Council of Independent Community Pharmacy Owners v. Newfoundland and Labrador, 2013 NLCA 32

Date: 20130514 Docket: 12/28 Citation: Council of Independent Community Pharmacy Owners v. Newfoundland and Labrador , 2013 NLCA 32 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN: COUNCIL OF INDEPENDENT COMMUNITY PHARMACY OWNERS APPELLANT AND: HER MAJESTY THE QUEEN IN RIGHT OF NEWFOUNDLAND AND LABRADOR RESPONDENT Coram: Welsh, Rowe and Hoegg JJ.A. Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division (G) 201101G5951 Appeal Heard: April 12, 2013 Judgment Rendered: May 14, 2013 Reasons for Judgment by Rowe J.A. Concurred in by Welsh and Hoegg JJ.A.

Counsel for the Appellant: James Goodwin Counsel for the Respondent: Rolf Pritchard Q.C. and Jessica Pynn

Rowe J.A. INTRODUCTION [ 1 ] This is an appeal from a decision denying an application by the Council of Independent Community Pharmacy Owners (“CICPO”) which had sought a declaration that

section 3 of the Pharmaceutical Services Administration Regulations , NLR 68/11 (“the Regulations”) was ultra vires . In this appeal, CICPO submits that

section 3 of the Regulations is ultra vires . FACTS [ 2 ] CICPO represents the majority (60 out of 105) of independent pharmacy owners in the province. There are also 90 chain retail pharmacies. [ 3 ] The Pharmaceutical Services Act (“the Act ”) establishes the Newfoundland and Labrador Prescription Drug Program (“NLPDP”). Participation by pharmacies in the NLPDP is by an “opt –in” agreement. It is not in dispute that a pharmacy that enters into such an “opt-in” agreement with government can later “opt out”.

Rather, what is in dispute is the validity of notice requirements government has imposed on those who wish to “opt out”. [ 4 ] The “opt-in” agreement provides that pharmacies must “give at least 30 days prior written notice of the intent to cease participation in the NLPDP”.

In June 2011, in the course of a dispute with government, members of CICPO gave notice of their intention to “opt out” of the NLPDP. (I am omitting reference to the particulars of the dispute with government or the dispute between CICPO and other pharmacists, as those disputes are not relevant to the validity of the Regulations .) [ 5 ] In light of this, on July 19, 2011, the Minister of Health and Community Services wrote to the members of CICPO stating, in part: It is [government’s] view that 30 days notice does not provide adequate opportunity for clients to secure alternate means of receiving their medications.

Further, this notice is insufficient to provide Government with the required time to develop a contingency plan to ensure beneficiaries of a timely, seamless and uninterrupted supply of required medications. [ 6 ] This was followed on July 25, 2011 by Cabinet’s approval of

section 3 of the Regulations , which reads:

(1) Where a pharmacy that has been issued a provider number under

section 16 of the Act intends to discontinue its participation in the program, the pharmacy shall provide notice of that intention by (

a) posting a notice in a conspicuous place in the pharmacy, and (

b) providing written notice to (

i) each beneficiary who has received drugs or related products under the program from that pharmacy within the previous 12 months, and (ii) the minister.

(2) Notice required under (a) subsection (1) shall be provided 120 days prior to the pharmacy discontinuing its participation in the program; and (

b) subparagraph (1)(b)(

i) shall be provided by mail to the last known address of the beneficiary.

(3) For greater certainty, notice provided under terms and conditions of participation in the program does not satisfy the requirement for notice under this section.

(4) The minister may waive or shorten the period of notice required under subsection (2). [ 7 ] On July 25, 2011, the Department of Health and Community Services (“the Department”) issued a press release which reads, in part: The Provincial Government is enacting a new regulation under the Pharmaceutical Services Act, effective today that will require all pharmacies participating in the Newfoundland and Labrador Prescription Drug Program (NLPDP) to provide 120 days notice to clients and the Minister of Health and Community Services before discontinuing their participation in the NLPDP.

This action is in response to the intention of some independent pharmacies throughout the province to withdraw services under the NLPDP. On June 27, 2011, 65 independent pharmacies, all members of the Council of Independent Community Pharmacy Owners, provided 30 days notice to the Provincial Government of their intention to withdraw services to NLPDP clients.

