This guest blog is a letter from Mr. Jim Keon, President of the Canadian Generic Pharmaceutical Association to Health Council of Canada CEO, John G. Abbott, in which Mr. Keon responds to our discussion paper, “Generic Drug Pricing and Access in Canada: What are the Implications?”, and to issues faced by Canadian-based generic drug producers generally. Mr. Keon offers insight into the dynamics of generics pricing and access from industry’s perspective, with specific comments on the Quebec and U.S. markets. We invite you to read our discussion paper and Mr. Keon’s response, then give us your thoughts on this important issue.
Dear Mr. Abbott:
Thank you for your invitation to the Canadian Generic Pharmaceutical Association (CGPA) to comment in writing on the public discussion paper entitled, Generic Drug Pricing and Access in Canada: What are the Implications? commissioned by the Health Council of Canada.
There are many aspects of the discussion paper that are quite useful and deserve further exploration and debate. It is, however, unfortunate that media coverage of the paper focused almost exclusively on sales data for reimbursed or retail prices of generic drugs in Canada that is more than five years old. This sales data is no longer reflective of the Canadian market due to major changes to the system for generic pricing and pharmacy compensation that have occurred in approximately 90 percent of the Canadian market since its original publication.
Given the changes to generic pricing and pharmacy compensation that have occurred in the past five years, the most relevant aspects of the discussion paper are related to access of generic prescription medicines and how Canada can improve generic utilization to maximize savings for governments, employers, unions and patients.
Below, I will address both price information and issues related to access.
1) Data on retail/reimbursed prices for generic drugs is five years old and no longer reflects the Canadian market
The data used in the discussion paper to support the notion that retail or reimbursed prices for generic drugs are too high in Canada come from a 2006 Patented Medicine Prices Review Board (PMPRB) report that examined sales data from 2005. The PMPRB reported on retail or reimbursed prices of generic drugs in several countries, not net prices charged by manufacturers in these jurisdictions. As the paper notes, Canadian retail or reimbursed prices for generic prescription medicines include significant support for the services community pharmacies provide to their patients.
Since the publication of the PMPRB report, retail or reimbursed prices for generic pharmaceutical products have been dramatically reduced in Canada, including in the provinces of Ontario, Quebec, Alberta, British Columbia, Manitoba and Nova Scotia. In fact, retail or reimbursed prices for generic drugs have been reduced by 75 percent in the Province of Ontario, Canada’s largest pharmaceutical market. In addition, alternative mechanisms for the funding of pharmacy services in Canada are also being addressed.
It must also be noted that generic drugs provide excellent value for Canadians. According to IMS Health, the world’s leading source for prescription drug sales information, in 2009 generic drugs were dispensed to fill more than 54 percent of all prescriptions in Canada yet accounted for only 24 percent of the $21.5-billion spent on prescription medicines.
2) Prices don’t matter if Canadians don’t have access to lower-cost generic medicines
While it is true that retail or reimbursed prices for generic pharmaceutical products have been significantly reduced in Canada over the past four years, Canadians are still not fully benefitting from the savings available from lower-cost generic prescription medicines.
Faster generic formulary listings
The discussion paper correctly points out that the current formulary listing process in some provinces can take several months from the time the drug has received Health Canada approval. This delay in listing newly approved lower-cost generic versions results in drug plans paying additional money for a brand-name drug even though a cost-saving generic equivalent is available.
Provincial governments should list lower-cost generic versions on their formularies immediately following Health Canada approval to maximize savings. This should take no longer than one month as in provinces such as Ontario.
Generic drug use: public Sector vs. private sector
The use of generic drugs by provincial drug plans in Canada is considerably higher than generic drug use by private sector payers. According to data from IMS Health and Brogan Consulting, generic drugs are dispensed to fill more than 60 percent of prescriptions paid for by public drug programs but only 47 percent of private sector prescriptions.
Changes to the pricing and reimbursement system for generic drugs and pharmacy compensation implemented by the provinces are lowering retail or reimbursed prices for private sector payers as well. Private payers in Canada must now examine their drug benefit plans to determine why their use of generics is so low and what steps can be taken to increase generic drug use and the related savings.
The discussion paper offers some options for maximizing the use of generic drugs, such as developing appropriate prescribing incentives and protocols, creating more stringent interchangeability laws and tiered formularies. These options and others must be further explored by all payers in Canada to ensure that the most appropriate and cost-effective medicines are being prescribed and dispensed to Canadian patients.
