DIVISIONAL COURT FILE NO.: 569/22

DATE: 20230313

ONTARIO SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

D.L. Edwards, Ryan Bell and Leiper JJ.

BETWEEN:

NEIGHBOUR’S DRUG MART LTD. (C.O.B. AS NEIGHBOUR’S DRUG MART)

Applicant

– and –

ONTARIO (MINISTRY OF HEALTH AND LONG-TERM CARE)

Respondent

Neil N. Abramson, Marco P. Falco and Robert Barbiero, for the Applicant

Michael J. Sims and Kristina Yeretsian, for the Respondent

HEARD at Toronto: Monday, March 6, 2023

Leiper, J.

PART I: INTRODUCTION

[1] The Applicant, Neighbour’s Drug Mart Ltd (“Drug Mart”) brings an application to judicially review a decision made by the Executive Officer of the Ontario Public Drugs Programs for Ontario (Ministry of Health and Long-Term Care) (“the “Executive Officer”) to revoke Drug Mart’s billing privileges, following an inspection of Drug Mart’s business.

[2] Drug Mart seeks to set aside the decision, or alternatively, to have it remitted for further consideration. Drug Mart submits that the decision was unreasonable because it misapprehended critical facts, including the role of the prior owner in the unsubstantiated claims, it relied improperly on a lack of remorse and unduly emphasized the principle of deterrence.

[3] The Ministry submits that the application should be dismissed because the decision was reasonable and justified on the facts and the law.

[4] For the reasons that follow, we dismiss the application for judicial review.

PART II: BACKGROUND FACTS

Ontario’s Billing Program for Pharmacy Operators Under the [Ontario Drug Benefit Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-o10/latest/rso-1990-c-o10.html)

[5] Ontario covers the cost of pharmaceuticals for people in Ontario who are eligible under the Ontario Drug Benefit Act, R.S.O. 1990, c. O.10 (the “ODBA”).

[6] The ODBA creates the position of Executive Officer, who administers the drug benefit program and ensures that the public interest is considered in that administration, including by ensuring that public resources are used properly and to meet the needs of patients and the public at large.

[7] The Executive Officer has broad authority under the ODBA to administer the drug benefit program, to grant and revoke billing privileges, and make payments for drug claims submitted in accordance with the ODBA and the Regulation. In addition, the Executive Officer has the power to direct inspections of pharmacies and make enforcement decisions to ensure that pharmacies comply with the ODBA.

[8] A pharmacy operator may apply to the Executive Officer for billing privileges. The Executive Officer may grant billing privileges to a pharmacy operator if he or she believes it is in the public interest to do so, after considering any matter that he or she deems appropriate. This assessment considers whether a pharmacy operator can be trusted to submit claims for payment to the program that are accurate, and which comply with applicable law.

[9] A pharmacy operator that obtains billing privileges under the ODBA submits claims for payment from the program electronically in almost all cases. The operator may receive payment directly from the Ministry for providing eligible drug products and services to eligible recipients. This eliminates the need for recipients to pay the pharmacy operator and then seek reimbursement from the province. These operators enter into a “Health Network Systems Subscription Agreement” (an “HNS Agreement”) with Ontario which governs the submission of claims, along with the ODBA and Ontario Regulation 201/96.

[10] Pharmacy operators without billing privileges under the ODBA may still dispense drugs to Program recipients. Those operators must charge the patient for the cost, and the recipient then must claim reimbursement from the Executive Officer.

The Legislative Scheme and Enforcement of the Requirements by the Executive Officer

[11] Pharmacy operators with billing privileges must comply with all applicable legislation, including the Drug Interchangeability and Dispensing Fee Act and the Drug and Pharmacies Regulation Act. The legislation and the HNS Agreement require that pharmacies keep detailed records related to the purchase and sale of drugs. Their obligation to comply with the legislation is reiterated in section 3.2 of the HNS Agreement.

[12] The Executive Officer has the authority to suspend a pharmacy operator’s entitlement to receive payment under the ODBA if he or she has reasonable grounds to believe that the operator has breached a condition prescribed in the Regulation or agreed to by the operator.

[13] Section 27 of the Regulation sets out the types of breaches that may lead to a suspension of a pharmacy’s entitlement to receive payment. These include submitting claims that the operator “knows or reasonably ought to know are false, inaccurate or misleading.”.

