2019 ONSC 2967
DIVISIONAL COURT FILE NO.: 17-565
DATE: 20190515
ONTARIO
SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
R.J. SMITH, D.L. CORBETT, and MYERS JJ.
BETWEEN:
AS169988 CONSULTANTS INC. (C.O.B. AS WARDEN PHARMACY)
Applicant
- and -
HER MAJESTY THE QUEEN (IN THE RIGHT OF THE PROVINCE OF ONTARIO), MINISTRY OF HEALTH AND LONG-TERM CARE (ONTARIO)
Respondent
Damien R. Frost And K. Ivory, for the Applicant
Dona M.H. Salmon, for the Respondent
HEARD at Toronto: April 29, 2019
F.L. MYERS J.:
REASONS FOR JUDGMENT
The Application
[1] Warden Pharmacy brings an application for judicial review and asks the court to quash the decision of the executive officer of the Ministry of Health and Long-Term Care dated September 25, 2017 terminating the pharmacy’s billing privileges under the Ontario Drug Benefit Program.
[2] The executive officer exercised her statutory discretion to revoke the pharmacy’s entitlement to participate in direct computer billing of the government drug plan after an audit found that the pharmacy had over-billed the plan by more than $140,000 during a specified two-year period.
[3] In my view, the executive officer’s decision is reasonable and must therefore be upheld.
The Regulatory Scheme
[4] The Ontario Drug Benefit Act, R.S.O. 1990, c O.10 establishes a government insurance plan to pay for prescribed medications for seniors and other listed classes of recipients. Under the government drug plan, a subscriber can obtain reimbursement for a significant portion of the cost of prescribed drugs by submitting invoices and the necessary forms to the executive officer who administers the plan under the statute.
[5] For many years the government has had a computerized process through which pharmacies can obtain payment for insured drugs directly from the government. This is a great convenience to plan members/customers. When the pharmacy is paid directly by the government, customers do not then have to pay the pharmacy and go through the process of seeking reimbursement.
[6] There are over 4,300 pharmacies that have direct billing privileges in Ontario. It is fair to say that this is a standard operating practice in the industry. Not being able to bill the government drug plan directly would be a major competitive disadvantage for any pharmacy in Ontario.
[7] The processes for granting and revoking direct billing privileges under the government drug plan are set out in the statute, a regulation made under the statute, and a standard form agreement prescribed in the regulation referred to as the Health System Subscription Agreement.
[8] Section 4.1 of the statute allows pharmacy operators to apply for billing privileges under the plan. The statute provides that in granting billing privileges to a pharmacy operator, the executive officer may require the pharmacy operator to enter into an agreement “containing any provisions that the executive officer considers necessary or advisable in the public interest in the particular case”.
[9] Section 11.1 of the statute provides that if the executive officer believes on reasonable grounds that an operator has breached any of the conditions prescribed in a regulation made under that section or agreed by the operator, the executive officer may make an order “suspending the operator or the pharmacy from being entitled to receive payment from the executive officer” under the drug plan. It is significant that an order may be made under this section either for breach of a regulatory condition or for breach of an agreed term.
[10] Section 27 of Ontario Regulation 201/96 lists the conditions which, if breached, authorize the executive officer to make an order under s. 11.1 of the statute:
The operator of the pharmacy or the physician, as the case may be, must be a party to a subscription agreement with the Ministry whereby the operator or physician agrees to have the premises from which he or she dispenses drugs connected electronically to the Health Network and to submit all claims for payment under the Act via the Health Network.
The operator of the pharmacy or the physician must comply with the terms and conditions of the subscription agreement referred to in paragraph 1.
The operator of a pharmacy or the physician must comply with,
i. the Act and its regulations, and
ii. any other statute and its regulations related to the operation of a pharmacy or the practice of a physician including, without limitation and as applicable, the Drug Interchangeability and Dispensing Fee Act, the Drug and Pharmacies Regulation Act, the Narcotics Safety and Awareness Act, 2010, the Regulated Health Professions Act, 1991, the Pharmacy Act, 1991, the Medicine Act, 1991, the Personal Health Information Protection Act, 2004, the Food and Drugs Act (Canada), the Criminal Code (Canada), and the Controlled Drugs and Substances Act (Canada).
