When does the double-edged sword of generic drug price reductions begin to cut the government agency or health system holding the sword?
That's the question many pharmacy leaders in Canada have for the provincial health system policy-makers who have embarked on a crusade to whack pharmacy reimbursement levels for many lower-cost generic medicines sold under the nation's publicly funded health system. The effort has drawn the ire of pharmacy advocates even as proponents in government and health policy circles tout its cost-saving benefits.
"Retail or reimbursed prices of generic prescription drugs have been dramatically reduced across Canada over the past few years," said Jim Keon, president of the Canadian Generic Pharmaceutical Association.
The campaign is nationwide and unrelenting. Ontario, British Columbia and Quebec opted to cut generic prescription payments to 25% of the branded equivalent price, beginning April 1; British Columbia legislators pegged another reduction, to 20% of the brand-name cost, to take effect in April 2014. Last June, New Brunswick reduced generic prices to 40% of the branded price, and followed up with another reduction, to 35%, in December 2012.
The province of Alberta went further, adopting a sweeping, across-the-board reduction in generic drug reimbursements with its 2013 budget that slashed payments for generics from 35% to 18% of branded-drug prices beginning May 1 of this year. The Alberta Pharmacists' Association expressed "shock" at the cuts, particularly in light of the fact that generics were reimbursed at 75% of branded-drug prices as recently as two years ago.
Canada's generic industry group was incensed. "The massive and indiscriminate cuts to reimbursed prices of generic pharmaceutical products announced by the government of Alberta 7#8230; are wholly unacceptable to Canada's generic pharmaceutical manufacturers and risk patient access to high-quality, affordable prescription medicines," asserted CGPA's Keon. "These across-the-board cuts represent a betrayal of our industry and were announced without consultation or prior notice to generic pharmaceutical manufacturers, community pharmacy or other key stakeholders in the pharmaceutical supply chain."
The most recent moves followed a controversial, nationwide cut in reimbursements for six generic medicines by the so-called Council of the Federation's Health Care Innovation Working Group, comprised of provincial and territorial representatives seeking ways to save on health costs. The cuts, which took effect April 1, 2013, pared the price of six widely used medicines to 18% of the brand-name equivalent across nine provinces — only Quebec isn't participating — and all three territories.
Pharmacy and generic-industry interest groups are crying foul, saying the cost-cutting crusade is a short-sighted scramble to save scarce public health dollars that will ultimately lead to higher overall costs by reducing incentives to dispense lower-priced generics. "This is a shaking of the foundations of the profession, with rapid changes in revenue and expense models that have been formed over the last 30 years," said Dawn Martin, executive director of the Pharmacists' Association of Saskatchewan.
According to a report in the Toronto Globe and Mail, "The spending cuts could trickle down the complex funding model for pharmacists in Canada, cutting into pharmacies' bottom lines by reducing drug company profit margins and therefore, subsidies those companies give to pharmacies." The six generics on the chopping block — which treat heart disease, gastrointestinal ailments, depression and other conditions — account for roughly one-fifth of all public spending on generics in Canada, according to the report, spawning hopes by provincial health officials that the cuts could eventually save a combined 100 million Canadian dollars a year.
When those cuts were announced in January, the Canadian Pharmacists Association expressed dismay that the council made no commitment "to invest some of the predicted savings into improved health care for Canadians."
"We were disappointed that no government other than the government of Saskatchewan committed to reinvest any portion of the savings from the lower prices into expanded pharmacy services," said Jeff Morrison, director of government relations and public affairs for the national pharmacy group. "Our position had always been that any system of reduced generic pricing should address enhancements to patient care."
Despite the controversy, however, the issue is far from cut-and-dry. Canadians pay more for generics than most of the rest of the world, and me-too medicines account for an estimated 65% of Canada's prescription market, compared with 84% in the United States. In an interview with the Globe and Mail, Michael Law, a University of British Columbia professor with UBC's Centre for Health Services and Policy Research, said the nation's "archaic buying system" led Canada to pay far more for generics than many other countries.
"We'd developed a system where we were systematically overpaying for generic drugs," Law said.
Pharmacy retailers in Canada are sympathetic to their customers' confusion over drug pricing — and in particular, over the provincial governments' increasing pressure on generic drug prices. Pharmacy providers also are eager to position themselves as consumer allies on the issue.
"Drug pricing is an issue that raises many questions among customers — and rightly so," Quebec-based drug store operator Uniprix tells consumers on its website. "The different drug plans that exist in Quebec [i.e., private and public] and the various conditions that apply in each case, combined with the competitive nature of the free market, means that drug prices can vary from one pharmacy to another or even from one month to the next."