Canada: Preliminary Overview of Reforms Proposed to Ontario’s Drug Plans

Last Updated: May 19 2006
Article by Stephen Andrews, Jeffrey S. Graham and John Risk

Most Read Contributor in Canada, September 2016

The Government of Ontario has introduced legislation (Ontario Transparent Drug System for Patients Act, 2006) that will amend the Drug Interchangeability and Dispensing Fee Act ("DIDF") and the Ontario Drug Benefit Act ("ODBA") (the "Bill"). With a few exceptions, the amendments to the DIDF and the ODBA, and related regulations, are scheduled to come into force on October 1, 2006. In introducing the Bill, the Government cited a number of reasons, including the need to:

  • get better value from the approximately $3.5 billion spent by the Government of Ontario on drugs under various provincial drug plans,
  • provide better access to drugs to residents of Ontario, and
  • help employers manage drug costs under employer sponsored drug plans.

At the same time, the Government has announced significant changes to policies related to Ontario's drug plans. The Government notes that more than 2 million residents benefit from government drug plans in Ontario, notably senior citizens, those on welfare and on the Ontario disability support program. The Government has acknowledged that the decision making process with respect to drug related decisions is not as transparent as it might be and public participation in the decision making process is not significant. In addition, the Government has acknowledged that there is an opportunity to make better use of the skill and experience of pharmacists in the administration of the drug plans.

Key Provisions of the Bill

Executive Officer

A new position of "Executive Officer" is being created as a Cabinet appointment. The Executive Officer will have previous power and functions of the Minister of Health and Long Term Care (the "Minister") to update the Formulary, designate listed drug products and designate products to be interchangeable with others. In addition, the Executive Officer will have the power to remove such designations.

The Executive Officer will have authority, for the purpose of determining compliance with the ODBA or the DIDF, to require a manufacturer, wholesaler, supplier of a listed substance, operator/owner/franchisor of a pharmacy to provide information, other than personal information, to the Executive Officer.

In addition, the Executive Officer will have a number of additional powers, including the power to:

  • establish the price for a listed drug product,
  • establish the price for a drug product, not on the Formulary, but for which special access has been established,
  • establish rules, criteria and procedures that must be followed by a manufacturer seeking changes in the price of a listed product,
  • negotiate agreement with manufacturers of drug products, including the price for listed drug products and substances and designated pharmaceutical products,
  • make payments under the Ontario drug plans,
  • grant individual authorizations under the exceptional access program (both unlisted drugs and listed drugs with clinical conditions that have not been met), and
  • set and disburse payments for pharmacy professional services.

Comment: The decision to create an Executive Officer responsible for the drug plans in Ontario is significant and is an important building block for a number of the policy changes that have been announced and are described below. The intention in creating the new role of Executive Officer is to depoliticize the management of the drug plans and enable the Government to be more flexible and creative in plan administration. It is understood that the Executive Officer will report to the Deputy Minister of Health and Long Term Care, rather than to the Minister or to the Legislature, similar to the general manager of OHIP. The position, his/her responsibilities and the reporting relationship to the Ministry will all be sources of considerable debate until these and other matters are clarified by the Government.


The requirements for interchangeability under the DIDF are proposed to be amended such that a listed generic drug product may be designated by the Executive Officer (rather than the Minister or the Cabinet) as interchangeable with a listed patented drug product where both products have the same active ingredients in the same dosage form as well as where they have similar active ingredients in similar dosage forms. The Government has indicated that the above change will apply to the off-Formularly market as well.

Comment: The brand name manufacturers are concerned that there is no definition in the Bill for the terms "similar active ingredients" and "similar dosage form" and that, among other things, patient safety could be at risk if the changes are made as understood. In addition, the extent to which the changes that have been announced will affect off-Formulary market are uncertain. The manufacturers believe that the changes will have a major impact and represent a major intrusion into the off-Formulary market. The Government believes that the changes are relatively narrow in design and will not have the drastic impact that the industry believes. This is clearly one issue where further dialogue is urgently required.

Product Rebate Prohibition

The Bill prohibits manufacturers from providing a rebate to wholesalers, operators of pharmacies, companies that own/operate/franchise pharmacies or their directors, officers, employees or agents with respect to interchangeable products. A rebate is defined in the Bill to include, subject to regulations, currency, a discount, refund, trip, free goods, or any other prescribed benefit, but does not include a payment for prompt payment in the ordinary course. A similar prohibition is being imposed on listed drug products and listed substances as well.

Comment: It has been suggested by some members of the provincial legislature that the prohibition will affect independent pharmacies differently than the pharmacy chains. It is believed that chains will be able to reach agreements with manufacturers that protect their position in the distribution chain. The Government believes that the prohibition is in the best interests of the system and that some of the other changes proposed, including increases in dispensing fees and other professional fee opportunities for pharmacists, will balance the revenue impact resulting from the rebate prohibition.