Without limiting the condition set out in paragraph 3, the operator of the pharmacy or the physician must not have committed an offence under the laws of Canada or Ontario related to fraud in the operation of the pharmacy or, in the case of a physician, in the practice of medicine.
The operator of the pharmacy or the physician must comply with the Manual.
The operator of the pharmacy or the physician must not submit any claims that the operator or physician knows or reasonably ought to know are false, inaccurate or misleading.
[11] Under these regulatory conditions, the termination of a pharmacy’s Health System Subscription Agreement or the breach of any of the terms of the agreement are grounds for an order under s. 11.1 of the statute. Similarly, if the pharmacy submits any claim for payment that it knows or reasonably ought to know is false, inaccurate, or misleading that too is a ground for an order under s. 11.1 of the statute.
[12] Under s. 4.1(3) of the statute and s. 27 of the regulation, the executive officer required the applicant to enter into a Health System Subscription Agreement when it obtained its billing privileges.
[13] Section 11.5 of the Health System Subscription Agreement provides:
The operator shall not have any relationship with any operator of a pharmacy or any officer, director, designated manager or shareholder of a pharmacy that (i) has been given notice of the revocation of its billing privileges under section 4.1 of the ODBA, notice of suspension of the right to payment under section 11.1 of the ODBA, or notice of termination of a [Health System Subscription Agreement] or (ii) had its billing privileges revoked, right to payment suspended under section 11.1 of the ODBA, or its [Health System Subscription Agreement] terminated.
[14] This is a very broadly drafted section. Since all 4,300 pharmacies in Ontario who subscribe to the direct payment system have the same section in each of their prescribed Health System Subscription Agreements, the section ostensibly prevents all subscribing pharmacies throughout the province from having any dealings at all with any suspended or terminated pharmacy operator and its officers, directors, managers, and shareholders. The respondent submits that the goal of the section is to prevent a suspended or terminated pharmacy from surreptitiously obtaining new billing privileges under another name or from running its suspended business through a “friendly” subscriber’s computer system. If that is the purpose, the section seems to be substantially over-broad. On its face, it appears to prevent shareholders and principals within a suspended pharmacy from working at another subscribing pharmacy whether as pharmacists or as floor cleaners. It effectively prevents licensed pharmacists who are in good standing with the Ontario College of Pharmacists from being employed in a retail pharmacy. I will deal with this concern more fully below.
[15] Section 12.3 of the Health System Subscription Agreement authorizes the executive officer to make an order to terminate the agreement on giving 30 days’ notice of the breach of any of the terms of the agreement by the pharmacy operator. The section allows the pharmacy operator to make written submissions within 21 days to dispute the facts relied upon by the executive officer and to make submissions for the revocation of the termination order.
[16] Section 12.7 of the Health System Subscription Agreement provides that if the agreement is terminated the executive officer may publish on the Ministry website the name of the pharmacy operator, the date, and the reason for termination. It is apparent that among other reasons for this provision, it is necessary to publicize this information so that other operators can know the identities of those with whom they are prohibited from dealing under s. 11.5 of their agreements.
[17] Finally, s. 12.8 of the Health System Subscription Agreement contains an express acknowledgement by the pharmacy operator that a breach of the agreement constitutes a breach of the conditions in s. 27 of the regulation which may then lead to a revocation of its billing privileges under s. 4.1 of the statute and an order suspending its ability to be paid by the executive officer under s. 11.1 of the statute.
The Facts
[18] As a result of an anonymous tip obtained from the College of Pharmacists, the Ministry conducted an inspection of the pharmacy under s. 14 of the statute. The inspector reviewed claims that had been submitted to the government drug plan by the pharmacy for the two year period from December 2014 to 2016. The inspector reported that between January 1, 2015 and November 30, 2016, the pharmacy had submitted improper claims that led to it being overpaid $61,615.67 and that it had submitted unsubstantiated claims that resulted in payment of a further $85,727.18 in violation of the terms of the plan. These claims were found on a review of 45% of the pharmacy’s billings to the drug plan during the two year audit period. Accordingly, the actual amount of overbilling during the period is likely higher, perhaps double that found in the inspection.
