Health Canada's Drug Establishment Licensing Phase 2: What Is Changing and How to Prepare Your Site

Health Canada has signalled a major update to how every Canadian drug company keeps its licence. The drug establishment licence, or DEL, is the authorization that lets a site fabricate, package, label, test, import, distribute or wholesale a drug. In its 2026 to 2028 Forward Regulatory Plan, Health Canada confirmed that Phase 2 of its work to modernize the DEL framework is coming, with a public comment period expected in Fall 2026 or Winter 2027.

If you hold a DEL, or you are planning one, the proposed changes will touch the parts of licensing that cost you the most time each year. This article explains what DEL Phase 2 is, what is likely to change, and the practical steps you can take now so the transition does not disrupt your operations or your inspection record.

Executive summary

DEL Phase 2 is a proposed set of amendments to the Food and Drug Regulations. It would reduce the burden of the annual licence review, give Health Canada more flexible compliance tools such as terms and conditions and modernized suspension provisions, and shift the framework toward risk-based, outcome-focused oversight. It follows Phase 1, finalized in 2024, which updated recall reporting, added finished product testing exemptions and modernized the list of recognized foreign regulators. Nothing is in force yet. The smart move is to tighten your licensing records now and plan to comment during the consultation.

What is a drug establishment licence?

A drug establishment licence is the authorization under Part C, Division 1A of the Food and Drug Regulations that every Canadian drug establishment must hold to fabricate, package or label, test, import, distribute or wholesale a drug. It applies to both human and veterinary drugs. The licence names the Canadian building, the activities allowed there, the drug categories, for example pharmaceuticals, biologics, vaccines, active pharmaceutical ingredients, radiopharmaceuticals or controlled drugs, and whether sterile dosage forms are authorized.

For importers, the DEL also lists the foreign buildings that fabricate, package, label or test the drugs being brought into Canada. Holding a DEL means proving and maintaining compliance with good manufacturing practices. For a closer look at importing a foreign-authorized product on a licence, see our guide on designated drugs and DEL import requirements.

What is DEL Phase 2 and why does it matter now?

DEL Phase 2 is the second stage of Health Canada's work to modernize drug establishment licensing. It is a proposed amendment to the Food and Drug Regulations, listed in the 2026 to 2028 Forward Regulatory Plan, with publication in Canada Gazette, Part I expected in Fall 2026 or Winter 2027 and a 75-day comment period. It matters now because the comment window is the only time to shape the rules before they are finalized.

Phase 1 was finalized through SOR/2024-136, registered on 17 June 2024 and published on 3 July 2024. It did three main things for drugs. It replaced the fixed table of recognized foreign regulatory authorities with a maintained online list, it introduced conditional exemptions from confirmatory finished product testing for certain radiopharmaceuticals and gene and cell therapies, and it tightened recall reporting. Phase 1 did not give Health Canada new power to place terms and conditions on a DEL or to suspend one on modernized grounds. That is the gap Phase 2 is designed to close.

The three changes to prepare for

1. A lighter annual licence review

Every DEL holder must submit an annual licence review, or ALR, by 1 April each year. If Health Canada does not receive it, the agency will take steps to cancel the licence. Phase 2 proposes to reduce the burden of this review. Health Canada has not published the final wording, so the exact relief is not yet known, but the direction is clear.

What you can do now is make the annual licence review a routine, not a scramble. Keep your building listings, activities, dosage forms and categories accurate year-round. Track your domestic inspection dates and your foreign buildings in countries covered by a mutual recognition agreement, because current guidance already waives some GMP evidence in those cases. A clean file is the fastest file to review, whatever the new threshold turns out to be.

2. New terms, conditions and suspension tools

Health Canada plans to modernize its compliance and enforcement tools for DELs, including the ability to apply terms and conditions to a licence and clearer suspension provisions. These are tools the agency already uses for medical device establishment licences. For drug establishments, they would give Health Canada a middle option between doing nothing and cancelling a licence.

In practice, a term or condition could require a specific corrective action, extra reporting or a defined timeline after an inspection finding. The way to stay off that path is strong GMP and a fast, documented CAPA process. If an inspection raises an observation, a clear root cause analysis and a verifiable corrective and preventive action show Health Canada you can be trusted to fix problems without a formal condition on your licence. Use our GMP inspection-readiness self-assessment to pressure-test your site before Health Canada does.

