The Protecting Canadians from Unsafe Drugs Act is known as Vanessa's Law in honour of the late daughter of Conservative MP Terence Young.
The 15-year-old died of a heart attack 13 years ago while on a prescription drug for a stomach ailment. The medication was later deemed unsafe and pulled from the market.
Young, MP for Oakville, has been fighting ever since for a more stringent Canadian drug-monitoring system.
Under the new legislation, the government now has the power to initiate mandatory recalls for unsafe drugs and to demand reports from health-care institutions on adverse drug reactions.
The bill also allows the government to impose tough new penalties for unsafe products, including jail time and new fines of up to $5 million a day instead of the current $5,000.
Drug companies must also revise labelling to provide details on health risks, and to do further testing on medications when they are shown to pose dangers to some consumers, especially children.
Health Minister Rona Ambrose told a news conference that Canadians deserve to have confidence that the medicines they use are safe.
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