First Step to Pan-Canadian Approach to Management of Drug Costs

By: Richard Y. Cheung and Ingrid VanderElst | Toronto

On January 18, 2013, the Canadian provinces and territories (with the exception of Quebec) announced a joint initiative (PDF) designed to achieve significant cost savings for publicly funded drug plans. Working through the Council of the Federation, participating provinces and territories will leverage their combined bargaining power to set a common reimbursement level for the following six generic drugs that, together, represent approximately 20% of publicly funded spending on generic drugs in Canada: atorvastatin, ramipril, venlafaxine, amlodipine, omeprazole, and rabeprazole. Beginning on April 1, 2013, the price for these six generic drugs will be set at 18% of the price of the corresponding brand name drug [1].

The only province not participating in the initiative is Quebec. However, Quebec is nonetheless expected to benefit from the announcement in light of the most-favoured nations clauses included in the commitments signed by manufacturers as a condition of publicly funded reimbursement of their drugs.

An announcement concerning drug cost management had been widely anticipated following the direction provided to the Health Care Innovation Working Group at the July 2012 meeting of the Council. While there had been speculation that the provinces and territories would implement a tendering system whereby generic drug manufacturers would compete for reimbursement by provincial and territorial drug plans, stakeholders had expressed apprehension about adoption of a single-source approach. Of particular concern was the potential for drug shortages arising out of reliance on a single supplier. The capped reimbursement approach appears to represent a compromise, as multiple suppliers will be maintained, while achieving desired price reductions for specific drugs.

The Working Group has indicated that the initiative is merely a starting point and that additional reforms may be forthcoming as a long-term strategy is developed.

[1] Current rates of reimbursement for generic drugs vary across the country and are generally set between 45% to 25% of the price of the brand name counterpart.

For more information on this topic, contact a member of the Fasken Martineau Life Sciences Group.

To see the original article, please click here.

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