Reviewing the Canadian Drug Landscape and Generic Pricing ModelsCGPA CONFERENCE - 26 OCTOBER 2011

François Joseph PoirierPartner

Toronto - 161 Bay Street

Not Peer Reviewed

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Agenda

• Overview of recent changes

• New legislations impact on generic pricing

• How are private plan sponsors adapting to changes

• The future ahead of us

OVERVIEW OF RECENT CHANGES

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Generic Prices in Transition

• British Columbia– Public and private at 40% to drop to 35% on 04/01/12– Public mark-up at 8%, except on high cost drugs (5%)– Rising dispensing fees to $10.50 on 04/01/12

• Alberta– Public and private at 56% for pre Oct. 2009– Public and private at 45% for post Sep. 2009

• Saskatchewan– Public and private at 45% to drop to 35% on 04/01/12– Rising dispensing fees to $10.25 on 04/01/12– Expanded prescribing authority

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Generic Prices in Transition

• Manitoba– Bill 41 to be implemented

• Ontario– Public at 25% – Private at 35% to drop to 25% on 04/01/12– Professional allowances at 35%, 25% in 2012 then 0%

• Quebec– Public and private prices vary by drugs– Some drugs such as Lipitor are at 25%– Rebates still exist

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Generic Prices in Transition

• Nova Scotia– Public to drop to 35% on 07/01/12– “In theory” applicable to private sector– Expanded prescribing authority

• New Brunswick– Tabled legislation setting generic pricing

• Prince Edward Island– Legislation being drafted

• Newfoundland and Labrador– Legislation being contemplated

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Generic Prices in Transition

• Additional consideration for generics– Variation in time to list from a few weeks in Western Canada

up to 6 months in Quebec and Eastern Canada– Different approaches on professional rebating

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Provincial Regulation – Public Payer

Practices Provinces

BC AB SK MB ON QC NB NS NF PE

Fixed Generic Pricing (% of brand)

Lowest price in Canada

Lowest Cost Alternative (interchangeable drugs)

Maximum Allowable Cost/ Reference Pricing (same therapeutic class)

Limit Professional Allowances

Competitive Tender (List price)

Listing Agreements (Manufacturer Payments)

Dispensing Fee/ Mark-Up Limits

Implemented ProposedP

P

Blank = Not Implemented

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Provincial Regulation Impact – Private Payer

Practices Provinces

BC AB SK MB ON QC NB NS NF PE

Fixed Generic Pricing (% of brand) *

Most Favoured Nation

Lowest Cost Alternative (interchangeable drugs)

Maximum Allowable Cost/ Reference Pricing (same therapeutic class)

Limit or Eliminate Professional Allowances

Competitive Tender (List price)

Listing Agreements (Manufacturer Payments)

Dispensing Fee/ Mark-Up Limits

Implemented Blank = Not Implemented

IMPACT OF GENERIC PRICING

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Pharmacist’s Perspective

• Reduced revenue for pharmacies forcing current business model review– From pills dispenser to pharmaceutical consultant

• Increased fees– In Ontario 32% of pharmacies increased dispensing fees– Generic mark-up increase from 10% up to 19%

• Increased generic pricing– Generics not listed on formulary– Some generics increased to new limit

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Pharmacist’s Perspective

• Reduced services

• No apocalyptic store closures as expected

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Private Sponsor’s Perspective

• Generic drugs spend has decreased but …– Relatively small percentage of total drugs spend – 8.2% of

Great West Life GroupLine 2010

• … offset by other Rx cost adjustments

• Prescribing pattern to replace brand name coming off patent by another brand name drugs instead of the generic version– Lipitor® with Crestor® (Cholesterol)

– Effexor® with Cipralex (depression)

– Neurontin with Lyrica® (Nerves pain and seizure)

– Napraxen with Celebrex® (Inflamation)

PRIVATE PLAN SPONSORS RESPONSES

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Private Sponsors’ Perspective

• The Generics manufacturing industry is creating cost savings opportunities through new medications but retail pharmacies scooping most of overall net savings

• Generics penetration still represents significant savings opportunities but need to implement cost management strategies

THE FUTURE

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Not to Sound Too Rosy but …

• Generics industry is well positioned to increase market share if:– Help promoting greater use of generic substitution

Introduction of managed formularies Tiered formulary – higher reimbursement for cost-effective

drugs/two-tier pricing structure to further encourage generics

– Cautious about “expected” patent cliffs of coming years– Keep “pounding” the message that generics substitution is

safe and a cost effective way to improve health

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Not to Sound Too Rosy but …

• Generics industry is well positioned to increase market share if:– New marketing techniques to “influence/educate” physicians

prescribing habits and pharmacists – more and more– Innovative ways, i.e. financial rewards, to encourage plan

sponsors to promote generic utilization– Limit the shortage issue compared to brand names– Get involved with “Biosimilars” to ultimately offer alternative

solutions to the biologic drugs– Further lobbying…

Mercer (Canada) Limited