[14] Inspectors are appointed under section 14 of the ODBA to inspect pharmacy operators and assess the validity of claims submitted to, and paid by, the program. If an inspector concludes that a pharmacy operator has submitted false, inaccurate, or misleading claims to the Program, the Executive Officer may issue a Notice of Order and Termination. The notice advises the pharmacy operator that the Executive Officer proposes to terminate its HNS Agreement with the operator, revoke its billing privileges, and suspend its entitlement to receive payment under the ODBA. The notice includes a full account of the Ministry’s inspection of the pharmacy.

[15] Section 12.3 of the HNS Agreement authorizes the Executive Officer to terminate the HNS Agreement upon giving 30 days’ notice of the breach of any of its terms by the pharmacy operator. It also allows the pharmacy operator to make written submissions to dispute the facts relied upon by the Executive Officer and to make submissions supporting the revocation of the Notice of Order and Termination. After considering any submissions made by the pharmacy operator, the Executive Officer’s final decision is sent to the operator in the form of a Notice of Decision.

The Inspection of Neighbour’s Drug Mart Pharmacy for Claims Between August 1, 2019 to July 31, 2021

[16] Drug Mart entered into an HNS Agreement with the Executive Officer on March 11, 1994. In 2009, and again on August 13, 2020, the original HNS Agreement was replaced by updated HNS Agreements.

[17] On August 4, 2020, Pharmacist Sina Salehi purchased Drug Mart from Pharmacist Galina Pivovarov. On August 13, 2020, the Ontario College of Pharmacists confirmed the transfer and, on that date, Mr. Salehi replaced Ms. Pivovarov as Drug Mart’s Officer. On August 25, 2021, Drug Mart sent a notice of change in ownership to the Ministry. As a result of the change in ownership, the Executive Officer selected Drug Mart as a candidate for inspection.

[18] The inspector was appointed in August of 2021. The inspector requested purchase records for 28 products during the two-year period of August 1, 2019, to July 31, 2021, to determine whether those claims could be substantiated.

[19] The inspector conducted a purchase/sales analysis on the Applicant’s purchase of products and its Program claims history for the time under review. The claims inspection period included:

(a) August 1, 2019 to August 3, 2020, when Ms. Pivovarov was Drug Mart’s designated manager, officer, and shareholder,

(b) August 4, 2020 to March 31, 2021, when Ms. Pivovarov continued to manage Drug Mart while Mr. Salehi was a shareholder and Officer, and

(c) March 31, 2021 to July 31, 2021, after Ms. Pivovarov’s employment with Drug Mart ended.

[20] The inspector compared the quantity of claims submitted by Drug Mart against its purchase of each product.

[21] In March of 2022, the inspector released an Inspection Report. The key findings of the Inspection Report were that Drug Mart had:

(a) billed the Program $116,022.20 worth of products that it could not demonstrate with purchase records to have acquired from its suppliers, and

(b) submitted claims totalling $142,639.14 that did not comply with the ODBA, the Regulation and the HNS Agreement.

[22] The overbilled amounts included claims for invalid extemporaneous mixtures, excessive drug cost charged, invalid limited use claims, package size errors, prescriptions for deceased patients, early refills, invalid vacation supply claims, invalid dispensing fee payments, invalid “no substitution” claims, invalid nutrition forms, missing nutrition forms, prescriptions not debited, and invalid “MedsChecks.” These claims contravened the OBDA, the Regulation and/or the HNS Agreement. Of the total unsubstantiated billings, approximately $90,000 of the total of $116,022.20 took place while Ms. Pivovarov owned Drug Mart. A further $20,000 in unsubstantiated billings took place after the sale, but while Ms. Pivovarov was managing Drug Mart.

[23] The inspector conducted a further review of claims submitted by the Pharmacy dating back to July 1, 2018 and through to August 25, 2021. The inspector identified $142,639.14 in claims which in some way did not comply with the ODBA, the Regulation, or the HNS Agreement. As with the overpayments identified in the first tranche of transactions, the majority of these took place when Ms. Pivovarov was owner of or managing Drug Mart.

The Notices of Overpayments and Billing Privileges Termination

[24] On March 31, 2022, the Ministry notified Drug Mart of the results of the inspection. The Ministry advised the Applicant that the Ministry would recover the overpayments by way of set-off against future Program payments. The Ministry permitted Drug Mart to respond to this information and gave Drug Mart until May 30, 2022, at its request.

[25] On March 31, 2022, Mr. Salehi asked the Ministry for a breakdown of the claims related to the overpayments organized by date, so that he could determine which claims were submitted prior to the change in ownership.

