Ontario drug savings ambiguous

The price of generic drugs in Ontario currently ranges between 30% and 80% of the brand name drug price, with post-2006 generic drugs constituting the majority of the high end of this range. For most drug plans in Ontario, explains Mercer, the current weighted average generic drug price is likely closer to 55% to 65% of the brand name price.

As a result, drug plans with a weighted average generic price around 55% will not see a measurable decrease in their overall generic drug prices until 2011, when generic prices are decreased to 35% of brand prices. Implications for Ontario plan sponsors will depend on the mix of generic drugs in their plan and the pharmacy industry’s reaction. Mercer says it is too soon to conduct meaningful analysis that will determine the overall cost impact for plan sponsors.

Cost increases
Mercer identifies several factors that could increase overall drug plan costs:

• dispensing fees for all prescriptions, whether for generic or brand name drugs, may rise;
• pharmacies might also increase the markup included in the ingredient cost from the current levels—typically 10% of the drug cost;
• increased generic drug prices, markup or dispensing fees will occur in pharmacies outside of Ontario; and
• market forces may affect prices in unexpected ways.

“The proposed changes will significantly affect pharmacists and pharmacies,” reads the communiqué. “The Ministry of Health has reported that the average pharmacy will see an annual reduction in revenue of approximately $200,000. However, the impact on private drug plan costs is not completely known since not only do generics account for only part of the overall cost of a drug plan, but pharmacies might attempt to recoup some of their lost revenue by increasing other prescription costs or increasing prescription costs in other provinces.”

Read the full communiqué here.

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