Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64

A challenge to Ontario’s legislation that was enacted with the aim to bring down the price of generic drugs has failed. The ban on the sale of private label drugs will remain in place.

In an attempt to bring down the price of generic drugs, Ontario had enacted two complimentary statutes that regulated generic drugs. Amendments in 2006 prohibited manufacturers from providing rebates to pharmacies, because the rebates were said to account for 40% of the price manufacturers charged for drugs. This was replaced by permitting payment for professional allowances.

However, Ontario’s Ministry of Health and Long-Term Care reported in 2007 that some of the leading generic drugs were three times more expensive  in Ontario than in France, Germany and the United Kingdom, five times more expensive than in the United States, and twenty-two times more expensive than in New Zealand. Further amendments removed the provisions for the professional allowances which had taken the place of the rebates.

Amendments in 2010 also prevented pharmacies  from controlling manufacturers who sell generic drugs under their own name, but do not fabricate them. The restrictions essentially banned the sale  of “private label products” in Ontario.

The Supreme Court did not assess whether the 2010 Regulations were necessary, wise or effective. The regulations merely needed to be consistent with the statutory purpose of the overarching legislative scheme. It was found that the original legislative intent was to combat high drug prices caused by manufacturers providing hidden discounts. It was also found that the 2010 private label Regulations served to prevent another possible mechanism for circumventing the ban on rebates. This meant that the regulations were not ultra vires, and thus the appeal was dismissed.