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Canadians pay too much for generic drugs
Time t o t urn savings f rom generics int o drug coverage f or all
A version of this commentary appeared in the Hill Times, Vancouver Province and the Toronto Star Would you pay $60 f or a large cof f ee at Tim Horton’s? How about $500,000 f or a Toyota Corolla? You probably wouldn’t, but consider this: compared to other countries, this is how inf lated Canadian prices are f or some generic prescription drugs. T hat our generic drug prices are high is no great secret, and recently nearly every provincial government has taken steps to lower prices. However, instead of leveraging competition to get lower pricing, thus f ar our governments have stuck to their old — and arbitrary — f ormula of paying a percentage of the equivalent brand name price. Ontario has gone the f urthest and reduced prices to 25% of the equivalent brand name drug. Paying one-quarter of the brand price might sound like a great deal, but it isn’t. T his week the Centre f or Health Services and Policy Research at the University of British Columbia published a paper where I demonstrate that Ontario pays nearly a quarter of a billion dollars more every year f or the top 100 generic drugs compared to prices in other countries. Since Ontario has the lowest prices in Canada, this means every other province is overpaying too. T he amount we’re overpaying varies by drug. For some drugs, the dif f erence is huge: while Ontario pays 62.5 cents f or one 20mg tablet of simvastatin, New Z ealand pays 2.4 cents. In f act, the price in New Z ealand dropped to 1.8 cents af ter the research f or the paper was completed, while Ontario’s stayed the same. T hat means Ontarians now pay 36 times more than New Z ealanders f or the same drug: just like the costly cof f ee, or the half -million dollar compact car. T he good news is that change should be coming soon. In June, Canadian premiers agreed to f lex their collective buying power to drive down generic prices using competitive purchasing strategies. T his week, the Ministers of Health f rom across Canada are meeting in Halif ax to discuss the details. T his is sound policy, and is long overdue. T he savings possible f rom these changes would be positive and almost immediate — and would provide essential new health dollars that could be reinvested back into the system. Here’s a sobering statistic: while Canadian medicare covers medically necessary hospital and physician services, we still pay around $5 billion out of our own pockets f or prescription drugs every year. T he result: 1 in 10 Canadians can’t af f ord their prescription drugs, and others are f acing grim trade-of f s between buying their needed prescription drugs, and f ood or rent. Health policy advisors and academics have been proposing solutions to gaps in our drug coverage f or decades. Many proposals to date have suggested massive changes to our complex and multi-billion dollar

system of drug coverage. It’s like moving mountains f rom a political perspective — and not likely to happen any time soon. T his is where generic drugs come in. Better pricing f or generic drugs of f er us a real opportunity to improve drug coverage in an incremental and achievable way. Let’s go back to simvastatin. Ontario’s public drug program spent $6.7 million on 20mg tablets of simvastatin in 2009. At the best international price, the province would have spent $0.3 million — a savings of $6.4 million. Paying to cover all the simvastatin used in the province would only cost a small amount more: $0.5 million in total. T hus, there would still be $6.2 million in public sector savings. Universal coverage — coverage f or every person in the province that needed the drug with no out-of -pocket charge — would still save money. T he f indings don’t just apply to simvastatin. In f act, there are more than 30 generic drugs where the total savings per drug under universal coverage would be more than $1 million in Ontario alone. Universal public coverage of every one of the top 100 generics would still save $87 million in public f unds if we got the best international prices. It would also benef it everyone by saving employers and individuals $158 million of f their prescription drug bill. Along with saving precious public f unds, better drug coverage would result in f ewer Canadians being unable to af f ord their prescription drugs, and improve their health as a result. Working toward competitive generic drug pricing is essential, and this week the Ministers of Health should continue work on this important initiative. But let’s also seize this opportunity to make drug coverage more comprehensive f or all Canadians. It makes both health sense and f inancial sense. Let’s not order any more $60 cof f ees. Michael Law is an expert advisor with and an Assistant Professor at the Centre for Health Services and Policy Research, School of Population and Public Health at the University of British Columbia.

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