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BC's Generic Drug Law Plays Catch-up to Ontario

Libs' deal with pharma firms failed to deliver savings; lower costs to be legislated.

Andrew MacLeod 1 Mar

Andrew MacLeod is The Tyee's legislative bureau chief in Victoria. Find him on Twitter or reach him here.

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Health Minister Mike de Jong: He's missing ways to save even more money, says UBC researcher. Photo: Justin Langille.

Recognizing that an attempt to negotiate savings on generic drugs has failed, the British Columbia government plans to legislate lower prices.

The plan follows a path Ontario took two years ago, and which NDP leader Adrian Dix said at the time B.C. should pursue. But a UBC drug policy researcher says the province should grab the opportunity to find even larger savings.

In 2010 Ontario passed a law cutting the price it would pay for generic drugs to 25 per cent of the brand name price. B.C. considered following Ontario, but instead negotiated an agreement with the B.C. Pharmacy Association and the Canadian Association of Chain Drug Stores.

"We negotiated an agreement on the basis of a certain set of expectations, savings to be sure, to Pharmacare and to the purchasers of drugs in B.C., and they have not been realized," said Health Minister Mike de Jong.

B.C. agreed to pay 35 percent of the brand name price. It also agreed to increase the dispensing fee paid to pharmacists and to provide $35 million to pay pharmacists for new services.

The government expected to save $70 million over two years, de Jong said. "We're about $46 million short. That can't continue and it won't continue."

Details of the expected savings and how they were missed are included in a presentation outlined for reporters by ministry officials Feb. 29.

Prescription drugs are a major expense for B.C., which spent about $972 million on drugs in fiscal 2010-2011. Some $325 million of that was for generics. The price the government pays for drugs also sets the cost for employer or union benefit plans, as well as individuals who buy their own drugs.

BC will get savings: de Jong

Minister de Jong said the province will terminate the agreement with the two pharmacy associations and will introduce legislation aimed at setting the generic price at 25 per cent of the brand name drug by April 1, 2013.

The price will stay at 35 per cent of the brand name price in the meantime.

Generic drugs are chemically the same as the brand name drugs they replace once a patent has expired, and are frequently available from multiple manufacturers at a fraction of the cost.

The termination means the dispensing fee will stay at $10 and will not go up to $10.50 on April 1, 2012 as planned. Nor will the government pay out the $35 million agreed to for new services.

The new price will make up the savings B.C. missed out on, de Jong said. "We will realize going forward on those savings and more," he said. "It's unfortunate we will have to exercise the legislative option. It wasn't our first choice."

When Ontario reduced what it paid for generic drugs, it set off a battle with the pharmacy sector which retaliated by doing things like withdrawing services from the province's health minister's constituency. B.C.'s health minister at the time, Kevin Falcon, told The Tyee he was ready for a similar showdown here.

"The circumstances are very different of course," said de Jong, downplaying the likelihood of a public battle with the pharmacies. "We did take the step that didn't occur in Ontario. We did negotiate an agreement and even those who are I'm sure disappointed, as I am, by the need to proceed the legislation, there will be recognition that the agreement failed."

He said the government will continue discussing the regulations with the pharmacy organizations, and there will still be funding for rural enhancements and additional medical consultations.

"No one's going to be surprised, least of all the other party to the agreement, that we have chosen to terminate and proceed down a path that will guarantee seniors and British Columbians the lower, reasonable generic drug prices," he said.

Asked whether B.C. will end the practice of drug companies offering pharmacies rebates to carry their products, as Ontario did, de Jong said, "I'm not going to lay out in detail the specifics of the legislation, but you should look at the Ontario model and you'll get a good sense of the direction we're headed legislatively."

In Sept. 2011, The Tyee reported the government intended to reopen the agreement. By Jan. 2012, a 60-day discussion period had ended without the parties reaching an agreement.

Pharmacy group surprised, disappointed

"We are surprised and disappointed with the Minister's announcement today," BCPhA CEO Geraldine Vance said in an emailed statement. She was in meetings and unavailable for an interview, a spokesperson said.

"Our priority now is to understand what government is proposing in its forthcoming legislation and to ensure that the vital clinical services that community pharmacists have been providing to British Columbians are preserved," the statement said. "We remain hopeful that government continues to believe that pharmacists have a key role to play in dealing with the pressures on primary care."

The Tyee contacted the CACDS, but did not receive comment by publication time.

"When this deal was announced I said B.C. was getting a raw deal," said NDP leader Adrian Dix. "Let me give credit where credit is due. The government has decided what I recommended then was the right thing. That is, I suppose, in this world, progress."

By failing to match the deal Ontario legislated two years ago, the B.C. government lost $84 million and private plans and individuals lost even more, he said.

"This isn't a time when we can spend tens and tens and tens of millions of dollars unnecessarily on prescription drugs that other provinces are getting for cheaper," he said.

The province should also invest more money in the Therapeutics Initiative, extend reference-based pricing to more classes of drugs and take other measures that reduce the cost of prescription drugs, he said.

The government has failed to do those things, he said, noting their corporate-friendly drug policies seem to be in line with the wishes of their political supporters.

Competitive bids would save more: researcher

The government could save even more money by redesigning the way it buys drugs, said Michael Law, a researcher at the University of B.C.'s Centre for Health Services and Policy Research.

"This pricing mechanism of using a percentage of the brand name price is not very good," he said. "For a lot of drugs, we're still paying too much."

Law was the author of a recent report that found British Columbians were more likely than people in other provinces to cite cost as the reason they've failed to take a medicine they've been prescribed.

Automatically paying a percentage of the brand name price means the amount the province pays fails to reflect what it actually costs to manufacture a drug, he said.

For example, Ontario pays 63 cents per pill for Simvastatin, a generic cardiovascular drug, he said. B.C. pays even more. But Law said New Zealand gets the drug for three cents per pill.

In 2009, by the way, $24.7 million was spent on Simvastatin in B.C., making it the fifth in the list of the top generics based on what Pharmacare pays.

"There are still real cost savings opportunities beyond that 25 per cent number," Law said. "We don't know how much less it is because we don't get manufactures to truly compete against each other."

Lipitor, a widely prescribed cholesterol lowering drug came off patent last year. Law said at least 10 manufacturers make the drug and B.C. could find bigger savings by having them bid against each other to supply the province.

"What the government has now is a good opportunity to go, not just where Ontario has, but really to break new ground and get the lowest generic drug prices for people in British Columbia," he said.  [Tyee]

Read more: Health, Politics

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