COURT FILE NO.: 203/04

DATE: 20060530

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

O’DRISCOLL, Matlow and E. MACDONALD JJ.

B E T W E E N:

APOTEX INC.

Applicant

• and -

LIEUTENANT GOVERNOR IN COUNCIL, MINISTER OF HEALTH and ATTORNEY GENERAL OF ONTARIO

Respondents

H.B. Radomski, Richard Naiberg & Joseph Cosentino, for the Applicant

Dennis W. Brown, Q.C. & James Kendik, for the Respondents

HEARD: April 25, 2005

E. MACDONALD J.:

1In this application, Apotex Inc. (“Apotex”) seeks judicial review of the Respondents’ decision to remove the designation of Apotex’s Apo-Flavoxate flavoxate hydrochloride tablets as an interchangeable drug product under the Drug Interchangeability and Dispensing Fee Act, R.S.O. 1990, c. P-23, as amended, (“DIDFA”) and the related decision to delist Apo-Flavoxate from the Comparative Drug Index (“CDI”).¹ This was accomplished by way of Ontario Regulation 59/04 made under the DIDFA on March 11, 2004, effective April 6, 2004.

2Flavoxate hydrochloride tablets, known as Apo-Flavoxate are a prescription medicine used in the treatment of dysuria, urgency, nocturia, suprapubic pain, frequency and incontinence. Apotex holds a Notice of Compliance for its 200 mg Apo-Flavoxate tablets.² These tablets were designated as interchangeable under DIDFA, along with various other approved brands of flavoxate hydrochloride tablets. Apo-Flavoxate was also listed as a benefit under the Ontario Drug Benefits Act (“ODBA”). Apo-Flavoxate tablets are a generic product and are therapeutically indistinguishable from, but priced at approximately 30% lower than the original brand of flavoxate hydrochloride tablets. The brand name product is known as Urispas. It is manufactured by Paladin Labs.

3By means of Ontario Regulation 59/04, passed on March 11, 2004, the Respondents removed the designation of Apo-Flavoxate as an interchangeable drug product under DIDFA and delisted it from the CDI. Apotex seeks judicial review of this decision on the basis that it was arbitrary, discriminatory and not rationally connected to the statutory powers granted to the Respondents under DIDFA. Apotex says that the decision causes harm to it and to patient/consumers by eliminating sales of Apo-Flavoxate.

4Section 14(a) of DIDFA empowers the Lieutenant Governor in Council (“LGIC”), upon recommendation of the Ontario Minister of Health and Long Term Care (“the Ontario Minister”), to designate a product as interchangeable with one or more products provided that the manufacturer has met the prescribed conditions under DIDFA.

5DIDFA encourages price competition in the market for particular pharmaceuticals for the benefit of those paying for the medications. When an individual is prescribed a particular drug, the DIDFA regime ensures that the individual is offered the lowest priced interchangeable brand of such drug.

6Aside from the issue of brands being interchangeable, there is a separate regime under which certain eligible individuals are provided their pharmaceuticals at no cost. This is governed by the Ontario Drug Benefit Act, R.S.O. 1990, c. 0-10, as amended (“ODBA”). The ODBA permits reimbursement of pharmacists by the Ontario Minister in respect of listed drug products supplied to certain eligible individuals. The ODBA empowers the LGIC to designate a drug product as an eligible benefit by regulation and upon recommendation by the Ontario Minister.

7Under DIDFA, the Ontario Minister publishes a schedule for designated interchangeable drug products known as the CDI. Similarly under the ODBA, the Ontario Minister publishes a schedule of listed drug products known as the Ontario Drug Benefit Formulary. The two schedules are published together and amended from time to time as the Formulary/CDI. The most recent edition of the Formulary/CDI is Edition No. 38, Update C, which was effective April 6, 2004. By Ontario Regulation 58/04, the Respondents’ removed the designation of Apo-Flavoxate as an interchangeable under DIDFA and delisted it from the CDI.

8In this application, Apotex challenges this removal and claims that despite repeated requests, the Minister has not provided any explanation or reasons for the removal of Apo-Flavoxate’s designation as interchangeable.

