Case In Point
Arbitrator Upholds Benefits Related Grievance: “Generic Substitute” Does Not Limit Reimbursement to “Lowest Cost” Drug Per Collective Agreement
Date: May 5, 2025
In Hydro One Inc. v The Society of United Workers, Arbitrator John Stout upheld a grievance against Hydro One for violating its Collective Agreement. Hydro One had limited reimbursement of prescription drug expenses to only the lowest cost generic medication, rather than covering the full cost of generic medications prescribed by physicians. This limitation was implemented despite the absence of any such restrictive provision in the company’s Health and Dental Plan (Benefit Plan).
Background
The grievance arose when Vicki Power, the Society’s Local Vice President, discovered in August 2022 that she was required to pay out-of-pocket for a generic medication prescribed for her dependent child. When she inquired, Green Shield Canada (GSC), Hydro One’s claims services provider, informed her that the company’s Benefit Plan would only reimburse employees up to the cost of the lowest-priced generic equivalent, requiring employees to pay the difference out-of-pocket when prescribed a different generic version of greater value.
Ms. Power raised the issue with Hydro One management, contending that the Collective Agreement did not mandate coverage exclusively for the lowest cost generic alternative. Following numerous discussions through the Benefits Administration Committee (BAC), Hydro One granted an exception for Ms. Power’s specific case but upheld GSC’s policy of reimbursing only for the lowest cost generic medication for other employees as appropriate.
The issue resurfaced in December 2023 when Ms. Power again encountered the same payment requirement at a pharmacy. Following further unsuccessful attempts to resolve the matter through the BAC, the Society filed a formal grievance on April 3, 2024.
The Benefit Plan
The Benefit Plan brochure, incorporated by reference into the Collective Agreement, specifically addressed prescription drug coverage under a section titled “Mandatory Generics,” which stated:
For all ‘brand name drugs’ that have a ‘generic substitute’, only the ‘generic substitute’ will be fully reimbursed.
GSC claimed that limiting coverage to the lowest cost generic equivalent was an “inherent feature” of a mandatory generics benefits plan and aligned with how the province of Ontario administers drug coverage under the Ontario Drug Benefit Program.
The Society contended that while the Benefit Plan addressed generic prescription drugs, it did not expressly limit coverage to the lowest cost option, and any such limitation would need to be clearly stated in the brochure.
Arbitrator’s Analysis
Arbitrator Stout applied established principles of collective agreement interpretation, focusing on the plain language of the agreement and the incorporated brochure. He found that while the Benefit Plan mandated “mandatory generics” and provided cost savings by requiring generic substitution for brand name drugs, the language did not address what should occur when more than one generic substitute existed, nor did it limit reimbursement to the lowest cost generic when more than one generic substitute was available.
The Arbitrator observed that the brochure promised full reimbursement for generic substitutes, with no qualification for “lowest cost.” The only situation where the brochure contemplated less than full reimbursement was when a member chose a brand name drug over a generic alternative.
Arbitrator Stout reasoned that given the specific language negotiated regarding dispensing fees and generic substitution, if the parties had intended to limit coverage to only the lowest cost generic, such a limitation would have been clearly stated in the brochure.
The Decision
Arbitrator Stout ordered Hydro One to:
- Instruct GSC to reimburse employees for any generic drug substitute prescribed by their physician
- Retroactively reimburse Society members who were not fully reimbursed the full cost of a generic substitute since January 25, 2024
The Arbitrator limited retroactive payments to January 25, 2024, the date of the last BAC meeting where this issue was discussed, noting that “violations of the Collective Agreement ought to be raised as soon as possible so that they can be resolved in a timely manner.”
Key Takeaways
This decision emphasizes that intended limitations on benefit coverage must be clearly and explicitly stated in collective agreements, especially where some limitations are stated in the collective agreement but not others. In his decision, Arbitrator Stout noted that “where parties specifically address a benefit in the collective agreement and include limitations, then any further limitation found in the benefit plan ought to be brought to the other parties’ attention.”
This decision highlights the importance of precise language in benefit plan provisions. Employers should carefully review their collective agreements and benefit plan documentation to ensure that any intended limitations on coverage are explicitly stated and have been brought to the union’s attention.
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