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 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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.