On August 30, 2012, the Supreme Court of Canada granted leave to
appeal the decision of the Ontario Court of Appeal upholding the
Ontario regulations that restrict pharmacies from selling
"private label" generic drugs. The parties
challenging the regulations include companies that own, operate and
franchise retail pharmacies, including Shoppers Drug Mart Inc., and
Sanis Health Inc., a generic drug company that sells its products
primarily to its parent company, Shoppers Drug Mart.
In order for the cost of a drug product to be reimbursed by the
Ontario government, the Ontario Drug Benefit Act ("ODBA")
mandates that the drug product be listed on the Ontario Drug
Benefit Formulary. For a generic drug product to be dispensed
in place of the brand name version of the drug, Ontario's Drug
Interchangeability and Dispensing Fee Act ("DIDFA")
requires that the generic drug product be listed as interchangeable
with the brand name version. Under the impugned regulatory
provisions1 introduced in 2010 pursuant to these two
statutes, "private label" generic drugs cannot be listed
on the Ontario Drug Benefit Formulary and cannot be designated as
interchangeable. Generally speaking, a "private
label" generic drug is defined as one that is supplied by a
generic drug company that does not fabricate the drug itself and
that does not have an arm-length's relationship with the retail
In the 2-1 decision from which leave to appeal was granted, the
Ontario Court of Appeal reversed the decision of the Divisional
Court holding the "private-label" regulatory provisions
to be outside the scope of the regulation-making power awarded to
the government under the ODBA and the DIDFA. MacPherson and
Karakatsanis JJA (as she then was) held that the impugned
provisions were within the jurisdiction of the government as they
only sought to regulate — not to prohibit — the
"private-label" generic companies from participating in
the Ontario drug supply market. The Court also held that the
regulations were within the statutory purpose of the ODBA and the
DIDFA to "to make generic drugs available to eligible persons
and the rest of the public at low prices". In so
finding, the majority noted that these provisions were introduced
in order to prevent the "private label" model from
circumventing the 2006 legislative ban on rebates paid by generic
companies to pharmacies, which could reduce the competitiveness of
the generic drug market and make future price reductions more
In dissent, Justice Epstein held that the regulations fell
outside the regulation-making authority of the government as there
was no nexus between the drug prices and the "private
label" model, and because the effect of the provisions was
prohibitive, rather than regulatory. She further would have
declared the provisions to be of no force and effect on the basis
that they interfered with property and commercial rights in a
manner not authorized by the ODBA or DIDFA and because they
constituted unauthorized discrimination against
"private-label" drug manufacturers.
No date for the hearing has been set as of yet.
The full text of the Ontario Court of Appeal and the Ontario
Divisional Court decisions can be found at:
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