While this period of notice is acceptable in cases of retirement or closure, it is not reasonable under circumstances where a group is intending a mass resignation from billing privileges under the NLPDP. … “Our first priority is the clients of the NLPDP,” said Minister Kennedy. “This regulation will ensure individuals have the opportunity to receive their medication prior to any withdrawal of services. We are also hoping to provide reasonable opportunity for clients of the NLPDP to make alternate arrangements with other pharmacies in this province.

This will also provide the Provincial Government with an opportunity to prepare alternate delivery methods for this important program.”

[ 8 ] On July 26, 2011, the Minister wrote to CICPO members, informing them of the new requirements set out in

section 3 of the Regulations . The Minister ended his correspondence as follows: You should be aware that failure to comply with the Pharmaceutical Services Administration Regulations is an offence punishable on

summary conviction. Your failure to comply with this Regulation will be brought immediately to the attention of your professional body, the Pharmacy Board of Newfoundland and Labrador, for disciplinary action as appropriate. I trust you will govern yourself accordingly. [ 9 ] The members of CICPO continue to operate under the NLPDP. They commenced this action challenging the validity of

section 3 of the Regulations . In her April 25, 2012 decision (2012 NLTD(G) 71), a justice of the Trial Division denied CICPO’s application. She concluded at paragraph 37: The Regulations were properly enacted under the authority of the Lieutenant-Governor in Council pursuant to

section 51(

k) of the Pharmaceutical Services Act . The Respondent has established they were enacted for a valid purpose, that is, to ensure the timely, safe and effective supply of medication to beneficiaries under NLPDP. The province has authority to prescribe the terms of participation in the NLPDP under Section 16(3) of the foregoing Act and Regulations, and has properly done so in this case. The Regulations do not amount to a prohibition on the ability of the participants to withdraw from the program.

Finally, it cannot be said the Regulations were enacted for an improper purpose based on arbitrary, irrelevant and extraneous considerations amounting to bad faith. [ 10 ] Subsection 16(3) of the Act reads: The minister may prescribe the terms and conditions of participation in the [NLPDP] and, where a pharmacy has applied under subsection (2) and has been approved, the pharmacy and all pharmacists working in it shall, by participation in the program, be considered to have accepted those terms and conditions and shall comply with them. [ 11 ]

Section 51(

k) of the Act reads: The Lieutenant-Governor in Council may prescribe regulations … (

k) necessary for the administration of this Act . ISSUES [ 12 ] The issue is whether

section 3 of the Regulations , in whole or in part, is ultra vires . ANALYSIS [ 13 ] Whether a regulation is ultra vires its enabling statute is a question of law, for which the standard of review is correctness. United Taxi Drivers’ Fellowship of Southern Alberta v. Calgary (City) , 2004 SCC 19 , [2004] 1 S.C.R. 485. [ 14 ] In argument, counsel for CICPO took the position that

section 3 of the Regulations as a whole is ultra vires . That said, he directed almost all of his oral argument to the view that what is invalid is the requirement that a pharmacy provide notice to “each beneficiary who has received drugs or related products under the NLPDP from that pharmacy within the previous 12 months” (subparagraph 3(1)(b)(i)) and that such notice “shall be provided by mail to the last known address of the beneficiary” (paragraph 3(2) (b)). [ 15 ] The main question before the Court is whether such written notice is “necessary for the administration of this Act”.

The Crown says that it is; CICPO says that it is not. [ 16 ] We need to consider first the relevant provisions of the Act : Program established 12.

(1) There is established a program entitled the Newfoundland and Labrador Prescription Drug program.

(2) The program is administered and operated by the minister.

(3) The objects of the program are to provide appropriate prescription drugs and other related benefits in a cost effective manner to those eligible for them.

(4) The minister may require that a beneficiary contribute to the cost of a benefit at a rate of co-pay prescribed by the regulations, and that rate may vary according to the component of the program under which the benefit is received. Terms of program 13. The program shall be the payor of last resort and shall pay prescription drug costs and other related benefits in the manner

prescribed by this Act for which a person is eligible only where those services are not, or are no longer, reimbursable by a third party. Program components 14.

(1) The components of the Newfoundland and Labrador Prescription Drug Program are: (

a) the Income Support component; (

b) the Senior Citizens component; (

c) the Low Income component; and (

d) the Special Needs component. . . . Participation in program 16.

(1) A pharmacy may apply for participation in the program , and shall, in order to participate in the program, obtain a provider number under subsection (2).

(2) The minister may issue a provider number to a pharmacy that applies to participate in the program and the minister may cancel or suspend a provider number in the circumstances prescribed by the regulations.

