Generic drug war

The Ontario government wants to lower the price of generic drugs by ending rebates generic drug manufacturers pay to pharmacies. These manufacturers pay each pharmacy that dispenses those drugs huge sums of money in exchange for stocking them. One report states that each pharmacy receives some $300,000 annually in such payments.

The idea that there is an inducement to sell certain drugs by way of a reward, or rebate, has to be a matter of concern, especially when weighing the safety and efficacy of one particular brand over another.

The government maintains that these rebates, which total almost $1 billion a year, inflate the cost of the drugs to the consumer.

The plan, however, is facing strong opposition from pharmacists.

Minister of Health Deb Matthews has stated that although these payments by the generic drug manufacturers are meant to lower the price of those drugs, thus making them much more affordable than the brand name products, the payments – which have been referred to as kickback fees – are used instead to cover other costs such as bonuses, fringe benefits and profit.

For cash-strapped consumers, many of whom are advancing in age and in need of drugs for a wider range of health issues, the lowering of prices would be welcome news. So when the big pharmacy chains such as Shoppers Drug Mart – a company whose profit in 2009 was $583 million from revenues of almost $10 billion – protested by threatening to close some outlets and shortening hours of daily operation, consumers responded in anger labeling them as greedy.

It should be noted that this move by the Ontario government does not interfere with the pharmaceutical giants, so called ‘big pharma’, like Pfizer and Merck that sell brand name drugs for astounding profit.

To offset the loss that pharmacies anticipate, the Ministry of Health has provided a fund of $150 million. This is expected to pay for other services that pharmacies can choose to offer, such as flu shots, medication counseling or home delivery. The health ministry will also allow for an increase in dispensing fees.

One interesting development is that in February Shoppers Drug Mart announced plans to begin producing its own line of generic medications since, despite the sidelines in cosmetics and groceries, the company’s strongest earnings last year came from dispensing prescriptions.

As the boomer generation moves in larger numbers into old age, we will continue to see ministries of health across the country attempt to find ways to reduce cost so they can continue to afford universal health care. The same move by Ontario to put an end to the rebate by generic manufacturers has already taken effect in Alberta while, in Quebec, the Charest government will now allow doctors to charge a fee for visits.

Premier Dalton McGuinty insists that his government will not back down in its efforts to reduce the cost of generic drugs using as an example one blood pressure drug that costs, per dose, 50 cents in Ontario, 10 cents in the U.S. and 2 cents in New Zealand.

Shoppers Drug Mart and Rexall, two of this country’s largest drug store chains, have already drawn battle lines. Shoppers, for example, has cut back store hours in the health minister’s riding and both companies have said they will reduce store hours and the services they provide to customers, maybe close some stores and reduce staff. So be it.

Some observers say that the small pharmacies are the ones which will suffer the most. The premier and health minister need to take note of this and find a way to provide special consideration for these small players. However, they must not allow themselves to be bullied by the large corporations.

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