Drug Benefit Plan Price

Drug manufacturers are prohibited from charging more than the price that is the drug benefit price as listed in the formulary for listed drug products. As proposed, a process is being established for drug manufacturers to seek price increases. The Ministry has indicated that the rationale for any such increase will need to be based on specific facts and that the cost of living changes alone will not be sufficient. The Bill includes new powers to penalize drug manufacturers for violation of the new rules.

Comment: Here again there appears to be an important difference of opinion, this time in respect of the current requirements, with Government indicating that all price increases above the listed price being forbidden and the industry believing that cost of living adjustments are permitted to be made to the listed price. The Government has indicated that it does not intend to attempt to enforce the clarified legislative regime retroactively. At the same time the Government is indicating that any manufacturer seeking to recover more than the listed price after the Bill comes into force, should be in dialogue with the Government well before October 1, 2006 (the date the Bill will come into force).

Reform of Section 8 Mechanism

Currently pursuant to Section 8 of the ODBA, upon request from a physician, the Minister may reimburse a drug that is not listed on the Formulary or listed on the Formulary with conditions under circumstances in which the conditions would preclude reimbursement. There are over 100,000 requests per year under this regime that leads to unacceptable delays. The statutory responsibility for making the decision is being transferred to the Executive Officer. In addition, the Government has indicated that it intends to re-engineer the process to reduce delays and paper work. A new conditional regime is to be implemented. The Government believes that the new regime has the potential of improved access for patients and increased opportunities for the drug manufacturers to be able to obtain reimbursement for breakthrough drugs.

Comment: Other than the transfer of decision-making responsibility from the Minister or Cabinet to the Executive Officer, for the most part, this aspect of the announced changes will be accomplished by policy changes. These changes will likely find support from all stakeholders. The brand name manufacturers and patient will want to work closely with the Government on the new procedures to ensure that Ontario adopts best international practice.

Generic Pricing

Regulations under the DIDF will be amended to limit the reimbursement price in respect of a drug product designated as interchangeable to 50% from 70% of the drug benefit price of the original product for the first interchangeable product as well as all other products. Currently the regulations provide that further interchangeable products are priced at 90% of the first interchangeable product.

Comment: The combination of the elimination of the rebates, referred to above, and the new price limitations will help the Government to achieve lower prices for generic drugs. It would appear that the Government has the support of the generic manufacturers for this change, as well as the elimination of the rebates, and that these changes, once implemented, will benefit both patients and the generic manufacturers.

Other Pharmacy Related Changes

Through regulation changes the dispensing fee for all community pharmacies will be increased to $7.00 from $6.54. At the same time, permitted mark-up will be lowered from 10% to 8% with a $25 cap, again through changes to regulations. The ODBA will be amended to permit certain of the pharmacies that operate in public hospitals to charge the same dispensing fee as pharmacies in the community. As noted above, the Executive Officer will have the authority to pay operators of pharmacies for professional services (e.g., for medical management and education).

Comment: The Government is focused on making all elements of the supply chain more transparent and believes that a greater focus on the important role that can be played by pharmacists will result in lower drug costs that are incurred by Ontario's drug plans.

Policy Changes

As noted above, some of the most important initiatives that the Government has announced are in the form of changes to existing policies or the development of new policies. Unfortunately, there is relatively little information that has been announced to date with respect to the policies and this lack of information makes it difficult to comment at this point. Set out below is a summary of what is known.


In addition to the changes that will affect hospital pharmacies noted above, the Government intends to work with hospitals to align the Ontario Drug Benefit formulary with hospital formularies to create a consistent drug lists in hospitals and the community. The goal is to ensure a recipient receives the same drug, whether it is prescribed at a hospital or the community. Other jurisdictions have created joint hospital/community formularies. Changes in the way that the Government approves drugs and the plans of the Government to enter into competitive agreements with manufacturers on behalf of the province will also affect hospitals.

Comment: The Government's intent to align formularies and secure more competitive prices in the market place will likely lead to increased scrutiny and changes in practice to hospital drug purchasing and management. Competitive agreements and alignment of formularies will presumably affect the range of drugs hospitals use, and the current processes hospitals have in place through buying agents. Bill 102 and accompanying policy changes will likely increase the emphasis on centralized approaches (provincially, regionally, or by network) to drug approval, purchasing and management. It is believed that the changes in this area are medium term priorities of the Government and that a number of other issues noted in this memorandum are likely to be greater short-term priorities.


In addition to the changes to dispensing fees, creation of authority to make payments to pharmacists for specific services and elimination of rebates as noted above, the Government has plans for a Pharmacy Council jointly chaired by the Ministry and a pharmacy representative that will provide input on policy, including an evaluation of alternative payment models for long term care pharmacies.

Comment: It is clear that the Government is reaching out to the pharmacist community and seeking a closer relationship to help manage drug costs in Ontario. There are economic consequences from pharmacies arising out of the Bill and related policies. At this point the impact is difficult to assess. Securities analysts considering the impact of the changes on one major pharmacy chain have suggested that the large chains will not be materially adversely affected and that the real impact will be felt by the independent pharmacies. The plight of the independent pharmacists has been raised in the provincial legislature as part of the second reading debate on the Bill. This is likely to be an issue that is considered very carefully in the Committee process that will follow the completion of second reading of the Bill, noted below.

