Canada: Ontario Drug System Reform Now Finalized

The Ontario government has published the final version of the amended regulations (final regulations) under the Ontario Drug Benefit Act (ODBA) and the Drug Interchangeability and Dispensing Fee Act (DIDFA). As we reported when the draft regulations were first published for comment (Torys' bulletin), the amendments will reduce the prices paid for generic drugs in both the public and the private sectors, and will affect commercial arrangements between entities in the drug supply chain. Many key amendments will come into force on July 1, 2010 and some on later dates.

The final regulations have been revised since they were first published for comment and the key provisions are outlined below.

Generic Drug Prices

As in the proposed regulations, the drug benefit price for listed interchangeable drugs (the price that the government will pay to pharmacies for supplying generic drugs to beneficiaries under Ontario drug programs) will still generally be capped at 25% of the cost of the original product, effective July 1, 2010 (the 25% Pricing Rule),1 but there are new exceptions to the rule.

  • One new exception is triggered if the drug benefit price of the original product has been reduced by more than 20% in the two-year period preceding the date on which the interchangeability designation is sought; in this case, the price will generally be capped at 25% of the price of the original product before its first price reduction.
  • Another new exception applies to interchangeable drugs that are not solid dosage forms, for which the price will generally be capped at 35% of the price of the original product.
  • Finally, a new exception applies to products proposed for reimbursement under the ODBA on or after April 1, 2012 if the proponent submits evidence that the patent of the original product was successfully challenged and the proponent has not entered into any arrangement with the original manufacturer other than a cross-licensing agreement. In this case, the price will be capped at 50% of the drug benefit price of the original product for the three-month period following the decision to reimburse.2

The treatment of generic drug prices in the private sector is unchanged in the final regulations: prices will still be capped in the private sector, initially at 50% of the drug benefit price (effective July 1, 2010), and then capped at 35% (effective April 1, 2011) and finally capped at the drug benefit price (effective April 1, 2012). The prices of drugs that are not listed in the Ontario Drug Benefit Formulary as interchangeable are not capped by the regulations.3


Under the final regulations, professional allowances (amounts paid by manufacturers to pharmacies to be used for patient benefit initiatives) will be completely eliminated in the public sector effective July 1, 2010. Professional allowances will be phased out and eventually eliminated in the private sector as well, when amendments to DIDFA come into force on April 1, 2013. During the phase out, caps on professional allowances will be reduced in the private sector, initially to 50%, then 35%, and then 25% of the cost of the products reimbursed in the private sector, coincident with the reduction of generic drug prices in that sector.

Under the final regulations, benefits provided in accordance with "ordinary commercial terms" continue to be excluded from the prohibition against rebates, but further limitations have been placed on these benefits. Regarding generic drugs, in addition to the requirements set out in the earlier proposed regulations (i.e., benefits must be provided in the ordinary course of business, be set out in a written agreement and relate to a prompt payment discount, a volume discount or a distribution service fee), the final regulations stipulate that the total value of any benefits must not exceed 10% of the value of the listed drug products, based on the drug benefit price in the Formulary and the number of units dispensed by a pharmacy and reimbursed under the ODBA. (In the case of drugs supplied in the private sector, the limit is set at 10% of the value of the interchangeable drug products, based on the number of units dispensed by a pharmacy at each product's price.) If requested, the manufacturer and the person who receives the benefit must report the net selling price of the drug products to the Executive Officer of the Ontario Drug Programs. For brand name products, the final regulations, like the proposed regulations, appear to permit only prompt payment discounts granted according to ordinary commercial terms.4 The provisions relating to ordinary commercial terms come into force on July 1, 2010.

Private Label Products

The final regulations still prohibit reimbursement for "private label products" under Ontario drug programs and prohibit the designation of private label products as interchangeable under DIDFA. The definition of private label products, which has been expanded to capture more arrangements, now includes a drug product whose manufacturer (who applies for listing or interchangeability) neither directly fabricates the product nor controls or is controlled by the person fabricating, and either (i) the manufacturer has no arm's-length relationship with a wholesaler, a pharmacy operator or a company that owns, operates or franchises pharmacies; or (ii) the product is to be supplied under a marketing arrangement associating the product with a wholesaler or one or more pharmacy operators or companies that own, operate or franchise pharmacies. This amendment will come into effect on July 1, 2010.

Pharmacy Compensation

The final regulations no longer contain the concept of different markups payable in respect of drugs sourced from comprehensive wholesalers versus self-distributors or different markups depending on pharmacy location. The markup will remain at 8% for all supplies under the ODBA. As under the proposed regulations, four categories of pharmacies are created, depending upon their location (rural versus urban) and the distance between pharmacies in an area, with rural and underserviced areas qualifying for higher dispensing fees.

Finally, the final regulations create a compensation scheme whereby the Executive Officer will pay pharmacy operators a fixed fee for every claim submitted over a three-year period beginning on July 1, 201o. The fee is set to decline annually and will be eliminated on March 31, 2013.


1 The amendments have created an immediate exception to the current 50% cap on generic drug prices for drugs containing atorvastatin; the price for any such drugs proposed for interchangeability are immediately capped at 25%. This exception will be revoked on July 1, 2010, when prices of all generic drugs will generally be capped at 25%. Presumably, the Ministry of Health is expecting applications for interchangeability designations in anticipation of patent expiry for the original product.

2 The regulations also contain an exception to the pricing rule for applications to list single-source generic drugs (with a ceiling that is the drug benefit cost of the original product) and for continued listing of generic drugs that have been single source for two years or for situations in which a manufacturer can establish an increase in raw material costs, with an absolute limit, which is the price of the original drug (these exceptions existed in the regulations prior to amendment). According to the final amendments, the exceptions relating to continued listing have been expanded to permit an exception to the pricing rules if a manufacturer can establish that direct manufacturing costs have increased and the absolute price ceiling has been abolished if the manufacturer can justify a higher price.

3 This means that no caps will apply in the private sector for drugs that are not otherwise eligible for coverage under Ontario drug programs.

4 There is also seemingly no requirement for the prompt payment discount to be provided in the ordinary course of business or to be set out in a written agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions