Editor’s Note: Addendum released on June 11, 2013. Original judgment has been corrected with text of addendum appended.
COURT OF APPEAL FOR ONTARIO
CITATION: Ontario College of Pharmacists v. 1724665 Ontario Inc. (Global Pharmacy Canada), 2013 ONCA 381
DATE: 20130610
DOCKET: C56771 and C56805
Gillese, Epstein and Lauwers JJ.A.
IN THE MATTER of the Drug and Pharmacies Regulation Act, R.S.O. 1990, c.H.4, s. 162, and the Health Professions Procedural Code, s. 87, being Schedule 2 to the Regulated Health Professions Act, 1991, S.O. 1991, c. 18, and deemed to be part of the Pharmacy Act, 1991, S.O. 1991, c.36;
BETWEEN
Ontario College of Pharmacists
Applicant (Respondent)
and
1724665 Ontario Inc., c.o.b. as Global Pharmacy Canada, RX Processing Services Inc., Richard Petko, Frank Stacho, Global Pharmacy Canada, Inc., David Billings and Wade Onuffer
Respondents (Appellants)
Alan J. Lenczner, Q.C., and Dena N. Varah, for the appellants RX Processing Services Inc., Richard Petko and Frank Stacho
John J. Chapman, for the appellants Global Pharmacy Canada, Inc., David Billings and Wade Onuffer
Linda R. Rothstein, Nick Coleman and Jean-Claude Killey, for the respondent
Heard: April 22, 2013
On appeal from the judgment of Justice Janet Wilson of the Superior Court of Justice dated March 15, 2013, with reasons reported at 2012 ONSC 5804.
Gillese J.A.:
[1] Global Pharmacy Canada is the trade name of a business that uses the internet to market the retail sale of generic prescription drugs to Americans. Although the seller of the drugs is now a Belize company, on its website, the seller refers to itself as Global Pharmacy Canada and directs customers to contact its “dedicated staff of friendly customer service agents located in Toronto, Canada”. The “dedicated staff” is actually located in a call centre in Mississauga, Ontario. They take the customer orders and process payments for the drugs. They also ensure that the orders are filled in India and shipped directly to the customers.
[2] Advertising is done through the internet and directly through promotional materials distributed in the United States. The customers are American. The drugs are sourced in India and never enter Canada. The corporations and individuals involved in operating Global Pharmacy Canada are scattered among Belize, the United States and Ontario.
[3] Are those companies and individuals subject to the jurisdiction of the Ontario College of Pharmacists? Are retail prescription drugs being sold in Ontario in breach of the legislation that governs pharmacies and pharmacists? These appeals depend on answers to those challenging questions.
OVERVIEW
[4] Ontario legislation closely regulates the retail sale of prescription drugs in Ontario. The Ontario College of Pharmacists (the “College”) is entrusted with policing violations of the legislation. In carrying out its legislative objects, the College has a duty to serve and protect the public interest.
[5] In the present case, the College first started an action in which it alleged that the appellants were in breach of various statutory provisions regulating the sale of prescription drugs in Ontario. The core allegations are that the appellants have been:
• operating a pharmacy without accreditation;
• using certain designated terms, such as “pharmacy”, “pharmacists”, “drug” and “drugs” in connection with their business, which is not an accredited pharmacy, and by persons who are not pharmacists;
• performing acts reserved to pharmacists and accredited pharmacies; and,
• selling prescription drugs in a pharmacy, without pharmacists, and without complying with the rigors required for the sale of prescription drugs, such as the requirement of a valid prescription.
[6] None of the appellants are authorized to sell prescription drugs in Ontario.
[7] The College then brought an application to stop the appellants from selling, by retail, prescription drugs from any location in Ontario, and to cease using the designated terms “pharmacy,” “pharmacist”, “drug”, or “drugs” in relation to their business.
[8] By judgment dated March 15, 2013 (the “Judgment” or the “injunction order”), the application judge granted the injunction until the appellants could demonstrate that they were in compliance with the governing legislation. She concluded that the sale of prescription drugs takes place in Ontario and that the appellants are subject to the College’s jurisdiction.
[9] Two groups of appellants appeal the injunction order, arguing that the application judge erred in both of her conclusions. The first group is RX Processing Services Inc. (“RXP”), Richard Petko and Frank Stacho (the “RXP appellants”). The second group is GPC-Belize, David Billings and Wade Onuffer (the “GPC-Belize appellants”). GPC-Belize is a Belize corporation carrying on business as Global Pharmacy Canada Inc.
[10] For the reasons that follow, I would dismiss the appeals.
THE STATUTORY FRAMEWORK
[11] The regulatory scheme under which these proceedings have been brought provides important context for these appeals.
[12] Three Ontario statutes, taken together, closely regulate pharmacists, pharmacies, and the retail sale of prescription drugs in Ontario: the Pharmacy Act, 1991, S.O. 1991, c. 36 (“PA”); the Drug and Pharmacies Regulation Act, R.S.O. 1990, c. H.4 (the “DPRA”); and the Regulated Health Professions Act, 1991, S.O. 1991, c. 18 (“RHPA”). The Health Professions Procedural Code (the “Code”), which is Schedule 2 to the RHPA and is also incorporated into the PA, and the regulations under these statutes are also part of the statutory scheme.
[13] The sale of prescription drugs in Ontario is highly regulated. For example, all pharmacies – meaning all premises from which drugs are sold by retail – must be accredited: see ss. 1(1) and 139, DPRA. Only a registered pharmacist can own or operate a pharmacy: see ss. 142 and 144, DPRA. Further, drugs can only be sold by certain qualified individuals under specific conditions: see ss. 27(1) and 27(2)(8), RHPA; s. 149, DPRA.
[14] The College is tasked with the regulation of drugs and pharmacies in accordance with the DPRA: see s. 6, PA. It is also responsible for regulating the practice of the pharmacy profession and governing its members in accordance with the RHPA, the PA, the Code, and any regulations passed thereunder: see s. 3(1), the Code. This includes the establishment, development and maintenance of standards of practice, professional ethics, and qualifications required of those operating pharmacies and acting as pharmacists within the province: see s. 3(1), the Code; s. 6, PA. In carrying out its legislative objects, the College is required to serve and protect the public interest: see s. 3(2), the Code.
[15] The College alleges that the appellants, in violation of various provisions of the applicable legislation:
• Sell drugs without being authorized health professionals, contrary to ss. 27(1) and 27(2)(8) of the RHPA;
• Operate a pharmacy without accreditation, contrary to s. 139 of the DPRA;
• Own and operate a pharmacy without themselves being pharmacists, contrary to ss. 142 and 144 of the DPRA;
• Operate a pharmacy and sell drugs by retail without a pharmacist or other qualified person present or supervising, contrary to ss. 146 and 149 of the DPRA;
• Sell prescription drugs without a valid prescription, contrary to s. 155 of the DPRA and s. 40 of O. Reg. 58/11, passed under the DPRA;
• Use the restricted designations “pharmacy”, “drug”, and “drugs” in connection with a retail business that is not an accredited pharmacy, contrary to s. 147 of the DPRA; and
• Use the restricted title “pharmacist” in relation to a person who is not a member of the College, contrary to s. 10 of the PA.
[16] The College is expressly authorized under s. 162 of the DPRA and s. 87 of the Code to apply to a judge of the Superior Court to enjoin activity that violates the applicable legislation and to compel compliance, as it did in this case.
[17] The full text of the various statutory provisions referred to in these reasons can be found in Schedule “A”.
BACKGROUND IN BRIEF
[18] The following factual background draws heavily from the thorough reasons of the application judge.
Before the Restructuring
[19] From 2007 to 2009, Global Pharmacy Canada advertised prescription drugs for sale worldwide, including in Ontario, via the website www.globalpharmacycanada.com. The business was operated by 17245665 Ontario Inc. c.o.b. as Global Pharmacy Canada Inc. (“GPC-Ontario”). GPC-Ontario operated out of a call centre in Mississauga, Ontario.
[20] GPC-Ontario was owned by Petko and Stacho.
[21] In the summer of 2009, the College received three complaints or inquiries about Global Pharmacy Canada. One, from an American, complained that Global Pharmacy Canada “should not be allowed to prey on U.S. citizens”. The second was from the California Board of Pharmacy, which inquired whether Global Pharmacy Canada was licensed with the College. The third was from a director of the Centre for Pharmacoeconomic Studies at the University of Texas at Austin, who suggested that Global Pharmacy Canada’s promotional material was “very deceptive”.
[22] These complaints and inquiries precipitated an investigation by the College, beginning in July 2009.
[23] Between August 2009 and November 2012, the College received further complaints from two Americans and an inquiry from the Director of the Montana Board of Pharmacy.
[24] In June 2010, Health Canada expressed concerns to Global Pharmacy Canada about its advertising and sale of drugs that were not approved for use in Canada, contrary to the Food and Drugs Act, R.S.C. 1985, c. F-27 (“FDA“), and its regulations.
[25] The application judge noted that the appellants conceded that from 2007 until they restructured their affairs in 2009 and 2010: (1) the College had jurisdiction to regulate GPC-Ontario’s activities; (2) generic drugs originating in India were being sold by an Ontario corporation to Ontario residents; and, (3) they were in breach of the applicable legislative provisions because prescription drugs were being sold in Ontario and none of the employees at the call centre were pharmacists.
The Restructuring
[26] In 2009-10, GPC-Ontario reorganized its corporate structure and operations in a way that the appellants claim removed it from the ambit of the College’s regulation. Details of the restructuring are set out below but, in summary, it consisted of three things. GPC-Ontario sold its tangible assets to RXP and its intangible assets to GPC-Belize. Steps were taken so that no Canadians could directly buy drugs from Global Pharmacy Canada. And, the Global Pharmacy Canada website was changed.
The Corporate Changes
[27] In May 2009, GPC-Ontario sold all of its tangible assets for approximately $41,000 to RXP, a recently incorporated Ontario company. The tangible assets consisted of all property located at its call centre in Mississauga, including network infrastructure and software licenses.
[28] RXP now runs the call and processing centre in Mississauga in essentially the same manner as GPC-Ontario ran it prior to the restructuring. It employs approximately 17 staff and one manager, Bruno D’Adderio. It operates from the same location and with many of the same employees as prior to the restructuring.
[29] Petko and Stacho are RXP’s sole shareholders and directors. It will be recalled that they are the same people who owned GPC-Ontario prior to the restructuring.
[30] In January 2010, GPC-Ontario sold all of its intangible assets for $120,000 to GPC-Belize. The sale included its website, domain name, the “Global Pharmacy Canada” name, logos, trademarks, the customer database, and all advertising and marketing collateral.
[31] The appellants have made no disclosure as to the identity of the shareholders and directors of GPC-Belize.
[32] GPC-Belize describes Billings and Onuffer as individuals “associated with” it. Both Billings and Onuffer are residents of Pennsylvania. Billings is GPC-Belize’s Chief Financial Officer. He signed the agreements on behalf of GPC-Belize with respect to its purchase of GPC-Ontario’s intangible assets. Onuffer’s name appears in two of Global Pharmacy Canada’s press releases. In one, Onuffer is referred to as “Mr. Wade Onuffer of globalpharmacycanada.com”, and is quoted extensively. In the other, he is referred to as a pharmacist and an “expert from Global Pharmacy Canada”. Before the application judge, Onuffer’s counsel acknowledged that he is not a pharmacist.
