Shoppers Drug Mart Inc. et al. v. Ontario (Minister of Health and Long-Term Care) et al., (2013) 312 O.A.C. 169 (SCC)

• Judge: McLachlin, C.J.C., LeBel, Abella, Rothstein, Cromwell, Moldaver and Wagner, JJ.
• Court: Supreme Court (Canada)
• Case Date: May 14, 2013
• Jurisdiction: Canada (Federal)
• Citations: (2013), 312 O.A.C. 169 (SCC);2013 SCC 64

Shoppers Drug Mart v. Ont. (2013), 312 O.A.C. 169 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

.........................

Temp. Cite: [2013] O.A.C. TBEd. NO.030

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

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

(34647; 34649; 2013 SCC 64; 2013 CSC 64)

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

Supreme Court of Canada

McLachlin, C.J.C., LeBel, Abella, Rothstein, Cromwell, Moldaver and Wagner, JJ.

November 22, 2013.

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 listed in the formulary under the Ontario Drug Benefits Act and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act. The plaintiffs were two pharmacy retailers.

The Ontario Divisional Court 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, in a decision reported at (2011), 286 O.A.C. 68, allowed the appeal. The provisions were intra vires their parent statutes and in full force and effect. The plaintiffs appealed.

The Supreme Court of Canada dismissed the appeal.

Administrative Law - Topic 7525

Delegated powers - Validity of delegated powers - Rules or regulations - Ultra vires - [See Statutes - Topic 5362 and second and third Statutes - Topic 5367 ].

Food and Drug Control - Topic 1155

Drugs - Prescription drugs - Interchangeable pharmaceutical products - [See second and third Statutes - Topic 5367 ].

Government Programs - Topic 615

Prescription drug payment - Drug designation - Listing on formulary - [See second and third 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 - The Supreme Court of Canada stated, "A successful challenge to the vires of regulations requires that they be shown to be inconsistent with the objective of the enabling statute or the scope of the statutory mandate.... Regulations benefit from a presumption of validity.... This presumption has two aspects: it places the burden on challengers to demonstrate the invalidity of regulations, rather than on regulatory bodies to justify them ... and it favours an interpretative approach that reconciles the regulation with its enabling statute so that, where possible, the regulation is construed in a manner which renders it intra vires... Both the challenged regulation and the enabling statute should be interpreted using a 'broad and purposive approach . . . consistent with this Court's approach to statutory interpretation generally'.... This inquiry does not involve assessing the policy merits of the regulations to determine whether they are 'necessary, wise, or effective in practice'.... It is not an inquiry into the underlying 'political, economic, social or partisan considerations'.... Nor does the vires of regulations hinge on whether, in the court's view, they will actually succeed at achieving the statutory objectives.... They must be 'irrelevant', 'extraneous' or 'completely unrelated' to the statutory purpose to be found to be ultra vires on the basis of inconsistency with statutory purpose" - See paragraphs 24 to 28.

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 listed in the formulary under the Ontario Drug Benefits Act and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act - The pharmacy retailers argued that the regulations were ultra vires because they interfered with commercial rights, prohibited an activity and discriminated between drug manufacturers, none of which was authorized by the grants of regulation-making authority in the Acts - The Supreme Court of Canada rejected the argument - The Acts expressly authorized interference with a manufacturer's ability to enter into and remain in the market - Further, the regulations did not prohibit manufacturers from selling generic drugs in Ontario - They restricted market access only if a certain corporate structure was used - Nor was there any discriminatory aspect - The regulations focused on the sale of drugs by private label manufacturers because those manufacturers and their affiliated pharmacies were the ones considered to be particularly poised to circumvent the statutory ban on rebates that applied to all manufacturers and pharmacies in Ontario - Far from being "discriminatory", the distinctions flowed directly from the statutory purpose and the scope of the mandate - See paragraphs 43 to 51.

Statutes - Topic 5367

Operation and effect - Delegated legislation - Regulations - Validity of - Ultra vires - Whether purpose authorized by empowering statute - [See Statutes - Topic 5362 ].

