Reduced burdens, increased pharmacy rebates proposed for Ontario

The Ontario Ministry of Health and Long-Term Care (Ministry) has proposed changes to Ontario’s drug product formulary listing and pricing regime under the Ontario Drug Benefit Act (ODBA) and Drug Interchangeability and Dispensing Fee Act (DIDFA).¹

What you need to know

• The Ministry has published proposed amendments to the regulations under the ODBA and DIDFA and is accepting comments until November 27.
• The proposed amendments, if enacted:
  • would simplify certain application requirements for listing of drugs on the Ontario drug formulary;
  • align certain claim processing procedures to those of the private sector;
  • increase the quantum of permissible rebates for interchangeable products from the current 10% to 25%; and
  • would provide flexibility to generic manufacturers in price adjustments and give the Ministry flexibility to adjust the price of originator products.

Impact on drug manufacturers and pharmacies

The Ministry indicates that the purpose of the proposed amendments is to “reduce technical requirements, address discrepancies and misalignments with industry standards and polices in other provinces and territories (P/Ts) and modernize existing processes for Ontario pharmacies”. The following are highlights of the proposed amendments:

1. Faster approval for listings for biosimilar products. For biosimilar products, the Ministry would no longer require or review scientific evidence of clinical similarity between the biosimilar and its originator biologic product, on the basis that Health Canada has already made this assessment. The Ministry indicates that this change would permit biosimilar products to be funded more quickly to “create fiscal space for new drug products”. This statement would seem to suggest that Ontario will adopt policies to favour biosimilar reimbursement over originator products. Other provinces have already developed tiered listing policies to encourage both biosimilar product use as well as switching from originator biologic product to biosimilar products.

2. Reduce requirements for approving generic line extensions. The proposed amendments simplify the listing process for generic line extensions (e.g., new tablet size, new formulation) to align these submissions with Health Canada requirements. This is intended to ensure that line extensions that do not have a comparator brand format can be approved for funding.

3. Managing drug shortages. The proposed amendments would create a pathway to allow for temporary funding of drug products in the event of a drug shortage. An alternative product having the “same or similar active ingredients or therapeutic use as the drug product” in shortage would be exempt from certain submission requirements to facilitate reimbursement and access.

4. Increasing permitted rebates as “ordinary commercial terms”. The ODBA and DIDFA prohibit “rebates” between drug manufacturers, wholesalers and pharmacies, with an exception that manufacturers of generic drugs can provide prescribed discounts to wholesalers/pharmacies up to an amount of 10% of the value of the drug (based on the price in the Ontario formulary).² These discounts are referred to as “ordinary commercial terms” and can be provided as a prompt payment discount, volume discount or distribution service fee. The proposed amendments would increase the cap on these discounts from 10% to 25%, allowing manufacturers to provide greater discounts to pharmacies. Ontario and Québec are the only provinces with anti-rebate prohibitions—in other provinces, manufacturers typically provide significant discounts to pharmacies to encourage pharmacies to stock their product.

5. Generic drug pricing. Current pricing of generic drugs is based on the number of competitors in the market. The proposed amendments would permit more flexibility to manufacturers of generic drugs in their price adjustments. The Ministry expects that the changes will lower generic prices and generate savings for drug plans.

The proposed amendments also give the Ministry flexibility to adjust the price of an originator product upon which the price of an interchangeable products is based, without changing the actual price of the originator product on the Ontario formulary.

What’s next

The Ministry has requested feedback on the proposed amendments by November 27 and has indicated that it will consult with stakeholders prior to publication of final amendments.

There are no transitional provisions in the proposed amendments to the regulations under ODBA and DIDFA. This suggests that the amendments will take effect as soon as the amendments are enacted as regulations.

If enacted, the amendments will create opportunities for biosimilar and generic drug manufacturers to expedite funding of their products. We would also expect to see renegotiations of agreements between manufacturers and pharmacies given the significant increase to permitted discounts for generic drugs.

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¹ See the Ministry’s press release and a copy of the proposed amendments.

² For branded (non-interchangeable) products, there is an exception for a prompt payment discount provided in accordance with ordinary commercial terms.

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