[33] Petko swore an affidavit disclosing some, but not all, of the documentation and facts about GPC-Ontario’s sales to RXP and GPC-Belize, and the corporate restructuring. He deposed that GPC-Ontario and GPC-Belize entered into an exclusive licensing agreement at the same time as GPC-Ontario and RXP entered into the May 2009 asset purchase agreement. However, details of the exclusive licensing agreement are unknown because that agreement has not been disclosed. Petko deposed that he was unable to locate that agreement.
[34] None of GPC-Belize, Billings or Onuffer filed any materials on the application. Instead, they relied on submissions made by counsel for RXP, Petko and Stacho.
[35] Pursuant to a Payment Processing Services Agreement dated January 2010, GPC-Ontario continued to perform banking functions for GPC-Belize after the sale of its intangible assets to it. On behalf of GPC-Belize, GPC-Ontario deposited cheques and money orders made payable to Global Pharmacy Canada Inc. into its own bank account. Petko was the signing officer. Thousands of dollars were deposited each day, and sometimes twice a day. Periodically, GPC-Ontario sent the accumulated funds, by wire transfer, to GPC-Belize, less the agreed-upon 3% fee. The application judge described the arrangement as a “clear commingling” of funds. GPC-Belize cancelled this banking arrangement in January 2013, during the proceeding below. No reasons were given for the cancellation.
[36] GPC-Belize and RXP entered into a Master Services Agreement (the “Agreement”), effective August 1, 2010, under which RXP provides call centre services for GPC-Belize. The Agreement states that RXP is to provide “customer relations and administrative services” in connection with GPC-Belize’s “pharmacy intermediary activities”.
[37] More details of the relationships among the various individuals and corporate entities emerge below.
The Operational Changes
[38] In addition to the corporate restructuring, measures were taken to address the issue of sales of the prescription drugs to Canadians. A block was put on the website so that Canadian residents could not access it from a Canadian IP address. Steps were taken so that any drugs purchased would not be shipped to a Canadian address. The cumulative effect of these measures is that Canadians can now only acquire the pharmaceutical drugs being sold by the appellants by using a web proxy service to hide their residency and having the drugs delivered to another country.
[39] The Global Pharmacy Canada website has also changed since the College began its investigation into the appellants’ activities.
[40] In August 2010 – some eight months after the sale from GPC-Ontario to GPC-Belize – the website continued to describe Global Pharmacy Canada as a “Canadian pharmacy company headquartered in Toronto, Canada”. In a section entitled “About Us”, there is a photo of the individuals who work at the “Global Pharmacy Canada customer service department located in Mississauga, Canada”. The text below read: “Since 2004, our office in Toronto, Canada has been helping residents of the United States place orders and receive deliveries…”. The customer order form, available for download on the website, featured a red maple leaf and the Canadian flag. Apart from the website, the only point of contact that customers had with Global Pharmacy Canada was through the call centre in Mississauga, which the website repeatedly encouraged customers to contact by phone, mail or FAX. A Safety Tips page encouraged consumers to “know where your company is really located, not where they say they are” and stated that Global Pharmacy Canada is “in fact located in Canada”.
[41] In February 2011, the website no longer described Global Pharmacy Canada as a Canadian pharmacy company. However, it continued to refer to itself as Global Pharmacy Canada and to its “dedicated staff of friendly customer service agents located in Toronto, Canada”. It continued to direct all customer interactions, including orders, payments and complaints, to the call centre at the same address and phone number in Mississauga. The order form continued to feature the red maple leaf and Canadian flag.
The Sale Process After Restructuring
[42] In para. 136 of her reasons, the application judge provides a clear roadmap for how the appellants sold prescription drugs following the restructuring. That roadmap is invaluable in resolving the issues on appeal. Thus, I reproduce para. 136 of the reasons in full.
[136] The following are the undisputed facts with respect to how the sale of drugs on behalf of GPC-Belize now occurs:
Individuals initiate the purchase of drugs by completing a Patient Order Form, available by mail or online from the www.globalpharmacycanada.com website. GPC-Belize owns the website.
Once completed, the Patient Order Form is sent by mail, fax, or electronically, with copies of prescriptions, pill bottles, or pharmacy receipts to “Global Pharmacy Canada Inc. c/o RX Processing Services, Inc.” to the Mississauga address, or to the Mississauga email address.
The payment method on the Patient Order Form is by Visa or MasterCard.
The Patient Order Form confirms “we will not process your credit card until we have completed your order” (emphasis added). The purchaser must sign authorizing the credit card payment and include the security code, the expiry date, and number of the card to facilitate payment.
The staff at RXP complete the necessary documentation to process the payment of the client from their Visa or MasterCard to complete the order.
Payment by cheque and money order is also accepted. Richard Petko’s evidence was that payment in this manner was a small percentage of the total drug sales. Between August 1, 2012 and February 4, 2013, over $1,200,000 USD was deposited into this account.
Up until February 4, 2013, GPC-Ontario deposited cheques payable to Global Pharmacy Canada Inc. to GPC-Ontario’s CIBC USD bank account, used exclusively for this purpose. Periodically, proceeds from this account were wired by the RXP staff to GPC-Belize, less the 3% agreed upon fee for service.
The Payment Processing Services Agreement was terminated by David Billings on January 5, 2013, although no changes occurred in the procedures as reflected in the February 6, 2013 bank statement. The sum of $119,672.71 was deposited into the CIBC account between February 1 and February 5, 2013.
The Patient Order Form confirms that Global Pharmacy Canada Inc. is appointed to act as agent for the patient for the purpose of conveying the order to a licenced pharmacy in India (emphasis added). The patient signs this acknowledgment. The acknowledgement confirms that the patient agrees to be bound by the terms and conditions available at the Global Pharmacy Canada website.
The patient order form contains a reorder form and a reminder. By ticking off the reorder box, the patient authorizes the credit card on file to be used to automatically reorder the drug and process future payments every three months, without the need for any further proof of a valid ongoing prescription.