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 listed in the formulary under the Ontario Drug Benefits Act and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act - The Supreme Court of Canada held that the regulations were intra vires - The overarching purpose of the statutory scheme was to control the cost of prescription drugs in Ontario without compromising safety - The purpose of the regulations banning private label products was to prevent another possible mechanism for circumventing a ban of rebates to pharmacy retailers that had kept drug prices inflated - As such, the regulations were consistent with the statutory purpose - See paragraphs 29 to 35.

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 listed in the formulary under the Ontario Drug Benefits Act and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act - The Supreme Court of Canada held that the regulations were intra vires - The regulations contributed to the legislative pursuit of transparent drug pricing - Weaning pharmacies off of drug manufacturer revenues and transitioning them to a business model based on reimbursement for providing professional services had been an important strategy in the amendments to the Acts and their regulations - The private label regulations fit into this strategy by ensuring that pharmacies made money exclusively from providing professional health care services, instead of sharing in the revenue of drug manufacturers by setting up their own private label subsidiaries - Thus, the regulations corresponded to the statutory purpose of reducing drug costs since disentangling the cost of pharmacy services from the cost of drugs put Ontario in a better position to regulate both - As part of the regulatory pursuit of lower prices for generic drugs, the regulations were consistent with the statutory purpose - See paragraphs 36 to 38.

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 listed in the formulary under the Ontario Drug Benefits Act and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act - The Supreme Court of Canada, having found that the regulations were consistent with the statutory purpose of reducing drug costs without compromising safety, rejected the pharmacy retailers' argument that the regulations were inconsistent with that statutory purpose because they neither could nor would reduce drug prices - The argument misconstrued the nature of the review exercise - Whether the regulations would ultimately prove to be successful or represented sound economic policy was not the issue - The issue was whether they accorded with the purpose of the scheme - Clearly, they did - See paragraph 39.

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 listed in the formulary under the Ontario Drug Benefits Act and from being designated as "interchangeable" under the Drug Interchangeability and Dispensing Fee Act - The Supreme Court of Canada, having found that the regulations were consistent with the statutory purpose of reducing drug costs without compromising safety, rejected the pharmacy retailers' argument that the regulations were inconsistent with that statutory purpose because they were under-inclusive in that they did not prevent a pharmacy from owning a manufacturer that was also the fabricator of the drug - This was pure speculation - At the moment, there were no pharmacies in Ontario that owned both the manufacturer and fabricator of a generic drug - The ban on private label products was not inconsistent with or extraneous to the statutory purpose simply because it failed to include corporate models that did not currently exist - See paragraph 40 to 42.

Cases Noticed:

Waddell v. Canada (Governor in Council) (1983), 8 Admin. L.R. 266, refd to. [para. 24].

United Taxi Drivers' Fellowship of Southern Alberta et al. v. Calgary (City), [2004] 1 S.C.R. 485; 318 N.R. 170; 346 A.R. 4; 320 W.A.C. 4; 2004 SCC 19, refd to. [para. 26].

Glykis v. Hydro-Québec, [2004] 3 S.C.R. 285; 325 N.R. 369; 2004 SCC 60, refd to. [para. 26].

Jafari v. Minister of Employment and Immigration, [1995] 2 F.C. 595; 180 N.R. 330 (F.C.A.), refd to. [para. 27].

Ontario Federation of Anglers and Hunters et al. v. Ontario (Minister of Natural Resources) et al. (2002), 158 O.A.C. 255; 211 D.L.R.(4th) 741 (C.A.), refd to. [para. 27].

Irving Oil Ltd., Canaport Ltd., Kent Lines Ltd. and Thorne's Hardware Ltd. v. National Harbours Board, [1983] 1 S.C.R. 106; 46 N.R. 91, refd to. [para. 28].

Thorne's Hardware Ltd. v. The Queen - see Irving Oil Ltd., Canaport Ltd., Kent Lines Ltd. and Thorne's Hardware Ltd. v. National Harbours Board.

R. v. CKOY Ltd., [1979] 1 S.C.R. 2; 24 N.R. 254, refd to. [para. 28].

Pacific Pilotage Authority v. Alaska Trainship Corp., Pacific Maritime Agencies Ltd. and Ship S.S. Alaska, [1981] 1 S.C.R. 261; 35 N.R. 271, refd to. [para. 28].

