How low can generic drug costs go?

Local pharmacy weighs in province’s decision on generic drug pricing

  • May. 23, 2013 10:00 a.m.

Everyone likes to save a buck, especially when it comes to pricy prescription medications.

However, some Alberta pharmacists are saying that the government is going too far with its cuts to generic drug pricing.

At the beginning of this month, the new pricing model for generic drugs in Alberta came into effect, making it mandatory for all generic drugs in the province to be sold at no more than 18% of the cost of the brand name drug.

In response to this decision, Jody Shkrobot, Edmonton-based pharmacist and former head of the Canadian Pharmacists Association, presented Health Minister Fred Horne and the Alberta government with a petition containing 25,000 signatures urging the government to reconsider that decision.

During a teleconference regarding the new model and subsequent petition, Shkrobot and others said that the new model will negatively impact patient care and may force some pharmacies to close. One pharmacist said she lost $3,500 from her pharmacy’s revenues in one month alone when the government decreased the generic drug pricing to 35% earlier in the last year.

Ian Fisher, owner of Fisher’s Pharmasave in Lacombe, said that he has not seen any adverse effects due to the current price cuts on his own business as of yet, but expects he will see the impacts of the new pricing model within the next three months.

He added that he has spoken to some pharmacists who have just opened up new stores and are already struggling to make ends meet.

To make up for the lack of income from generic drugs, Fisher said the only thing pharmacists can change in the short-term is labour.

“Ultimately there will be less staff in every pharmacy,” said Fisher. “People will be busier, the phone will ring longer, the lineups will be longer, there will be less time to consult.”

Fisher added this will mean pharmacists have less time to do things like one-on-one patient consults because their time will be spent on the technical side of being a pharmacist, counting pills and dispensing prescriptions.

So far, only some 80 companies have been able to reduce the pricing of their generic drugs to the mandatory 18%. There is something in the area of 4,000 more drugs that still need to be adapted to adhere to the current model.

“Some of the drug companies have kind of rebelled,” said Fisher. He said that some generic drugs are still being sold at 20 to 22% of the brand name drugs. Fisher added that 18% is just too low of a target.

“I think that there is just no money when they go to that 18 per cent,” said Fisher.

Fisher said it might make more sense to only make the top six generic drugs sell at 18%. He said that, because the drugs are so popular they are purchased in large volumes, it makes it easier to sell them at a lower price.

Other drugs are only made by one or two companies and aren’t bought in large enough quantities to warrant being sold at such a low cost. Another possible solution, suggested at the Wildrose teleconference, was that Alberta adopt a similar price model to Ontario, which charges 25% of the brand name price.

Should Alberta be successful in adopting the 18% model, it could also cause problems if there was a drug shortage, as there have been several times in recent years, said Fisher. If drug manufacturers will get the lowest return on their product in Alberta, it makes sense to sell their drugs elsewhere in the country first, making it difficult for Alberta pharmacies to obtain any generic drugs.

“If we are going to be the cheapest in Canada, there will definitely be more of those kinds of situations,” said Fisher. As for pharmacies being able to continue to make a viable income on the sales of brand name drugs, Fisher says that is unlikely as there is a very small number of clients who use brand name medication.

“As soon it’s available, probably 99 per cent of people use the generic brand,” said Fisher.