RXP Staff in Mississauga process the order by completing the documentation necessary to process the Visa or MasterCard payment. The customer is charged the full amount for the prescription drugs requested. Visa or MasterCard in turn processes the credit card payment for the correct amount and forwards these amounts to the account of GPC-Belize.
Once confirmation of payment is received by Visa or MasterCard, or by the cheque clearing the bank, the staff of RXP then inputs the customer’s order form and prescriptions into the Global Pharmacy Canada website to be filled by a supplier in India.
According to D’Adderio, manager at RXP, at the end of each day, all orders processed by the RXP staff are uploaded to a website that is accessed by the participating pharmacists in India.
I note that there is no named pharmacist in India. There is no indication in any of the documentation sent to the client who the supplier of the drugs may be, and whether or not these drugs in fact come from an Indian pharmacist as represented, or from a supplier of drugs.
Orders are confirmed by an email sent by “orders@globalpharmacycanada.com” or by letter sent by “Your Friends at Global Pharmacy Canada”, enclosing a Global Pharmacy Canada fridge magnet. The header of this confirmation letter reads “Global Pharmacy Canada c/o RX Processing Services, Inc.” with the Mississauga address and phone number, and the www.globalpharmacycanada.com website.
An invoice is prepared by the supplier in India or by the Global Pharmacy Canada website accessed by the supplier (this was not clear on the evidence) and is placed in the package which is shipped from India to the client in the United States or elsewhere. The header of the invoice states “Global Pharmacy Canada” and lists the Dundas Street Mississauga Address, without mention of RXP. The footer of the invoice describes how consumers can re-order drugs, stating: “Please fax this form to: (866)850-6021 or send by mail to: 1090 Dundas St. East, Suite 106, Mississauga ON L4Y 2B8, CANADA (the RXP address). For faster service, call us at (866)850-6021 to authorize your refill over the phone.”
The packages are sent to the United States without any indication that they contain prescription drugs. The customs declaration form that appears on the outside of each package states “health products for personal use”.
There is no evidence before me how the Indian supplier of the drugs is paid. I presume that GPC-Belize pays the supplier of the drugs the agreed upon fee. RXP plays no role in the payment of the Indian supplier of the drugs.
If for some reason one of the Indian suppliers cannot fill the order, RXP remains involved in the process. If the drug is not available, RXP will advise the customer and will do one of two things. One option is to reverse any credit card charges that have been made when the drugs were ordered if the drug is no longer available. If the drug is on back-order and not presently available, the RXP staff will advise the customer of the delay, and the customer will decide whether to wait to obtain the drug, or whether he or she wished to obtain a refund. The RXP staff will produce the paperwork for the refund at the customers’ direction.
RXP staff receive and resolve customer complaints involving all practical matters including non-delivery or delayed delivery of the drugs. If the customer raises any problem with the effects of the medication itself, the RXP representative tells the person to see his or her doctor.
Prior to the involvement of Health Canada, any allegedly defective goods were returned by the purchaser to the Mississauga address. As a result of Health Canada’s concerns about the presence of drugs at the call centre premises, now, if there is a problem with an order, the purchasers are advised by the staff at the call center to either destroy the product, or return the drugs to the supplier in India. As noted, there is no information in the package received by a client who is the supplier of the drug.
THE DECISION BELOW
[43] The application judge concluded that the appellants were selling prescription drugs, by retail, in Ontario. She further concluded that the College had jurisdiction to regulate the appellants’ activities. A summary of her reasoning on both matters follows.
The Appellants are Selling Prescription Drugs in Ontario
[44] The application judge began her analysis on where a “sale” occurs by referring to the traditional definitions such as the transfer, by mutual assent, of the ownership of a thing from one person to another for a money price. She noted the difficulty of applying traditional legal concepts of sales to contracts made via the internet.
[45] The application judge then discussed Prescriptions4us v. Ordre des pharmaciens du Quebec, [2004] Q.J. No. 9014 (S.C.), aff’d [2004] J.Q. No. 13143 (C.A.). In Prescriptions4us, Cohen J. considered whether the sale by a Quebec-based company to Americans, of prescription drugs sourced from Manitoba pharmacists, could be said to have taken place in Quebec. In concluding that it had, Cohen J. applied ordinary contractual concepts of offer and acceptance under the relevant provision of the Civil Code of Quebec, S.Q. 1991, c. 64. Prescriptions4us’s head office was located in Montreal. To purchase drugs, the consumer obtained the necessary forms from Prescriptions4us’s website, completed them, and sent them to the head office. Justice Cohen concluded that there could be no other possible location for the conclusion of the contract than Montreal – the place of the offer and the place where the acceptance was received by the vendor.
[46] In the present case, the application judge then set out a detailed roadmap of how customers purchase prescription drugs from the appellants (reproduced at para. 42, above). She rejected the appellants’ submission that acceptance should be characterized as the Indian supplier’s confirmation that it would forward the drugs to the purchaser or as the forwarding of payments by the credit card companies to GPC-Belize. In her view, based on the roadmap and traditional contract law principles, the appellants could be understood to be selling drugs in Ontario. She reached the same conclusion using the approach set out by the Supreme Court of Canada in Celgene Corp. v. Canada (Attorney General), 2011 SCC 1, [2011] 1 S.C.R. 3.
[47] In Celgene, pharmaceutical drugs were being sold by a New Jersey-based distributor to consumers in Canada. The distributor argued that the New Jersey head office was the locus of sale according to commercial law principles, and therefore that it was not obliged to provide pricing information to the Patented Medicine Prices Review Board (the “Board”). The Board acknowledged that the sale took place in New Jersey, according to commercial law principles. However, it took the position that the consumer protection purpose of the Patent Act, R.S.C. 1985, c. P-4, and the Board’s mandate to protect Canadians from excessive prices charged for patented medicines, militated against a strict commercial law interpretation of the legislative phrase “sold in any market in Canada”.
