Canada's top court upholds Ontario ban on private-label drugs
By Randall Palmer
OTTAWA (Reuters) - The Supreme Court of Canada dealt a blow to pharmacy chains on Friday when it upheld the province of Ontario's ban on drugstores' sales of their own private-label generic prescription drugs.
Pharmacy companies saw the private-label drugs as a way to reduce the impact of Ontario regulations designed to lower the cost of generic drugs. A lower court ruled that the store brand drugs circumvent bans on professional allowances and rebates.
The Ontario rules have weighed on the earnings of the drugstore chains, including Shoppers Drug Mart Corp, a principal appellant in this case. Shoppers' share price edged lower after Friday's ruling, down 7 Canadian cents at C$59.04.
In the 7-0 decision, Justice Rosalie Abella noted that Canada spends more on prescription drugs per capita than almost any other industrialized country and she highlighted "Ontario's totemic struggle to control generic drug prices."
She pointed out the proportion of government health care expenses that went for drugs had risen to 15.9 percent in 2010 from 9.5 percent in 1985.
The provincial ban on a pharmacy chain's buying from its own subsidiary aims to overcome anticompetitive behavior, or to prevent prices that are unnaturally high.
"Each time the government has introduced new measures, market participants have changed their business practices to obviate the restrictions and keep prices high," Abella wrote.
The ruling only applies directly to Ontario, the biggest market in Canada. But it could inspire similar bans in other provinces, which have already followed Ontario's lead in cutting prices for generic drugs. Continued...