Years behind Ontario, BC Deepens Savings on Generic Drugs

'Right direction, but we need to keep going': researcher.

By Andrew MacLeod 26 Nov 2012 |

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

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Tyee calculates B.C. spent about $378 million more for drugs in the last three years by waiting to match Ontario's rate for generics. Pill image by Shutterstock.

Starting in April 2013, the British Columbia government will drop what it will pay for generic drugs to match the price Ontario announced three years earlier.

"It's a good move in the right direction, but we need to keep going," said Michael Law, a researcher with the Centre for Health Services and Policy Research at the University of British Columbia.

On April 1, 2013, B.C. will start paying for generics at 25 per cent of the price of the equivalent brand name drug. A year later it will bump that down further to 20 per cent, which Health Minister Margaret MacDiarmid said "as far as we know will be the lowest price in Canada."

The reductions will save the government money and enhance patient care, she said. "B.C. families will soon notice that they pay less at the till when they fill their prescriptions."

The move has been three years, and three health ministers, in the making.

BC slow to achieve savings

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.

The total market in B.C. was worth some $1.84 billion in 2011, with $710 million of that for generics.

In April, 2010, then health minister Kevin Falcon told The Tyee he was interested in following Ontario's lead when that province reduced what it would pay for generics from 50 per cent to 25 per cent of the brand name price.

At the time Ontario's health minister was engaged in a public battle with that province's pharmacies threatening to withdraw services.

B.C. didn't have the same kind of public confrontation and instead negotiated with industry groups representing drug stores. But when the province announced its reductions in July 2010, from a 65 per cent starting point according to its press release, it instead set the price at 35 per cent of the brand name equivalent.

That reduction was expected to save the province $170 million a year. Other payers such as private drug plans and individuals were also expected to save some $210 million a year.

NDP Leader Adrian Dix criticized B.C. at the time for not getting the same savings Ontario was, and for not doing more to control the cost of brand name drugs.

By Sept. 28, 2011 then health minister Mike de Jong announced the deal was not on track and the province would save some $50 million less than expected.

In March 2012, de Jong said the government would terminate its agreement with pharmacy associations and introduce legislation that would allow the province to set generic prices through regulation. The intention was to lower the price to 25 per cent by April 1, 2013, he said.

At the time the CEO of the B.C. Pharmacy Association, Geraldine Vance, said she was "surprised and disappointed" by the government's position. Today's announcement quoted her saying the ministry's consultation process was good and her association was glad the government agreed to a "transition period" as it lowers what it will pay. She was unavailable for further comment.

Further reduction possible: minister

A health ministry spokesperson said it's too complicated and there are too many unknowns to calculate what the transition period, or delay, has cost the public system or other payers.

By The Tyee's rough figuring, if a reduction from 65 per cent to 35 per cent of the brand name price would have saved British Columbians and the government $380 million a year as the ministry said in 2010, then a further 10 per cent reduction would have saved about another $126 million per year.

By the time B.C. gets to the price Ontario set in 2010, it will have been three years.

"This announcement today is not without controversy," Minister MacDiarmid acknowledged. The companies that make generics were unhappy with the cut, she said.

Also, the 2010 agreement included $35 million to reduce the loss to pharmacies, but that money was stopped when the agreement was cancelled. MacDiarmid said today's regulations don't include anything to soften the blow to the pharmacies. "That was one of the issues," she said.

Responding to a reporter's questions, she said a trade deal the federal government is negotiating with the European Union has the potential to increase drug costs for the province. Several times representatives of B.C. have expressed their view to officials in Ottawa, but ultimately it is a federal deal and the province can't block it, she said.

MacDiarmid also said some drugs cost substantially less to produce than what the province is agreeing to pay. "Potentially there are even more savings than we're currently driving towards."

Michael Law at CHSPR said his research has shown that even when provinces pay 20 per cent of the brand name price, more than eight out of 10 generic drugs remain cheaper in other countries.

"I think there's good evidence we could go further," he said. "This should be seen as a step along a longer road getting prices to a lower point."

Provinces have been calculating what they'll pay for generic drugs the same way for some 20 years, Law said. "To move ourselves to a different system won't be an overnight task."

He recommends provinces enter agreements to bulk buy generic drugs together and allow competitive bids from possible suppliers.  [Tyee]

Read more: Health, Politics

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