[48] The Supreme Court upheld the Board’s reasoning and result.
[49] In the application judge’s view, as expressed at para. 153 of her reasons, Celgene confirms “that a purposive analysis of the meaning of sale is appropriate, and that substance, not form, should be relevant in assessing whether there is a sale, unless the words are not capable of bearing any other meaning”.
[50] On the facts as she found them, the application judge said that the “only rational conclusion” was that the sale of drugs by the appellants was taking place in Ontario.
The College has Jurisdiction Based on a Sufficient Connection
[51] The application judge concluded that the College has jurisdiction to regulate the appellants’ conduct because of “a wealth of evidence” showing a sufficient connection between the appellants’ activities and Ontario.
[52] The application judge set out the applicable legal principles for establishing whether a sufficient connection exists, relying on, among other cases, Unifund Assurance Co. v. Insurance Corp. of British Columbia, 2003 SCC 40, [2003] 2 S.C.R. 63, and Crowe v. Ontario Securities Commission, 2011 ONSC 6918, 108 O.R. (3d) 410 (Div. Ct.).
[53] She then made detailed findings of fact about the structure and operation of RXP and GPC-Belize, and the relationships among the principals of those entities. She found that, despite the various agreements that had been entered into as part of the restructuring, from a practical perspective, “little [had] changed” as a result of the restructuring.
[54] The application judge further found that RXP was an agent with apparent authority, if not actual authority, to contract on behalf of GPC-Belize. While some of the terms of the various contracts might suggest otherwise, her factual findings led her to conclude that RXP was acting as agent for GPC-Belize in the retail sale of prescription drugs. The documents, “considered as a whole”, gave RXP actual authority to bind GPC-Belize. Further, GPC-Belize made representations on its website to the effect that RXP had the authority to bind it, in contract, to individuals purchasing its retail prescription drugs.
[55] Finally, the application judge rejected the argument that the College was without jurisdiction because the purchasers were not residents of Ontario or Canada. Relying on Gregory & Co. Inc. v. Quebec Securities Commission, 1961 CanLII 75 (SCC), [1961] S.C.R. 584, and Thorpe v. College of Pharmacists of British Columbia (1992), 1992 CanLII 895 (BC CA), 97 D.L.R. (4th) 634 (B.C.C.A.), the application judge stated that the sufficient connection test can be met even if the public affected by the activity in question is outside the jurisdiction.
THE ISSUES
[56] These appeals raise two issues. Did the application judge err in her determination that the appellants are:
selling prescription drugs, by retail, in Ontario; and
subject to the College’s jurisdiction?
ARE THE APPELLANTS SELLING PRESCRIPTION DRUGS IN ONTARIO?
[57] The appellants say that the application judge erred in concluding that they sell, by retail, prescription drugs in Ontario. Their submission runs as follows.
[58] GPC-Belize is in the business of facilitating the purchase, by Americans, of pharmaceutical drugs from India. All significant aspects of its business involve activities outside Ontario. Its sole connection with Ontario is its contractual arrangement with RXP, under which RXP provides ancillary support and administrative services. GPC-Belize has no physical presence in Ontario, has no Ontario personnel, does no advertising or solicitation of Ontario residents, does not import pharmaceutical drugs into Ontario, and sells no drugs to Ontario residents. In short, the appellants say they are not selling pharmaceutical drugs in Ontario.
[59] I reject this submission.
[60] The Supreme Court’s decision in Celgene instructs us that in a regulatory context, words such as “place of sale”, “sold” and “selling” may not necessarily be given their strict commercial law meanings. At para. 21 of Celgene, the Court says that “[t]he words, if clear, will dominate; if not, they yield to an interpretation that best meets the overriding purpose of the statute.”
[61] I agree with the application judge that, given the overriding purpose of the relevant legislation in this case, a purposive approach to determining the meaning of sale is appropriate. The College has a mandate to regulate the sale of prescription drugs in the province, and a duty to serve and protect the public interest – it is the substance, and not the form, which is relevant when determining whether the sale of prescription drugs takes place in Ontario.
[62] The application judge made detailed findings of fact about the sale process following restructuring. On those findings, it is clear that the substance of the sale transaction takes place through RXP, an Ontario corporation that is located and operates in Ontario. As the application judge noted, “[a]ll documentation – including the Patient Order Form, confirmation of the order, the invoice, and the packing slip – are in the name of Global Pharmacy Canada bearing the Mississauga address.” Furthermore, critical aspects of the sale transaction by which the customers get prescription drugs and the appellants get paid for providing them, are conducted by RXP. The customer submits its order form, which RXP processes, or calls RXP with its order. RXP takes the order and processes payment for it. RXP then arranges for the delivery of the drugs directly to the American customer. If there is a problem, customers contact RXP. In short, without RXP staff at the call centre in Mississauga, no prescription drugs would flow from Global Pharmacy Canada (or GPC-Belize) to its customers and GPC-Belize would not get paid.
ARE THE APPELLANTS SUBJECT TO THE COLLEGE’S JURISDICTION?
[63] The appellants say that there are such “few and relatively insignificant points of contact” between GPC-Belize and Ontario that the application judge erred in finding a sufficient connection to ground the College’s jurisdiction. Specifically, they submit that she erred in two ways.
[64] First, they contend that the application judge erroneously blurred the distinctions between the activities of GPC-Belize and RXP – the two are separate companies whose relationship is governed by contract and the separate legal personality of each must be respected.
[65] Second, they submit that the application judge erred in treating RXP as GPC-Belize’s agent in matters relating to GPC-Belize’s business, including contract formation. They contend that GPC-Belize lacks a meaningful connection to Ontario and that the central aspects of its business (its customers, products, and suppliers) do not touch Ontario. The “administrative service” that RXP provides is an insufficient point of contact to give the College jurisdiction over them.
