Shoppers Drug Mart Inc. et al. v. Ontario (Minister of Health and Long-Term Care) et al., 2011 ONCA 830

• Judge: MacPherson, Epstein and Karakatsanis, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 27, 2011
• Jurisdiction: Ontario
• Citations: 2011 ONCA 830;(2011), 286 O.A.C. 68 (CA)

Shoppers Drug Mart v. Ont. (2011), 286 O.A.C. 68 (CA)

MLB headnote and full text

Temp. Cite: [2011] O.A.C. TBEd. DE.040

Shoppers Drug Mart Inc., Shoppers Drug Mart (London) Limited and Sanis Health Inc. (applicants/respondents on appeal) v. Minister of Health and Long-Term Care, Lieutenant Governor-in-Council of Ontario and Attorney General of Ontario (respondents/appellants on appeal)

(C53663)

Katz Group Canada Inc., Pharma Plus Drug Marts Ltd. and Pharmx Rexall Drug Stores Ltd. (applicants/respondents on appeal) v. Minister of Health and Long-Term Care, Lieutenant Governor-in-Council of Ontario and Attorney General of Ontario (respondents/appellants on appeal)

(C53664; 2011 ONCA 830)

Indexed As: Shoppers Drug Mart Inc. et al. v. Ontario (Minister of Health and Long-Term Care) et al.

Ontario Court of Appeal

MacPherson, Epstein and Karakatsanis, JJ.A.

December 23, 2011.

Summary:

At issue was the validity of two sections of provincial regulations that prohibited private label generic prescription drugs (i.e., a generic prescription drug that a pharmacy retailer marketed under its own trade name) from being designated as a listed drug product under the Ontario Drug Benefits Act and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act.

The Ontario Divisional Court, in a decision not reported in this series of reports, held that the impugned provisions were ultra vires and of no force and effect. Ontario appealed.

The Ontario Court of Appeal, Epstein, J.A., dissenting, allowed the appeal. The provisions were intra vires their parent statutes and in full force and effect.

Administrative Law - Topic 7525

Delegated powers - Validity of delegated powers - Rules or regulations - Ultra vires - [See both Statutes - Topic 5363 and Statutes - Topic 5367 ].

Food and Drug Control - Topic 1155

Drugs - Prescription drugs - Interchangeable pharmaceutical products - [See both Statutes - Topic 5363 and Statutes - Topic 5367 ].

Government Programs - Topic 615

Prescription drug payment - Drug designation - Listing on formulary - [See both Statutes - Topic 5363 and Statutes - Topic 5367 ].

Statutes - Topic 5362

Operation and effect - Delegated legislation - Regulations - Validity of - General principles - At issue was the validity of two sections of provincial regulations that prohibited private label generic prescription drugs (i.e., a generic prescription drug that a pharmacy retailer marketed under its own trade name) from being designated as a listed drug product under the Ontario Drug Benefits Act (ODBA) and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act (DIDFA) - The Ontario Court of Appeal indicated that the "crucial starting point in any assessment of delegated legislation such as the challenged regulations" here was that, as a general principle, subordinate legislation should be construed in a manner that rendered it intra vires - A second crucial starting point was recognition that the OBDA and DIDFA, taken together, constituted a specialized legislative scheme in a highly important and complex domain of public policy, namely, health and economics - A third starting point was an acknowledgement that the delivery of drug products to Ontario residents involved the expenditure of several billion dollars of public funds annually - Therefore, courts had to be careful in evaluating government decisions in this domain - See paragraphs 42 to 46.

Statutes - Topic 5363

Operation and effect - Delegated legislation - Regulations - Validity of - Scope of authority to make - At issue was the validity of two sections of provincial regulations that prohibited private label generic prescription drugs (i.e., a generic prescription drug that a pharmacy retailer marketed under its own trade name) from being designated as a listed drug product under the Ontario Drug Benefits Act (ODBA) and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act (DIDFA) - The Ontario Court of Appeal held that the provisions were intra vires their parent statutes and in full force and effect - The court disagreed with the Divisional Court's conclusion that the regulations were ultra vires because they purported to prohibit, rather than regulate, private label products - The regulation-making powers under ODBA and DIDFA conferred the authority to promulgate private label product regulations - The impugned regulations imposed a "condition" on products to be designated as a listed drug product and as interchangeable - The pharmacy retailers were still entitled to participate in most, but not all, components of the Ontario drug supply chain - This was regulation, not prohibition - See paragraphs 47 to 53.