(3) The minister may prescribe the terms and conditions of participation in the program and, where a pharmacy has applied under subsection (2) and has been approved, the pharmacy and all pharmacists working in it shall, by participation in the program, be considered to have accepted those terms and conditions and shall comply with them. . . . Fees and payments 17. …

(4) Where drugs or related products (

a) have been obtained from a participating pharmacy by a person who is later determined to be a beneficiary eligible for those benefits; or (

b) have been obtained from a pharmacy that is not a participating pharmacy under this Act but that are benefits for which a beneficiary is eligible, the department may reimburse a beneficiary for the costs of his or her benefits directly. (Emphasis added.) [ 17 ] Under the NLPDP, when beneficiaries present a “drug card” issued by the Department, pharmacies that have “opted in” (“participating pharmacies”) fill prescriptions for such persons and bill the Department.

In some instances, as per subsection 12(4) of the Act , there is a “co-payment” made by the beneficiary to the pharmacist; however, the sums that beneficiaries have to pay “up front” are relatively modest when they obtain drugs from “participating pharmacies”. A pharmacy that has not “opted in” or that has “opted out” (i.e. “a pharmacy that is not a participating pharmacy”) charges beneficiaries full price for their prescriptions; the beneficiary then obtains re-imbursement (less any co-payment) from the Department.

Thus, beneficiaries pay the full price “up front” if their prescriptions are filled by non-participating pharmacies (as the members of the CICPO would be if they “opt-out”). As

section 14 of the Act contemplates, senior citizens, those with low incomes and persons with special needs are among beneficiaries; one can readily see how some of these persons would face difficulty paying full price “up front” for pharmaceuticals. [ 18 ] Evidence at trial indicated that in major centres there are pharmacies other than CICPO members. As well, in many remote areas (e.g. the Labrador coast) pharmaceuticals are provided through publicly funded clinics. However, in certain parts of the province (e.g.

Burgeo) the only pharmacy in the area is a member of CICPO; beneficiaries in such parts of the province would have to pay full price “up front” and seek reimbursement from the Department if the CICPO member “opts out” of the NLPDP. [ 19 ] The Crown’s position is that 30 days notice for a mass “opt out” by CICPO members would undermine the operation of the NLPDP, as it would give rise to too many beneficiaries seeking to make alternate arrangements (i.e. to obtain their drugs from a “participating pharmacy”) in too short a time.

See above the quote from the Minister’s letter of July 19, 2011, as well as the Department’s press release of July 25, 2011. Since prescriptions are usually filled for a maximum of 90 days, the 120 day period during which “a notice [would be displayed] in a conspicuous place in the pharmacy” would ensure that beneficiaries have at least 30 days lead time to make alternate arrangements before a pharmacy “opts out”. This directly supports the operation of the NLPDP and, as such, is “necessary for the administration of this Act ”.

Accordingly, CICPO’s appeal as to this component of the regulation is dismissed. [ 20 ] Counsel for CICPO argued vigorously that what is not “necessary for the administration of this Act ” is the additional requirement to provide written notice to each beneficiary who had received drugs or related products under the NLPDP from that pharmacy within the previous 12 months ( subparagraph 3 (a)(b)(

i) and paragraph 3(2)(b)). Rather, counsel for CICPO submitted that this additional notice requirement has as its purpose the creation of an artificial barrier for pharmacies that wish to “opt out”. He further argued that as the Act contemplates some pharmacies participating in the NLPDP and others not (see subsection 17(4) of the Act ), it cannot be “necessary for the administration of this Act” that such a barrier be created. Accordingly, counsel submits, Cabinet was without statutory authority to approve subparagraph 3(1) (b)(

i) and paragraph 3(2) (

b) of the Regulations .

[ 21 ] The Crown urges on the Court that it is not for us to “second guess” Cabinet decisions. In this regard, the Crown relies on Shoppers Drug Mart Inc. v. Ontario (Health and Long Term Care) 2011 ONCA 830 , 109 O.R. (3d) 279, leave to appeal allowed [2012] S.C.C.A. No. 34649, where the Ontario Court of Appeal wrote at paragraph 65: As long as regulations remain within the scope authorized by the statute and are consistent with statutory purposes, “it is not the role of the Court to assess and second-guess the merits of Cabinet decisions.

