To Disclose or Not to Disclose: The Supreme Court Clarifies the Test for Determining Eligibility of New Drug Submission Documents for Disclosure under the Access to Information Act

Published February 23rd, 2012

Merck Frosst Canada Ltd. v. Canada (Health), 2012 SCC 3

In order to obtain approval to market a new drug in Canada, a pharmaceutical company (the “third party”) must provide a substantial amount of information to Health Canada in the form of a New Drug Submission (“NDS”).  The third party would generally prefer that most of the information within the NDS be kept confidential by Health Canada; however, because Health Canada is a government institution, the information is subject to the Access to Information Act (the “Act”).  The purpose of the Act is to strike a balance between encouraging disclosure and transparency within the government while protecting third party interests.  Therefore, with only limited and specific exceptions, any third party information that is under the control of a government institution may be disclosed upon request.  These exceptions to disclosure of third party information, and when they apply, were the subject of extensive court proceedings between Merck Frosst Canada Ltd. (“Merck”) and Health Canada, culminating in the decision of the Supreme Court in Merck Frosst Canada Ltd. v. Canada (Health), 2012 SCC 3.

In this decision, the Supreme Court interpreted section 20 of the Act, which sets out exceptions to disclosure of third party information; section 25 of the Act, which sets out provisions for severing information that cannot be disclosed from information that can be disclosed; and sections 27, 28, and 44 of the Act, which set out when the head of the government institution (the “head”) must give notice to the third party of an access to information request and how the third party may respond to this notice by submitting arguments and evidence that the information is exempt from disclosure. 

The Supreme Court first set out a specific test in paragraph [84] for when the head must give notice to the third party that access to information was requested and is intended to be disclosed.  Since there could be a high level of harm to the third party if exempted material is inadvertently disclosed, there should be a low threshold for giving notice to the third party.  In short, the head must give notice to the third party if there is any doubt about whether the information is exempt from disclosure.  In order to come to this conclusion, the head must conduct a sufficient review of the requested information to determine whether the threshold for notice is met.  Once notice is given, the onus is squarely on the third party to show why, on the balance of probabilities, the information is exempt from disclosure.

The specific exemptions to disclosure provided for in the Act relate to third party confidential commercial information.  First, the Supreme Court discussed the exemption for disclosure of third party trade secrets.  It was held that Merck did not establish that, on the balance of probabilities, the requested information fell within this exemption.  In particular, Merck’s evidence had failed to explain how the information intended to be disclosed was exempt as constituting a trade secret.

Next, the Supreme Court discussed the exemption for disclosure of third party confidential financial, commercial, scientific or technical information.  In Merck’s NDS, a number of published studies had been compiled and relied on in specific ways.  One of the main questions addressed by the Supreme Court was whether such published studies could be considered confidential information because knowledge of the way in which they had been compiled and relied on could give competitors an edge in the marketplace.  The court held that this type of information would not generally be exempt from disclosure, since the studies themselves were already publicly available; however, much will depend upon the evidence in a particular case.  In this regard, the Supreme Court again decided that Merck’s evidence had simply failed to explain how the information intended to be disclosed was exempt as constituting confidential financial, commercial, scientific or technical information.

Finally, the Supreme Court considered the exemption for disclosure of information that could harm the third party, in the sense of resulting in material financial loss (or gain to a competitor), or prejudicing the competitive position of the third party.  Here, the Supreme Court set out that the proper threshold of proof of harm by the third party is a reasonable expectation of probable harm, meaning “a middle ground between that which is probable and that which is merely possible” (paragraph [201]).  Turning to the specific facts of this case, it was decided that Merck had not established that disclosure of the information would result in harm.

The severance provision of the Act was then reviewed (in obiter) and the Supreme Court stated that the head must determine when information subject to the disclosure obligation “can reasonably be severed” from exempted material so that the severed material can then be disclosed.  First, the head must determine whether what is left after severance has any meaning.  If not, severance is unreasonable.  Second, a cost-benefit analysis of severance must be considered.  If the effort of severance by the head is disproportionate to the quality of access to information it would provide, then severance is unreasonable.

The Supreme Court suggested that, from a practical standpoint, if faced with a notice that third party information is intended to be disclosed by the head of a government institution, the third party should be as helpful as it can be in identifying why disclosure is exempt or severance is unreasonable.  In some circumstances, the reasons Merck had provided for exemption could be sufficient.  However, the Supreme Court determined that Merck had failed to specifically identify sufficient direct and objective evidence as to why the information should be exempt and therefore failed in this appeal.

Practice Points:

In this case Merck filed evidence in the form of affidavits from various experts.  The Supreme Court was critical of this evidence because it did not directly address the reasons set out by the head as to why the information should be disclosed.  Moreover, while the affidavits claimed that harm or prejudice would befall Merck if the information was disclosed, it did not explain how disclosure of the information would bring about such harm or prejudice.

Although Access to Information Requests are often considered basic administrative procedures, this decision highlights the importance of sufficient affidavit evidence that is specifically directed at the impugned information.  Where a party files only generalized, “generic type” evidence to explain how/why the information is exempt from disclosure, there is a good chance that a court will find such evidence insufficient.