3. Risk-based, less prescriptive oversight

The third theme is a shift from prescriptive rules to risk-based, outcome-focused oversight. Instead of one fixed process for every site, Health Canada wants the flexibility to match its attention to the risk a site presents. Lower-risk, well-run sites could see a lighter touch, while higher-risk sites could see more.

Risk-based oversight rewards companies that can prove control. That means a mature quality management system, reliable data, current supplier qualification and documentation that stands up on its own. A risk-tiered supplier qualification programme is a good example of the kind of evidence that signals low risk to a regulator.

How DEL Phase 2 fits with MDEL Phase 2

Health Canada is modernizing both licensing systems at once. The medical device establishment licence, or MDEL, framework is further along. MDEL Phase 2 amendments were finalized in 2026 and come into force on 14 December 2026. The drug side, DEL Phase 2, is a step behind, still at the proposal stage. Companies that handle both drugs and devices should plan for two overlapping transitions.

If you hold or plan an MDEL, our explainers on the new MDEL rules in force in December 2026 and the MDEL Phase 2 amendments cover what is changing there. The common thread across both is the same: accurate licences, current records and a quality system that matches what you actually do.

Who is affected by DEL Phase 2

Everyone who holds or needs a drug establishment licence is in scope. That includes fabricators, packagers and labellers, importers, distributors, wholesalers and testing laboratories, for both human and veterinary drugs. Importers have the most to track, because their licence also carries foreign building listings and the evidence that supports them. Companies that rely on a third party for any licensed activity should confirm who holds the DEL for each step, so there are no gaps when the rules change.

A short history of DEL modernization

Health Canada has been updating establishment licensing in stages. Phase 1 came through SOR/2024-136, which was registered on 17 June 2024 and published on 3 July 2024. Most of its provisions came into force 180 days after registration, while the designated regulatory authority and finished product testing changes applied on registration.

Phase 1 focused on three areas. It moved the list of recognized foreign regulatory authorities into a maintained online list, so Health Canada can keep it current without a new regulation each time. It added conditional exemptions from confirmatory finished product testing for certain radiopharmaceuticals with a short useful life and for certain gene and cell therapies, where re-testing on import is impractical. And it tightened the detail and timelines for recall reporting. Phase 2 turns to the licensing lifecycle itself: the annual review, the enforcement tools and the overall style of oversight.

What DEL Phase 2 will not change

It helps to be clear about what is not on the table. The requirement to hold a DEL for fabricating, packaging, labelling, testing, importing, distributing or wholesaling a drug is not going away. Neither is the duty to comply with good manufacturing practices, to list foreign buildings for imported drugs, or to keep the licence accurate. Phase 2 is about making oversight more flexible and less burdensome where it safely can be, not about lowering the bar for quality. Companies that read it as a chance to relax controls will misjudge it.

What your DEL must reflect today

Whatever Phase 2 finalizes, the fundamentals of a DEL stay the same. Use this reference to check that your licence still matches your operations.

DEL Phase 2 readiness checklist

• Confirm every licensed activity, drug category and building on your DEL matches your real operations.
• Verify that sterile dosage form authorizations are correct and supported by GMP evidence.
• Keep foreign building listings current, including activities, categories and any mutual recognition agreement coverage.
• Diarize the 1 April annual licence review and prepare its documents well in advance.
• Maintain current evidence of GMP compliance for each building, and track domestic inspection dates.
• Keep a fast, documented CAPA process so inspection findings are closed with verifiable actions.
• Assign someone to monitor Canada Gazette, Part I and submit comments during the Phase 2 consultation.
• Map how proposed terms, conditions or suspension provisions could affect your specific licence.

Common mistakes to avoid

• Treating the annual licence review as a once-a-year scramble instead of a year-round record discipline.
• Letting the licensed activities or building list drift out of step with what the site actually does.
• Missing the 1 April annual licence review deadline, which can trigger steps to cancel the licence.
• Assuming Phase 2 is already law. It is a proposal, and the final wording may differ.
• Ignoring the consultation. Companies that do not comment lose the only chance to influence the rules.
• Weak CAPA that leaves findings open, inviting the very terms and conditions Phase 2 will make easier to impose.

