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Drugs - Ontario Drug Benefit Program (ODBP) - Cases. Neighbour’s Drug Mart Ltd. v. Ontario (Ministry of Health and Long Term-Care)
In Neighbour’s Drug Mart Ltd. v. Ontario (Ministry of Health and Long Term-Care) (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal against JR dismissal, here against the "decision of the Executive Officer of the Ontario Public Drug Programs for Ontario" terminating a "Neighbour’s Health Network System Agreement (“Operator’s Agreement”), revoked its billing privileges under s. 4.1 of the Ontario Drug Benefit Act, R.S.O. 1990, c. O.10 (“ODBA”), and suspended its entitlement to receive payment under the ODBA":[4] The application of the regulatory regime to the facts of this case by the Executive Officer and Divisional Court understandably was informed by two factors. First, the regulatory scheme operates on the basis of an honour system that relies on operators not to submit any claims that the operator knows or reasonably ought to know are false, inaccurate or misleading. Second, Neighbour’s is a corporate operator; as such, its owner and directors are obliged to ensure that the corporation’s managers and other employees comply with regulatory requirements.
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[8] Nor do we accept the second and third grounds of appeal advanced by Neighbour’s. Revocation of the Operator’s Agreement was not an unreasonable sanction in the circumstances, nor did it amount to a form of absolute liability. Revocation was imposed in the context of a regulatory scheme that relies on an honour system to operate. As recognized by the Divisional Court, the Decision to revoke the Operator’s Agreement was based, in large part, on the significant period of time during which Mr. Salehi, as Neighbour’s owner and director, did not discharge the operator’s responsibility to take reasonable steps to ensure that its manager and employees did not submit claims that were false, inaccurate or misleading.
[9] Neighbour’s further argues that provisions of the Operator’s Agreement somehow precluded the imposition of revocation as a sanction in the circumstances. In support of its argument, Neighbour’s relies on s. 11.2 of its Operator’s Agreement with Ontario, which states, in part:11.2 Change in Control or Sale, If: (a) the Operator undergoes a change In control, directly or indirectly, including a change of the controlling interest in the Operator’s shares; or (b) there is a sale of all or substantially all of the Operator's assets (“Change”),
(i) the Operator shall notify the Executive Officer in writing no later than thirty (30) Days prior to the date on which the Change takes effect (“Takeover Date”);
(ii) the Operator shall seek or ensure that the new owner seeks the Executive Officer's consent for the continuation of billing privileges under the ODBA following the Takeover Date, which such consent shall not be unreasonably withheld; and
(iii) if the Executive Officer provides consent under paragraph (ii), the Operator or new owner shall complete and submit to the Ministry an updated Application for ODP Registration.
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11.2.2 Despite paragraph (ii) of section 11.2, the Executive, Officer shall not give consent for the continuation of billing privileges under the ODBA unless the new owner assumes all of the rights and liabilities of the former Operator under this Agreement. Despite the foregoing, the assumption by a new owner of the Operator's rights and liabilities under this Agreement shall not release the Operator from any of its outstanding liabilities under this Agreement. [10] Neighbour’s contends that by consenting to the continuation of the company’s billing privileges after Mr. Salehi purchased its shares from Ms. Pivovarov, the Executive Officer signaled that he was satisfied no problem existed with the pre-change of control billings of Neighbour’s under the ODBA that could merit a sanction of revocation or termination of the Operator’s Agreement. Consequently, the consent given by the Executive Officer to the change in control of Neighbour’s precluded him from subsequently terminating the Operator’s Agreement.
[11] We are not persuaded by this argument. First, such an interpretation of the significance of the Executive Officer’s consent simply is not apparent from the language of s. 11.2. Second, the argument is undercut by the plain language of s. 11.2.2 that stipulates “the new owner assumes all of the rights and liabilities of the former Operator under this Agreement.” That would include the liabilities – financial and regulatory – resulting from Neighbour’s submitting unsubstantiated and overpayment claims. . Neighbour’s Drug Mart v. Ontario (Ministry) of Health & Long-Term Care
In Neighbour’s Drug Mart v. Ontario (Ministry) of Health & Long-Term Care (Div Court, 2023) the Divisional Court considered a JR application against the decision of 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" [under the Ontario Drug Benefit Act (ODBP)]. In these quotes the court summarizes some ODBP law generally, and specifically that regarding billing:Ontario’s Billing Program for Pharmacy Operators Under the Ontario Drug Benefit Act
[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 balance of the case is useful for proving insight into the investigative and disciplinary ODBP process.
. 2099065 Ontario Inc. v Ontario (Health and Long-term Care)
In 2099065 Ontario Inc. v Ontario (Health and Long-term Care) (Div Ct, 2021) the Divisional Court gave a useful summary of the Ontario Drug Benefit Act (and Program):[5] The Ontario Drug Benefit Program provides coverage for most of the cost of over 4,400 prescription drug products and therapeutic substances for persons eligible to receive benefits, such as seniors, residents in long-term care homes, and those receiving social assistance. The Program is administered under the authority of the Ontario Drug Benefit Act. Among other things, the purposes of the Act include providing taxpayers with value for money and ensuring the best use of resources at every level of the system.
[6] The Executive Officer is the official charged with administering the Program. She has broad authority under the Act to administer the Program, grant and revoke billing privileges, and make payments for drug claims submitted in accordance with the Act and Ontario Regulation 201/96.
