Ontario Proposes Regulation Under "Sunshine" Law

Ontario is currently seeking feedback on its newly released proposed regulation under the "sunshine" legislation, the Health Sector Payment Transparency Act, 2017 (HSPTA). The proposed regulation was released on February 21. The HSPTA was enacted on December 12, 2017.¹

What You Need To Know

• The new legislation will require the medical product industry (payor), including both drug manufacturers and medical device companies, to report annually on payments (transfer of value) made to individuals and organizations in the health care sector (recipients).
• The definition of transfer of value is very broad, and would cover fees and payments made under agreements that are common in the industry.
• The coming into force date is expected to be January 1, 2019.
• Feedback on the proposed regulation is being sought until April 6.²

Details of the Proposed Legislation

The key aspects of the regulatory proposal include the following:

Payors. Payors are defined to include companies that manufacture, import, promote and sell medical products (drugs or medical devices), and organizers of continuing education events for health care professionals. The proposed regulation adds pharmacies and laboratory/specimen collection centres as payors regulated under the HSPTA.

We note that draft regulation proposes to exclude recreational cannabis from the definition of a drug, but the regulatory framework would apply to medical cannabis. Thus, the HSPTA would not apply to producers and distributors of recreational cannabis once it is legalized, but would apply to producers and distributors of medical cannabis.

Further, those who facilitate a transfer of value (intermediaries) would also be regulated under the HSPTA, regardless of whether the payor directs how the transfer of value is to be made, or is aware of the recipients' identities. The exception to being considered an intermediary is narrow.

Recipients. The proposed regulation includes an extensive list of individuals/organizations that would be considered recipients under the HSPTA. Other than the obvious candidates, such as health care professionals, health regulatory colleges, hospitals and other health care facilities, the list also includes pharmacies, laboratory/specimen collection centres, advocacy organizations (for health care professionals or patient groups), health charities, group purchasing organizations, universities and research institutions, and subsidiaries of the specified organizations. The proposal would capture board members, directors/officers, employees of the specified organizations, as well as immediate family members of the above individuals.

Transfer of value. The proposed regulation would specify the transfer of value that must be reported by a payor to include cash, in-kind items/services, investment interests, as well as compensation for services, honoraria, grants/donations/sponsorship, membership fees, and rental/facility fees. Compensation for services would seemingly include fee for service agreements and thus be caught by the proposed regulation. Contracts with key opinion leaders would seemingly be included and thus also be caught. A transfer of value would also include rebates/discounts, items provided on a value-added basis in procurements, inventory listing fees, equipment/leases of equipment longer than 90 days, licensing/copyright fees, royalties, referral fees, marketing fees, and renovations. Unsurprisingly, any personal gifts, entertainment, travel and accommodations provided would be considered a transfer of value. The proposal would exclude the fair market value of goods that a payor sells to a recipient.

Exemptions. The proposed regulation would exempt a number of transactions from the reporting requirement. These transactions include employment salary/benefits, medical products intended to be given to patients for free, educational materials intended for use within a clinical setting, and compensation for expert testimony/services in a legal proceeding. In addition, the proposed regulation would exempt prompt payment, volume discounts and distribution service fees provided by drug manufacturers as prescribed under legislation.³

Threshold, manner and frequency of report. The draft regulation proposes the dollar value threshold to reporting to be $10. The payors would report the transfer of values through an online platform by June 30 each year. The first reporting would be required by June 30, 2020.

Penalties. As reported in our prior bulletin,⁴ the HSPTA sets out the penalties for non-compliance. Persons who contravene the HSPTA or its regulations may be subject to a fine of the following amount for each day or part day the offence occurs or continues:

• an individual's first offence: fine not exceeding $10,000;
• an individual's subsequent offence: not exceeding $25,000;
• a corporation's first offence: not exceeding $50,000; and
• a corporation's subsequent offence: not exceeding $100,000.

What's Next

Although enacted into law, the HSPTA has not yet been proclaimed into force. The province proposes to set January 1, 2019 as the coming into force date for the HSPTA and its regulation. The proposed regulation intends to clarify important details surrounding the implementation of HSPTA. As noted, the government is seeking feedback on the proposed regulation under the HSPTA and interested parties are encouraged to submit comments by April 6.

Ontario is the first province to mandate private sector payments to the health care sector. As the first reporting period due date is currently contemplated as June 30, 2020, medical product companies should take the opportunity to review current agreements and arrangements with health care professionals and organizations to prepare for implementation of this legislation. Other Canadian provinces are likely watching developments in Ontario closely but so far have not proceeded to enact similar regulations.

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¹ See: https://news.ontario.ca/mohltc/en/2017/12/ontario-passes-legislation-to-strengthen-transparency-in-health-care.html?utm_source=ondemand&utm_medium=email&utm_campaign=p. The final version of the passed legislation remained largely unchanged from the initial draft. We have previously published on the proposed HSPTA, see, "More Transparency in Health Care: Ontario's Proposed "Sunshine" Legislation."

² See: http://www.ontariocanada.com/registry/view.do?postingId=26846&language=en.

³ Ordinary commercial terms that are permissible under the Ontario Drug Benefit Act /Ontario Regulation 201/96 (General) would not be reported.

⁴ See "More Transparency in Health Care: Ontario's Proposed "Sunshine" Legislation."