Arbitrator rules against Mandatory Generic drug plan

Mandatory Generic Drug Substitution is a drug plan feature that encourages employees to take lower cost, generic drugs whenever possible. Mandatory generic drug plans usually allow for reimbursement to employees only up to the amount of the lowest-cost alternative where a generic drug is available. Plans like this would cover band-name drugs only if a generic equivalent is not available or if the employee’s doctor completed a form indicating that the patient could not tolerate the alternative drug or that it would not work for them. Generic drugs must comply with the same federal standards as brand name drugs. They must also contain the same active ingredients, work in the same way (there are some instances where binding ingredients in the drugs may cause issues), work in the same amount of time and must look different from their brand counterpart.

Generic alternatives can be as much as two thirds cheaper than the brand name drug (Empire Life, Mandatory Generic Substitution).

Recently however an Ontario arbitrator has struck down an employer’s use of mandatory generic substitution in their benefits plan. As reported in Benefits Canada arbitrator Russell Goodfellow ruled on a grievance by United Steelworkers Local 1-2010 that challenged Eacom Timber Corp’s move to mandatory generic substitution in 2016.

The change to mandatory generic substitution was not negotiated in the collective agreement, and Goodfellow ruled that the company could not impose mandatory generic substitution saying “A prescription drug is a drug prescribed by a physician”. The company, Goodfellow noted, was trying to cut costs by limiting the circumstances in which employees could access brand-name drugs. “In my view, that is contrary to the collective agreement,” he wrote. “It reduces or limits the agreed-upon benefit.”

This case highlights the importance of communication around benefits and what any changes to the benefits program means to employees.

Sources: Empire Life, Mandatory Generic Substitution
Benefits Canada