The Government is accountable for such decisions only in the electoral process” Apotex Inc. v. Ontario (Office of the Lieutenant Governor) , 2007 ONCA 570 , 229 O.A.C. 11 (Ont. C.A.) at para. 37 . [ 22 ] The foregoing is no doubt good law. It is not for this or any other court to assess the validity of a regulation based on whether or not it is good policy. That is the business of government (and the legislature), not the business of the courts. What is the court’s business is whether a regulation is authorized by the enabling statute. [ 23 ] In Shoppers Drug Mart Inc. v.

Ontario , supra, the Court of Appeal reversed a decision by the Divisional Court ( 2011 ONSC 615 ). In doing so, the Court did not take issue with the following passage from the Divisional Court’s decision (at paragraph 32): The executive branch of government has no inherent legislative power; it has only that power that is delegated to it by statute. Therefore, the scope of the regulation-making power is limited by the scope of the power delegated under the legislation.

Once the purpose of the legislation is established, and its language is interpreted consistently with that purpose, the regulations are required to be authorized by the enabling statute and to be consistent with that purpose. This is a pure question of law. The Lieutenant Governor in Council is either empowered to enact the regulation or he is not. If the regulations do not meet these criteria for validity, then they are ultra vires and cannot stand. There is not, at that stage, any question of deference. [ 24 ] The foregoing is also good law. (See, for example, in a different context Bell Canada v.

Canadian Telephone Employees Association , 2003 SCC 36 , [2003] 1 S.C.R. 884, para. 47 .) I would add parenthetically that an exception to the general rule stated by the Divisional Court is that Cabinet may act in the absence of statutory authority in certain limited matters pursuant to the royal prerogative. That exception is not relevant here. [ 25 ] In looking at the written notice requirement in subparagraph 3(1) (b)(

i) and paragraph 3(2) (

b) of the Regulations , one should have regard to the practical difficulties in meeting it. Let us say, for example, that as of January 1 a pharmacy wants to give written notice to all beneficiaries to whom it provided pharmaceuticals in the previous 12 months; suppose that preparing all the letters and envelopes took until January 21. The pharmacy then would have to prepare more notices as the “previous 12 months” would be counted back from January 21, rather than January 1.

The pharmacy could not get around this by handing a written notice to each beneficiary that it served during the period January 1 st to 21 st , as the Regulations require that notice be sent to the beneficiary’s mailing address. Perhaps the only way to fulfill the written notice requirement would be to close the pharmacy for a day or so, thus avoiding any new beneficiaries to whom written notice would have to be given and use the time to mail written notices to the beneficiaries recently served.

All this becomes even more of a practical impediment if the notice requirement is interpreted to mean that the written notice must be received (rather than merely sent) by all beneficiaries served within the “previous 12 months”. To ensure this, the pharmacy would likely have to close for about a week (to avoid any new beneficiaries) in order to ensure that all letters had been delivered by Canada Post. In considering all this, one should recall that prescriptions are usually filled for a maximum of 90 days, which bears no relation to giving written notice to all beneficiaries within the “previous 12 months”.

How can any of this be rationally connected to the proper administration of the Act ? [ 26 ] While the Crown has shown why the 120 day period for displaying “a notice in a conspicuous place in the pharmacy” is “necessary for the administration of this Act ”, it has not shown how the proper operation of NLPDP is aided or advanced by a requirement for the pharmacy to give written notice by mail to all beneficiaries for the “previous 12 months”. [ 27 ] The Crown did not provide any plausible explanation for the requirement to give written notice to all beneficiaries within the “previous 12 months”.

Accordingly, I accept CICPO’s submission that such a requirement is no more than an artificial barrier to pharmacies wishing to “opt out”. It certainly has had that practical effect, as CICPO members have not “opted out”, even though they were within two days of doing so when

section 3 of the Regulations was approved by Cabinet in July 2011. The creation of such an artificial barrier to “opting out” is not a purpose authorized by the statute. The relevant provisions of

section 3 of the Regulations are not “necessary for the administration of this Act ”, and accordingly, they are ultra vires . They may be severed without affecting the operation of the other elements of

section 3 , notably the 120 day notice period. CONCLUSION [ 28 ] The appeal is allowed, in part. Subparagraph 3(1) (b)(

i) and paragraph 3(2) (

b) of the Regulations are ultra vires and are of no force and effect. CICPO will have its costs on a party-and-party basis in this Court and in the Trial Division. ______________________________ M. H. Rowe J.A. I Concur: _____________________________ B. G. Welsh J.A. I Concur: _____________________________

L. R. Hoegg J.A.