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Digest of the Week — Private Label Generic Drugs

2013 CarswellOnt 15719 |
Shoppers Drug Mart Inc. v. Ontario (Minister of Health and Long-Term Care) |
Supreme Court of Canada


 

Administrative law | Review of subordinate legislation | Ultra vires | Not authorized by parent statute


As part of 2010 reforms, conditions for listing drug product pursuant to Regulations under Ontario Drug Benefit Act and Drug Interchangeability and Dispensing Fee Act were amended to prohibit listing of private label generic drugs — Pharmacies brought challenge to validity of provisions — Court of Appeal reversed decision of Divisional Court, finding previously impugned regulations intra vires their parent statutes and of full force and effect — Pharmacies appealed decision — Appeal dismissed — Original legislative intent of Acts was to combat high drug prices caused by manufacturers quoting artificially high prices while providing hidden discounts to pharmacies — Private label Regulations of 2010 fit into overall strategy of Acts by ensuring pharmacies made money exclusively from providing professional health care services instead of sharing in revenues of drug manufacturers by setting up their own private label subsidiaries — Private label manufacturers’ affiliation to pharmacies could make them more resistant to Ontario’s efforts to promote lower prices; Regulations were therefore connected to statutory purpose of controlling and reducing drug prices — Fact that Regulations may have been under-inclusive because they failed to include corporate models which did not currently exist did not make them inconsistent with or extraneous to statutory purpose of Acts.


Commercial law | Trade and commerce | Consumer protection | Public health legislation | Pure food and drugs | Regulation of new drugs


As part of 2010 reforms, conditions for listing drug product pursuant to Regulations under Ontario Drug Benefit Act and Drug Interchangeability and Dispensing Fee Act were amended to prohibit listing of private label generic drugs — Pharmacies brought challenge to validity of provisions — Court of Appeal reversed decision of Divisional Court, finding previously impugned regulations intra vires their parent statutes and of full force and effect — Pharmacies appealed decision — Appeal dismissed — There was no given commercial “right” to trade in market as highly regulated as pharmaceutical market in Ontario — Manufacturers had no right to sell drugs in public market in Ontario unless they were listed in Formulary, and no right to sell generic drugs at all unless they were designated as interchangeable; Lieutenant Governor in Council had authority to set conditions drug companies needed to meet in order to enter and remain in market — Private label Regulations restricted market access only if particular corporate structure was used and could not be characterized as total or near-total ban on selling generics drugs in Ontario.


Statutes | Interpretation | Rules of interpretation | Object and purpose


As part of 2010 reforms, conditions for listing drug product pursuant to Regulations under Ontario Drug Benefit Act and Drug Interchangeability and Dispensing Fee Act were amended to prohibit listing of private label generic drugs — Pharmacies brought challenge to validity of provisions — Court of Appeal reversed decision of Divisional Court, finding previously impugned regulations intra vires their parent statutes and of full force and effect — Pharmacies appealed decision — Appeal dismissed — Applicable legislation in this case expressly authorized making distinctions between different drug manufacturers, thus “discrimination” argument was without foundation — Prescription of conditions to be met by drug manufacturers necessarily created classes of manufacturers who did or did not meet those conditions and to whom regulations applied differently — Far from being “discriminatory”, distinctions Regulations drew flowed directly from statutory purpose and scope of mandate.



As part of 2010 reforms, the conditions for listing drug product pursuant to Regulations under Ontario Drug Benefit Act and Drug Interchangeability and Dispensing Fee Act were amended to prohibit the listing of private label generic drugs. Pharmacies brought a challenge to the validity of these provisions. The Court of Appeal reversed the decision of the Divisional Court. The previously impugned regulations were found to be intra vires their parent statutes. They were deemed to regulations to be of full force and effect. The pharmacies appealed the decision of the Court of Appeal.


Held: The appeal was dismissed.


Per Abella J. (McLachlin C.J.C., LeBel, Rothstein, Cromwell, Moldaver, Wagner JJ. concurring): The original legislative intent of the Acts was to combat high drug prices caused by manufacturers quoting artificially high prices while providing hidden discounts to pharmacies. The private label Regulations of 2010 fit into the overall strategy of the Acts by ensuring pharmacies made money exclusively from providing professional health care services instead of sharing in the revenues of drug manufacturers by setting up their own private label subsidiaries. The private label manufacturers’ affiliation to pharmacies could make them more resistant to Ontario’s efforts to promote lower prices. The Regulations were therefore connected to the statutory purpose of controlling and reducing drug prices. The fact that Regulations may have been under-inclusive because they failed to include corporate models which did not currently exist did not make them inconsistent with or extraneous to the statutory purpose of the Acts.


There was no given commercial “right” to trade in a market as highly regulated as the pharmaceutical market in Ontario. Manufacturers had no right to sell drugs in the public market in Ontario unless they were listed in the Formulary, and they had no right to sell generic drugs at all unless the drugs were designated as interchangeable. The Lieutenant Governor in Council had the authority to set the conditions drug companies needed to meet in order to enter and to remain in the market. Private label Regulations restricted market access only if a particular corporate structure was used and could not be characterized as a total or near-total ban on selling generics drugs in Ontario.


The applicable legislation in this case expressly authorized making distinctions between different drug manufacturers, thus the “discrimination” argument was without foundation. The prescription of conditions to be met by drug manufacturers necessarily created classes of manufacturers who did or did not meet those conditions and to whom regulations applied differently. Far from being “discriminatory”, the distinctions drawn by the Regulations flowed directly from the statutory purpose and scope of mandate.


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