[26] On April 6, 2022, the Ministry prepared a letter providing the details of the overpayments and organizing the claims by date. The Ministry reminded Mr. Salehi that Drug Mart was responsible for all overpayments under the HNS Agreement regardless of changes to its Officers, or shareholders.

[27] The unsubstantiated claims were all for prescriptions prepared, dispensed, or billed by pharmacists other than Mr. Salehi. During the period of unsubstantiated billings, Mr. Salehi did not work at Drug Mart. He left its operation and management to Ms. Pivovarov during the material time.

[28] On May 3, 2022, the Executive Officer issued a Notice of Order and Termination against Drug Mart based on reasonable grounds to believe that the Applicant had violated the ODBA, the Regulation and the HNS Agreement.

[29] Drug Mart was given the right to make submissions disputing the facts or to explain why the enforcement actions in the Notice of Order should not be carried out. These submissions were due by May 25, 2022.

The Responses from the two Pharmacists

[30] On May 24, 2022, lawyers retained by Ms. Pivovarov, requested a three-week extension to respond to the Notice. The Ministry granted the request and gave Ms. Pivovarov until June 15, 2022 to respond to the Notice of Order.

[31] On June 15, 2022, lawyers for Ms. Pivovarov filed submissions blaming Mr. Salehi for failing to provide the necessary records to substantiate the claims she had made while working at Drug Mart. Those submissions did not explain the discrepancies observed in the purchase/sales analysis carried out by the inspector.

[32] On May 25, 2022, Mr. Salehi made written submissions which blamed Ms. Pivovarov for all misconduct that led to the unsubstantiated claims. He stated that he took the matter seriously and was completing remedial education. He acknowledged that he would be responsible for the overpayment by way of equal instalments over a two year-period. Although he had told the inspector that Ms. Pivovarov had ceased working at Drug Mart on March 30, 2021, in his written submissions he stated that she worked there until the end of April 2021. He pointed out that he has owned other pharmacies in Ontario, and this was the first time he had an issue with an ODBA audit.

[33] Mr. Salehi asked that his billing privileges not be suspended. His submissions also stated:

(a) when he first met Ms. Pivovarov, she seemed to be an honourable and trustworthy person;

(b) the overpayments and unsubstantiated billings appear to relate to the misconduct of Ms. Pivovarov, which misconduct was entirely unknown to Mr. Salehi;

(c) Ms. Pivovarov had engaged in this misconduct to inflate the value of the pharmacy prior to sale, and to “cover her tracks” while she continued to work at Drug Mart;

(d) he was “shocked and distressed” by her conduct;

(e) Ms. Pivovarov had betrayed and deceived him. He deeply regretted having purchased the Pharmacy from Ms. Pivovarov;

(f) as a “pharmacist and pharmacy owner”, he accepted “responsibility for this matter” and advised that he was repaying “all amounts in issue”;

(g) he “most profoundly apologize[d] to the ODB for what [had] occurred”;

(h) Mr. Salehi said that he terminated Ms. Pivovarov, hired new pharmacists, and instructed them to “clean up any mess” left behind by Ms. Pivovarov. He submitted that this was a challenge, and it took time to identify the errors and billing processes, thus some of the problems with batch refills and automatic refills continued to operate after Ms. Pivovarov had ceased working at the pharmacy, until all of the errors could be identified and addressed;

(i) Mr. Salehi explained that although some of the claims relate to a period after Ms. Pivovarov was terminated and while Mr. Salehi owned the Pharmacy, this was a relatively brief period of time;

(j) the pharmacy no longer engages in the automatic billing and refill system used by Ms. Pivovarov;

(k) Mr. Salehi was participating in extensive remedial education in the form of three Ontario Pharmacists Association (“OPA”) courses, a review of the Ontario College of Pharmacist’s Designated Manager e-learning module; and

(l) Mr. Salehi is currently suing Ms. Pivovarov for:

(i) artificially inflating the transaction price of the Pharmacy; and

(ii) repayment of the unsubstantiated billings.

The Decision of the Executive Officer of September 16, 2022

[34] On September 16, 2022, the Executive Officer issued a decision terminating Drug Mart’s HNS Agreement, revoking its billing privileges, and suspending its entitlement to receive payment under the ODBA program.

[35] The Executive Officer’s reasons accepted as fact that Ms. Pivovarov last worked at Drug Mart on March 31, 2022, because this was what Mr. Salehi told the inspector.

