|Implemented in this survey?|
In July 2010 the Ontario Drug Program made changes to generic drug funding from 50% to 25% of branded price, increased dispensing fees, and eliminated professional allowances to pharmacies over 3 years. This represents a regulation change to the 2006 Drug Interchangeability and Dispensing Fee Act, and the Ontario Drug Benefit Act. The reaction by pharmacists and the generic drug manufacturers was negative, but it is expected that patients will benefit.
The Ontario government has introduced legislation that reduces the price a generic manufacturer can charge, from 50% of the branded price to 25% of the branded price, along with changes to pharmacy dispensing fees and the elimination of professional allowances paid to pharmacies by the generic drug manufacturers. These changes will be phased in over a 3 year period. The main thrust of the policy is for those on the government plan (elderly and those on welfare) but in fact the policy also has an impact on private payor pricing as well, although the timelines are delayed for the private sector.
The government expects that this regulatory change will allow them to save in excess of Canadian $500M per year, some of which will be reinvested in the drug program to improve access for Ontarians. Although pharmacies may see a reduction in profits, it was felt that the generic manufacturers will not be adversely affected since they are no longer required to pay the professional allowances to pharmacies. The claim by government is that these allowances accounted for as much as a 20% discount, but this would likely represent larger purchasing groups rather than individual pharmacies. Compensation increases to pharmacists, especially in rural communities, are expected to partly offset the loss of revenues in pharmacies (there is a schedule that includes increases over the next few years, and those increases are larger in rural communities). These changes also apply to the private sector and should result in cost savings both for insurers and corporations, which is expected to have a positive economic effect on the private sector.
The primary objective of this generic drug policy was to reduce the economic burden on the public payer, to bring prices more in line with international norms, and to improve access for patients who pay through a drug plan or out-of-pocket.
This policy used legislation and changes in regulation, with an offsetting increase in pharmacist dispensing fees. Hence a small financial investment was required, but represents only a portion of the savings governments expect to realize through this policy change.
Generic drug manufacturers, Pharmacists and Pharmacies, Patients
|Degree of Innovation||traditional||innovative|
|Degree of Controversy||consensual||highly controversial|
|Structural or Systemic Impact||marginal||fundamental|
|Public Visibility||very low||very high|
The use of regulation to manage prices of health services is a traditional approach. To couple this with increased reimbursement to pharmacists, and elimination of professional allowances is somewhat unique and controversial at the same time. An overwhelming support for this comes from many health professionals and patient interest groups as might be expected. However, those stakeholders with the most to loose (pharmacists and generic drug manufacterers) have been very open regarding their opposition.
Provincial governments have been operating with a deficit budget over the past few years, and projections suggest this is expected to continue for the next 3-5 years. As a consequence, efforts to improve efficiency and reduce budgets are high on the priority list, especially in health where the budget has been growing well above inflation for many years. Although no new legislation has been put in place (new generic drug price legisilation began in 2006) there has been a realization that drug budgets were one place where savings could be realized in relatively short timeframes. This most recent change is an aggressive attempt to manage costs, by cutting prices by 50%. The removal of professional allowances to pharmacies means that the impact on generic manufacturers is minimized since they were the source of these allowances. These efforts are consistent with recent efforts to manage healthcare budgets by controlling the rate of growth. It is not expected that this effort will result in a year over year reduction in the overall drug budget, but it should result in a significantly smaller rate of growth (likely 1% to 3% overall including branded pharmaceuticals).
Budget deficits (recession) have forced governments to examine options that minimize budget growth without affecting citizens adversely. Pharmacies are suggesting that some services will be affected, but patients will still benefit from lower prices.
|Implemented in this survey?|
The original legislation from 2006 was meant to: improve patient access, ensure better value, and promote appropriate use. The policy was driven by legislation, and was initially driven by the Minister of Health, and included consultations with a variety of stakeholders. The legislation includes efforts to control both branded and generic drug prices, but the most recent efforts (July 2010) have focused on generic drug pricing. The justification for this effort is partly due to the fact that Canadian generic prices are amoungst the highest in the world. Although this latest effort to reduce generic drug pricing was initiated by the Minister a variety of stakeholders were involved and include: the branded pharmaceutical manufacturers, the generic pharmaceutical manufacturers, pharmacists, pharmacies, health professionals, and patient interest groups. Although the methods employed are not new, and in some ways this is an extension of earlier initiatives, this is felt to be a much bolder move, and the reaction from stakeholders captured more media attention than usual. It remains to be seen whether other provinces will follow the lead of Ontario, but it is safe to say that health policy initiatives in Ontario rarely go unnoticed by other provinces in Canada.
The approach of the idea is described as:
amended: Changes to generic drug policy began in 2006 and resulted in a decrease in generic drug prices from 70% of branded price to 50% at that time. This represents a second, but very aggressive phase of this effort, with further reductions to 25%.
