Class Dismissed: Fothergill Fact-Checks Motion to Certify a Proposed Class Action Alleging Canadian Generic Drug Price Fixing Conspiracy

Authors: Marian Wolanski and Oleyna Strigul

In the February 20, 2026 decision of Eaton v Teva Canada Limited, 2026 FC 239, the Federal Court per Justice Fothergill refused to certify a proposed class action proceeding against a number of generic pharmaceutical companies, effectively unmasking the Plaintiff’s alleged conspiracy of anti-competitive behavior by the Defendants as a paltry speculation rather than a plot.

Background

The litigation arose from a purported industry-wide conspiracy across North America. The Plaintiff, Kathryn Eaton, alleged that the Defendants, a group of generic pharmaceutical companies doing business in Canada, had conspired to allocate the market and fix the prices of generic drugs in Canada and the United States of America contrary to sections 45 and 46 of the Competition Act. According to the Plaintiff, the Defendants conspired to fix drug prices in Canada at the maximum formulary price, facilitated through off-invoice discounts or “kickbacks” to pharmacies and wholesalers as well as by limiting the number of sellers of generic drugs through agreements not to sell a particular drug in exchange for a larger market share of another drug, or to sell fewer pharmaceutical products in Canada in exchange for a larger market share in the USA. The Plaintiff alleged that this conspiracy had the effect of inflating the prices of generic drugs throughout Canada. The Plaintiff sought $5,000,000,000 in damages for the proposed Class pursuant to section 36 of the Competition Act.

 Both parties put forward expert evidence to support their positions. The Plaintiff’s expert, Dr. Pakes, relied on evidence from publicly-available sources to demonstrate that the market prices for generic prices in Canada exceed prices in comparable countries. According to Dr, Pakes, the generic drug market in Canada is conducive to collusion, and absent collusion, manufacturers have an incentive to compete on generic drug prices, which drives prices down very close to marginal costs.

 On the other hand, the Defendant’s expert, Dr. Hollis, maintained that the generic drug industry in Canada is not conducive to collusion. Dr. Hollis explained that any generic manufacturer that sets a list price below the determined formulary price would be engaging in an ineffective strategy for increasing sales to pharmacies because pharmacy net revenues from generic drug sales come from dispensing fees, mark-ups and off-invoice discounts. Further, a reduction in list price by one manufacturer effectively lowers the reimbursement amount that will be paid for sales of generic products in that product group by all manufacturers. A reduction in list price by a generic manufacturer also does not result in any benefit for the customer (i.e. the pharmacy), since a reduction in list price lowers the amount the pharmacy is reimbursed by the same amount.

The Decision

The sole issue before the Court was whether the Plaintiff had satisfied the criteria for certifying the proceeding as a class action. There are five criteria prescribed by Rule 334.16(1) of the Federal Courts Rules that must be met in order to certify a proceeding as a class action, namely that:

1. The pleadings disclose a reasonable cause of action
2. There is an identifiable class of two or more persons
3. The claims of the Class members raise common questions of law or fact
4. A class proceeding is the preferable procedure
5.    The Plaintiff is a suitable Class representative.

 The Court found that the Plaintiff had not satisfied four of the five criteria.

Do the pleadings disclose a reasonable cause of action?

The Plaintiff advanced her case under section 36 of the Competition Act, which confers a right of private action against any person who has caused loss or damage by breaching one of the provisions of Part VI of the Competition Act. In this case, the Plaintiff alleged that the Defendants’ conduct has contravened sections 45 and 46 of the Competition Act.

 In order to fall within sections 36 and 45 of the Competition Act, it was necessary for the Plaintiff to plead the basis upon which the Defendants are alleged to be competitors. The Court was of the view that the Plaintiff’s Statement of Claim did not accomplish this, and therefore failed to disclose reasonable causes of action. The lengthy Statement of Claim (described by Counsel for the Plaintiff as “shorter than Leo Tolstoy’s War and Peace but longer than Ernest Hemmingway’s The Old Man and the Sea”) had been amended four times and was over 700 paragraphs long. Despite the length, the Court found it did not contain sufficient particulars of the acts of each alleged co-conspirator, including the involvement of each Defendant and what specific actions were taken to advance the alleged conspiracy, and that the alleged harm pled by the Plaintiff consisted only of bald allegations. Further, the Court noted that many of the allegations appear to have been derived from legal proceedings in the USA, with no material facts to support the assertion of a conspiracy that extends to Canada. The Court also commented on how unusual it was for the formation and existence of the conspiracy to be the central issue in a competition law class action dispute brought under sections 36 and 45, since the existence of an alleged conspiracy is generally not an issue.

 In terms of the Plaintiff’s claim under section 46 of the Competition Act, the Court similarly held that the Plaintiff failed to plead sufficient particulars of the alleged foreign directives and thus has not pleaded any material facts to support its claim, noting that if a statement of claim does not disclose a reasonable cause of action under section 45, it cannot disclose a reasonable cause of action under section 46.

Is there an identifiable class of two or more persons?

The Defendants did not dispute the existence of an identifiable Class, so this was the only criteria pursuant to Rule 334.16(1) that was met.

Do the claims of the Class members raise common questions of law or fact?

The Court found that the Plaintiff failed to provide evidence to establish a basis in fact for the alleged conspiracy among the Defendants to fix prices or allocate the market of generic drugs, or provided any evidentiary basis to support the claim under section 46 of the Competition Act that the Defendants implemented a foreign directive. The proposed common questions were therefore held to be not certifiable.

Is a class proceeding the preferable procedure?

The Court explained that when there is no basis in fact for the proposed common issues, there is also no basis in fact for a class action being capable of satisfying the preferable procedure criterion. In this case, as there were no common questions found, a class action was not the preferable procedure for resolving the Plaintiff’s claims.

Is the Plaintiff a suitable Class representative?

The Court declined to consider the issue of whether the Plaintiff was a suitable class representative at depth, instead focusing on the “more fundamental flaw” of the rudimentary nature of the litigation plan put forward by the Plaintiff. In the Court’s view, the litigation plan provided by the Plaintiff was boilerplate and superficial, merely listing steps common to any lawsuit while avoided grappling with foreseeable difficulties, and was “plainly inadequate”. Given the deficiencies in the litigation plan, the Plaintiff did not satisfy this criterion.

Conclusion

Overall, the Plaintiff’s allegations of a conspiracy were outcompeted by the class certification requirements. The Court held that the Plaintiff failed to satisfy any of the criteria for certification of a class action except the conceded existence of an identifiable Class, largely due to the lack of material facts pled by the Plaintiff about the alleged conspiracy. As such, the Court ordered that the motion to certify the proceeding as a class action be dismissed without leave to amend and with no costs awarded.