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legislation did not apply to prices paid by private payers. In fact, prices charged to private payers for new generics have gone up.

There is currently a shift taking place within the Canadian public system as it actively pursues lower costs for drugs that are listed on provincial formularies:

requires generic manufacturers to provide the province with the lowest price available elsewhere in the country.

manufacturers must provide a guaranteed price that is no higher than the best prices available elsewhere in Canada if they want to have that drug product listed on the provincial formulary.

implemented an interim multi- source generic pricing policy. Effective January 1, 2009, new multi-source generics that are

added to the provincial formulary will be funded at 50 per cent of the brand price.

The Competition Bureau looked at the top 10 selling generic drugs in Canada and found that prices paid outside of Ontario and Quebec remained at the previous level of about 63 per cent of the original brand name drug’s price. But when new generic drugs were looked at, (those that have entered the market since the Ontario legislation came into effect) prices ranged from 70 to 75 per cent of the brand name prices, meaning that generic prices have risen since the Transparent Drug System for Patients Act came into being.

Public plans may provide coverage for the drugs used by senior citizens, low income earners and their families, and people requiring very high cost medicines.

The challenge for private payers

Private plans are in an unenviable position because they don’t benefit from legislation such as Ontario’s, but they are affected by it. For instance, when a government plan specifies that one drug will be covered and another will not, pharmacies often make a business decision to begin stocking and dispensing the government’s preferred drug, regardless of which one a private plan might cover. And of course, a single private plan can’t offer the volume of trade that public plans do, so private drug plans have neither the political power nor the economic influence of a provincial drug plan.

Another challenge faced by private drug plans is the fact that many groups are comprised of plan members living right across the country, so there are a variety of provincial health plans and legislation affecting how the benefits plan works for employees in different parts of the country. Perhaps

Te n d e r i n g : one example

In this case, when a drug plan has been designed to offer the same coverage as the ODB plan, the 32 generic equivalents that were previously eligible will no longer be considered for coverage. Plan members (under the age of 65) who submit claims for these generics will not be reimbursed and their costs will be out-of-pocket. When Vasotec is dispensed, the claim will be considered and paid according to the best available price.

A competitive tendering process for brand name and generic drugs is part of Ontario’s strategy to obtain the lowest possible price for the drugs it pays for. As an example, in July 2008 the province issued a Call for Application for four drug products including Enalapril Maleate, a drug used in the treatment of high blood pressure.

In December, Vasotec (a brand name drug manufactured by Merck Frosst Canada Ltd.) was announced as the successful applicant for Enalapril Maleate. Vasotec is now the only Enalapril Maleate drug product listed on the Ontario Drug Benefit (ODB) formulary for ODB recipients.

In this example, the private plan does not benefit from the availability of the generic equivalents for Vasotec, nor does it benefit from the favorable price that the provincial plan has negotiated.

The Competition Bureau says, “Not only do these developments show an increasing use of competitive processes by plans to reduce generic drug prices, they also provide evidence of a change in the competitive dynamic between generic and brand drug manufacturers. In the past, brand manufacturers did not compete with generic manufacturers on the basis of price. But now they appear to be more willing to discount prices to maintain market share for their drugs after they have lost patent protection.”


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