Doctors Hospital and Minister of Health, Re (1976), 12 O.R.(2d) 164 (Div. Ct.), refd to. [para. 28].

Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231; 163 N.R. 81; 41 B.C.A.C. 81; 66 W.A.C. 81, refd to. [para. 28].

Toronto (City) v. Virgo, [1896] A.C. 88 (P.C.), refd to. [para. 45].

Forget v. Québec (Procureur général) and Office de la langue française, [1988] 2 S.C.R. 90; 87 N.R. 37; 17 Q.A.C. 241, refd to. [para. 47].

Statutes Noticed:

Drug Interchangeability and Dispensing Fee Act Regulation (Ont.), R.R.O. 1990, Reg. 935, sect. 9(1) [para. 18, footnote 9].

Ontario Drug Benefits Act Regulation (Ont.), Reg. 201/96, sect. 12.02(1) [para. 18, footnote 8].

Authors and Works Noticed:

Brown, Donald J.M. and Evans, John M., Judicial Review of Administrative Action in Canada (2012 Loose-leaf update), vol. 3, pp. 13:1310 [para. 26];15:3200, 15:3230 [para. 25]; 15:3261 [para. 28].

Canada, Competition Bureau, Benefiting from Generic Drug Competition in Canada: The Way Forward (2008), http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/0306.html, pp. 7 [para. 1, footnote 1]; 10 [para. 14]; 20 to 22, 32 [para. 36].

Canada, Organisation for Economic Co-operation and Development, Health at a Glance 2009 (2009), http://www.oecd-ilibrary.org, p. 167 [para. 1, footnote 1].

Canadian Institute for Health Information, National Health Expenditure Trends, 1975 to 2012 (2012), http://secure.cihi.ca/ free_products/NHEXTrendsReport2012EN.pdf, p. 21 [para. 1, footnote 3].

Hansard (Ontario) - see Ontario, Hansard, Legislative Assembly, Official Report of Debates.

Keyes, John Mark, Executive Legislation (2nd Ed. 2010), pp. 95 to 97 [para. 26]; 266 [para. 28]; 312 [para. 46]; 544 to 550 [para. 25].

Ontario, Hansard, Legislative Assembly, Official Report of Debates, Nos. 13, 19 and 23, 2nd Sess., 39th Parliament, April 12, 21 and 28, 2010, generally [para. 15].

Ontario, Hansard, Legislative Assembly, Official Report of Debates, No. 41, 1st Sess., 33rd Parliament, November 7, 1985, p. 1446 [para. 31].

Régimbald, Guy, Canadian Administrative Law (2008), p. 132 [para. 24].

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), pp. 368 [para. 26]; 458 [para. 25].

Counsel:

Terrence J. O'Sullivan and M. Paul Michell, for the appellants, Katz Group Canada Inc., Pharma Plus Drug Marts Ltd. and Pharmx Rexall Drug Stores Ltd.;

Mahmud Jamal, Craig T. Lockwood, Eric Morgan and W. David Rankin, for the appellants, Shoppers Drug Mart Inc., Shoppers Drug Mart (London) Limited and Sanis Health Inc.;

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

Solicitors of Record:

Lax O'Sullivan Scott Lisus, Toronto, Ontario, for the appellants, Katz Group Canada Inc., Pharma Plus Drug Marts Ltd. and Pharmx Rexall Drug Stores Ltd.;

Osler, Hoskin & Harcourt, Toronto, Ontario, for the appellants, Shoppers Drug Mart Inc., Shoppers Drug Mart (London) Limited and Sanis Health Inc.;

Attorney General of Ontario, Toronto, Ontario, for the respondents.

This appeal was heard on May 14, 2013, by McLachlin, C.J.C., LeBel, Abella, Rothstein, Cromwell, Moldaver and Wagner, JJ., of the Supreme Court of Canada. On November 22, 2013, Abella, J., delivered the following reasons for judgment for the court in both official languages.