Ten years ago, prescription drug prices in Canada were essentially shrouded in mystery. Canadians who purchased drugs on a regular basis may have been aware that the total retail price paid at the pharmacy consisted of the ingredient cost plus the dispensing fee. In most provinces, these two price components are clearly disclosed on the official drug receipt.
In Alberta and Quebec, awareness of dispensing fees is likely much lower, as pharmacies in these provinces are not required to display dispensing fees on the drug receipt. Alberta pharmacists do, however, split these fees when they are submitting claims electronically to pharmacy benefit managers (PBMs). They also disclose this amount to customers when asked. Quebec pharmacists are less transparent. While they typically charge dispensing fees, they do not separate these amounts for PBMs.
In recent years, the makeup of drug costs—including dispensing fees, markups, manufacturers’ rebates, etc.—has come under the microscope as provincial drug programs have examined ways to reduce public drug expenditures.
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So why should we care what components make up drug prices? Most of us would have no idea what goes into the price of milk or muffins or a television set. The difference is that drugs are not sold in Canada in the same manner as most other consumer goods. Drugs prices aren’t advertised like milk or TVs. You can’t compare drug prices online. You can’t even compare them by going from pharmacy to pharmacy—unless you ask, and who has time for that? Unlike most other goods and services, drugs are not subject to a transparent marketplace, and therefore, it is the responsibility of governments and intermediaries such as PBMs and insurers to ensure that we’re getting drugs at a fair market price.
In the past few years, most provinces (including Alberta) have enacted legislation, which has resulted in reduced drug costs for publicly funded programs as well as private plans. On May 1 of this year, the Alberta government reduced the allowable price for all interchangeable generic drugs included on the provincial formulary to just 18% of the brand drug costs. As with other initiatives, this change is applicable to both the provincial plan and private plans. However, according to an article in the Edmonton Journal, not all interchangeable generics have come down to the 18% level yet. Other provinces implemented a pan-Canadian deal earlier this year to limit just the top six generic drugs to the 18% level.
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While the Alberta government has helped reduce drug costs for private plans, it has garnered a better deal for the provincial plan. There are some significant differences between what pharmacists are allowed to charge to the provincial plan versus private plans.
The retail price of a drug in the Alberta provincial plan is limited to the following:
- Actual Acquisition Cost (AAC); plus
- Dispensing Fee Max: $10.22 (AAC $0 – $74.99); $15.53 (AAC $75 – $149.99); $20.94 (AAC $150+); plus
- Inventory Allowance: $1.71 (AAC $0 – $74.99); $2.00 (AAC $75 – $149.99); $5.03 (AAC $150+)
No markup is allowed on the AAC for most drugs, apart from a few exceptions noted on the .
Drugs paid through private plans
Pharmacy markup, dispensing fees and generic drugs not on the Alberta provincial formulary are not regulated, and pharmacists may charge private plans market prices for these components. However, PBMs such as ClaimSecure, ESI, Green Shield Canada and Telus limit the markup to reasonable and customary prices.
Alberta’s new stance on generic drugs may also have a ripple effect in other parts of Canada as Quebec now has a “best price policy,” which requires that it have the lowest drug prices in Canada. Other potential consequences of this action are that it may drive some pharmacies out of business. Particularly vulnerable are smaller independent pharmacies located in rural communities. It could also result in disruptions in supply and/or some manufacturers simply pulling certain drugs off the Canadian marketplace or abandoning Canada altogether.
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