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Lower Cost Generics May Not = Lower Cost Private Drugs

Posted by on Jun 2, 2010 in Health | 0 comments

While the price of many generic drugs will decrease over the next three years, this does not necessarily mean that private employer-sponsored drug benefit plan costs will decrease. according to a comprehensive Mercer Communiqué discussing the potential impact of the proposed changes to Ontario’s drug system.

Key changes reported include:

  • A decrease in generic drug prices for both the Ontario Drug Benefit (ODB) plan and for private plans to 25% of the brand drug price.
  • The reduction and eventual elimination of professional allowance.
  • Pharmacy dispensing fees and mark up for the ODB Plan will change depending on a pharmacy’s category in accordance with a chart printed in the Communiqué. These changes will not apply to private plans.
  • Pharmacies will be prohibited from selling private label prescription drugs.
  • An additional $100 million will be added to the fund that compensates pharmacists for clinical pharmacy services provided to Ontarians.

Several factors that could increase overall drug costs include:

  • Dispensing fees for all prescriptions, whether for generic or brand name drugs, may rise. It has already been reported that some Ontario pharmacies have raised their dispensing fees to $15.
  • Pharmacies might also increase the mark-up included in the ingredient cost from the current levels – typically 10% of the drug cost. Mark-up is determined through an agreement between a pharmacy and the pharmacy benefit manager and any change would have to be renegotiated.  However, pharmacies might refuse to accept the provider drug card unless the mark-up is significantly increased.
  • In order to make up for lost revenue in Ontario, pharmacy chains might significantly increase generic drug prices, mark-up or dispensing fees in its pharmacies outside of Ontario; and
  • Market forces may affect prices in unexpected ways.

However, Mercer says the impact on private drug plan costs is not completely known since not only do generics account for only part of the overall cost of a drug plan, but pharmacies might attempt to recoup some of their lost revenue by increasing other prescription costs or increasing prescription costs in other provinces.

More information on the Ontario reforms is available from the Ministry of Health

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