[19] On March 29, 2017, the executive officer sent a copy of the inspection report to the pharmacy and gave notice to the applicant that as a result of the inspection report, the executive officer had reasonable grounds to believe that the pharmacy had violated:
a. clauses 15(1)(b) and (e) of the statute;^1
b. conditions 2, 3, 4, 5, and 6 set out in s. 27 of the regulation; and
c. section 3.2 and article 7 of its Health System Subscription Agreement.
[20] The executive officer gave notice that as of April 28, 2017 she may:
a. make an order suspending the pharmacy’s entitlement to receive payment under the drug plan pursuant to section 11.1 of the statute;
b. terminate the Health System Subscription Agreement; and
c. make an order revoking the pharmacy’s billing privileges under s.4.1 of the statute.
[21] The notice also advised the pharmacy that it had the right to dispute the facts and to make submissions as to the possible revocation within 21 days. The executive officer granted a request by counsel for the pharmacy to extend the time for the delivery of the pharmacy’s response and submissions to May 31, 2017.
[22] Also on March 29, 2018, the Ministry posted the name of the pharmacy, its officers, directors, shareholders, and designated manager on its website on a list of operators who had been provided with notice of proposed termination of their billing privileges.
[23] As it was entitled and invited to do, the pharmacy delivered detailed written submissions explaining its processes and making its case as to why orders should not be made against it. It also made submissions, in the alternative, for less severe remedies short of termination of its billing privileges.
The Order and Reasons of the Executive Officer
[24] With reasons dated September 25, 2017, the executive officer released a decision terminating the pharmacy’s Health Network System Subscription Agreement, revoking the pharmacy’s billing privileges, and suspending the pharmacy’s entitlement to receive payments under the plan.
[25] The executive officer’s decision was enforceable upon being made.
[26] The executive officer provided thorough reasons for the decision and the remedy applied. The reasons considered the evidence and the detailed submissions made by the pharmacy on a number of specific issues. As a result, the amount of the unsubstantiated billing proved was reduced slightly to $83,039.17. The executive officer also considered the pharmacy’s submissions that it had changed its processes to try to prevent improper billing from recurring. The executive officer found:
For many of the overpayments, I accept the Operator’s assertions that the overpayments were not the result of the intentional submission of false or misleading claims. However, by taking such a position, I am not excusing the operator or the actions of its designated manager. When claims are improperly submitted to the ODB Program due to inattention to the ODB Program rules or, worse, a wilful blindness or disregard of the rules, it is the taxpayers of Ontario that suffer. It is absolutely necessary that the designated manager of the pharmacy understand the rules governing the ODB Program, so that he or she can properly oversee the operation of the pharmacy, and adequately train his or her staff. The value of the overpayments in this case demonstrates that the operator’s designated manager has failed to consistently operate the pharmacy in accordance with ODB Program rules.
In these circumstances, where a Ministry inspection has revealed unsubstantiated claims of $80,000 and other inappropriate claims, to which the Operator had sufficient opportunities to respond but did not provide a sufficient explanation, the only appropriate remedy is to revoke the Operator’s billing privileges, suspend its right to receive payment under the [statute] and terminate the [Health System Subscription Agreement]. Participation in the ODB Program is a privilege, and for that reason, a pharmacy that has, over a period of time, submitted such a large volume of claims that are not valid should not have the privilege of participating in a publicly funded drug program that operates on an honour system.
