The Canadian Generic Pharmaceutical Association (CGPA) and the pan-Canadian Pharmaceutical Alliance (pCPA) announced on January 29 an updated pricing framework for prescription generic drugs that will apply to provincial, territorial and federal drug plans.1 This agreement will drastically reduce the overall cost of generic drugs expended by the public drug plans over the next five years and follows a similar agreement negotiated by Québec's government and CGPA in July 2017.2
What You Need To Know
- Price reductions will apply to nearly 70 generic drugs. Under the current pCPA framework, the price of generic drugs is capped as a percentage of the price of the equivalent brand (innovator) product. The generic drug price is generally capped at 25% of the brand price however certain medications are subject to a lower cap of 15% or 18%. Under the updated framework, the price of 20 frequently prescribed generic products will be capped at 10% of the brand price, and an additional set of generic products will be subject to an 18% price cap. These include medications used to treat conditions such as depression, epilepsy, high cholesterol and high blood pressure.
In effect, the price of certain generic drugs is being reduced 25% to 40% of their current price.
- Term of five years. This new pricing will apply for a five year period beginning on April 1.
- No tendering. As part of the agreement, provincial and territorial governments have agreed to suspend open tendering for coverage of generic drugs by the drug plans over the five year term. This means that drug products manufactured by multiple generic companies will be listed on public drug plan formularies.
The CGPA has voiced its concerns that generic drug tendering would result in supply issues and create a disincentive for manufacturers to invest in bringing new generic products to Canada.
CGPA and pCPA have stated the framework will provide savings to patients and increase the sustainability of drug plans while providing price consistency and stability for the generic industry. Overall, the initiative is expected to generate savings of up to $3 billion for public drug plans over the next five years.
The Canadian Pharmacists Association (CPhA) has expressed concern the updated pricing framework will have a significant negative financial impact on the pharmacy industry. This is presumably because generic drug companies provide rebates and professional allowances to pharmacies, where permitted by provincial law. So, if revenues for generic manufacturers decrease, pharmacies may not receive the current level of rebates. In a statement,3 CPhA has called on governments to invest a portion of the expected savings from this initiative into the services provided by pharmacies, to allow pharmacists across the country to continue to provide a high quality of care for patients.
To discuss these issues, please contact the author(s).
This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.
For permission to republish this or any other publication, contact Janelle Weed.
© 2019 by Torys LLP.
All rights reserved.