[7] A pharmacy operator that obtains billing privileges under the Act submits claims for payment from the Program electronically. It is an honour system. The pharmacy operator is paid directly by the Program; customers do not have to pay the operator and later seek reimbursement. Pharmacy operators who do not have billing privileges under the Act may still dispense drugs to Program recipients. However, in the absence of billing privileges, Program recipients must pay the pharmacy directly and later seek reimbursement from the Program.
[8] A pharmacy operator cannot bill the Program as of right. Section 4.1 of the Act provides that a pharmacy operator can 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 factor that he or she deems appropriate.
[9] The Regulation requires all pharmacy operators to enter into a Health Network System Agreement (“HNS Agreement”). The HNS Agreement sets out the terms governing the pharmacy operator’s submission of claims for payment to the Program and the manner in which the Executive Officer or pharmacy operator may terminate the Agreement. The relationship between the Executive Officer and a pharmacy operator under the Program is governed by the Act, the Regulation, and the HNS Agreement.
[10] Section 27 of the Regulation also requires pharmacy operators to comply with all applicable legislation, including the Drug Interchangeability and Dispensing Fee Act and the Drug and Pharmacies Regulation Act which require pharmacies to keep detailed records of all purchases and sales of drugs. The obligation to comply with these statutes is reiterated in section 3.2 of the HNS Agreement.
[11] The Executive Officer has the authority to revoke a pharmacy operator’s billing privileges under the Act, terminate the HNS Agreement, and permanently suspend the operator’s entitlement to payment under the Act where a significant abuse of the honour system has occurred. A pharmacy operator’s billing privileges under s. 4.1 of the Act are a privilege and not a right. The Executive Office may grant billing privileges in the public interest and may also revoke them.
[12] Section 11.1(1) of the Act provides the Executive Officer with the authority to order the suspension of a pharmacy operator’s entitlement to receive payment under the Act if she has reasonable grounds to believe that the operator has breached a condition prescribed in the Regulation or agreed to by the operator. Section 11.1(2) provides that beginning on the day set out in the order, the operator is not entitled to payment by the Executive Officer under the Act. Section 11.1(6) provides that the Executive Officer may rescind a suspension made under s. 11.1(1) with or without conditions. The rescission of an order under s. 11.1(6) is discretionary, so an order of suspension under s. 11.1(1) may be permanent if the Executive Officer declines to rescind it.
[13] A breach of the prescribed conditions in s. 27 of the Regulation may lead to suspension of billing privileges under s. 11.1 of the Act. The conditions include connecting electronically and submitting claims for payments through the HNS and complying with the terms of the HNS Agreement, the Act, the Regulation, and the Ontario Drug Programs Reference Manual published by the Ministry of Health. Further, the Regulation requires that a pharmacy operator not submit any claims that the operator “knows or reasonably ought to know are false, inaccurate or misleading”.
[14] Inspectors appointed by the Executive Officer as a delegate of the Minister of Health under s. 14 of the Act conduct inspections of pharmacies to assess the validity of claims submitted to, and paid by, the Program. If an inspection leads to the finding 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, revoke its billing privileges, and suspend its entitlement to receive payment under the Act.
[15] Section 12.3 of the HNS Agreement authorizes the Executive Officer to terminate the agreement on 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 within 21 days 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 consideration of any submissions made by the pharmacy operator, the Executive Officer’s decision is then sent to the operator in the form of a Notice of Decision.
[16] Section 11.5 of the HNS Agreement prohibits operators from having any relationship with the operator of a pharmacy subject to either a Notice of Order and Termination or Notice of Decision, or any of its officers, directors, designated managers, or shareholders. This provision exists to prevent a suspended or terminated pharmacy from surreptitiously obtaining new billing privileges under another name or from running its suspended business through another subscriber’s computer system. . 2099065 Ontario Inc. v Ontario (Health and Long-term Care)
In 2099065 Ontario Inc. v Ontario (Health and Long-term Care) (Div Ct, 2021) the Divisional Court commented on administrative penalties:[61] It is well established that in order to overturn a penalty imposed by an administrative decision maker, it must be shown that the decision maker made an error in principle or that the penalty was “clearly unfit.” The courts have used a variety of expressions to describe a penalty that reaches this threshold, including “demonstrably unfit”, “clearly unreasonable”, “clearly or manifestly excessive”, “clearly excessive or inadequate” or representing a “substantial and marked departure” from penalties in similar cases. To be clearly unfit, the penalty must be disproportionate or fall outside the range of penalties for similar offences in similar circumstances. A fit penalty is guided by an assessment of the facts of the particular case and the penalties imposed in other cases involving similar infractions and circumstances, College of Physicians and Surgeons of Ontario v. Peirovy, 2018 ONCA 420 at para. 56.
[62] 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: AS169988 Consultants Inc. v. Her Majesty the Queen (in the right of the Province of Ontario), Ministry of Health and Long-Term Care (Ontario), 2019 ONSC 2967 (Div. Ct.) (Warden Pharmacy), para. 48.
[63] I would adopt the words of Myers J. in Warden Pharmacy when he wrote, in para. 45, that “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.” So it is here.
[64] Although it is true that rehabilitation is an important objective in the penalty process, so is the preservation of the public purse and general deterrence. This is especially true in the context of a large, province-wide benefit program operated on the honour system. The potential for abuse is high, as is the harm to the public given that drug benefit resources are not unlimited.
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