[36] The Executive Officer questioned the management and supervision of Drug Mart. The Executive Officer accepted the submission that much of the unsubstantiated claim activity had occurred before Mr. Salehi was involved, but noted that, “in any event, as per article 11.0 of the Agreement, Mr. Salehi became responsible for all liabilities under the Agreement when he assumed ownership on August 4, 2020, regardless of the fact that he had no involvement with the Operator prior to that date.” He concluded that under Ms. Pivovarov’s management there was “significant non-compliance” with the program rules.

[37] The Executive Officer also drew an adverse inference from the information that Ms. Pivovarov’s billing number was used by Drug Mart long after her last date of working at Drug Mart, according to the information provided by Mr. Salehi:

I have concerns about the contradictory information provided by the Operator regarding the end of Ms. Pivovarov’s employment. In particular, the Ministry’s HNS data shows that claims were submitted to the Ministry by the Operator using Ms. Pivovarov’s MOH ID number up until March 31, 2022. In particular, between April 1, 2021 and March 31, 2022, 25,868 claims were submitted using Ms. Pivovarov’s ID number out of a total of 30,402 claims submitted by the Operator in this time period. As Ms. Pivovarov was no longer working at the Pharmacy after March 31, 2021, the submission of claims using her MOH ID number constitutes the providing of false, inaccurate or misleading information to the Ministry which violates the ODBA, the ODBA Regulation, and the Agreement.

[38] The Executive Officer noted concerns with Drug Mart’s overall management and supervision and expressed the view that the overpayments could have been avoided if Drug Mart had been better managed by both of its designated manager and officers during the periods of time under review. Finally, the Executive Officer expressed concerns with Mr. Salehi’s failure to take responsibility for the discrepancies. For the period after he assumed management and control, the Executive Officer found that:

As noted in the Inspection Report, the discrepancies were significant even if only a shorter time period of April 1, 2021 to July 31, 2021 is looked at because the percentage of the total value of discrepancies compared to total billings in this four-month period was proportionally similar to the full purchase sales analysis period.

[39] The Executive Officer concluded that participating in the ODBA billing program is a privilege. The remedial measures offered by Mr. Salehi ought to have been taken before he purchased Drug Mart. The Executive Officer concluded that a pharmacy operator who has submitted a large volume of ineligible claims should not have the privilege of participating in a publicly funded drug program that operates on an honour system. The Executive Officer concluded that it was not in the public interest to allow the Applicant to retain its billing privileges.

[40] The Executive Officer’s reasons also considered and referred to other cases in which billing privileges had been revoked:

i. 2099065 Ontario Inc., c.o.b. as Chapman’s Pharmacy (2021 ONSC 4319) where the Ministry inspection identified $62,006.67 in overpayments and $87,294.49 in unsubstantiated claims. In Chapman’s Pharmacy, the court upheld a revocation in which the court discussed the obligations of both the owner of the pharmacy and the designated manager to carry out their obligations, with the duty of the owner to include ensuring compliance by the manager (at para. 65.)

ii. AS169988 Consultants Inc. c.o.b. as Warden Pharmacy (2019 ONSC 2967) where a Ministry inspection of the pharmacy identified $61,615.67 in overpayments and $85,727.18 in unsubstantiated claims.

iii. The Ontario College of Pharmacist Discipline Committee decision concerning $62,638.75 in unsubstantiated claims and other invalid claims (Ontario (College of Pharmacists) v Ivasiv, 2018 ONCPDC 33); and

iv. Ontario (College of Pharmacists) v Ghobrial, 2016 ONCPDC 13) where the Ministry inspected and found $61,580.92 in unsubstantiated claims during the Ministry’s inspection of Supercare Pharmacy.

PART III: THE ISSUE ON THE APPLICATION FOR JUDICIAL REVIEW

[41] The sole issue on the application is whether the decision was reasonable. The standard of review is reasonableness: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 SCR 653 at para. 16.

PART IV: ANALYSIS OF THE ISSUES

[42] Drug Mart raises three indicia of unreasonableness arising from the decision of the Executive Officer of September 16, 2022: in revoking Drug Mart’s privileges, the Executive Officer misconstrued the evidence before him, improperly considered “lack of remorse” and made an illogical decision which assigned improper weight to the principle of general deterrence. I consider each in turn.

Did the Executive Officer Misconstrue the Evidence?

