Canadian generic medicines are overpriced relative to generics in other countries, according to a study.
The Bruyère Research Institute and University of Ottawa study, Pan-Canadian overpricing of medicines: a 6-country study of cost control for generic medicines, finds that Canadian prices for six generic medicines (amlodipine, atorvastatin, omeprazole, rabeprazole, ramipril and venlafaxine) are more than double those of peer countries.
In April 2013, the premiers of Canada’s provincial and territorial governments, under the auspices of the Council of the Federation, achieved an agreement to lower the price to be paid for those six generics, pegging their reimbursement prices to 18% of the original innovator’s price.
Five of the six medicines were cheaper in some or all of the foreign countries that were studied. This held true even in the few situations where Canadian generics companies supplied the product.
“For example, New Zealand purchases amlodipine and the United States purchases venlafaxine from Apotex, a Canadian generics firm, at substantially lower prices (86% to 87% lower for amlodipine in New Zealand and 48% to 94% lower for venlafaxine in the United States, depending on product strength) compared with the Council of the Federation’s price for Canadian buyers,” the study notes.
It also says the Council of the Federation’s decision to set the maximum price ceiling for these post-patent medicines at 18% of the equivalent innovator’s product, and not some higher or lower percentage, reflects a one-size-fits-all approach to health policy that is unlikely to suit all medicines optimally.
“The Canadian approach of setting a single price ceiling for multiple medicines is highly unusual,” the study notes. “All other countries studied here have preferred competition or negotiation to varying extents.”
In New Zealand, the public health system competitively tenders to procure each medicine from a single preferred vendor at the best price. In the United States, federal government programs (except Medicare) can procure a given medicine from multiple vendors, but each vendor negotiates its own government-approved maximum price that is tailored to its particular economic and political situation. Likewise, in Sweden, the public health system procures drugs from multiple vendors, with the difference that each vendor proposes a price that the government accepts or rejects, without negotiation. Similar to Canada, the United Kingdom and Germany set maximum price ceilings that bind all vendors, but with the very important difference that prices are revised at short intervals (e.g., quarterly or monthly) on the basis of negotiations with vendors and market trends.
“Thus, although the Council of the Federation’s new 18% price ceiling saves some money compared with prices paid in the past, it is grossly deficient when one considers the opportunity costs that Canada sustains annually by refraining from adopting one of the alternative systems proven to be more effective in its peer countries, be it single-source tendering (as in New Zealand) or flexible price ceilings (as in Germany, Sweden, the United Kingdom and the United States),” says the study.
The Council of the Federation plans to report in 2014 on the progress of its generic drug pricing plan. While that report will likely show that some money was saved, the study says that much more could be saved by following the example of peer countries and using competition or negotiation.
“Since a price ceiling applied categorically to entire groups of medicines, whether at 18% or another arbitrary level, is likely to be suboptimal, we recommend that the Council of the Federation return to its original but unfulfilled plan to ‘initiate a national competitive bidding process,'” says the study. “This approach is more likely to restrain Canadian drug prices and to avoid the politically difficult appearance of Canadian generics companies doing business at lower prices abroad than in Canada.”