Canada’s Intellectual Property Firm

Proposed amendments to Ontario Regulations to streamline administrative process, change OCT payment limit, and reduce government payments to pharmacies

Authored byChen Li and Alice Tseng

On October 28, 2019, the Ontario Ministry of Health and Long-Term Care (the Ministry) published proposed changes to Regulations made under the Ontario Drug Benefit Act (ODBA) and the Drug Interchangeability and Dispensing Fee Act (DIDFA) for comments due on November 27, 2019 and November 30, 2019, respectively.

Proposals to reduce administrative burden to drug manufacturers and pharmacies

The first set of proposed changes aim to modernize the Ministry’s administrative processes and align its practices with industry standards and policies in other provinces and territories. Key proposed changes include:

  • Increasing the cap for ordinary commercial term (OCT) payments from 10% to 25%. The prohibition against “rebates” under the ODBA and DIDFA does not apply to benefits in accordance with OCT, which is a benefit provided in the ordinary course of business that meets certain conditions. Currently, only the provinces of Ontario and Quebec restrict rebates from manufacturers to wholesalers and pharmacies.  An increase of the OCT cap for interchangeable drugs, currently set at 10% of the value of the drug, would permit manufacturers to offer greater benefits to wholesalers and pharmacies. Notably, this coincides with the proposal by the Ministry to reduce its payments to pharmacies (discussed below).
  • Reducing requirements for biosimilar drug submissions. With the proposed amendments, the Ministry will rely on Health Canada’s approval of biosimilars and will not require a duplicate review of the same scientific evidence, allowing faster approval of biosimilars.
  • Reducing requirements for generic line extension. A generic line extension occurs when a generic company introduces additional items for which there are no brand comparators. The proposed amendments are intended to align Ontario’s submissions with Health Canada’s processes and reduce the burden on generic pharmaceutical manufacturers.
  • Permitting generic drug price adjustments. The current pricing structure of generic drugs is based on the number of competitors in the market (price tier). The proposed amendments would reduce the burden on industry as manufacturers will no longer be required to apply for a price adjustment when the number of competitors changes.

Other notable proposed changes include measures to facilitate the management of drug shortages, extension of the submission window for electronic drug claim reversals from 7 to 90 days, and removal of the requirement for the Drug Notification Form (DNF) from manufacturer’s submissions for Ontario Drug Benefit (ODB) Formulary listing.

Proposals to reduce Ministry’s payments to pharmacies

The second set of proposed changes involve a reduction in government payments to pharmacies for dispensing prescriptions to ODB program recipients (other than long-term care home residents). These changes would replace two of the four pharmacy reimbursement reforms proposed earlier this year after Budget 2019, namely the reforms regarding tiered mark-up and MedsCheck (see April 2019 notice from the Ministry regarding the four reforms).

The changes would allow the Ministry to deduct a percentage of the sum of the dispensing fee and mark-up for all drug claims. The percentage will depend on the Ministry’s annual savings target. The currently proposed reconciliation adjustment is two-tiered, with adjustments based on the cost of the drug:

  • Up to 16% for drug costs equal to or over $1,000; and
  • Up to 4% for drug costs under $1,000.

The reconciliation amounts would also be subject to maximum annual amounts.

The reconciliation adjustment process, which is projected to achieve cumulative savings of $180.1M by 2022-23, is a time-limited proposal scheduled to end on March 31, 2023.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.