[66] In my view, the appellants’ submission on this issue is essentially an attack on the application judge’s findings of fact. Those findings are not to be overturned, absent palpable and overriding error. There is none. Consequently, I see nothing in this submission.
[67] There is no dispute about the legal principles that apply when determining the applicability of a provincial regulatory scheme to the out-of-province appellants. The question is whether there is a sufficient connection between those appellants and Ontario, such that the College has jurisdiction over them. The first two propositions in para. 56 of Unifund provide the starting point for answering that question:
Consideration of constitutional applicability can conveniently be organized around the following propositions:
The territorial limits on the scope of provincial legislative authority prevent the application of the law of a province to matters not sufficiently connected to it;
What constitutes a “sufficient” connection depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it; …
[68] Furthermore, as the application judge observed, there is no single standard defining what constitutes a sufficient connection: whether there is a sufficient connection depends largely on context.
[69] Here are some of the application judge’s factual findings, which underlie her conclusion that there was a sufficient connection between the appellants and Ontario to ground the College’s jurisdiction.
• From May 2009 to January 2010, RXP was not paid for the services it rendered to GPC-Belize. Instead, it simply kept any funds flowing from cheques it received that were made payable to Global Pharmacy Canada Inc.;
• RXP does not present any sort of budget to GPC-Belize – GPC-Belize simply pays all amounts requested, with no questions asked;
• The “players” in Ontario at RXP are the same individuals who owned and operated GPC-Ontario;
• The manager of RXP confirmed that nothing about his task had changed since the restructuring;
• The RXP staff perform essentially the same functions as they did on behalf of GPC-Ontario before the restructuring, from the same premises. They continue to answer the phone “Global Pharmacy Canada”, as they did before the restructuring. They continue to receive and process orders and payments for the drugs, and respond to customer complaints. All customer mail and enquiries continue to be directed to the call centre;
• The RXP staff perform the activities that the website claims are performed by Global Pharmacy Canada;
• The organizational distinctions between RXP and GPC-Belize are blurred. For example, one provision in the Agreement confirms that RXP functions under the “control and policy direction” of GPC-Belize;
• The January 2010 Payment Processing Services Agreement, signed by Billings on behalf of GPC-Belize and Petko on behalf of GPC-Ontario, provides evidence that the two companies are not “in substance … as separate as claimed”. In this regard it will be recalled that for many months following the sale of its intangible assets from GPC-Ontario to GPC-Belize, GPC-Ontario continued to deposit cheques made out to Global Pharmacy Canada into its own bank account.
[70] The application judge did not blur the legally distinct personas of GPC-Belize and RXP, as the appellants contend. Rather, as the foregoing list demonstrates, she made factual findings which show that although the two have separate legal identities, they do not operate separately. Apart from contact with the GPC-Belize website, all contact between Global Pharmacy Canada and its customers is exclusively through the RXP call centre here in Ontario. In light of the application judge’s findings, her determination that the two companies do not operate independently is amply justified.
[71] Similarly, the application judge’s factual findings justify her determination that RXP serves as GPC-Belize’s agent in matters relating to GPC-Belize’s business, including contract formation. Given those findings, it is clear that RXP provides much more than merely “administrative service” to GPC-Belize. The RXP call centre in Mississauga is home to the only staff that deal with Global Pharmacy Canada customers. They are, for all intents and purposes, its sales force.
[72] I also reject the submission that there is no or insufficient connection between each of Billings and Onuffer and Ontario to ground jurisdiction. Those appellants were given the full opportunity to participate in these proceedings. They chose to file no evidence. On the findings of the application judge, both are connected to the Global Pharmacy Canada business, core aspects of which are performed by RXP here in Ontario. Recall in this regard that Billings, in his role as GPC-Belize’s CFO, signed the restructuring documents on behalf of GPC-Belize. Recall also his close personal and longstanding relationship with Petko. Recall further Global Pharmacy Canada’s press releases in which Onuffer is described as being with Global Pharmacy Canada and then quoted at length.
[73] Finally, I reject the appellants’ submission that the College is “overreaching” by assuming jurisdiction over them. The College’s duty under s. 3(2) of the Code is “to serve and protect the public interest”. In the circumstances of this case, the territorial limits on the scope of the provincial legislative authority relate to the conduct that the College can regulate. The College’s reach is not defined as, or limited to, the Ontario public.
CONCLUSION
[74] As I have explained, in this case there is conduct over which the College has power to regulate: the sale of prescription drugs in Ontario. The principle that regulators may act to protect persons who are located outside the regulator’s territorial jurisdiction, when the conduct targeted by the regulator occurs within the jurisdiction, has been repeatedly affirmed, beginning with Gregory, at p. 588. See also Thorpe, at p. 640, and Crowe, at para. 32.
[75] The College is not overreaching – it is fulfilling its legislated duty to serve and protect the public interest in the matters over which it has been given authority, including the sale of prescription drugs in Ontario.
[76] In the domain of pharmaceutical drugs, reputation is based on regulation. If a company trades on Ontario’s reputation for quality and strong regulatory standards, and sites a critical part of the sales process in Ontario, it will be subject to Ontario’s regulation.
[77] Accordingly, I would dismiss both appeals with costs, payable on a joint and several liability basis, to the College fixed at $25,000, all inclusive.
Released: June 10, 2013 (“E.E.G.”)
“E.E. Gillese J.A.”
“I agree Gloria Epstein J.A.”
“I agree P. Lauwers J.A.”
Schedule “A”
Pharmacy Act, 1991, S.O. 1991, c. 36
Definitions
s. 1. In this Act,
“College” means the Ontario College of Pharmacists…
Deeming Provision
s. 2. (1) The Health Professions Procedural Code shall be deemed to be part of this Act.
s. 2. (2) In the Health Professions Procedural Code as it applies in respect of this Act,
“College” means the Ontario College of Pharmacists;
“health profession Act” means this Act;
“profession” means the profession of pharmacy;
“regulations” means the regulations under this Act.
