On October 23, 2014, the Minister of National Revenue (the Minister) filed Notices of Application in the Federal Court against a number of generic drug manufacturers, including Actavis Pharma Company, Apotex Inc., Mylan Pharmaceuticals ULC, Pharmaceutical Partners of Canada Inc., Pharmascience Inc., Ranbaxy Pharmaceuticals Canada Inc., Sandoz Canada Inc., Taro Pharmaceuticals, and Teva Canada Limited1 (the Respondents), to authorize the Minister to require the Respondents to provide information on rebates and other incentives paid to pharmacies and pharmacists.
The Notices of Application state that in the course of an audit of an unidentified pharmaceutical company in Canada, the Canada Revenue Agency discovered that pharmaceutical companies were paying rebates, incentive payments, professional allowances, promotional allowances, fees for service or other payments (referred to collectively in the Notices of Application as Incentive Payments) to pharmacies and pharmacists who were not reporting such Incentive Payments for tax purposes.
Under the Income Tax Act (Canada) (the ITA) the Minister (through the Canada Revenue Agency (CRA)) can require any person to provide documents or information for any purpose related to the administration or enforcement of the ITA. However, when the information sought relates to unnamed persons such requirement cannot be imposed without judicial authorization.
As the CRA intends to require the Respondents to identify the pharmacies and pharmacists who received Incentive Payments and the nature of the payments received the Applications are brought pursuant to section 231.2(3) of the ITA to obtain judicial authorization to require the Respondents to provide the requested information. CRA has limited the authorization to Incentive Payments made from January 1, 2010 to December 31, 2012 to pharmacies and pharmacists located in Canada.
The Respondents may oppose the Applications. If the Applications are granted, the CRA will issue the Respondents a formal “Requirement to Provide Information”. The Respondents will then be required to provide the information within the time stipulated in the Requirement.