9The appropriate standard of review is that of patent unreasonableness. We also consider that the decision by the Minister to delist the drug as interchangeable under the DIDFA constitutes statutory power. Thus, the decision is reviewable by this court.

10There has been no rational basis put forth by the Respondents as to why Apo-Flavoxate was delisted under the DIDFA and the CDI. It was said in argument that the Respondents have misapprehended and confused the two legislative schemes in place. We see merit in this submission. The decision to remove Apo-Flavoxate’s designation under the DIDFA is not rationally connected with the decision to delist this drug as an eligible benefit under the ODBA. We agree with the Applicant’s submission that while it is clear that DIDFA and the ODBA are linked, these legislatives enactments are different and serve different goals. DIDFA focuses on interchangeability while the ODBA is geared towards a government reimbursement scheme related to provincial expenditures on prescription drugs.

11In the late summer of 2003 Apotex was informed that the Ontario Minister intended to recommend to the LGIC that flavoxate hydrochloride tablets be delisted as a benefit under the ODBA. By letter dated November 26, 2003, Apotex’s counsel wrote the Ontario Minister requesting that the Apo-Flavoxate hydrochloride tablets not lose their designation as interchangeable under the DIDFA, even if the tablets were to be delisted under the ODBA. By letter dated December 1, 2003, Apotex’s counsel again requested that the Ontario Minister not recommend that Apo-Flavoxate be delisted as an interchangeable product under the DIDFA and to advise Apotex if its intentions were otherwise.

12The interchangeability listing of Apo-Flavoxate is independent of its listing as a benefit under the ODBA. The record contains evidence that demonstrates examples of drug products that are designated as interchangeable under DIDFA and listed in the CDI but are not listed as benefits under the ODBA.

13Under the rubric of harm to Apotex and the public, Apotex submits that as a generic pharmaceutical company it cannot market its products effectively unless they are listed as interchangeable in the CDI. Generic manufacturers market their products to pharmacists as opposed to dispensing physicians. Market share depends upon substitution of the generic product as authorized by the CDI. Absent listing on the CDI, Apotex will not be able to make sales of Apo-Flavoxate and will not be able to maintain a viable market share for this product.

14The Ontario Minister’s justification of its decision to delist Apotex’s product is summarized in paragraph 26 and 27 of the Factum of the Respondents. These paragraphs are as follows:

On August 14th, 2003, the Ministry sent a letter addressed to Mr. Peter Gingras, Director, Scientific Administration at Apotex Inc., informing him of the Drug Quality and Therapeutics Committee (DQTC)³ recommendations to the Minister that Apo-Flavoxate be de-listed from the ODB Formulary and that new requests for Apo-Flavoxate would not be reimbursed through the Individual Clinical Review (section 8 of the ODBA) mechanism.

The DQTC’s recommendations were based on factors including:

a) Due to the poor quality of evidence, the efficacy of flavoxate over placebo could not be established.

b) There was no economic evaluation available.

c) Flavoxate was considerably more expensive than oxybutynin [another product used in the treatment of urinary incontinence].

d) Long term, well-designed, directly comparative studies would assist in determining the efficacy and potential cost-effectiveness of flavoxate versus other therapeutic alternatives on the Formulary/CDI. These data were unavailable in the published medical literature.

e) Based on the lack of clinical trial evidence to support its efficacy, flavoxate did not reasonably offer any clinical value.

15There is an inherent contradiction in the logic that is projected by the Respondents as a justification of the delisting of the interchangeability status of the drug in question. On the one hand, the Minister’s representative, Susan Paetkau, puts forth various reasons to justify the delisting and on the other hand, acknowledges in paragraph 30 of her affidavit that the drug is still available.

16In summary, the Minister says that the decision to delist Apo-Flavoxate is a function of its mandate to ensure that drugs listed on the Formulary/CDI and declared to be interchangeable with other drugs are proven to be safe and affective. The Minister says that there is inadequate evidence that flavoxate, including Apo-Flavoxate, is effective.

17In our view, the Minister’s justification for its decision does not survive a scrutiny of events that appears to have led to the decision to delist the drug as interchangeable. We agree with the submission that the decision to remove Apo-Flavoxate’s interchangeability designation under the DIDFA is not rationally connected with the decision to delist this drug product as an eligible benefit under the ODBA.

