TORONTO — Although Ontario’s policy for reimbursing pharmacies for generic drugs has presented challenges for Shoppers Drug Mart and other retailers, researchers at the University of British Columbia (UBC) have completed a study concluding that Canada could save almost $1.3 billion a year if all other provinces were to adopt Ontario’s model.

Canadians pay among the highest generic drug prices in the world and about double those in the United States.

Michael Law and colleagues at the university’s Centre for Health Services and Policy Research examined savings after Ontario introduced changes last summer to the way it paid for generic drugs. Ontario reduced the amount reimbursed to pharmacies for generics by 50% and saved between $181 million and $194 million (Canadian) in the second half of 2010, they found.

“The policy was really controversial, and so we wanted to see as a consequence not only how much Ontario saved as a result but how much other provinces could save if they were to have done the same change,” says Law, an assistant professor at UBC. “It’s about 5% of total spending on prescription drugs.

“It gives an idea of the scope of these savings; there’s all sorts of places where government could use this money in the health care sector.”

The change to the Ontario Drug Benefit Plan, which slashed the retail price of generics from about 50% of the cost of brand name drugs to about 25%, did not come without a fight — pharmacists protested at the legislature and warned that they would have to close some stores and reduce services because of a shortfall.

Quebec subsequently reduced generic drug prices to the same level; British Columbia, Saskatchewan and Nova Scotia took steps to move toward 35% of brand name prices.

“These savings in Ontario and what we’ve estimated in other provinces are only going to get bigger, because Ontario’s policy isn’t going to be fully enacted until next year at this time and more drugs continue to come off patent and become available as generics.”

Jeff Connell, vice president of corporate affairs at the Canadian Generic Pharmaceutical Association, notes that the $1.3 billion in potential savings doesn’t take into account money that provincial governments have provided to pharmacies to ease the blow of lost revenues.

For example, the Alberta Pharmaceutical Strategy provides additional compensation for pharmacists to conduct patient consultations, medication reviews and immunizations.
And in Saskatchewan, an arrangement between the Pharmacists’ Association of Saskatchewan and the Canadian Association of Chain Drug Stores stipulates that a portion of savings will reimburse pharmacies for expanding services.

Jeff Poston, executive director of the Canadian Pharmacists Association, asserts that the UBC study provides a preliminary look at the savings.

“It demonstrates there are benefits, there are savings to be made in relation to generic drugs,” he says. “It’s important that those savings get used to expand coverage, but also they should be reinvested into pharmacy services in order to improve optimal outcomes [for patients].”

Connell comments that generic drug manufacturers want to ensure that prices are not reduced to levels where the risks and benefits are brought to the point that there’s no incentive to bring new generic drug products to market.

He notes that eight of the 10 top-selling generic drugs in Canada arrived on the market because generic drug companies challenged invalid or non-infringement patents, and also notes that the litigation saved Canadians about $7 billion on those products.

Connell suggests that Canada might consider a system such as that in the United States, where generic drugs are dispensed to fill 78% of all prescriptions. “In Canada, it’s 58%; if generic drug use in Canada had been raised to those levels, Canadians would have saved an additional $3.5 billion in 2010,” he claims.