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Toronto
Revelations about massive rebates to pharmacies from generic drug manufacturers rocked committee hearings on the Ontario government's controversial Transparent Drug System for Patients Act 2006.
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The legislation, passed in late June, aims to achieve savings in the Ontario Drug Benefit (ODB) program, which costs $3.4 billion a year, by allowing more interchangeability of generic drugs for brand-name drugs. It will make the system "more efficient, more transparent, more accountable, more understandable," MPP Tim Peterson told the legislature. (The ODB program provides drugs at no direct cost, except for a small co-payment, to senior citizens and social assistance recipients.)
Much to the public's surprise, however, it was revealed during committee hearings on Bill 102 that pharmacies were receiving "rebates" from generic drug manufacturers of up to 60% of the dollar value of drugs that they sold. That number was higher even than the ministry's estimate of 40%, said Helen Stevenson, special consultant to the Ministry of Health.
Marc Kealey, chief executive officer of the Ontario Pharmacists' Association (OPA), likened the rebates to volume discounts in a competitive market. There are multiple, generic versions of some common drugs and manufacturers compete, based on the size of the rebate, to have pharmacies stock their drugs, he explained.
Kealey took exception to suggestions that such rebates were unethical. Money from rebates has been used to educate pharmacists and patients, and invest in infrastructure upgrades such as information technologies, not to line their pockets, he said.
The totals are hefty. By the OPA's own calculations, 40% of the ODB program's share of spending on generic drugs in 2005 amounted to $228 million. (A total of $1.6 billion was spent on generics in Ontario's public and private markets that year.)
Stevenson speculated that the size of rebates, which are banned in the US, goes a long way toward explaining the fact that Canada has, according to the Patented Medicines Prices Review Board, the most expensive generic drugs in the developed world.
The Ontario Medical Association (OMA) and the OPA spoke in favour of Bill 102, which amends the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act. Its features include:
• A new executive officer position empowered to list new drugs on the formulary. The current system requires new listings to be approved by an Order in Council — a time-consuming and cumbersome procedure. The officer would act on recommendations from a Committee to Evaluate Drugs, essentially a renamed Drug Quality and Therapeutics Committee with new consumer/public representation.
• A mechanism to replace Section 8, under which Ontario doctors filled out 143 370 special application forms in 2004 to obtain prescription drugs not listed on the provincial formulary. The Act calls for a new mechanism that allows conditional listing of drugs and some exceptional access. As well, the executive officer may authorize retroactive access and coverage.
• Elimination of the $25 cap placed on the 8% mark-up on drugs; an increase in the dispensing fee to $7 from $6.54; and the introduction of a "cognitive service fee" to compensate pharmacists for professional work, such as counselling patients.
The province says it will save money by putting pressure on the price of generics. The government will negotiate agreements to pay generics 50% of the price of the off-patent brand-name product that was copied, although the price to be listed in the provincial formulary will likely be on the order of 70% or 63% of the brand-name cost.
The province also says it will ban "rebates" but allow pharmacies to receive, from generic manufacturers, 20% of the listed drug cost as a "professional allowance." (A code of conduct is being drawn up, with OPA involvement, to spell out how that 20% could be spent.) The latter prohibition, however, won't apply to drugs purchased under employer-sponsored health plans or by individuals who pay out-of-pocket for their therapies. In the case of corporate plans, the prices listed in the formulary are often used as the benchmark price.
Even those who applaud many of the proposed changes note there are many unresolved issues that won't be clarified until the regulations are published, by October.
Once supportive of the legislation, the Canadian Generic Pharmaceutical Association is now taking a more cautious view. "We're quite concerned," said President Jim Keon. "We won't give our support until we see and understand how the regulations will work."
The brand-name industry is taking a similar stance, said Rx&D spokesperson Jacques Lefebvre.
This article has been cited by other articles:
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  I. Dhalla MD and A. Laupacis MD MSc Moving from opacity to transparency in pharmaceutical policy Can. Med. Assoc. J., February 12, 2008; 178(4): 428 - 431. [Full Text] [PDF]
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