[43] Drug Mart submits that the Executive Officer fundamentally misapprehended or failed to weigh the evidence. Although there was evidence that the most substantial dollar value from the impropriety resulted from the actions of Ms. Pivovarov, Drug Mart under Mr. Salehi’s management, nevertheless lost the privilege of direct billing. Further, despite Mr. Salehi’s apology and agreement to repay the wrongful claims, the Executive Officer found that Mr. Salehi, as the new Operator, did not accept responsibility and failed to appreciate the seriousness of the findings concerning the improper billing. Finally, Drug Mart submits that in finding that revocation was the “only appropriate remedy,” the Executive Officer fundamentally misapprehended the facts before him that the bulk of overbilling was attributable to Ms. Pivovarov.

[44] I disagree. The Executive Officer gave detailed reasons for revoking Drug Mart’s privileges, in the context of the policy and scheme of the legislative framework. His reasons demonstrate that he understood the different roles played at different times by Ms. Pivovarov and by Mr. Salehi. The decision clearly adverted to the change in ownership and the chronology of the sale of Drug Mart. The decision to revoke was grounded on the need for trust and responsibility which Drug Mart breached, both while under the ownership and management of Ms. Pivovarov, and then, Mr. Salehi. This accorded with the facts before the Executive Officer, and with the discussion in Chapman’s Pharmacy which underlined the oversight responsibilities of pharmacy owners. Simply put, the Executive Officer rejected Mr. Salehi’s attempts to shift the responsibility to Ms. Pivovarov. This was not an unreasonable decision.

[45] The sale of Drug Mart happened in August 2020 which meant that although Mr. Salehi entrusted the operation to Ms. Pivovarov into 2021, he had authority as the owner and corporate director during an almost 12-month period when the false or unsubstantiated claims were being made. The Executive Officer considered this shorter period, based on Mr. Salehi’s submissions, when Ms. Pivovarov was no longer working at Drug Mart (April-July 31, 2021), and found that the same problematic billing practices continued. The Executive Officer concluded that this was sufficient to revoke the billing privileges of Drug Mart even considering that it was under new management.

[46] Reading the reasons as a whole and in context I cannot conclude that the Executive Officer misapprehended Mr. Salehi’s submissions or failed to consider Ms. Pivovarov’s role in Drug Mart’s billing practices.

Did the Executive Officer Improperly Consider Lack of Remorse in the Decision?

[47] I would not give effect to this submission. The reasons do not refer to or discuss “remorse.” Rather, the Executive Officer’s reasons discussed Mr. Salehi’s explanations and made findings relative to those explanations. This included Mr. Salehi’s willingness to accept responsibility for improper billing when he was actively involved and responsible for the oversight of Drug Mart. The Executive Officer accurately noted that Mr. Salehi acknowledged the corporate obligation of Drug Mart to repay the funds and his apology. However, it was open to the Executive Officer, in spite of the acknowledgment and apology from Mr. Salehi to make the following finding:

I am very concerned with Mr. Salehi’s repeated refusal to take responsibility for the discrepancies identified during the purchase sales analysis period, and to only be concerned with the amount of the discrepancy, not the fact that those discrepancies occurred and continued to occur well after he stated that Ms. Pivovarov was no longer “running the place.”

Was the Decision Contradictory and Illogical?

[48] Drug Mart submits that the Executive Officer placed undue emphasis on the principle of general deterrence in concluding that revocation was a reasonable outcome in this case.

[49] The reasons reveal that the Executive Officer considered the role that inspections can play in both education and rehabilitation but accorded greater weight to the factor of deterrence because of his findings that there had been “serious noncompliance with ODB program rules and significant shortcomings in the Operator’s governance, policies and procedures.” This was a reasonable finding that was available to the Executive Officer in exercising his discretion to consider the appropriate regulatory response to the evidence before him, in conjunction with the scheme of the program including the trust required in operators who benefit from the system of billing.

PART V: CONCLUSION

[50] The application for judicial review is dismissed. In accordance with the agreement of the parties, costs are awarded to the Respondent in the amount of $15,000 all inclusive, payable by the Applicant, Drug Mart.

Leiper J.

I agree.

I agree.

Ryan Bell J.

Date of Reasons for Judgment: 13 March 2023

Date of Release: 13 March 2023

DIVISIONAL COURT FILE NO.: 569/22

DATE: 20230313

ONTARIO

SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

D.L. Edwards, Ryan Bell and Leiper JJ.

BETWEEN:

NEIGHBOR’S DRUG MART LTD. (C.O.B. AS NEIGHBOUR’S DRUG MART)

Applicant

-and-

ONTARIO (MINISTRY OF HEALTH AND LONG-TERM CARE)

Respondent

REASONS FOR JUDGMENT

Leiper J.

Date of Reasons for Judgment: 13 March 2023 Date of Release: 13 March 2023