Those with the strongest opposition to this policy change are the Ontario Pharmacists Association and the Canadian Generic Pharmaceutical Association, as both groups stand to loose revenues and these lost revenues could affect service levels in pharmacies. However, a number of patient interest groups (Canadian Association of Retired Persons, Best Medicines Coalition), nurses (Registered Nurses Association of Ontario), branded pharmaceuticals (Canada's Research Based Pharmaceutical Companies) and some of the media (The Star) are supportive as they expect it will result in better access for patients and potential cost savings to the government. Although no formal alliances were openly identified most patient focused groups were supportive of the initiative both in terms of lowering prices, and improved funding to pharmacists for those in remote regions. Government attempted to minimize conflicts by ensuring most stakeholders were involved in early consultations, and by providing early notification of policy intent before it was enacted. Ensuring conflicts were partially addressed through the increased dispensing fee schedule over the next 4 years, is expected to ease the level of conflict.
|Minstry of Health||very supportive||strongly opposed|
|Minstry of Trade and Development||very supportive||strongly opposed|
|Generic Drug Manufacturers||very supportive||strongly opposed|
|Pharmacies||very supportive||strongly opposed|
|Pharmacists||very supportive||strongly opposed|
|Registered Nurses||very supportive||strongly opposed|
|Physicians||very supportive||strongly opposed|
|Best Medicines Coalition (Patient Advocates)||very supportive||strongly opposed|
|Canadian Association of Retired Persons||very supportive||strongly opposed|
|Researchers||very supportive||strongly opposed|
|Physicians||very supportive||strongly opposed|
|Private Sector or Industry|
|Insurance companies||very supportive||strongly opposed|
|Branded drug manufacturers||very supportive||strongly opposed|
|Globe and Mail (National)||very supportive||strongly opposed|
|The National Post (National)||very supportive||strongly opposed|
|The Star (Ontario)||very supportive||strongly opposed|
|The Sun (Ontario)||very supportive||strongly opposed|
|Liberals (currently in power)||very supportive||strongly opposed|
|Conservatives||very supportive||strongly opposed|
|New Democratic party||very supportive||strongly opposed|
Legislation was already in place (2006) but changes to regulations for this and other policies will result in a net savings to government and patients.
|Minstry of Health||very strong||none|
|Minstry of Trade and Development||very strong||none|
|Generic Drug Manufacturers||very strong||none|
|Registered Nurses||very strong||none|
|Best Medicines Coalition (Patient Advocates)||very strong||none|
|Canadian Association of Retired Persons||very strong||none|
|Private Sector or Industry|
|Insurance companies||very strong||none|
|Branded drug manufacturers||very strong||none|
|Globe and Mail (National)||very strong||none|
|The National Post (National)||very strong||none|
|The Star (Ontario)||very strong||none|
|The Sun (Ontario)||very strong||none|
|Liberals (currently in power)||very strong||none|
|New Democratic party||very strong||none|
This policy amendment was initiated by the executive director of the drug program branch, and included consultation with a variety of stakeholders including pharmacists, drug manufacturers, health professionals and patient interest groups. The governments released information through academic, professional, and media channels to ensure all stakeholders were fully aware of the intended policy change. Although strong objection both at the announcement of the intended policy change, and when it was enacted was voiced from both the Ontario Pharmacist's Association and the Generic Drug Manufacterers Association, most other stakeholders were supportive of the initiative. The objections focused on issues of maintaining appropriate service levels to patients at pharmacies, where supporters identified the potential for improved access for patients.
At this time it is not clear whether an evaluation beyond a budgetary one will be undertaken.
It is highly likely that this policy will achieve its objectives of both reducing the generic drug budget and providing improved access for patients. However, there still exists some concern from pharmacists/pharmacies that the quality of services, especially in rural communities, could be adversely affected.
|Quality of Health Care Services||marginal||fundamental|
|Level of Equity||system less equitable||system more equitable|
|Cost Efficiency||very low||very high|
This policy will reduce costs for generics for both public and private payors over the next three years and lead to broader listing of other drugs which will benefit patients directly, both in terms of how much they pay (especially those without coverage) and in terms of the scope of available publicly funded drugs.
Ontario Ministry of Health and Long-Term Care. Ministry Programs. Ontario Drug Benefit Program. http://www.health.gov.on.ca/en/public/programs/drugs/
Ontario Ministry of Health and Long-Term Care. Public Information.Transparent Drug System for Patients Act (2006). http://www.health.gov.on.ca/english/public/legislation/drugs
Ontario Pharmacist's Association. News Release June 8, 2010.
Christopher J. Longo
Affiliation, McMaster University, Strategic Market Leadership and Health Services Management, School of Business, and Centre for Health Economics and Policy Analysis