scope of stakeholders involved, a reliance on globalized supply chain networks, and the diverse root causes behind drug shortages. In Canada, 68% of drugs are imported, and most drug shortages are caused by manufacturing disruptions or other delays.

HC participates in several multi-stakeholder committees and information-sharing discussions to provide leadership, to collaborate, and to coordinate responses and actions in addressing drug shortages. These committees and discussions involve differing mandates and member representation, with members from HC's ROEB, HC's DSTF, other HC branches, provinces and territories, drug-related industry associations, health care provider organizations, patient associations, and drug regulators in other countries.

Engagement efforts are made with domestic stakeholders among government, industry, health care professionals, and patients, as well as international regulatory counterparts through formal committees and ad hoc interactions.

In November 2022, HC established DSTF as a temporary entity with the capacity to build upon ROEBs DSD's efforts to date. DTSF will cease operations on March 31, 2024, after which time ROEB will continue to advance and strengthen approaches to drug shortages on behalf of HC.

Note: In the last few months, consumer-friendly information and an infographic about drug shortages have been posted on Canada.ca and on HC social media platforms.

What we expected to find

We expected to find that the governance framework supports HC's oversight, accountability, and management related to drug shortages, including timely reporting, informed decision making, and clearly defined, documented, and communicated roles and responsibilities.

Why it matters

A sound governance structure, including optimal participation in drug shortage committees, multi-stakeholder communication, and clearly delineated roles and responsibilities for managing drug shortages within HC, supports efficient and effective information sharing, collaboration, coordination, and informed decision making, both within HC and between HC and its stakeholders. This, in turn, enhances the ability to address drug shortages in a timely and effective manner.

Key findings

HC provides leadership, collaboration, regulatory, and coordination roles in addressing drug shortages in Canada. Fulfilling these roles involves implementing regulatory-driven actions, providing leadership, and convening non-regulatory activities through its participation in several committees and multi-stakeholder groups that have been established to share information, collaborate, and coordinate responses and actions to address drug shortages.

Shared information can inform decisions by HC, provinces, territories, industry, and health care providers to address and mitigate drug shortages, including regulatory actions that are within their respective authorities. We found that these drug shortage committees and communication channels resulted in timely information sharing on drug shortages to inform decision making.

Drug shortage committees, aside from the TAC, mainly focus on information sharing as opposed to decision making. We found examples of potential overlaps in the mandates, membership lists, and discussions of some existing committees, with some duplication of effort between the information shared during committee meetings and during issue specific multi-stakeholder discussions. As a result, there may be opportunities for HC to revisit its participation in drug shortage committees and communication channels to streamline discussions and improve efficiency.

Within HC, ROEB's DSD manages drug shortages, with involvement of other HC branches as required. Overall, we found that accountabilities, roles, and responsibilities related to managing drug shortages are clearly defined and communicated within HC via the DSD's Drug Shortages Case Management Standard Operating Procedures (SOP) and other guidance documents.

From document review, we found that there is a primary distinction between roles for addressing drug shortages within HC, with DSD being responsible for case management, and DSTF being the temporary lead for developing medium- to longer-term strategic and policy responses. However, documents also revealed that there was duplication of work between ROEB and DSTF in managing policy aspects of drug shortages, specifically in leadership, strategic planning, communications, stakeholder engagement, and data collection and reporting.

Conclusion

The governance framework supports the oversight and management of drug shortages in Canada, with HC providing leadership, convening, collaboration, regulatory, and coordination roles. Strong relationships are in place between HC, MAHs, and DEL holders, as well as various committees that have been established to share information, and collaborate on and coordinate responses and actions to address drug shortages. Within HC, accountability, roles, and responsibilities are clearly defined, with some exceptions that are anticipated to be alleviated when DSTF ceases operations and its roles and responsibilities are carried forward within ROEB. HC participates in several drug shortage committees and multi-stakeholder discussions that may be time consuming, with sharing of similar information. A review of committee participation may be warranted during the operational transition.

Recommendation # 1

The Assistant Deputy Minister (ADM) of ROEB should review the existing governance framework supporting drug shortage activities, once DSTF roles and responsibilities are completely within ROEB, in order to:

• Ensure roles and responsibilities are updated and communicated.
• Streamline ROEB's membership and participation in drug shortage committees and multi-stakeholder communication efforts to support increased time effectiveness and efficiency.

