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March 19, 2014
Supreme Court affirms Ontario ban on pharmacies’ private label prescription drugs

The Supreme Court of Canada has upheld the province of Ontario’s ban on sales by pharmacies of their own generic private label prescription drugs.

The ruling by the high court effectively torpedoes the plans by the country’s major pharmacy chains to introduce their own generic prescription drugs as a way to offset the financial losses they’ve incurred since 2010 when that province and others capped the price of generic drugs at 25 per cent of their brand name equivalent. (See the April 2010 and June 2010 editions of the Coughlin Courier for background.)

In a unanimous decision, the court noted that Canada spends more on prescription drugs per capita than almost every other industrialized country.  It also cited that generic drugs were three times more expensive in Ontario than in France, Germany and Britain, five times more expensive than those posted in the United States and 22 times greater than recorded in New Zealand.

The court had unusually harsh words about the pricing practices of the province’s pharmacies.

“Each time the government has introduced new measures, market participants have changed their business practices to obviate the restrictions and keep prices high,” wrote Supreme Court Justice Rosalie Abella.  “If pharmacies were permitted to create their own affiliated manufacturers whom they controlled, they would be directly involved in setting the formulary prices and have strong incentives to keep those prices high.”

In their submissions to the court, lawyers for the Katz Group, the owner of the Rexall and Pharma Plus drug store chains, and Shoppers Drug Mart argued that the pricing restrictions imposed by the province did not meet the intent or purposes of provincial legislation governing pharmaceutical sales.

The court disagreed.

“The 2010 private label regulations were part of the regulatory pursuit of lower prices for generic drugs and are consistent with the statutory purpose,” Justice Abella said.  

The ruling does not affect the stores’ ability to sell generic over-the-counter medications.

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