Additional Objects
s. 6. In addition to the objects of the College set out in subsection 3 (1) of the Health Professions Procedural Code, the College has the following objects:
- To regulate drugs and pharmacies under the Drug and Pharmacies Regulation Act.
1.1 To exercise the powers and duties of the College under the Drug Interchangeability and Dispensing Fee Act.
- To develop, establish and maintain standards of qualification for persons to be issued certificates of accreditation…
Restricted Titles
s. 10. (1) No person other than a member shall use the title “apothecary”, “druggist”, “pharmacist”, “pharmacy technician” or “pharmaceutical chemist”, a variation or abbreviation or an equivalent in another language…
Drug and Pharmacies Regulation Act, R.S.O. 1990, c. H.4
Definitions
s. 1. (1) In this Act,
“College” means the Ontario College of Pharmacists…
“drug” means any substance or preparation containing any substance,
(a) manufactured, sold or represented for use in,
(i) the diagnosis, treatment, mitigation or prevention of a disease, disorder, abnormal physical or mental state or the symptoms thereof, in humans, animals or fowl, or
(ii) restoring, correcting or modifying functions in humans, animals or fowl,
(b) referred to in Schedule I, II or III,
(c) listed in a publication named by the regulations, or
(d) named in the regulations,
but does not include,
(e) any substance or preparation referred to in clause (a), (b), (c) or (d) manufactured, offered for sale or sold as, or as part of, a food, drink or cosmetic,
(f) any “natural health product” as defined from time to time by the Natural Health Products Regulations under the Food and Drugs Act (Canada), unless the product is a substance that is identified in the regulations as being a drug for the purposes of this Act despite this clause, either specifically or by its membership in a class or its listing or identification in a publication,
(g) a substance or preparation named in Schedule U,
(h) a substance or preparation listed in a publication named by the regulations, or
(i) a substance or preparation that the regulations provide is not a drug…
“pharmacy” means a premises in or in part of which prescriptions are compounded or dispensed for the public or drugs are sold by retail, and includes a remote dispensing location…
“prescriber” means a person who is authorized under the laws of a province or territory of Canada to give a prescription within the scope of his or her practice of a health discipline…
“prescription” means a direction from a prescriber directing the dispensing of any drug or mixture of drugs for a designated person or animal…
Certificates of Accreditation
s. 139. (1) No person shall establish or operate a pharmacy unless a certificate of accreditation has been issued in respect thereof…
Operation of Pharmacies by Corporation
s. 142. (1) No corporation shall own or operate a pharmacy unless the majority of the directors of the corporation are pharmacists…
s. 142. (2) No corporation shall own or operate a pharmacy unless a majority of each class of shares of the corporation is owned by and registered in the name of pharmacists or in the name of health profession corporations each of which holds a valid certificate of authorization issued by the College…
Operation of Pharmacies
s. 144. (1) No person other than a pharmacist or a corporation complying with the requirements of section 142 shall own or operate a pharmacy…
Supervision of Pharmacist
s. 146. (1) Subject to subsection (1.0.1), no person shall operate a pharmacy unless,
(a) it is under the supervision of a pharmacist who is physically present; and
(b) it is managed by a pharmacist who is designated as the designated manager by the owner of the pharmacy.
s. 146. (1.0.1) The requirement under clause (1) (a) that a pharmacist be physically present in a pharmacy does not apply with respect to a remote dispensing location, as long as,
(a) a certificate of accreditation has been issued permitting the operation of the remote dispensing location; and
(b) the remote dispensing location is operated in accordance with the regulations.
Designations
s. 147. No person shall in connection with a retail business use any of the following designations, unless the business is an accredited pharmacy:
Drug store.
Pharmacien détaillant.
Pharmacy.
Pharmacie.
Drug department.
Service de pharmacie.
Drug sundries.
Remèdes divers.
Drug or Drugs.
Médicaments.
Drug mart.
Comptoir de médicaments.
Medicines.
Remèdes…
Dispensing of Drugs
s. 149. (1) Subject to subsections (2) and (3), no person shall compound, dispense or sell any drug in a pharmacy other than,
(a) a pharmacist;
(b) an intern acting under the supervision of a pharmacist who is physically present;
(c) a registered pharmacy student acting under the supervision of a pharmacist who is physically present; or
(d) a pharmacy technician acting under the supervision of a pharmacist who is physically present…
s. 149. (2) Where a pharmacist or an intern is present in the pharmacy and available to the purchaser for consultation, subsection (1) does not apply to the sale in a pharmacy of a drug listed in Schedule III…
s. 149. (3) The requirement in clause (1) (d) that a pharmacist be physically present to supervise does not apply with respect to a remote dispensing location, as long as a pharmacist is actively supervising the pharmacy technician mentioned in that clause and,
(a) a certificate of accreditation has been issued permitting the operation of the remote dispensing location; and
(b) the remote dispensing location is operated in accordance with the regulations...
Prescription Drugs
s. 155. (1) Subject to the regulations, no person shall sell by retail any drug referred to in Schedule I, except on prescription given in such form, in such manner and under such conditions as the regulations prescribe…
Restraining Orders
s. 162. (1) Where it appears to the College that any person does not comply with any provision of this Act or the regulations, despite the imposition of any penalty in respect of such non-compliance and in addition to any other rights it may have, the College may apply to a judge of the Superior Court of Justice for an order directing such person to comply with such provision, and upon the application the judge may make such order or such other order as the judge thinks fit...
