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12/10 - W. Michael Thomas
CFP, CLU, GBA, RPA, CH.F.C., R.F.P.


Quebec to lower generic drug prices

The Quebec government has announced a plan to gradually decrease generic drug prices to 25 per cent of the equivalent brand-name drug price over the next two years. The government announced details of the plan on Nov. 5, 2010, following discussions with the pharmaceutical industry.

Quebec has a “best price policy,” which requires that the province have the lowest drug prices in Canada. Since Ontario recently announced a phased-in plan that will see generic drug prices ultimately move to 25 per cent of the equivalent brand-name price, Quebec is now matching this level of pricing.

Generic drugs in Quebec (both existing and new) will immediately be priced at 37.5 per cent of brand-name, down from about 60 per cent of brand-name. Generic drug prices will be further reduced in two stages, as follows:

  • April 2011 - 30 per cent of brand-name
  • April 2012 - 25 per cent of brand-name

Handling of non-formulary drugs has not yet been determined.

The announcement did not specify how pharmacy rebates and dispensing fees might change.

New pricing applies to employee benefit plans

The Quebec government has indicated the new lower pricing will apply to private insurance, including employee benefit plans.

Looking ahead

These changes should have a positive impact on drug claim costs for Quebec plan sponsors and plan sponsors with Quebec plan members.

DRUGS AND PROVINCIAL HEALTHCARE

Alberta Pharmaceutical Strategy delays drug claim savings

Phase 2 of the Alberta Pharmaceutical Strategy was introduced to reduce the cost of generic drugs for all Albertans, while partially offsetting associated losses to pharmacies with new measures.
Under the new agreement with pharmacy, existing generic drug prices were reduced to 56 per cent of the comparable brand-name drug price, down from about 75 per cent. To ease transition towards lower generic pricing, pharmacies are given a transitional allowance to be paid on prescriptions costing less than $75. The transitional allowances are applied as follows:
  • $3 per prescription from April 1, 2010, to March 31, 2011.
  • $2 per prescription from April 1, 2011 to March 31, 2012.
  • $1 per prescription from April 1, 2012 to March 31, 2013.
The allowances will end after March 31, 2013.
While the strategy was expected to result in overall cost savings, these will not materialize for the next two years.

Why generic drug claim savings are delayed

While some generic drug prices have decreased as a result of the pharmaceutical strategy, more than 50 per cent of generic drugs on the Alberta drug formulary have not changed in price. Roughly five per cent of generics on the Alberta formulary have increased in price.

Allowing exceptions to the new pricing policy and granting of a $3-per-prescription transitional allowance to pharmacies (on prescriptions costing less than $75) has resulted in delayed reduction in drug claim costs for plan sponsors.

Seniors’ Drug Plan/pharmacy services

Changes to Alberta’s Seniors Drug Program are on hold. No new information is available on these expected changes, nor has there been an update on new pharmacy services announced in association with the Alberta Pharmaceutical Strategy.

 

W. Michael Thomas is a Partner at The Investment Guild (the Investment Guild is a People Corporation company)


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