A worked example: an importer preparing for Phase 2

Consider an importer of sterile injectables with two foreign fabrication sites, one in a country covered by a mutual recognition agreement and one that is not. Today the company scrambles each March to assemble GMP evidence for both sites before the 1 April annual review. Preparing for Phase 2, the quality team builds a living licence file: a single record that maps each foreign building to its activities, categories and sterile authorizations, flags which site qualifies for a mutual recognition agreement waiver, and tracks the next evidence renewal date for the other. When the annual review arrives, it is a quick confirmation rather than a project. If Phase 2 reduces the review burden, the company gains. If it adds new conditions after an inspection, the same file shows control. Either way, the work pays off.

How to use the consultation

The comment period is a practical tool, not a formality. When the proposal is published in Canada Gazette, Part I, you will have 75 days to respond. Make the time count.

• Read the proposed regulatory text and the Regulatory Impact Analysis Statement that accompanies it.
• Identify the provisions that touch your licence, your annual review and your inspection history.
• Estimate the time and cost impact on your site, with concrete examples.
• Submit clear, specific comments before the deadline, and keep a copy for your records.

Frequently asked questions

Is DEL Phase 2 in force yet?

No. DEL Phase 2 is a proposed amendment to the Food and Drug Regulations. Health Canada expects to publish it in Canada Gazette, Part I in Fall 2026 or Winter 2027, followed by a 75-day comment period. It becomes law only after it is finalized in Canada Gazette, Part II.

What will change in the annual licence review?

Health Canada has said Phase 2 will reduce the burden of the annual licence review, but the final wording is not published. Until it is, the current rule stands: every DEL holder must submit an annual licence review by 1 April each year, including applicable information and evidence of GMP compliance.

What are terms and conditions on a DEL?

Terms and conditions are requirements Health Canada could attach to a licence, such as a specific corrective action, extra reporting or a defined timeline. Phase 2 proposes to give Health Canada this tool for DELs, along with modernized suspension provisions, similar to what already exists for medical device establishment licences.

How is DEL Phase 2 different from MDEL Phase 2?

DEL Phase 2 covers drug establishment licences and is still at the proposal stage. MDEL Phase 2 covers medical device establishment licences, was finalized in 2026 and comes into force on 14 December 2026. They are separate amendments on similar timelines.

Who needs a drug establishment licence?

Any Canadian establishment that fabricates, packages or labels, tests, imports, distributes or wholesales a drug, human or veterinary, needs a DEL under Part C, Division 1A of the Food and Drug Regulations. Natural health products are licensed separately under their own regulations.

How can we prepare before the rules are final?

Keep your licence accurate, your GMP evidence current and your CAPA process fast. Diarize the 1 April annual licence review, monitor Canada Gazette for the Phase 2 proposal, and plan to comment. A gap assessment now will show where your licence file and quality system need work before any new rule applies.

How MFLRC can help

MFLRC helps Canadian and international drug companies hold, maintain and defend their establishment licences. Through our regulatory affairs, licensing and import and export services, we run DEL readiness gap assessments, align your building listings and activities with your real operations, build and strengthen SOPs and quality management systems, prepare you for Health Canada GMP inspections, and support annual licence reviews, licence amendments and import and export compliance. If Phase 2 brings new terms, conditions or suspension provisions, our Quality Assurance Person services and audit support help you stay ahead of them.

We also track the Forward Regulatory Plan so you do not have to, and we can draft your consultation comments so your operational reality is heard before the rules are set. See how we support pharmaceutical companies across the regulatory lifecycle.

Conclusion

DEL Phase 2 is still a proposal, but its direction is set: a lighter annual licence review, stronger compliance tools and more risk-based oversight. The companies that come through the transition smoothly will be the ones whose licences already match their operations, whose GMP evidence is current and whose quality systems can prove control. Start tightening those now, watch for the Canada Gazette proposal, and use the comment period. Preparation today turns a regulatory change into a routine update rather than a disruption.

Sources and references

• Health Canada, 2026 to 2028 Forward Regulatory Plan.
• Health Canada, Modernizing the Drug Establishment Licensing (DEL) Framework.
• Health Canada, Drug establishment licences overview.
• Health Canada, Guidance on Drug Establishment Licences (GUI-0002).
• Canada Gazette, Part II, SOR/2024-136 (Recalls, Establishment Licences and Finished Product Testing).