The Ontario Court of Appeal confirmed in a decision released earlier this week that it is illegal to sell prescription drugs over the Internet to Americans where a substantial portion of the sales operations take place in Ontario when the seller is not licensed to operate a pharmacy in Ontario and otherwise does not comply with the laws and regulations governing pharmacies. In Ontario College of Pharmacists v. 1724665 Ontario Inc. (Global Pharmacy Canada), 2013 ONCA 381 the Court affirmed the decision of Justice Janet Wilson of the Superior Court of Justice who in Ontario College of Pharmacists v. 1724665 Ontario Inc., 2012 ONSC 5804 concluded that the appellants were selling prescription drugs, by retail, in Ontario; and were subject to the jurisdiction of the Ontario college of Pharmacists.
Global Pharmacy Canada (GPC) is the trade name of a business that used the internet to market the retail sale of generic prescription drugs to Americans. It is a Belize company but its website refers to itself as Global Pharmacy Canada and directs customers to its customer service agents located in Toronto. The agent is RX Processing Services Inc. (RXP) which is located in a call centre in Mississauga, Ontario. RXP takes the customer orders and process payments for the drugs. It also ensures that the orders are filled in India and shipped directly to the customers in the U.S. and never enter Canada. Canadians are geo-blocked from purchasing drugs from GPC.
The two key issues before the Court was whether GPC and RXP and the individuals behind them were subject to the jurisdiction of the Ontario College of Pharmacists and whether retail prescription drugs were being sold in Ontario.
The trial judge had concluded that the defendants were selling prescription drugs in Ontario using a traditional commercial law definition of sale, including the locus of the offer and acceptance, to determine whether a sale of prescription drugs to Americans occurred following the analysis in Prescriptions4us c. Ordre des pharmaciens du Quebec,  Q.J. No. 9014 (Q.S.C.), aff’d  J.Q. no. 13142 (QCCA). She also reached the same conclusion using a purposive approach relying on the Supreme Court of Canada decision in Celgene Corp. v. Canada (Attorney General), 2011 SCC 1 (CanLII), 2011 SCC 1,  1 S.C.R. 3.
The Ontario court of Appeal rested its opinion solely using the purposive approach to interpret the term sale to meet the overriding purpose of the regulatory scheme governing pharmacies, which is to protect the public both in and out of Ontario.
The appellants say that the application judge erred in concluding that they sell, by retail, prescription drugs in Ontario. Their submission runs as follows.
GPC-Belize is in the business of facilitating the purchase, by Americans, of pharmaceutical drugs from India. All significant aspects of its business involve activities outside Ontario. Its sole connection with Ontario is its contractual arrangement with RXP, under which RXP provides ancillary support and administrative services. GPC-Belize has no physical presence in Ontario, has no Ontario personnel, does no advertising or solicitation of Ontario residents, does not import pharmaceutical drugs into Ontario, and sells no drugs to Ontario residents. In short, the appellants say they are not selling pharmaceutical drugs in Ontario.
I reject this submission.
The Supreme Court’s decision in Celgene instructs us that in a regulatory context, words such as “place of sale”, “sold” and “selling” may not necessarily be given their strict commercial law meanings. At para. 21 of Celgene, the Court says that “[t]he words, if clear, will dominate; if not, they yield to an interpretation that best meets the overriding purpose of the statute.”
I agree with the application judge that, given the overriding purpose of the relevant legislation in this case, a purposive approach to determining the meaning of sale is appropriate. The College has a mandate to regulate the sale of prescription drugs in the province, and a duty to serve and protect the public interest – it is the substance, and not the form, which is relevant when determining whether the sale of prescription drugs takes place in Ontario.
