Ontario generic pay cuts draw ire of Rx groups

Jim Frederick

In the latest ill-conceived, money-saving broadside issued by health policy-makers against the dispensing and use of cost-effective generic drugs, the Ontario Liberal government revealed last month that it will cut generic prescription drug prices for patients covered by the Ontario Drug Benefit Program in half. Pharmacy and generic drug advocates called it a penny-wise, pound-foolish move to curb rising health costs in the province, and quickly launched an advertising campaign in the province.

Slashing the markup retail pharmacies can charge for me-too medicines, the government has told pharmacies in the province that they can charge no more than 25% of the cost of a brand-name product for its generic equivalent, down from the current maximum markup of 50%. Ontario health minister Deb Matthews also ordered an end to the rebates drug stores receive from generic companies to sell their products.

The danger, of course, is that slashing reimbursements to pharmacies for multisource drugs will kill a critical incentive for them to dispense the lower-cost generic rather than the higher-cost branded drug.

Pharmacy operators fear the reductions will prove devastating to their bottom lines. Those in other provinces across Canada also worry that the new cost-cutting measure could spread to their regions as well.

“I have a simple message for big pharmacies: The days of artificially high drug prices paid on the backs of patients and taxpayers are gone, and they are gone for good,” an unapologetic Matthews asserted in April.

The cuts follow more than nine months of apparently fruitless discussions between pharmacy groups and Ontario’s Ministry of Health and Long-Term Care on alternate ways the government could save healthcare dollars. And they’ve drawn the ire of numerous pharmacy and health advocacy groups.

Toronto-based drug store giant Shoppers Drug Mart, for one, said the cuts “will have a direct negative impact on pharmacy services and patient care in the province of Ontario. The plan indicates an unreasonably low rate of reimbursement compared to what was proposed by community pharmacy,” the company added.

It also “suggests that the Ontario Liberal government will further interfere in the commercial relationships between generic manufacturers and pharmacies, and that this government will play an increased role in the regulation of private sector drug benefit programs—programs which it does not fund or pay for,” the 1,220-store drug chain noted.

Compounding the problem for pharmacies, according to Shoppers, is that “the Ontario Drug Benefit Program already benefits from some of the lowest generic drug pricing in the country, and the province pays the lowest dispensing fee in Canada.”

Also weighing in was Andy Giancamilli, CEO of Katz Group Canada and Rexall. The changes, he said, “will no doubt have a major negative impact on pharmacy health care in Ontario. Taking into account the type of funding cuts announced by the Ministry, we are headed on a dangerous path that could result in substantial job losses, store closures, irreparable damage to the pharmacy industry across the province and, most importantly, a significant reduction in community pharmacy’s ability to provide the high level of pharmaceutical care that Ontarians have come to trust,” Giancamilli added.

Within days of Matthews’ announcement, Shoppers announced a plan to cut store and pharmacy hours in some of its units in Ontario, and Rexall said it was “assessing its operations, professional practice and future investment plans in the province of Ontario, to determine the company’s ability to preserve the high level of pharmacy services and patient care customers have come to expect at Rexall and Rexall Pharma Plus.”

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