In Canada, melatonin is deemed to be a "nutritional supplement." It's sold in most pharmacies and health food stores as a natural and healthy way of overcoming jetlag or ensuring a good night's sleep.
In the UK, melatonin is a harder to come by. In 1995, its designation was changed from nutritional supplement to "medicinal product", which meant that it could no longer be sold alongside vitamins in the health food store. Yet - in a classic Catch-22 - because melatonin was not licensed to be sold as a medicine, was hard to obtain on a prescription basis also (this article describes the late 1990s through to late 2000s system).
Things began to change in in 2008, when the prescription melatonin-based medication Circadin was approved. Other forms of melatonin have also been licenced by the European Medicines Agency, so can be sold in the UK on their European licences. It is also legal to import and sell unlicensed medications into the UK (see here for details) which explains why US-made melatonin products are readily available on-line through sites such as amazon.co.uk. Yet the NHS prescription guidelines still warn "Melatonin is not suitable for everyone and some people should never use it. Other people should only use it with special care...."
Melatonin shows how far medicine is from being an exact science. One might think that there would be some objective criteria for deciding whether a substance is a nutritional supplement or a medicinal product, that Canada and the UK would apply the same criteria, examine the same scientific evidence, and reach the same conclusion about melatonin's safety. One would be wrong.
A regulator risks making two types of mistakes. If controls are too tight, people who have a legitimate use for a drug may be unable to obtain it. If controls are too lax, people may misuse a drug and be harmed by it. Since it's extremely difficult to estimate the unmet needs for a drug or the amount of overuse, let alone the cost of each of these, pharmaceutical regulation is an inexact science.
In this context, history matters. I don't know why melatonin was not regulated when it first came on the market - perhaps because people had less knowledge of the power of hormones back then, perhaps because of the way pharmaceutical regulations were written there was no need to seek approval for a naturally-derived product such as melatonin. But once a substance is readily available, it's hard to take it off the market. There are many regular melatonin users in Canada, and they would demand a pretty good explanation of why they should be deprived of a product that appears to promote sleep without producing any readily detectable harmful side effects.
Melatonin illustrates the fact that the regulation of medicines is an economic choice, as well as a medical one. Some gain from tighter control of pharmaceuticals, some people lose. This is apparent by considering the various players in the pharmaceutical business: governments, private insurers, consumers, and pharmaceutical companies.
Tighter control imposes costs on governments. In Canada and the UK, the public health care system pays for doctors visits. Any time someone goes to see the doctor to get a prescription filled, that's a cost on the public purse. The UK, as well as some Canadian provinces (e.g. BC and Quebec) have public pharmacare programs, covering the costs of some prescription drugs. Putting a medicine on the list of approved (and paid for) pharmaceuticals might increase health care costs (or decrease them, if the new treatment replaced another, more expensive treatment). (Though governments have an interest in the well-being of their citizens, and presumably take this into account also).
Private health insurance, in Canada anyways, typically only pays for prescription medications. To the extent that private insurers aren't simply able to pass costs onto their customers, they have an interest in deregulating routine treatments. It's far cheaper (for the insurer) if people buy antibiotic cream, antifungal cream, cold medications or sleeping aids over the counter. Only when a low cost treatment has the potential to prevent high cost treatments down the road would a private insurer be interested in paying for it.
Consumers' interests are a little bit harder to work out. When a medication is available over the counter, the consumer has to pay for it him or herself, which is a cost. At the same time, it is extremely convenient to be able to buy medications without a prescription. Moreover, even when governments and insurance companies pay, eventually the cost will be shifted back onto taxpayers and consumers. But consumers do not share equally in the costs of paying for public and private health insurance. A person who contributes more than average (pays a high amount of taxes, say) would have an interest in minimizing public costs; a person who pays little or no taxes would have an interest making government health insurance as generous as possible. So, even though consumers have a huge stake in this issue, their interests are hard to work out - see, for example, coverage of the recent US decision to change the allergy medication Allegra from prescription to over the counter here.
The final group with a stake in pharmaceutical regulation is the drug companies themselves. For them, it's a gamble. Over the counter availability leads to higher sales. At the same time, competition from generics and the lack of a third-party payer puts downwards pressure on prices. For allergy medications such as Claritin, the switch from prescription to over the counter has been highly profitable. For the anti-cholesterol drug Lipitor, the jury is still out.
It is worth noting, however, that drugs tend to move from prescription to over the counter status at around the time that their patent protection expires. Producers prefer low sales/high price, but when the lack of patent protection puts downwards pressure on prices, they prefer high sales/low price to low sales/low price.
Medicine has all of the trappings of science - the white coats, the degrees on the wall - but it's conditioned by history, custom, tradition and, of course, economics.