18Any decision by the Ontario Minister to delist a drug product as interchangeable under the DIDFA constitutes a statutory power under section 1 of JRPA. The same may be said about the power of the LGIC to pass regulations giving effect to the delisting of the drug. Accordingly, these decisions are reviewable by this court. See Apotex Inc. v. Ontario (Ministry of Health) (1989), 1989 4123 (ON SC), 71 O.R. (2d) 525. (Div. Ct.).

19The decision maker must act within the limits of his/her jurisdiction. The jurisprudence is clear that the decision maker cannot exercise his/her statutory power in an arbitrary, capricious or irrational manner that is unfair and constitutes a denial of natural justice. The duty of fairness has a particular presence when the rights and interests of a person are affected. This is particularly so when a decision is made that results in the loss of pre-existing rights. See Nicholson v. Haldimand Norfolk (Regional) Police Commissioners, 1978 24 (SCC), [1979] 1 S.C.R. 311 at 324-326 and Apotex Inc. v. Ontario (Minister of Health) (1989), supra at 533 and 534. The circumstances that surround the Minister’s decision to remove the interchangeability status of Apo- Flavoxate constitute a denial of natural justice. An order shall go quashing Regulation No. 59/ 04, made on March 11, 2004 with the result that Apo-Flavoxate is restored to its former status as an interchangeable drug product for the purposes of CDI. Apotex shall have its costs of this Application. If the parties are unable to agree on the quantum of these costs, they may make written submissions within 30 days of the release of these reasons.

O’Driscoll J.

Ellen Macdonald J.

Released:

MATLOW J. (Dissenting):

20With respect, I disagree with the disposition of this application by the majority. I would dismiss the application and invite submissions from counsel with respect to costs.

21Unlike the other members of the Court, it is my view that there was a clear rational basis put forth by the respondents for removing the designation of Apo-Flavoxate tablets as an interchangeable drug product pursuant to the DIDFA quite independently of the decision to delist it pursuant to the ODBA..

22Section 14.1 of the DIDFA provides that the LGIC may remove the designation of a product as an interchangeable product even if none of the prescribed conditions under clause 1 (c) have been breached if the LGIC considers it advisable in the public interest to do so.

23The respondents accepted the recommendation of the DQTC to remove the designation of Apo-Floxate tablets because there was insufficient evidence of its efficacy. That conclusion was reached initially by a subcommittee of DQTC made up of medical and other experts who had relevant experience with the drug under review.

24By accepting the recommendation, the LGIC did precisely what section 14.1 of the DIDFA empowered it to do “in the public interest”. It clearly determined that it was not in the public interest to continue the designation of a drug whose efficacy had not been established and to effectively promote its sale by its inclusion on the list even at its lower price.

25It is, therefore, my view, that the respondents’ decision was made in the proper exercise of their discretion to implement government policy in a technical scientific context and deserves deference. I am persuaded that this Court should not interfere with it.

MATLOW J.

Released:

COURT FILE NO.: 203/04

DATE: 20060530

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

o’driscoll, matlow and e. macdonald jj.

Footnotes

1. 1In these reasons, the reference to the “Respondents” means the Lieutenant Governor in Council and the Minister of Health.
2. 2In order to advertise or sell a new drug in Canada, every drug manufacturer must obtain a Notice of Compliance (“NOC”) for that drug. This comes from the Federal Minister of Health pursuant to the provisions of the Food and Drug Act (“FDA”) and the regulations thereunder. The NOC constitutes a declaration of equivalence to the Canadian Reference Brand of the product (the originator’s product) for the purposes of safety and effectiveness. Once the notice of compliance is issued, the extent to which one equivalent brand of a drug product will be interchanged with another in the market place is effectively determined by Provincial Regulatory Schemes. The Provincial Ministries of Health are responsible for designating and maintaining a listing of ‘interchangeable’ brands of drug products.
3. 3The DQTC is an advisory body to the Minister established under the authority of section 9 of the Ministry of Health and Long Term Care Act.