Private Labels

The Supreme Court of Canada issued its decision in Katz Group Canada Inc. v. Ontario (Health and Long‑Term Care)2013 SCC 64 today, which upheld Ontario’s regulations of ‘private label’ generic drugs and dismissed the appeal by Shoppers and Katz.

The decision under appeal (2011 ONCA 830) relates to Ontario’s Drug Interchangeability and Dispensing Fee Act and the Ontario Drug Benefits Act and particularly regulatory changes made in 2010 which included provisions on private label generic drugs. Under the legislation:

[18] Private label products cannot be listed in the Formulary[8] or designated as interchangeable.[9] These restrictions essentially ban the sale of private label drugs in the private and public markets in Ontario and are at the heart of this appeal.

In the unanimous decision, written by Justice Abella, the court wrote:

[37]  The private label Regulations fit into this strategy by ensuring that pharmacies make money exclusively from providing professional health care services, instead of sharing in the revenues of drug manufacturers by setting up their own private label subsidiaries. In this way too, the Regulations correspond to the statutory purpose of reducing drug costs since disentangling the cost of pharmacy services from the cost of drugs puts Ontario in a better position to regulate both.

[38] The 2010 private label Regulations were therefore part of the regulatory pursuit of lower prices for generic drugs and are, as a result, consistent with the statutory purpose.

[44] It seems to me somewhat ethereal to speak of a commercial “right” to trade in a market as highly regulated as is the pharmaceutical market in Ontario.Manufacturers have no right to sell drugs in the public market in Ontario unless they are listed in the Formulary, and no right to sell generic drugs at all unless they are designated as interchangeable. Since the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act give the Lieutenant Governor in Council the authority to set the conditions that a drug must meet in order to be listed in the Formulary and designated as interchangeable, they expressly authorise interference with a manufacturer’s ability to enter and remain in the market.

Some reporting on the decision from the Globe and National Post.