WHAT IT MEANS AND WHY IT’S IMPORTANT Once again, government seems to be mangling the delicate balance among pharmacies, generic drug suppliers and consumers. Ontario lawmakers and health “reformers” are doing it the old-fashioned way: by seeking short-term cost cuts at the expense of long-term savings.
(THE NEWS: Shoppers Drug Mart responds to Ontario's revised generic pricing rules. For the full story, click here)
In the United States, pharmacy retailers and generic drug makers have pleaded with Congress and federal regulators, at least since the passage of the Deficit Reduction Act of 2006, not to cut generic drug reimbursements in such federal programs as Medicaid and Medicare. They assert — quite rightly — that cutting the payment rate for generic drug dispensing to lower healthcare spending for those programs actually raises prescription drug costs.
How? By killing a critical incentive for pharmacists to dispense the lower-cost generic, rather than the higher-cost branded drug. Given the draconian cuts to Medicaid generic prescription reimbursements advanced by the DRA, why should a pharmacy lose money filling a Medicaid script with a generic when it could fill with the brand at a more favorable reimbursement that preserves profit margins? It means shifting the burden onto taxpayers, rather than the pharmacy, but who can blame retail pharmacies for not wanting to dispense medicines at a loss?
Passage of the health-reform act last month has done much to prevent those cuts in the United States, by establishing a more equitable generic payment system for Medicaid. Not so for pharmacy providers north of the border.
This time, it’s a Canadian provincial government shooting itself in the foot. The Ontario Liberal Government plans to cut generic prescription drug prices for patients covered by the Ontario Drug Benefit Program in half — from 50% of the equivalent brand name price for multisource generic drugs to 25% of the brand price. The cuts follow more than nine months of apparently fruitless discussions between pharmacy groups and Ontario’s Ministry of Health & Long-Term Care on alternate ways the government could save healthcare dollars.
Toronto-based drug store giant Shoppers Drug Mart is helping lead opposition to the plan. The company said it is “strongly opposed to the changes … and believes that they 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,” said the company. 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,” noted the 1,220-store drug chain.
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.”
Pharmacy leaders in the province spent long hours proposing alternatives that they said would have saved the program billions over the next few years. If adopted, they asserted, those proposals “would save the government money, enhance pharmacy services and improve efficiencies, provide greater patient access and at the same time, ensure the long-term economic viability of community pharmacy and the Ontario Drug Benefit Program.”
The proposals were relatively modest: a less severe cut in generic dispensing rates; a small increase in the tight-fisted $7 dispensing fee to pharmacies. They also included giving generic drug makers and pharmacy retailers a freer hand to negotiate supply agreements “in accordance with ordinary commercial terms,” and “enhancing drug utilization management programs by implementing such measures as therapeutic substitution and increased generic prescription utilization initiatives.”
It isn’t rocket science.