Federal Court Dismisses C$5 Billion Generic Drug Price-Fixing Class Action

The Federal Court of Canada has found that a C$5 billion class action alleging an industry-wide conspiracy to fix generic drug prices in Canada has no basis in fact.

On February 20, 2026, the Federal Court dismissed the plaintiff’s certification motion in Kathryn Eaton v. Teva Canada Limited et al., 2026 FC 239, and did so without leave to amend. The plaintiff chose not to appeal. The decision reinforces the Court's important gatekeeping role at certification, particularly where, as here, the plaintiff advances a sprawling, ill-defined and ultimately speculative case. The outcome was a significant victory for the defendants including Pharmascience Inc., a Canadian company with no US operations and no involvement in the US enforcement proceedings on which the plaintiff’s conspiracy theory was based.¹

Background

The plaintiff, Kathryn Eaton, sought certification on behalf of all persons in Canada who purchased generic drugs out-of-pocket or through private drug plans from January 1, 2012 onward, claiming C$5 billion in damages under the Competition Act. The claim alleged a broad North American conspiracy involving several generic drug manufacturers—including companies operating only in Canada—to fix prices and allocate the generic drug market.

Central to the plaintiff’s theory were deferred prosecution agreements (DPAs) entered into by certain defendants’ US parents or affiliates admitting to price fixing and market allocation in the United States. Although none of the DPAs referenced Canada, the plaintiff alleged that the conspiracy extended across North America, and that the US admissions established some basis in fact for parallel conduct in Canada.

In order to try to Canadianize the conspiracy, the plaintiff alleged that the Canadian generic drug market is conducive to collusion and that manufacturers price the drugs they sell to pharmacies in a manner that artificially inflates those prices and limits competition. In attempting to make that case, the plaintiff invoked the way that generic pharmaceutical manufacturers react to the provincially regulated pricing frameworks in which they operate as evidence of the alleged conspiracy. The Court found no support in the evidence adduced by the plaintiff for any of this theory.

The Ruling: Four Out of Five Criteria Failed

The Federal Court held that the plaintiff failed to satisfy four of the five certification criteria under Rule 334.16(1) of the Federal Courts Rules, finding that: (a) the statement of claim disclosed no reasonable cause of action; (b) there were no common issues of law or fact; (c) a class proceeding was not the preferable procedure; and (d) there was no suitable class representative. The motion was dismissed without leave to amend, bringing the case to an end.

Central to the decision was the Court’s finding that the plaintiff’s 700-plus paragraph statement of claim, despite its length, lacked any meaningful particulars of how each defendant actually participated in the alleged conspiracy. Instead, the plaintiff “lumped” the defendants together with bald allegations, unsupported by material facts connecting the alleged conspiracy to Canada. Much of the pleading was derived wholesale from US proceedings without being connected to Canada, and where it addressed Canadian-specific conduct, it lacked particulars.

On the evidence, the Court found that US litigation materials offered “little support” for the plaintiff’s claims, as the Canadian and American generic drug markets are “separate and distinct,” with different regulatory frameworks. The Court also rejected the plaintiff’s characterization of off-invoice discounts sometimes used by manufacturers to compete for pharmacy business as illegal “kickbacks”. The Court recognized they are in fact permitted under Canada’s regulatory framework and represent a recognized form of competition among generic manufacturers, consistent with findings by the Competition Bureau and the Ontario Superior Court in Spina v. Shoppers Drug Mart Inc., 2023 ONSC 1086.

Throughout the decision, the Federal Court endorsed its view in Jensen v. Samsung Electronics Co Ltd., 2021 FC 1185 (affirmed 2023 FCA 89) that certification is designed to be a “meaningful screening device,” not a “rubber-stamping exercise or symbolic review”, and that a section 45 conspiracy claim cannot proceed on “pure speculation or wishful thinking”.

Key Takeaways

1. You cannot import a US conspiracy into Canada: Admissions or guilty pleas in the US do not in every case establish some basis in fact for a conspiracy in Canada. The Court found the Canadian and US generic drug markets separate and distinct—with different regulators, no reciprocity in drug approvals, no product interchangeability.
2. Plead with particularity, or don’t plead at all: A conspiracy claim must set out the particular acts of each co-conspirator. “Lumping” several defendants together with bald allegations without material facts will not survive certification.
3. Corporate separateness matters: Plaintiffs cannot assume that the acts of a US parent or affiliate are attributable to a Canadian subsidiary without pleading material facts supporting an agency relationship or piercing the corporate veil.
4. “Conducive to collusion” does not equate to collusion: Expert evidence that a market structure could theoretically support a conspiracy is not evidence that one actually exists. Following Jensen, the Federal Court confirmed that the “some basis in fact” standard demands more than a description of market conditions that might facilitate collusion.
5. Certification is a gatekeeping exercise, not a rubber stamp: The Court will not wave through sprawling competition class actions that lack Canada-specific evidence and proper pleading.

The decision makes clear that plaintiffs cannot rely on US enforcement actions as a substitute for properly pleaded and supported claims in Canadian courts and underscores the rigorous pleading and evidentiary standards that must be met before competition class actions of this scale will be certified.