I am not satisfied that the steps taken by the Operator following the Ministry’s inspection do enough to rebuild the Ministry’s trust in the Operator. As explained in these Reasons for the Decision, I do not believe that the unsubstantiated claims are the result of poor housekeeping and inventory management, or due to the automated billing of prescription refills. There remains an unexplained discrepancy of over $80,000
In summary, the actions taken by the operator did not address the ministry’s overarching concern that the operator abused the honour system upon which the ODB Program operates by submitting false or misleading claims to the Ministry for payment or failing to reverse claims that the Operator knew were false or misleading. The risk that the Ministry will continue to reimburse false or misleading claims while the Operator strives for improved compliance is too great during a time of economic restraint in the Ontario health care system
The Grounds of Review Asserted by the Pharmacy
[27] The pharmacy argues that as a matter of law, the executive officer was not entitled to terminate the pharmacy’s direct billing privileges. Rather, s. 11.1 of the statute limits the authority of the executive officer to “make an order suspending the operator of the pharmacy from being entitled to receive payment.” The pharmacy argues that it must follow that since the executive officer can only suspend its entitlement to receive payments under the drug plan, then the executive officer cannot have the authority to terminate its Health Network System Subscription Agreement or to revoke its billing privileges.
[28] The pharmacy therefore argues that by revoking its billing privileges the executive officer exceeded the jurisdiction granted to her by the statute. Moreover, to the extent that the Health Network System Subscription Agreement allowed for its termination for breach, the pharmacy submits that requiring operators to enter into an agreement with that term was also an invalid excess of jurisdiction by the Ministry.
[29] The pharmacy also argued that it was denied procedural fairness because it was not notified in advance of the decision being released; it had no opportunity to respond to the decision; and it was provided with no time to arrange its affairs. The pharmacy also argued that it was denied procedural fairness because the name and content of the anonymous tip to the College of Pharmacists was not disclosed to the pharmacy by the executive officer or the Ministry.
[30] The pharmacy submits that the listing of its directors, officers and managers’ names on the Ministry’s website prior to the decision being made was improper and evinces a reasonable apprehension of bias on the part of the executive officer.
[31] Finally, the pharmacy argues that the remedy of revocation was too severe and usurped the role of the College of Pharmacists.
Jurisdiction
[32] The court has jurisdiction to review the executive officer’s decision under s. 2(1) of the Judicial Review Procedure Act, RSO 1990, c J.1.
Standard of Review
[33] Despite the pharmacy’s effort to categorize as jurisdictional the issue of whether the executive officer had the authority to terminate the pharmacy’s billing privileges under the drug plan, in my view, the issue reduces to an interpretation of the powers set out in the statute and the common law. This is an issue of law arising under the decision-maker’s home statute. All of the issues of law, fact, and mixed fact and law asserted in this application (other than procedural fairness) are to be assessed on a reasonableness standard on an application for judicial review: See 1161183 Ontario Inc. v Ontario (Ministry of Health and Long-Term Care), 2015 ONSC 6779 at para. 19.
[34] In Agyapong v. Jevco Insurance Company et al., 2018 ONSC 878, Justice Wilton-Siegel described a reasonableness standard of review as follows:
In determining whether a decision is reasonable, the court is concerned largely with the justification, transparency and intelligibility of the Board’s reasons, as well as whether the decision falls within a range of possible, acceptable outcomes, given the facts and law: see Dunsmuir v. New Brunswick, 2008 SCC 9 at para. 47.
[35] The issue of fairness is decided on its merits without a specific standard of review. See: Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 SCR 817,
Analysis
The Executive Officer’s Authority to Terminate Pharmacies’ Billing Privileges
[36] The executive officer held that nothing in s. 11.1 of the statute limited her entitlement to revoke the pharmacy’s billing privileges. Although s. 11.1 mentions only suspension specifically, there is no indication in the wording of the section, the surrounding sections, or the statutory purposes, that it is intended to be exhaustive. There is nothing inconsistent with a power to revoke existing alongside a power to suspend. Under the common law, the power to revoke a privilege is implicit in the power to grant the privilege. In my view, it would take more express words if the statute intended to oust the common law and grant a power to appoint without implicitly granting a power to revoke. It would similarly be incongruous to require the parties to sign an agreement setting out detailed requirements, conditions, and obligations that did not include a power to terminate on material breach.
