The Ontario (Canada) government’s push for cheaper prices on generic drugs hit a snag Friday when a court struck down a rule forbidding retailers like Shoppers Drug Mart from selling their own private-label generic prescriptions.
Industry sources said the ruling is “a big deal” because it’s a win for Shoppers — known for its Life brand products — and rival Rexall chain owner Katz Group. Both challenged the private label ban.
The court challenge came after their profit margins were trimmed by Ontario reforms last year that capped the price of generic drugs at 25 per cent of the equivalent brand name medicines, a 50 per cent cut, and banned professional allowances paid to pharmacists by generic drug companies.
Those drug reforms by Ontario Health Minister Deb Matthews were aimed at saving money for consumers, taxpayer-funded drug plans and employer drug plans because the province had some of the highest generic drug prices in the world.
“While we are encouraged by this decision, we assume that all parties are reviewing the ruling and considering their options and next steps,” Shoppers spokeswoman Lisa Gibson said following Friday’s court decision.
“Accordingly, we do not wish to discuss the matter further at this time.”
Investors reacted positively to the 23-page ruling by a three-judge panel of the Ontario Superior Court of Justice, with Shoppers shares rising $1.62, or 4.4 per cent, to close at $38.72 on the Toronto Stock Exchange.
The judges ruled the regulation was “beyond the scope” of Ontario’s drug laws.
“It interferes with the right to trade and commercial freedom without any specific authority to do so.”
One highly placed source said the decision clears the way for drug chains to ask manufacturers in the highly competitive generic drug industry to bid on making private-label medicines for them, take the lowest offer and pocket the difference between that price and the one they were paying other suppliers as a “private label fee.”
But the government wants any such price breaks to go to consumers and taxpayers.
Health Minister Deb Matthews — whose controversial generic drug price cuts last spring infuriated pharmacists and drug chains — said her department’s lawyers are reviewing the ruling.
“The government’s drug reforms are about one very simple goal: we want fair drug prices for Ontarians because that’s what they expect and rightly deserve. We won’t ever back down from this.”
Generic drug makers are also reviewing the ruling, said Jeff Connell of the Canadian Generic Pharmaceutical Association.
Shoppers Drug Mart announced last spring that it planned to introduce a line of generic drugs but later dropped the idea.
Industry sources said another reason for the ban on private-label generics was that they could create a conflict of interest for pharmacists, who would have to choose between drugs made for their own store versus similar medicines made by other companies.
Source: The Toronto Star