Criterion 2 – Risk management

Context

Note from the TBS Guide to Integrated Risk Management: Risk management, which involves a systematic approach to setting the best course of action under uncertainty by identifying, assessing, understanding, making decisions on, and communicating risk issues, is an integral component of good management.

At the departmental level, the Corporate Risk Profile included two key risks specific to drug shortages for 2023 to 2026. Mitigation strategies included publishing data on drug shortage activities, strengthening collaborations with stakeholders, improving supply and demand analysis, and developing tools to strengthen market surveillance and oversight.

To address the above corporate risks, the following initiatives are under way:

• a strategic plan for health product shortages, informed by public consultation;
• working towards procuring a drug shortages case management system;
• renewal of the contract for the third-party managed Drug Shortages Web Site;
• advancing new regulatory solutions to prevent and mitigate drug shortages more effectively;
• enhanced information and transparency on health product shortages, with redesigned HC web pages that include more streamlined and timely information on high-impact drug shortages, and related HC and stakeholder actions;
• the creation of a critical and vulnerable drug list; and
• the development of drug shortage data, surveillance, monitoring, and reporting tools.

Drug shortages can have a particularly adverse effect on the most vulnerable population segments. The HC SGBA+ Policy states that SGBA+ should be integrated into all Health Portfolio activities, and the 2021-22 HC SGBA+ Policy Revision states that SGBA+ should be used in decision making.

What we expected to find

We expected to find processes in place to identify, assess, prioritize, and manage strategic and operational risks related to potential, anticipated, and actual drug shortages, including risks associated with human, IT, and financial resource capacity constraints, as well as SGBA+ risks.

Why it matters

Formalized processes for strategic planning and risk management, as well as operational risk management, reduce the likelihood of key strategic and operational risks not being identified or mitigated. Formalizing processes for addressing SGBA+ and human resource-specific risks would support meeting HC's SGBA+ Policy requirements and support ROEB in meeting its mandate and obligations for addressing drug shortages.

Key findings

The Department is aware of higher-level strategic risks related to drug shortages, including those related to supply chain vulnerabilities, the absence of a case management and tracking system for drug shortages, limited data and analytics to inform drug shortage prevention, and internal human resource capacity constraints for managing drug shortages. Interviews revealed that DSD developed a strategic plan for 2022 to 2025 after engaging extensively with stakeholders to take stock of the drug shortage landscape, and current and anticipated risks from the COVID-19 pandemic. We were informed that this strategic plan was ADM-approved in October 2022 and was provided to DSTF, given its mandate to support efforts in developing medium- to longer-term policy responses to health product shortages. We acknowledge that branch-level strategic planning is currently in progress, and DSD participates in the operational planning process.

We found that strategic drug shortage risks are being managed by DSD, but there are opportunities to strengthen strategic risk management.

We also found that DSD manages operational risks by identifying emerging signals, and assessing, prioritizing, and managing them in a risk-based manner through its drug shortage case management process. However, a consolidated information management system, or case management system, is not currently in place to collect, track, and analyze data that would help formally and systematically inform the prevention, management, and mitigation of operational risks. Instead, there is reliance on a manual tracking system with the use of many spreadsheets to track different signals, and communications via email. This is less efficient than a built-for-purpose case management system and could result in critical signals being lost or overlooked.

In general, drug shortage case management within HC tends to be reactive, as supply issues and data gaps make it challenging to conduct shortage risk assessments and pre-emptive assessments of shortage impacts. It is acknowledged that supply data gaps can be caused by manufacturer and distributor desires to keep information confidential for market and competitive reasons. Despite this, there may be opportunities to leverage existing stakeholder relationships and systems, and shift to a more prevention-focused approach.