[37] Section 11.1 provides for a suspension upon the executive officer forming reasonable grounds to believe that there has been wrongdoing. That is just the beginning of an enforcement process. After the reasonable grounds are communicated to the operator, a written hearing takes place, and the executive officer makes actual findings of fact on the grounds alleged. Nothing in s. 11.1 speaks to the final remedies available to the executive officer once the reasonable grounds are proven in a fair process.
[38] The pharmacy relies on the decision of Kiteley J. in Wrightman v Ontario (Minister of Health and Long Term Care), [2008] OJ No. 1119 (OSCJ). In that case, Kiteley J. granted a stay pending judicial review of a decision by a prior executive officer to terminate a Health System Subscription Agreement on 90 days’ notice. Kiteley J. found that there was a serious issue to be tried as to whether the executive officer had exceeded her jurisdiction by, among other things, terminating when s. 11.1 mentions only suspension.
[39] Justice Kiteley’s decision was an interlocutory determination that the applicant in that case had raised a serious issue for trial. That was a preliminary assessment made on a low standard of proof in an interim proceeding.
[40] In coming to her interlocutory conclusion, Kiteley J. relied on the case of Delivery Drugs Ltd (c.o.b. Gastow Pharmacy) v British Columbia (Deputy Minister of Health), 2006 BCSC 631, [2006] BCJ No. 893; appeal dismissed [2007] BCCA 550. Kitieley J. quoted the chambers judge’s finding that under the BC statute, the Minister’s right to contract at common law had been limited to the four corners of the statute. Therefore his right to contract did not permit termination of the pharmacy’s billing privileges without cause under the contract because the statute only provided for termination of a pharmacy’s billing privileges with cause. The judge held that the statute created a complete code that supplemented the common law of contract.
[41] Along the same lines, the pharmacy relies on the Supreme Court of Canada decision in Canada (AG) v Mavi, 2011 SCC 30 for the proposition that subordinate undertakings cannot be used to interpret the statute under which they were given.
[42] After Justice Kiteley’s decision was given, the Ontario Legislature changed the statute. In 2009, among other things, s. 4.1 was added. As noted above, when granting billing privileges, s. 4.1(3) expressly authorizes the executive officer to require pharmacies to enter into an agreement on such conditions as she considers necessary or desirable in the public interest. Under the Ontario statute now, therefore, agreement terms are part of the licensing conditions authorized by the statute itself. There is no discrete code in the statute to which the agreement is subservient.
[43] The statute should be interpreted to achieve accountability and economic prudence in the disbursement of scarce public resources. The pharmacy’s argument that its rights cannot be terminated but can only be suspended is inconsistent with this objective. The executive officer reasonably concluded that she should not permit this pharmacy to continue to participate in an honour system that is easily abused and not easily enforced.
Alternative Outcomes Short of Termination
[44] The pharmacy argues that less drastic enforcement mechanisms ought to have been applied. It notes that in the year since the decision was made, the decision has been stayed, on consent, with the applicant being subject to monthly monitoring by the executive officer. No untoward events have occurred. Therefore, the pharmacy submits that some suspension with ongoing monitoring is a more fitting outcome in this case.
[45] Having decided to make an honour system available to registered professionals so as to minimize enforcement costs and thereby to maximize the availability of funds for needy beneficiaries, it is not at all surprising that termination would be the usual remedy for significant abuse of the honour system. The applicant’s position would require the Ministry to incur ongoing enforcement costs monitoring the pharmacy.
[46] The pharmacy argues that the remedy of termination is particular unfair in light of the provisions of s. 11.5 of the Health Network System Subscription Agreement. As discussed above, under that provision, it appears that none of the operator, or its manager (a licensed pharmacist) or its directors, officers, or shareholders, can have any association whatsoever with any pharmacy that subscribes to the direct billing system. In this case, the manager is the pharmacist and his spouse is a shareholder of the operator company. Neither can be employed by pharmacies in Ontario if s. 11.5 has the meaning that it appears to have. After consultations with her client, counsel for the Ministry advised the court that it is the executive officer’s express position that ss. 11.5 and 11.5.1 of the Health Network System Subscription Agreement are not intended and will not be used to prevent the manager or his spouse from working for an arm’s length pharmacy. Moreover, if the proper interpretation of the agreement is that they are prohibited, the executive officer expressly waives the entitlement to enforce that outcome under the power to waive set out in s. 13.2 of the agreement. Without that waiver, this is an issue that would be of concern, particularly in this case, where the defalcation may be more a matter of inexperience and incompetence rather than advertent misconduct.