Statutes - Topic 5363

Operation and effect - Delegated legislation - Regulations - Validity of - Scope of authority to make - At issue was the validity of two sections of provincial regulations that prohibited private label generic prescription drugs (i.e., a generic prescription drug that a pharmacy retailer marketed under its own trade name) from being designated as a listed drug product under the Ontario Drug Benefits Act (ODBA) and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act (DIDFA) - The Ontario Court of Appeal held that the provisions were intra vires their parent statutes and in full force and effect - The court disagreed with the Divisional Court's conclusion that the regulations were ultra vires because they constituted an interference with the pharmacy retailers' property and commercial rights that was not expressly authorized by the ODBA and DIDFA - The impugned regulations did not completely ban generic drug companies from conducting business in Ontario - The regulations were not an improper restraint on trade, but rather a regulation of the business model behind the manufacture and sale of generic drug products to pharmacies - In any event, any interference with property or commercial rights was necessarily implied in the authority to set conditions for the listing of drugs under the ODBA or the DIDFA - See paragraphs 66 to 68.

Statutes - Topic 5367

Operation and effect - Delegated legislation - Regulations - Validity of - Ultra vires - Whether purpose authorized by empowering statute - At issue was the validity of two sections of provincial regulations that prohibited private label generic prescription drugs (i.e., a generic prescription drug that a pharmacy retailer marketed under its own trade name) from being designated as a listed drug product under the Ontario Drug Benefits Act (ODBA) and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act (DIDFA) - The Ontario Court of Appeal held that the provisions were intra vires their parent statutes and in full force and effect - The court disagreed with the Divisional Court's conclusion that the regulations were ultra vires because they were extraneous to the purposes of the ODBA and DIDFA - There was no dispute that the purpose of the parent statutes was to make generic drugs available to eligible persons and the rest of the public at low prices - The court accepted Ontario's submission that the statutes and regulations attempted to lower prices not only by directly regulating price, but also by indirectly regulating the compensation model of some participants, with a focus on pharmacies - Ontario could reasonably conclude that private label generics would reduce the competitiveness of the generic drug market in ways that would adversely affect long term prices - This was a complex market and regulatory framework - As long as regulations remained within the scope authorized by statute and were consistent with statutory purposes, it was not the court's role to second guess the merit of cabinet decisions - See paragraphs 54 to 65.

Cases Noticed:

Apotex Inc. v. Ontario (Minister of Health) et al. (2004), 191 O.A.C. 135; 73 O.R.(3d) 1 (C.A.), agreed with [para. 44].

Apotex Inc. v. Ontario (Minister of Health) et al. (2007), 229 O.A.C. 11; 2007 ONCA 570, refd to. [para. 65].

Adult Entertainment Association of Canada et al. v. Ottawa (City) (2007), 224 O.A.C. 267; 283 D.L.R.(4th) 704; 2007 ONCA 389, refd to. [para. 125].

Arcade Amusements Inc. v. Montreal (City), [1985] 1 S.C.R. 368; 58 N.R. 339, refd to. [para. 125].

Bomberry and Hill v. Ontario (Minister of Revenue), [1989] 3 C.N.L.R. 27; 34 O.A.C. 17; 63 D.L.R.(4th) 526 (Div. Ct.), refd to. [para. 130].

R. v. Sharma (D.), [1993] 1 S.C.R. 650; 149 N.R. 161; 61 O.A.C. 161, refd to. [para. 138].

Statutes Noticed:

Drug Interchangeability and Dispensing Fee Act Regulation (Ont.), R.R.O. 1990, Reg. 935, sect. 9(1) [para. 28].

Ontario Drug Benefits Act Regulation (Ont.), Reg. 201/96, sect. 12.02(1) [para. 26].

Authors and Works Noticed:

Brown, Donald J.M., and Evans, John M., Judicial Review of Administrative Action in Canada (1998), para. 15:3200 [para. 43].

Brown, Donald J.M., and Evans, John M., Judicial Review of Administrative Action in Canada (2011) (Looseleaf), s. 15.3263, pp. 15-54 to 15-92 [para. 120].

Keyes, J.M., Executive Legislation (2nd Ed.), pp. 310 to 312 [para. 121].

Mullan, David J., Administrative Law (3rd Ed. 1996), s. 512 [para. 120].

Counsel:

Kim Twohig, Lise G. Favreau and Kristin Smith, for the appellants;

Mahmud Jamal, Craig Lockwood and Eric Morgan, for the Shoppers respondents;

Terrence O'Sullivan and Paul Michell, for the Katz respondents.

This appeal was heard on June 27, 2011, by MacPherson, Epstein and Karakatsanis, JJ.A., of the Ontario Court of Appeal. On December 23, 2011, the court released its judgment with the following opinions:

MacPherson and Karakatsanis, JJ.A. - see paragraphs 1 to 75;

Epstein, J.A., dissenting - see paragraphs 76 to 146.