O. Reg. 58/11 under the DPRA
Rules re Dispensing
s. 40. (1) A drug shall not be dispensed in a pharmacy pursuant to a prescription unless the prescription has been authorized by a prescriber…
s. 40. (2) Subject to subsections (3) and (4), the authorization required by subsection (1) may be given verbally or by signature...
s. 40. (3) A drug shall not be dispensed in a pharmacy pursuant to a prescription given verbally unless all of the following conditions have been met:
The drug is not a narcotic drug. (This does not prevent the dispensing of a verbal prescription narcotic.)
The verbal direction was received by a member who was practising at the pharmacy.
The member receiving the verbal direction recorded,
i. the date the verbal direction was received,
ii. the number of refills authorized by the verbal direction, and
iii. the name of the member who received the verbal direction.
- The prescription was recorded and signed by the member receiving the verbal direction…
s. 40. (4) A drug shall not be dispensed in a pharmacy pursuant to a prescription given by signature that has been transmitted by means of fax, electronic mail or other form of electronic transmission, except where a member who is practising at the pharmacy either,
(a) has received the prescription directly from the prescriber by means of a transmission process that ensures the security, confidentiality and integrity of all personal information contained in the prescription and, before dispensing drugs pursuant to the prescription, has verified that the prescription, including the prescriber’s signature, is authentic and has not been altered; or
(b) has received the prescription through an automated pharmacy system that is contained in a remote dispensing location and that employs technology for the creation and transmission of a digitally scanned image of a paper-based prescription that has been approved in accordance with clause 29 (d)…
s. 40. (5) A drug shall not be dispensed in a pharmacy pursuant to a transferred prescription unless the provisions of section 43 have been complied with…
s. 40. (6) For greater certainty, this section also applies where a prescriber authorizes a refill in an original prescription or authorizes a repeat of a prescription previously given…
Regulated Health Professions Act, 1991, S.O. 1991, c. 18
Controlled Acts Restricted
s. 27. (1) No person shall perform a controlled act set out in subsection (2) in the course of providing health care services to an individual unless,
(a) the person is a member authorized by a health profession Act to perform the controlled act; or
(b) the performance of the controlled act has been delegated to the person by a member described in clause (a)…
s. 27. (2) A “controlled act” is any one of the following done with respect to an individual…
- Prescribing, dispensing, selling or compounding a drug as defined in the Drug and Pharmacies Regulation Act, or supervising the part of a pharmacy where such drugs are kept…
Health Professions Procedural Code, Schedule 2 to the RHPA
Objects of College
s. 3. (1) The College has the following objects:
To regulate the practice of the profession and to govern the members in accordance with the health profession Act, this Code and the Regulated Health Professions Act, 1991 and the regulations and by-laws.
To develop, establish and maintain standards of qualification for persons to be issued certificates of registration.
To develop, establish and maintain programs and standards of practice to assure the quality of the practice of the profession.
To develop, establish and maintain standards of knowledge and skill and programs to promote continuing evaluation, competence and improvement among the members.
4.1 To develop, in collaboration and consultation with other Colleges, standards of knowledge, skill and judgment relating to the performance of controlled acts common among health professions to enhance interprofessional collaboration, while respecting the unique character of individual health professions and their members.
To develop, establish and maintain standards of professional ethics for the members.
To develop, establish and maintain programs to assist individuals to exercise their rights under this Code and the Regulated Health Professions Act, 1991.
To administer the health profession Act, this Code and the Regulated Health Professions Act, 1991 as it relates to the profession and to perform the other duties and exercise the other powers that are imposed or conferred on the College.
To promote and enhance relations between the College and its members, other health profession colleges, key stakeholders, and the public.
To promote inter-professional collaboration with other health profession colleges.
To develop, establish, and maintain standards and programs to promote the ability of members to respond to changes in practice environments, advances in technology and other emerging issues.
Any other objects relating to human health care that the Council considers desirable…
s. 3. (2) In carrying out its objects, the College has a duty to serve and protect the public interest…
Court Orders
s. 87. The College may apply to the Superior Court of Justice for an order directing a person to comply with a provision of the health profession Act, this Code, the Regulated Health Professions Act, 1991, the regulations under those Acts…
ADDENDUM
COURT OF APPEAL FOR ONTARIO
CITATION: Ontario College of Pharmacists v. 1724665 Ontario Inc. (Global Pharmacy Canada), 2013 ONCA 394
DATE: 20130611
DOCKET: C56771 and C56805
Gillese, Epstein and Lauwers JJ.A.
IN THE MATTER of the Drug and Pharmacies Regulation Act, R.S.O. 1990, c.H.4, s. 162, and the Health Professions Procedural Code, s. 87, being Schedule 2 to the Regulated Health Professions Act, 1991, S.O. 1991, c. 18, and deemed to be part of the Pharmacy Act, 1991, S.O. 1991, c.36;
BETWEEN
Ontario College of Pharmacists
Applicant (Respondent)
and
1724665 Ontario Inc., c.o.b. as Global Pharmacy Canada, RX Processing Services Inc., Richard Petko, Frank Stacho, Global Pharmacy Canada, Inc., David Billings and Wade Onuffer
Respondents (Appellants)
Alan J. Lenczner, Q.C., and Dena N. Varah, for the appellants RX Processing Services Inc., Richard Petko and Frank Stacho
John J. Chapman, for the appellants Global Pharmacy Canada, Inc., David Billings and Wade Onuffer
Linda R. Rothstein, Nick Coleman and Jean-Claude Killey, for the respondent
Heard: April 22, 2013
On appeal from the judgment of Justice Janet Wilson of the Superior Court of Justice dated March 15, 2013, with reasons reported at 2012 ONSC 5804.
[1] On consent of the College of Pharmacists, the judgment of this court released on June 10, 2013, is suspended until June 25, 2013 to allow for an orderly winding-down of the current operations of RX Processing Services Inc.
“E.E. Gillese J.A.”
“Gloria Epstein J.A.”
“P. Lauwers J.A.”