The public has no obligation to support the prevailing profit margins of national drugstore chains

Posted on April 13, 2010 in Health Debates

Source: — Authors: – Opinion
Published On Tue Apr 13 2010.   Susan Eng Vice-president, advocacy, CARP

You could be paying much less for generic drugs if the provincial governments are successful in getting rid of the rebates the drug companies pay drug stores to stock their products. However, the drugstore chains are putting up a fight and there’s no telling where this will end, but you should be alert to pressure tactics at the drug counter.

Here’s the scoop: Provincial governments spend billions annually on drug plans providing free or subsidized prescription drugs for seniors, residents of long-term care and special care homes and people on social assistance. The plans vary across the provinces.

The province decides what drugs it will cover – the list is called the formulary – and negotiates and sets the price that it will pay. In the case of generic drugs, the price is often set as a percentage of the original brand name drug price; at the moment around 50 per cent or more of the brand name price.

At the same time, the drug companies pay rebates to drug stores estimated in a report by the Competition Bureau of about 40 per cent of the drug price. These rebates keep the generic drug prices high and as a result, Canadians pay 50 per cent to 75 per cent more for generics than our counterparts in the United States or Britain.

Ontario and Quebec banned the rebates but Ontario permitted “professional allowances” of 20 per cent, which were intended to allow the drug stores to provide patient counselling. But after auditing the changes for a couple of years, Ontario found that the allowances were not, in fact, used for patient counselling services so now they will be eliminated,

Eliminating these allowances will allow Ontario to reduce the maximum price it will pay for generic drugs from 50 per cent to 25 per cent of the original brand name price. This will take place immediately for generic drugs covered by the Ontario public drug plan and phased in over three years for those purchased directly by patients or reimbursed by private drug plans.

The savings from these measures will be used to increase dispensing fees and payments for professional services actually provided by pharmacists.

These professional services, not determined yet, can include monitoring or reviewing all your medication, some help with managing chronic conditions like diabetes, asthma and chronic pain and especially management of narcotic drugs.

All this means lower drug costs – for the tax-funded drug plan, the private health plans and your budget. There will be more access to professional advice from your pharmacists knowing that they will be compensated by the province and the potential for more drugs being listed in the formulary.

So why are the drugstore chains complaining?

Perhaps because they were not providing any real services for the rebates they were getting since, if they were, they could now get direct compensation for them rather than relying on rebates from the drug companies. Instead of threatening to fire pharmacists or close stores, they could be negotiating for higher fees for the much-needed professional advice that we could get from the pharmacists.

It is clear, too, that the business model has to change for single pharmacies as well as the national drugstore chains. The public has no obligation to support the prevailing profit margins that these businesses have become used to and should protest loudly if they are held to ransom in this campaign.

CARP, originally the Canadian Association of Retired Persons, is a national advocacy organization for older Canadians.

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