Canadian provinces to reduce reimbursements for six generics

NEW YORK — Canada's provincial and territorial governments have reached a deal that they said would save money on drugs, but that generic drug makers said had left them "disappointed."

According to published reports, a group of premiers — heads of government for Canada's provinces and territories — had reached a coordinated deal to reduce the prices their governments paid for six generic drugs, though Quebec did not take part; that province announced in November 2012 the elimination of its "15-year rule," a rule unique to the province that required its prescription drug plan to reimburse the price of the original drug even after patent expiration had made cheaper generics available. Currently, provinces pay between 25% and 40% of the cost of branded drugs for six key generics, but under the deal, they will pay 18% starting in April.

The drugs are the generic versions of Pfizer's cholesterol drug Lipitor (atorvastatin); King Pharmaceuticals' blood pressure drug Altace (ramipril); Pfizer's antidepressant Effexor (venlafaxine); Pfizer's angina drug Norvasc (amlodipine); AstraZeneca's gastroesophageal reflux disease drug Prilosec (omeprazole); and Eisai and Johnson & Johnson's GERD drug Aciphex (rabeprazole).

While praising a decision by the provincial governments not to pursue a plan to tender for generic drugs, the Canadian Generic Pharmaceutical Association was displeased with the reimbursement reduction.

"CGPA is pleased that provincial governments have decided not to proceed with tendering for generic pharmaceutical products. Tendering for generic drugs could result in drug shortages and delayed savings to Canada's healthcare system." CGPA president Jim Keon said. "We are, however, disappointed by the provincial governments' announcement of further cuts to retail or reimbursed prices for generic prescription medicines."

Canada's generic drug industry saw significant expansion starting in 1969, when the Patent Act was amended to allow manufacturers to import the active ingredients for making generic versions of branded drugs. But the generics industry in Canada hasn't made the same strides as its U.S. equivalent. While generics account for 80% of dispensed prescriptions here, the equivalent rate in Canada is more than 60%, according to IMS Health.

According to published reports, the provinces hope the new plan will save them nearly $100 million, including about $10 million in Saskatchewan alone. But the CGPA said prices had already been "dramatically" reduced.

Meanwhile, the plan could hurt pharmacy retailers, according to reports. Credit Suisse downgraded the shares of Canadian drug chain and drug manufacturer The Jean Coutu Group following the news, even though the company's profits increased by 10% to $55.8 million in the third quarter due to higher generic drug sales.

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