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PAGE 10 FOCUS augusT 23, 2010 • Law Times Industry braces for generic drug changes A BY DARYL-LYNN CARLSON For Law Times series of amendments to Ontario's pharmaceutical drug regulations under both the Ontario Drug Benefi t Act and the Drug Interchange- ability and Dispensing Fee Act have some serious implications for generic drug manufacturers, phar- macies, and their legal advisers. Th e changes initially sparked an outcry by pharmacies in partic- ular, which complained they could lose money as a result of them. Th e changes, most of which took eff ect July 1, were ostensi- bly intended to lower prices for generic drug products in both the public and private sectors. Th ey will also aff ect many of the com- mercial arrangements that were previously permitted between manufacturers and pharmacies to promote the retail distribution of generic drugs. But for lawyers, the com- plex changes will require those representing pharmacies or manufacturers to undertake some signifi cant reading time to absorb all of the nuances that will aff ect their clients. "For lawyers, they're go- ing to have to be aware be- cause to the extent that they represent manufacturers and pharmacies, they're going to have know what this means so they can be in compliance with the legislation," says Lisa Corrente, a partner at Torkin Manes LLP and chairwoman of the Ontario Bar Associa- tion's health law section. "I imagine many of their clients will be coming to them from a business perspective with concerns that lawyers will have to address from a legal and a practical perspective." For example, she cites the the government had no control over where the money went. "What that means is they'll be allowed to give a rebate subject to certain conditions," says Corrente, who points out that it's not necessarily all bad news as some of the fi ner points of the legal defi nitions haven't been included in the amended legislation. "Th e new regulations have Manufacturers will still be able to provide rebates in some circumstances, says Lisa Corrente. new legislation's elimination of professional allowances that generic drug manufacturers have been able to pay pharma- cies in order to encourage them to carry their products. Th e legislation also limits rebates paid by manufacturers to wholesal- ers, pharmacies, and companies that own franchises largely because excluded the actual defi nition of rebates and replaced that with the value of a benefi t. What that means is they'll be allowed to give a rebate subject to cer- tain conditions. So for the time being, this exemption might be an opportunity for manufactur- ers and pharmacies to revamp the way they do business and the way they provide services regarding supplies." Corrente also notes that professional allowances in the private sector will be phased out incrementally over three years before the full force of the law comes into eff ect in April 2013, thereby enabling the industry to adjust. Th e amendments to both acts have been a work in progress for upwards of two years. Earlier this year, the province held public consultations as a result of nega- tive feedback from generic drug makers and pharmacies and soft- ened its approach. In a paper about the changes, Ingrid VanderElst, a partner with Torys LLP's intellectual property group, explains their implica- tions in the fi rm's food and drug regulatory newsletter. "Under the fi nal regulations, benefi ts provid- ed in accordance with 'ordinary commercial terms' continue to be excluded from the prohibition against rebates, but further limi- tations have been placed on these benefi ts," she notes. VanderElst also points out that those benefi ts that are excluded from the rebate prohibition must meet certain terms to comply, including a written agreement between the generic drug manu- facturer and retailer outlining a vol- ume or prompt-payment discount in order to meet the criteria. "If requested, the manufac- turer and the person who receives the benefi t must report the net selling price of the drug prod- ucts to the executive offi cer of the Ontario drug programs," Van- derElst cautions. Regarding private label prod- ucts, she notes: "Th e fi nal regula- tions still prohibit reimbursement for 'private label products' under Ontario drug programs and pro- hibit the designation of private la- bel products as interchangeable" under the dispensing fee act. VanderElst explains that the Inside you will find: • an up-to-date alphabetical listing of more than 57,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; • contact information for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; • legal and government contact information related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law-related offices of importance. More than a phone book Hardbound • Published February each year • On subscription $141 • P/C 0600140999 One-time purchase $157 • P/C 0600010999 • ISSN 0084-8573 CD-ROM • On subscription $214 • P/C 0600260999 One-time purchase $229 • P/C 0600210000 For a 30-day, no risk evaluation call 1.800.565.6967 Canada Law Book, a Thomson Reuters business. Prices subject to change without notice, to applicable taxes and shipping and handling. www.lawtimesnews.com CLL ad - new.indd 1 8/19/10 5:09:43 PM defi nition of private label prod- ucts has been expanded to in- clude more cordial arrangements with reciprocal benefi ts, includ- ing potentially a drug product whose manufacturer applies for a listing or interchangeability sta- tus and meets certain criteria. She concludes with a summary about pharmacy compensation, which explains how the amendments have tried to simplify matters. "Th e fi nal regulations no lon- ger contain the concept of diff er- ent markups payable in respect of drugs sourced from compre- hensive wholesalers versus self- distributors or diff erent markups depending on pharmacy loca- tion," she writes. VanderElst notes the amend- ments include four categories of pharmacies, which depend on their location and distance be- tween each other in one urban area, a provision enabling under- serviced locations to qualify for higher dispensing fees. Th erefore, it may take some time for lawyers and their ge- neric drug manufacturing and pharmacy clients to determine whether the legislation will be benefi cial or not. Th e general consensus is there likely won't be a determination or any proposed amendments to further alter the two legislative changes until the recent ones are in full eff ect in 2013. LT