Ontario Government Urged to Reconsider Rules for Value Adds in RFPs for Drug Products

On April 1, 2014, a Standing Committee of the Ontario Government on Social Policy (Committee) published its report on Diluted Chemotherapy Drugs. This report was prepared in response to the discovery that 1,202 patients in Ontario and New Brunswick received diluted doses of two admixed chemotherapy drugs (gemcitabine and cyclophosphamide). If the recommendations of the Committee are implemented, there may be significant changes with respect to the procurement of drugs products through the current RFP processes in Ontario, particularly with respect to the inclusion of rebates and value adds.

By way of background, Medbuy, a national group purchasing organization, issued an RFP for pharmaceutical products, which was awarded to Marchese Health Care (Marchese). It was later discovered that Marchese supplied patients diluted doses of gemcitabine and cyclophosphamide. The facility that supplied the drugs was unregulated, meaning that it did not hold a drug establishment from Health Canada, or a provincial pharmacy license. In essence, Marchese’s activities fell in a grey area between drug manufacturing and pharmacy compounding.

The Committee made several recommendations, including further oversight and national standards for the labelling of chemotherapy drugs. Of particular interest to manufacturers is the Committee’s recommendation that the Government of Ontario take steps to prohibit rebates and value adds in government contracts. These incentives are currently permissible under the Broader Public Sector Procurement Directive if "directly relevant and transparently connected" to a procurement. With respect to value adds, the Committee noted that, while not mandatory, value adds were encouraged during the RFP process and included in the scoring process. However, the Committee cited a lack of transparency with respect to how rebates are offered and used by group purchasing organizations and hospitals alike. If the recommendations of the Committee are implemented, manufacturers will have to reconsider their current pricing and value strategies when responding to an Ontario Government RFP.

For more information, the full text of the report on diluted chemotherapy drugs can be found here.

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