[47] The court notes as well that it remains open to the pharmacy to apply for revocation of the executive officer’s order under s. 11.1(6) of the statute.
[48] In any event, the executive officer considered the pharmacy’s submissions on alternative remedies. Counsel provided her with the same precedents as to remedy as were argued before us. The court will defer to tribunal decisions on remedy as long as they are in the reasonable range as tempered by fairness and consistency with similar cases. In my view, the executive officer’s decision on remedy is reasonable and is one to which the court ought to defer in light of the executive officer’s particular expertise with this complicated system.
The Process was Fair
[49] The fact that the College of Pharmacists received an anonymous tip is not part of the proceeding. While the tip prompted the investigation under s. 14 of the statute, it was only the investigator’s report that was relied upon to support the decision of the executive officer. The pharmacy was provided with notice of the case that it had to meet and an opportunity to make submissions. It exercised that opportunity and the executive officer gave extensive reasons that considered the pharmacy’s submissions in detail. All of the requisite elements of fair procedure were provided to the applicant.
[50] There was no duty on the executive officer to give notice of the date of the release of her decision or to defer its effectiveness. Neither does a party have a right to respond to a decision once the decision-maker has released it. No law is cited by the applicant for its arguments to the contrary. The pharmacy had many months to prepare for a possible adverse outcome while the process was under way. The pharmacy had notice of the investigation, notice of the allegations against it including the potential remedies that could be ordered against it, and an opportunity to respond to the investigative findings. The duty of fairness was met in this case.
Publication
[51] As to publication of the proceedings on the Ministry’s website, the Health Network System Subscription Agreement explicitly authorizes some publication for the reasons discussed above. It is true that the executive officer published more than just the facts set out in the agreement. However, the pharmacy was not able to point to any basis to establish that doing so was a violation of its rights or any law.
[52] I do not see any objectively reasonable argument to conclude that the executive officer may have been biased or pre-judged the outcome by publishing on the Ministry’s website the factual statement that she had given notice to the pharmacy and its principals on March 29, 2017. The fact that proceedings have been brought does not tell an objective, reasonable observer that the decision-maker has closed her mind to the outcome.
Outcome
[53] The application is dismissed. The executive officer seeks costs of $10,000 to $12,000. The pharmacy sought costs of $20,000. Therefore the amount sought by the executive officer is well within the range of costs that the pharmacy ought reasonably to have anticipated. The pharmacy shall pay costs to the executive officer of $10,000 all-inclusive.
F.L. Myers J.
I agree _______________________________
R.J. Smith J.
I agree _______________________________
D.L. Corbett J.
Date: May 15, 2019
2019 ONSC 2967
DIVISIONAL COURT FILE NO.: 17-565
DATE: 20190515
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
R.J. SMITH, D.L. CORBETT, AND MYERS JJ.
BETWEEN:
AS169988 CONSULTANTS INC. (C.O.B. AS WARDEN PHARMACY)
Applicant
- and -
HER MAJESTY THE QUEEN (IN THE RIGHT OF THE PROVINCE OF ONTARIO), MINISTRY OF HEALTH AND LONG-TERM CARE (ONTARIO)
Respondent
REASONS FOR JUDGMENT
F.L. Myers J.
Released: May 15, 2019
15 (1) A person is guilty of an offence if the person, (b) submits to the executive officer a claim for payment where the executive officer is not required to make any payment or where the claim is in excess of the amount the executive officer is required to pay; (e) refuses to submit information required to be submitted under this Act or knowingly furnishes false or incomplete information to the Ministry in connection with the administration of this Act or the Drug Interchangeability and Dispensing Fee Act;