The Canadian Nutraceutical Market – with Growth Comes Risk

Florentina Cornea, Beazley Life Sciences & Healthcare Underwriter

 Over the last couple of decades the Nutraceutical sector has seen major growth in both Canada and globally as an increased focus on health and wellness has coincided with new marketing channels (most notably social media) and more globalised supply chains. The pandemic may spur an even greater interest among consumers on ways to support their health and wellbeing and there is a general expectation that growth will continue. One projection is that the Canadian market will grow by around 6% per annum between 2019-24[1] and the global market is predicted to be worth around US$314B by 2030[2]. The Nutraceuticals sector is very complex and exposed to a range of litigation and regulatory risks. It is key that businesses at every point in the supply chain have appropriate risk management and risk transfer mechanisms in place that address these specific challenges.

We are often asked for a definition of a Nutraceutical. The name itself was coined in 1989 to mean a “food or part of a food that provides medical or health benefits, including the prevention and/or treatment of a disease”. It is really an attempt to bring under one banner a range of vitamins, minerals, enzymes, herbs and other plant and animal derived products used for health and wellness. More recently, other product categories have come to be considered or marketed as Nutraceuticals, including sports nutrition and beauty/personal care. Our NutraGuard policy defines a Nutraceutical as a cosmetic product, dietary supplement, personal care product or drug that does not require a doctor’s authorization for purchase by the general public.

A defining feature of the Nutraceutical market is the complexity and occasional opacity of its manufacturing and supply chains. A single product can often contain ingredients with multiple origins and been subject to several manufacturing processes. There is potential for contamination risks, including from microbes, chemicals such as pesticides or mycotoxins and also the likes of solvent residues. There is also a risk of adulteration with other drugs and for adverse effects to arise from interaction with other nutraceuticals or medications. Contamination issues can lead to high profile action and scrutiny. In the US, for example, a number of years ago the New York Attorney General led a sustained effort against several major retailers in relation to store brand supplements that were marketed as containing the likes of Echinacea, Ginseng and St. John’s Wort. The AG alleged that only around 20% of samples examined contained verified DNA from the plant products identified on the label and a large number were tested as being contaminated with other plant material. [3]

In Canada, Nutraceuticals are subject to bespoke regulation and oversight. In 1999, Health Canada created the Natural and Non-prescription Health Products Directorate (“NHPD”) as a dedicated regulator for this sector. The NHPD’s remit is described as being to ensure that Canadians have access to natural health products that are safe, effective and of high quality. The Natural Health Product Regulations were introduced in 2004 under the umbrella of the Food and Drugs Act and encompass vitamin and mineral supplements; homeopathic medicines; plant and herbal remedies; traditional medicines; probiotics and certain personal care products. Also, all cosmetics sold in Canada must be safe to use and must not pose any health risk. They must meet the requirements of the Food and Drugs Act and the Cosmetic Regulations.  As of 2019, there were around 150,000 Natural Health Products licensed for the Canadian market.[4]

Given such commercial and regulatory complexities, it is essential that parties at every stage of the supply and distribution chain have robust and effective quality control procedures in place in terms of testing, verification, licensing, labelling, transportation and storage. The NHPD has highlighted concerns about various aspects of the process, including site safety, post-market monitoring and labelling.[5]

It is essential that businesses operating in the Nutraceutical space partner with an insurer who understands the sector and the complexity of the exposures it faces. We have been underwriting Nutraceutical risks in Canada for around a decade and have developed a close knowledge of the sector and the drivers of its expansion and diversification. Having first launched our NutraGuard product in the US, earlier this year we introduced a Canadian version and we look forward to working with brokers and clients in the Nutraceuticals sector to support its growth.

Disclaimer- The opinions expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Beazley or its affiliates.

[1] (https://www.mordorintelligence.com/industry-reports/canada-nutraceuticals-market)
[2] (https://www.globenewswire.com/en/news-release/2021/06/17/2249181/0/en/Nutraceuticals-Market-Size-Worth-Around-US-314-2-Bn-by-2030.html)
[3] (https://ag.ny.gov/press-release/2015/ag-schneiderman-asks-major-retailers-halt-sales-certain-herbal-supplements-dna)
[4] NHPD presentation, May 2019
[5] NHPD presentation, May 2019
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