In 2010, regulations were made pursuant to each of the Ontario Drug Benefit Act (ODBA) and the Drug Interchangeability and Dispensing Fee Act (DIDFA). The ODBA regulates the payment by the Ontario government for prescription drugs for eligible persons by listing reimbursable drugs on a Formulary. The DIDFA relates to the designation of generic drugs as interchangeable for brand name drugs. The impugned sections of the regulations, Section 12.0.2 of the ODBA Regulation and Section 9 of the DIDFA Regulation, prevent private label generic drugs from being designated as interchangeable under the DIDFA and listed on the Formulary under the ODBA. The Court described a private label generic drug as being essentially from a manufacturer that is not arms length from the pharmacy selling the generic drug. The Applicants challenged the validity of this prohibition.
The Court indicated that the standard of review is one of correctness. The Court first considered the scope of the enabling legislation, the ODBA and the DIDFA, to make regulations. Both Acts allow regulations to be made that prescribe conditions to be met in order for a product to be designated as interchangeable under the DIDFA or to be designated as a listed drug product under the ODBA. The Court found that the impugned sections sought to prohibit the sale of private label generics, not prescribe the conditions that could be met by private label generics. Specifically, the Court found that the enabling legislation provides only a power to regulate, not a power to prohibit, and therefore the impugned sections are ultra vires. The Court also considered the general power to make regulations contained in the ODBA, but found this provision was not specific enough to support the prohibition.
Furthermore, the Court found that the impugned sections were not consistent with the purposes of the OBDA and the DIDFA, which the Court found to be to control the cost of prescription drugs in Ontario without compromising safety. Finally, the Court found that the impugned sections interfere with property rights and commercial freedom. The Court ordered that section 12.01 of Ontario Regulation 201-96 made under the ODBA and section 9 of Ontario Regulation 935 made under the DIDFA are declared ultra vires and of no force and effect.