Generic drug use: Quebec vs. the rest of Canada
The Province of Quebec, in particular, is wasting considerable taxpayer dollars by failing to use cost saving generic pharmaceutical products. While generic drugs are dispensed to fill more than 57 percent of prescriptions in the rest of Canada, in Quebec, generics are dispensed to fill only 51 percent.
This discrepancy is due, at least in part, to the Government of Quebec’s “15-Year Rule”. Under this rule, Quebec’s drug plan will pay for the brand-name version of a drug for 15 years after it is listed on the province’s drug plan formulary, even after lower-cost generic drugs become available. According to the Government of Quebec the annual subsidy to brand-name drug companies through the 15-year rule totals more than $161-million.
Furthermore, if the goal of the 15-year rule is to encourage brand-name drug companies to invest in Quebec, it misses the mark entirely.
The 15-year rule provides no advantage to a brand-name drug company that invests in Quebec over a company that invests in any other jurisdiction. They all share $161M annually of Quebec taxpayers’ money. As the latest annual report of the PMPRB shows, brand-name drug companies spend more money on R&D in Ontario than they do in Quebec.
A more efficient way of rewarding pharmaceutical companies that invest in Quebec is to provide an advantage or benefit to companies that actually invest in Quebec. This could be done, for example, by providing some form of tax credit to companies that invest in R&D and pharmaceutical manufacturing in the Province of Quebec.
The other advantage of a more direct policy such as this is that it would equally encourage both brand-name and generic drug companies to invest in Quebec without favouring one side of the industry over the other.
Generic drug use: Canada vs. United States
According to sales data released April 1, 2010 by IMS Health Canada, generic drugs were dispensed to fill 54 percent of all prescriptions in Canada in 2009. In the United States, IMS Health reports that generic drugs are dispensed to fill fully 75 percent of all prescriptions. If generic utilization in Canada increased to levels in the United States, Canadians payers would save an additional $1.6-billion in the first year alone. Given the available savings, it would be beneficial to Canadian payers for the Health Council to further investigate why payers for prescription drugs in the United States are so far ahead of their counterparts here in Canada.
Incentives for generic companies to make the significant investments, and assume the considerable risks, required to bring cost-saving generic drugs to market.
The discussion paper also makes important recommendations regarding incentives for generic pharmaceutical manufacturers to make the significant investments, and bear the considerable risks, required to bring cost-saving generic prescription medicines to market.
The report recognizes that it is beneficial to the health-care system for generic manufacturers to challenge patents and that there must be incentives to encourage generic market entry at the earliest appropriate opportunity. Such litigation results in significant savings for government and private payers.
In the absence of such litigation, brand-name pharmaceutical companies would be encouraged to further exploit the patent system to delay market entry of generic competition, leading to additional expenditures of billions of dollars for prescription medicines. Supplementary patents are becoming extremely common, and the average blockbuster drug in Canada is now protected by many patents.
As the Health Council report notes, such an incentive period for generic companies that successfully invalidate weak and frivolous patents in court to gain market entry is not unique. In the United States, for example, the first generic firm to file an allegation that the brand-name patent is invalid or will not be infringed is granted 180-days of market exclusivity, provided that the generic company prevails in litigation. During the 180-day period, the Food and Drug Administration (FDA) may not approve a subsequent generic competitor.
While it is the view of CGPA that an exclusivity period such as that in the United States may not be appropriate for Canada, an incentive period that rewards generic drug makers for successfully challenging invalid or non-infringed patents to bring cost-saving prescription medicines to market is not only appropriate but a necessity given the price reductions that have occurred in recent years.
In summary, now that the issue of reimbursed or retail prices of generic prescription medicines and pharmacy compensation has, in large part, been addressed in Canada, it is now time for governments, employers, unions, taxpayers and patients to turn their attention to the issue of access. Again, the price of generic drugs does not matter if Canadians do not have access to them. We encourage the Health Council of Canada to expand upon its work on access issues in order to provide further policy options to Canadians for ensuring they maximize the enormous savings opportunities available to them through greater use of cost-saving generic prescription medicines.
Some of the material on this page is written by guest bloggers. We appreciate their opinions. However, please note that they are not necessarily those of the Health Council of Canada.