The application judge made detailed findings of fact about the sale process following restructuring. On those findings, it is clear that the substance of the sale transaction takes place through RXP, an Ontario corporation that is located and operates in Ontario. As the application judge noted, “[a]ll documentation – including the Patient Order Form, confirmation of the order, the invoice, and the packing slip – are in the name of Global Pharmacy Canada bearing the Mississauga address.” Furthermore, critical aspects of the sale transaction by which the customers get prescription drugs and the appellants get paid for providing them, are conducted by RXP. The customer submits its order form, which RXP processes, or calls RXP with its order. RXP takes the order and processes payment for it. RXP then arranges for the delivery of the drugs directly to the American customer. If there is a problem, customers contact RXP. In short, without RXP staff at the call centre in Mississauga, no prescription drugs would flow from Global Pharmacy Canada (or GPC-Belize) to its customers and GPC-Belize would not get paid.
The trial judge had also found, relying on the seminal case Unifund Assurance Co. v. Insurance Corp. of British Columbia, 2003 SCC 40, that the provincial regulatory scheme applied to the out of province defendants including GPC. Under Unifund, constitutional applicability involves considerations of the scope of provincial legislative authority to prevent the application of the law of a province to matters not sufficiently connected to it. What constitutes a “sufficient” connection depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it. She referred to other leading cases which supported the power to regulate conduct beyond provincial borders of the enacting jurisdiction. See, Gregory & Company Inc. v. The Quebec Securities Commission,  S.C.R. 584 (Quebec Securities Commission can protect the public against fraud); Thorpe v. College of Pharmacists of British Columbia, (1992) 97 D.L.R. (4th) 634 (B.C.C.A.) (interpreting the scope of the provincial Pharmacists Act, R.S.B.C. 1979, c. 326, as applying to control conduct beyond the borders of British Columbia); and R. v. Stucky, 2009 ONCA 151 (the accused had operated a direct mail business from Ontario that sold lottery tickets and merchandise to persons outside of Canada and the court construed the meaning of “to the public” for the purposes of the Competition Act, R.S.C. 1985, c. C-34 as being not limited to the Canadian public if there was a link or connection between the offence and Canada).
The Court of Appeal adopted the same framework and relying on the trial judge’s factual findings affirmed the decision that there was a sufficient connection between the defendants/appellants and Ontario, such that the College had jurisdiction over them. It made clear that Ontario’s laws can apply extra-territorially under a regulatory regime which is designed to protect the public.
Finally, I reject the appellants’ submission that the College is “overreaching” by assuming jurisdiction over them. The College’s duty under s. 3(2) of the Code is “to serve and protect the public interest”. In the circumstances of this case, the territorial limits on the scope of the provincial legislative authority relate to the conduct that the College can regulate. The College’s reach is not defined as, or limited to, the Ontario public…
As I have explained, in this case there is conduct over which the College has power to regulate: the sale of prescription drugs in Ontario. The principle that regulators may act to protect persons who are located outside the regulator’s territorial jurisdiction, when the conduct targeted by the regulator occurs within the jurisdiction, has been repeatedly affirmed, beginning with Gregory, at p. 588. See also Thorpe, at p. 640, and Crowe, at para. 32.
The College is not overreaching – it is fulfilling its legislated duty to serve and protect the public interest in the matters over which it has been given authority, including the sale of prescription drugs in Ontario.
In the domain of pharmaceutical drugs, reputation is based on regulation. If a company trades on Ontario’s reputation for quality and strong regulatory standards, and sites a critical part of the sales process in Ontario, it will be subject to Ontario’s regulation.
The case is an important one in several respects. It confirms that Ontario laws can apply to protecting the public both in Ontario and abroad where there exists a sufficient connection between Ontario and the individual or entity sought to be regulated. It also confirms that the location of foreign web sites is not nearly as important as the substance of what is occurring in Canada when it comes to determining whether Canadian regulatroy requirements have to be met by foreign businesses. Moreover, it is a reminder that Canadian entities that engage in operating call centres or business process outsourcing operations may be found to be selling goods in Canada and subject to regulatory scrutiny here even if they are not technically selling goods in Canada under the traditional commercial law definition of sale.