Generic Manufacturers of Drugs

In addition to the limitations on prices of interchangeable drugs, and the prohibition on rebates, the Government announced its intention to "partner" with generic manufacturers to develop a Code of Conduct that defines acceptable marketing practices. Public comment from the industry has been positive, and limited, reflecting presumably satisfaction with the general direction and specific changes in their current form.

Brand Name Manufacturers

The brand name manufacturers are quite concerned with both the direction and content of the Bill and related policies. Many of the leaders of the industry in Canada have been great advocates for increased pharmaceutical investment in Canada in general, and Ontario in particular. The general sense is that the Bill and related policies will negatively impact the opportunities for increased investment in Ontario by brand name manufacturers and undermine the ability of the pharmaceutical sector in Ontario to advance the interests of the industry at international head offices. At the same time, the smaller biotech companies are concerned that a less robust brand name manufacturing sector in Ontario will make it more difficult to forge partnerships with brand name manufacturers in the future and generally depress interest in the sector in Ontario.

While the process leading to the introduction of the Bill and the related policies suffers from the lack of transparency that the Government is, ironically, seeking to enhance, there are a number of encouraging aspects of the Bill and related policies that the industry will need to better understand in the coming weeks and months ahead. For example, the Government announced its intention to create an Innovation Fund that will fund innovation research projects that will show the value of drugs within the health care system. This is a clear acceptance of the position that the industry has been advancing for some time. The Government has indicated that it is willing to speed up the process of reviewing breakthrough new drugs (with the caveat that the definition of what is a breakthrough drug is still under consideration). This too is a longstanding issue for the industry. The Government has indicated that it intends to communicate the concerns of stakeholders, including industry, with the Common Drug Review to the Canadian Expert Drug Advisory Committee. Once again, this is an issue on which the industry has many thoughtful comments and suggestions to make and the good faith commitment of the Government should be welcomed.

In addition, the Government believes that the appointment of the Executive Officer will be a positive development for industry. The appointment will lead to the current secrecy that surrounds the listing process being removed and the timing of the decisions with respect to listing being accelerated. There is little in this proposed direction that should be objectionable to industry. The Government also believes that the ability to reach creative partnership and commercial agreements will also be to the benefit of the industry. The Government has indicated that it is looking to build a more competitive pricing environment for pharmaceutical products, using the Veterans Administration in the United States as a model, rather than a New Zealand style referenced based pricing regime. While the changes proposed create risks for the industry, the challenge will be for the industry to engage in a consultation/negotiation process with the Government that leads to positive impacts for industry participants.


The Government has announced that two patient representatives will be added to the Committee to Evaluate Drugs (formerly the Drug Quality and Therapeutics Committee), which the Government notes is the first time any jurisdiction has given patients an active role in decision making and policy making for drugs. In addition, the Government has announced the creation of a Citizen's Council that will give the public an opportunity to guide public drug policy. These proposals are novel. In each case, the Government is to be congratulated for seeking to democratize the drug system.

At the same time, the Government has announced plans to align the public drug programs so that irrespective of where or how a drug is given it is available across the province. This is an issue that has been championed by Cancer Care Ontario and, here again, the news is positive for patients. Other important policy changes announced include plans for best prescribing practices guidelines to be developed with physicians, patients, pharmacists and drug manufacturers and plans to assess the implementation of a province wide electronic network that will contain prescription histories of patients. These are ambitious plans that have real potential to contribute in a positive manner to the administration of the Ontario drug plans.

Status and Next Steps

The Bill is now in second reading debate and will be referred to Committee for consideration in the coming weeks. The Government appears to intend to pass the Bill into law prior to the summer recess that will occur in mid-June. It can be expected that the debate on the Bill will be intense over the coming weeks with all major affected groups expressing their views to the Government directly as well as in the Committee hearing process.

The Ontario process will undoubtedly be watched carefully by other Canadian jurisdictions. There is an ongoing federal-provincial-territorial ("FPT") process underway on a defined list of issues related to national pharmaceutical strategy issues. To some extent, the Bill and related policies will likely reshape the dialogue of the FPT process. At the same time, independent of the FPT process, developments in Ontario have the potential to influence decisions in other Canadian jurisdictions as well and it is reasonable to expect that a number of other Canadian provinces and territories will be watching carefully the legislative process in Ontario with respect to the Bill and the parallel policy making process.

Finally, while the Bill is a very important step in reforming the administration of the Ontario drug plans, it is only a step in this much more ambitious reform effort. Much of what the Government has announced will take the form of changes in policy. These new policies will require careful consideration and input from all affected stakeholders and the Government would be wise to include stakeholders, including drug manufacturers, early in the development of these policies so that the ultimate work product reflects the best advice and consensus building that is possible.


We are watching the legislative and policy making process carefully and expect to comment further on the Bill and related policies in the coming weeks as some of the issues outlined above are clarified. We would be pleased to provide additional information on any aspect of the proposed regime or to assist in any effort to communicate views of stakeholders to the Government before or during the Committee hearing process on the Bill.

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
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.