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Court upholds Ontario ban on private-label generics
November 22nd, 2013
TORONTO – Shoppers Drug Mart Corp. reported that the Supreme Court of Canada has upheld a Court of Appeal of Ontario decision in December 2011 that restored a ban on private-label generic drugs in Ontario.
With the ban intact, drug chains won't be able to sell private-label generics — generic prescription medications marketed under a pharmacy retailer trade name — in Canada's most populous province.
"While the company respects the decision of the Supreme Court of Canada, it is disappointed with the outcome," Shoppers Drug Mart said in a statement Friday.
In its Dec. 23, 2011, decision, the Court of Appeal for Ontario on Friday ruled that a lower court decision overturning the ban — part of provincial pharmacy reimbursement reform in 2010 — went too far and that Ontario was within its legislative and regulatory authority to prohibit drug stores from offering private-label generics.
Shoppers Drug Mart and Katz Group Canada Inc., operator of Rexall/Pharma Plus, had challenged the ban and had it nullified by the Ontario Divisional Court the previous February.
The ruling on Friday, however, affirmed the ban on private-label generics, which have been seen as one way for Canadian drug chains to regain some of the profits lost through provincial health care reforms enacted in 2010, beginning in Ontario.
Under the reform, Ontario halved pharmacy reimbursement for generic medications and eliminated professional allowances, or rebates, paid by generic drug makers to pharmacies.
Through the reform effort, Ontario had sought to lower the cost of generic drugs and deemed the rebates as a key obstacle, contending that the savings aren't passed on to pharmacy customers. The province also saw a potential conflict of interest with private-label generics, arguing that such products open the possibility of chains preferring to dispense their own brands over other generics and, in turn, interfere with its ability to mitigate generic drug costs.
Independent pharmacies also consider private-label generics as a competitive threat, contending that they lack the resources to offer such products and would be at a big disadvantage to chain drug stores.
"Ontario could reasonably conclude that private-label generics would reduce the competitiveness of the generic drug market, making future price reductions more difficult," the Ontario Court of Appeals stated in its Dec. 23, 2011, ruling.