SGBA+ risks and impacts are an important consideration for ensuring that the impact of drug shortages on the most vulnerable population segments is understood and informs decision making. We found that SGBA+ risks and impacts are considered by the TAC as part of the assignment of Tier 3 drug shortage responses, but this tends to be done implicitly, with limited documented evidence. We also did not find evidence of SGBA+ being used to inform strategic and policy decisions related to drug shortages; rather, SGBA+ reports were compiled at year-end, and not on an ongoing or more frequent basis. We understand that that there is a plan to adopt a more proactive approach to SGBA+ for drug shortages. The audit was conducted when DSD had only collected its first year of SGBA+ information, and no trends emerged from that sample of shortages. We noted that there are requirements to report on SGBA+ metrics through two performance indicators in the Drug Shortages Performance Information Profiles (PIPs). In addition, a Vulnerable Populations Check Sheet was developed for use by the TAC when assessing drug shortages, but we did not see documented evidence of the Check Sheet being used or completed, and there is no reference to the check sheet in the SOP: Tier Assignment Committee guidance document.

ROEB had previously put a People and Workplace Plan in place for 2018 to 2022 to address recruitment, retention, and learning and development, as well as tools to support succession planning. However, we found that this plan has not been updated, and the results of deliverables from the previous plan were not presented.

Conclusion

There is an awareness of strategic risks, and operational risks are being identified and managed. However, there are opportunities to formalize and strengthen strategic and operational risk management. In addition, risks specific to SGBA+ and human resource capacity are being managed, but these also could be formalized and strengthened.

Recommendation # 2

The ADM of ROEB should:

• Ensure that an updated medium- to long-term strategic plan is completed and implemented to address and manage drug shortages, including the identification of strategic risks, as well as associated risk mitigation strategies and processes.
• Ensure that a consolidated information management system is implemented to formally and systematically collect, track, and analyze data to inform the prevention, management, and mitigation of operational risks.
• Develop, disseminate, and implement guidance on the application of SGBA+ to drug shortages, and implement processes to monitor for compliance.
• Develop an updated recruitment, retention, and learning and development plan to support drug shortage activities.

Criterion 3 – Compliance promotion

Context

HC and other stakeholders are primarily focused on drug shortage mitigation measures targeting actual or potential drug shortages that have been identified as critical, or having the potential to become critical, including those determined to be Tier 3 shortages by the TAC. Mitigation actions can take several forms that can be implemented by either industry or governments, including seeking alternative supply sources, and communicating shortages to stakeholders and the public.

Several regulatory amendments to the FDR have been made to support HC in mitigating drug shortages. These include the implementation of an exceptional importation pathway, the ability to compel MAHs and DEL holders to provide information related to drug shortages, and restrictions on the export of drugs intended for the Canadian market, if this could cause or exacerbate a drug shortage in Canada.

HC is limited in compliance and enforcement (C&E) measures it can undertake for regulated mandatory shortage reporting. Although the FDR and HC C&E Policy provide DSD with the flexibility to undertake any necessary C&E actions, the actions listed in these policies, such as issuing recalls and suspending licenses, may exacerbate existing drug shortages. In addition, legislation for mandatory reporting does not cover shortages of non-prescription drugs, which may lead to gaps in regulatory oversight.

Note: Companies must report each time they cannot fully meet the demand for their drug.

What we expected to find

We expected to find:

• current, documented, communicated, and implemented processes for detecting drug shortages;
• identified, evaluated, and implemented mitigation strategies;
• effective drug shortage monitoring and compliance activities; and
• stakeholder engagement processes to support timely collection and dissemination of relevant information.

Why it matters

Compliance monitoring and promotion of regulatory requirements strengthen MAHs' adherence to regulatory provisions, which in turn informs policy and decision making by HC and other drug shortage-regulating bodies. This also informs the public and medical community on shortages that could potentially affect health and wellness.

Key findings

We found that there are processes in place to manage drug shortages, with channels in place to coordinate central intake of drug shortage signals from many sources. A key source is the third party-managed Drug Shortages Web Site, where MAHs are mandated by the FDR to report all anticipated or actual drug shortages, as well as discontinuations. Another key source of drug shortage signals is the Provincial and Territorial Drug Shortages Task Team (PTDSTT), with whom HC engages and shares signals. There are also measures in place to engage, collaborate, and coordinate actions with stakeholders, including through engagement with drug shortage committees to identify, assess, and mitigate shortages. Opportunities were identified for improving the efficiency of HC processes with a consolidated information management system to formally track the identification and progress of signals and shortages; this point has been addressed in the report section on Criterion 2.

We found that guidance documents were developed and communicated by HC to provide information in support of the identification and implementation of mitigation strategies, including roles, responsibilities, and processes to address drug shortages. We further found that mitigation strategies for individual drug shortages were identified, evaluated, and implemented in accordance with approved processes.

