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Bulk buying and competitive bids would lower generic drug costs, says researcher

The commitment Canada's premiers made to begin bulk buying some prescription drugs could save taxpayers hundreds of millions of dollars, but more can be done to cut costs, an article in the Canadian Medical Association Journal argues.

"Compared to people in other countries, Canadians pay high prices for generic drugs," says the article by Michael Law and Jillian Kratzer, researchers with the Centre for Health Services and Policy Research at the University of British Columbia. "The joint commitment from Canada’s premiers to use coordinated bulk purchasing to lower these prices is important, and, moving forward, governments should learn from past attempts at obtaining more competitive prices."

A figure in the paper compares the cost of five common generics to B.C., Ontario, New Zealand and the United States Department of Veterans' Affairs, the last two of which use bulk buying. In all cases B.C. pays at least seven times as much the payer that pays the least.

The most dramatic example is Simvastatin, a drug used to control cholesterol levels, which costs 2.4 cents a pill in New Zealand, 6.9 cents for Veterans' Affairs, 62.5 cents in Ontario and 87.5 cents in B.C..

Ontario, for example, could save $250 million a year by getting the international price for the top 100 generic drugs, it says.

In recent years Ontario has reduced what it pays for generic drugs to 25 percent of the price of their brand name equivalents. British Columbia pays 35 percent, but last year said it wasn't saving enough money and passed a law then health minister Mike de Jong said would allow it to reduce the price further.

In June, 2012, the country's premiers announced they would begin bulk buying three to five common generic drugs.

To be successful, bulk buying needs to include as many drugs and provinces as possible, Law and Kratzer's article says. The savings could be used to introduce universal coverage for some common generic drugs, which would improve health since as many as one in ten Canadians don't take their prescribed drugs because they can't afford them, it says.

Funding the drugs would also build public support for moves to reduce the cost of generics, it says.

"There's good evidence for a lot of drugs that 25 percent [of the brand name price] is still too high," Law said in an interview.

Using a percentage based on the brand name price means governments are still paying an amount that has no relation to what the drugs actually cost to produce, he said. In many cases they will be overpaying and in some cases they will be underpaying, he said.

Law said he hopes when new B.C. health minister Margaret MacDiarmid announces what the province will do it will take the lead on getting generic drug manufacturers to compete.

Andrew MacLeod is The Tyee’s Legislative Bureau Chief in Victoria. Find him on Twitter or reach him here.

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