The Ontario Superior Court has ruled that a ban prohibiting pharmacies from producing private label (store brand) generic substitutes went against the pharmacies’ commercial freedom and right to trade. In the lawsuit, pharmacy chains Shoppers Drug Mart Corporation and Katz Group Canada Limited were challenging a 2010 law, which also made it illegal for generic drug companies to make payments to drugstores – called professional allowances – in order to keep the pharmacies’ shelves stocked with their brand. These rebates were estimated to be worth $750 million a year, and the pharmacies created the new labels to offset the revenue loss.
This focus on generic drug alternatives comes as Ontario has taken significant steps to reduce health care costs in the past year. The professional allowance bans, as well as the price cut of generic drugs to 25 percent and of the equivalent brand name to 50 percent, are examples of how Ontario enacted cost-cutting measures.
Ontario Health Minister Deb Matthews believes that the ruling on private labeling will not help these efforts and that the private labels will generate savings for the pharmacies that will not be passed on to consumers or the government. As a result of the Superior Court’s ruling, Ontario has filed an appeal.
Sources:
http://www.theglobeandmail.com/globe-investor/ontario-to-challenge-chains-win-on-private-drugs/article1912845/
http://www.theglobeandmail.com/globe-investor/pharmacies-face-upheaval-with-private-label-drug-ruling/article1902970/
http://www.cbc.ca/news/health/story/2011/02/19/ontario-drug-ruling-appeal.html