Monitoring for critical or Tier 3 drug shortages occurs throughout the case management life cycle to ensure that drug supplies and related risks are being continuously managed. Based on interviews, we found that monitoring often continues after a shortage has been de-escalated and sometimes resolved, with the nature and extent of follow-up monitoring being dependent on the circumstances of that shortage, including the supply situation, planned resupplies, supply history, and a risk assessment of future shortages. From our testing of a sample of shortages, we further found that processes for escalation and de-escalation were generally followed, and rationales for both were documented by the TAC.

We found that DSD monitors mandatory reporting of drug shortages by MAHs as its primary means of monitoring compliance. However, this tends to be done on an ad hoc basis rather than in a formal and systematic manner. DSD generally tries to monitor late and overdue reports from MAHs on a quarterly basis but acknowledges a need for more formalization to improve compliance with reporting timelines. When instances of missed drug shortages are identified, DSD works collaboratively with MAHs to ensure that these shortages are reported and to deter future instances of non-compliance.

We further found that DSD supplements the monitoring of mandatory reporting of drug shortages with compliance promotion activities, including outreach and awareness, targeted at MAHs. In addition, DSD engages stakeholders through various communication channels, such as committees, e-mails, multi-stakeholder discussions, and guidance posted on the Government of Canada website. We were informed that DSD continues to work on increasing proactive engagement, with significant resources being allocated to engage with stakeholders and health care provider organizations and to establish effective working relationships with health care organizations. However, there are opportunities to conduct outreach in a more structured and proactive manner in order to strengthen proactive compliance promotion for mandatory reporting of drug shortages.

Note: Drug shortage de-escalation is a consensus decision made by the TAC members convened for the file upon resolution of the shortage.

Conclusion

Overall, the Department has put internal processes and controls in place to prevent and manage shortages. However, there are opportunities to formalize and strengthen processes and controls, including compliance monitoring and promotion of regulated mandatory reporting of drug shortages.

Recommendation # 3

The ADM of ROEB should formalize and implement regular compliance monitoring, as well as reporting on the results of monitoring and compliance promotion efforts, in order to strengthen the regulated mandatory reporting of prescription drug shortages.

Appendix A – About the Audit

Audit objective

The audit objective was to determine whether drug shortages that have potential and actual patient impacts are being identified and mitigated through adequate reporting, monitoring, and regulatory controls and processes.

Audit scope

The audit scope focused on the following:

• the governance structure supporting drug shortage reporting, surveillance, and management;
• collaboration between stakeholders to support timely and effective communication and collaboration around shortages; and
• internal controls currently in place for identifying, assessing, monitoring, and mitigating risks associated with anticipated or actual drug shortages.

The period of scope for this audit was from July 1, 2021, to June 30, 2023. However, significant developments, initiatives, and activities subsequent to June 30, 2023, were taken into consideration. Initiatives and activities undertaken by DSTF, which is a temporary entity, have been identified, but an assessment of their effectiveness and efficiency was beyond this audit's scope. However, DSTF is discussed in relation to its impacts and connection to functions within ROEB's DSD.

Audit approach

The audit was conducted in accordance with the Government of Canada's Policy on Internal Audit, which requires examining sufficient and relevant evidence, and obtaining sufficient information and explanations to provide a reasonable level of assurance in support of the audit conclusion. The audit approach included, but was not limited to:

• Testing of controls, as required;
• Review of processes and methodologies and examination of outputs and other relevant supporting documentation; and
• Interviews with management, committee members, and key stakeholders within corporate and branch organizational units.

Statement of conformance

This audit was conducted in conformance with the International Standards for the Professional Practice of Internal Auditing and is supported by the results of the OAE's Quality Assurance and Improvement Program.

Audit criteria

1. The governance structure supporting the oversight and management of drug shortages promotes effective communication, informed decision making that aligns with departmental strategic objectives, and includes clearly identified and communicated roles and responsibilities.
2. Processes are in place to identify, assess, prioritize, and manage risks related to potential, anticipated, and actual drug shortages.
3. The Department has put effective and efficient internal processes and controls in place to prevent, manage, and enforce compliance related to drug shortages.