Law Times

PAGE 10 FOCUS August 22, 2011 • LAw times Pharmacies, manufacturers in pitched battle with gov't BY ROBERT TODD Law Times A high-stakes battle pit- ting drug manufactur- ers and pharmacies against the Ontario govern- ment continues to heat up as parties await a decision from the Ontario Court of Appeal. Th e litigation is over the introduction province's of regulations concerning private- label drug products under the Ontario Drug Benefi t Act and the Drug Interchangeability and Dispensing Fee Act. Jason Markwell, a partner at Norton Rose OR LLP, notes the province has ushered in a series of important changes since 2006 that altered the way reimbursements are made to the price of eligible drug products. It began with Bill 102, which abolished rebates to pharmacies. It also changed the price at which Ontario re- imburses eligible drug prod- ucts to a 25-cent model from 70 cents originally. Litigation against the prov- ince, initiated by Katz Group Canada Ltd. and Shoppers Drug Mart, marks the fi rst time a case has come forward involving a non-arm's-length corporate rela- tionship between the manufac- turer and the pharmacy. "Th is sort of changes the way government has looked at its pricing models," says Mark- well. "It seems to think that what's going on here somehow violates the ban on rebates. Th e Shoppers Drug Mart people and the Katz people say, 'It's not a ban on anything. Th ere's nothing in the Ontario Drug Benefi t Act or the Drug Inter- changeability and Dispensing Fee Act that prevents us from carrying on business the way we are. We are in fact trying to make our drugs available to the public and to make some money. But we're off ering our drugs at the same price they would have paid anyway. And the fact that we may be making money upstream through the sup- ply is irrelevant to the regulatory purpose." Jill Daley, also with Norton Rose, notes that private labels aren't new to the over-the-coun- ter drug regulatory regime with phar- macies. Other Ca- nadian provinces already approve re- imbursements for them. But On- tario's approach since 2006 could have major implications for the policies in those other provinces. "Ontario has a very large pa- tient population," says Daley. "Ontario's public drug plan has the ability to impact on how other provincial drug plans may model their practices or pricing." Ontario's Divisional Court The government 'seems to think that what's going on here somehow vio- lates the ban on rebates,' says Jason Markwell. the provisions in Ontario's regula- tory scheme that prohibited pri- vate-label generic drugs. Th e court ren- dered decisions in favour of the pharmacies and manufacturers in February, but after the Ontario Court of Appeal granted leave to appeal to the attorney general of Ontario, the case was heard in June. Th e judgment re- mained under reserve at press time. Markwell says it's diffi cult to predict how the Court of Appeal will come down on the issue. "Th e Divisional Court was heard the fi rst parallel chal- lenges on the issue in October 2010. Th at's where Shoppers and Katz sought to strike down pretty emphatic in rejecting this ban," he notes. Th e court pointed to three reasons for striking the regula- tions. It said they're not in line with the purposes of the two acts; they're beyond the scope of the regulatory powers within the parent statutes; and they interfere with the right of trade and commercial freedom. "Any one of these defects is suffi cient to render the regu- lation invalid," wrote Justice Anne Molloy on behalf of the Divisional Court panel. "In combination, the defects are even more overwhelming." She later added: "Accord- ingly, I would grant the relief sought in the form of an order declaring that s. 12.02 of On- tario Regulation 201/96 made under the ODBA and s. 9 of Ontario Regulation 935 made under the DIDFA are ultra vires and of no force and eff ect." Markwell suggests it would be surprising to see the matter end up at the Supreme Court of Canada as it's a case of fi rst instance. Th e top court typical- ly waits until there have been diff erent approaches to a legal issue before weighing in on the topic. Having said that, the matter YOUR ONE-STOP RESOURCE FOR INTERPRETING ONTARIO'S NEW ENVIRONMENTAL TOXICS LEGISLATION NEW PUBLICATION ANNOTATED GUIDE TO THE ONTARIO TOXICS REDUCTION ACT JOSEPH F. CASTRILLI Provide the best possible advice to your clients by interpreting the new Ontario Toxics Reduction Act, 2009 correctly. 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Reg. 455/09, and selected sections of other legislation referenced in the text Help your clients comply with this new environmental legislation with Annotated Guide to the Ontario Toxics Reduction Act. isn't important only to the par- ties directly involved in the liti- gation. In fact, all generic drug manufacturers and even some innovative companies will be eagerly awaiting the Ontario Court of Appeal's ruling. Generally speaking, Mark- well believes the case is a di- rect result of the challenges the provinces are facing in terms of the cost of running their health programs. "At a macroeco- nomic level, all of these payers are coming to terms with [the question of] how do we deal with increasing drug costs?" he says. "Th is is just the most re- cent example of how Ontario is trying to deal with it." It's a topic that's unlikely to go away any time soon, adds Daley. 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• Provocative Comments
• Cautionary Note
• Focus On Health/Life Sciences Law