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  • April 20, 2010

Drug Changes : The Facts

Fair Drug Prices for Ontarians

Ontario is one of the largest purchasers of prescription drugs in the world, but we've been paying some of the highest prices for generic drugs.

Compared to some US states, we pay as much as five times more for some of the most popular generic drugs for diabetes, high blood pressure and other health conditions.

This is money we could put to better use covering more drugs and investing in our health system.

That's why the government is moving to drop the cost of generics by 50%. This would mean :

  • Better access to cheaper medications
  • More choice for people, and
  • A stronger, more accountable health care system.

Simply put, fair drug prices benefit all Ontarians. Ensuring Better Value for Money

Along with increasing Ontarians' access to drugs, getting better value for money spent on these drugs is one of the government's top priorities. Changes brought about by The Transparent System for Patients Act has enabled a significant amount of progress in this regard. In 2004/2005 the annual growth rate of drug program costs was 10%. It is now at 5%. That has translated into savings of more than $1 billion taxpayer dollars since 2006, money we have reinvested into a system that is funding more drugs for more people.

Pricing Agreements

In 2008-09, Ontario invested over $400 million in new drugs, partly due to savings generated through pricing agreements with drug manufacturers. The rising cost of prescription drugs and the use of these products is the biggest challenge facing the province's publicly funded drug programs, threatening their sustainability and long-term viability.

Recognizing this, Ontario Public Drug Programs may negotiate Listing Agreements with manufacturers for brand name products that are listed on the Formulary. These agreements provide fair compensation to manufacturers, while ensuring that taxpayers are receiving the best possible value as well as access to the best possible drugs. Pricing agreements have been signed with 98% of companies that have products under the public drug programs.

Generic Drugs Generic drugs are drugs that have the same chemical composition and provide the same effect as brand name drugs. They become available after brand name drugs come "off patent", which means they stop being protected by their patents. Because generic drugs cost significantly less than brand name drugs, one of the simplest ways to bring drug costs down is to expand access to generic drugs. However, the cost of generic drugs is higher in Ontario and Canada than most other developed countries, and bringing those costs down is one of the government's priorities.

Ontario is already paying less for generic drugs than it did two years ago, and Ontario Public Drug Programs continues to look for ways of obtaining more competitive prices. In 2006, the reimbursement price of generic drugs was set at a fixed 50% of the price of the equivalent brand name product. This means that when a brand name drug that costs $10 comes off patent and a generic drug is created, that generic drug will cost no more than $5.

The government has also expanded the use of generic drugs by changing the rules regarding what is called "interchangeablity." Once a generic drug is listed on the formulary it is designated "interchangeable" with the brand-name drug already listed on the formulary. That means that when patients go to their pharmacist to fill a prescription, the pharmacists dispense the cheaper generic equivalent. That costs Ontario's public drug program, and Ontario taxpayers, much less money.

But there are also many brand-name drugs that are not listed on the formulary, but available for physicians to prescribe, provided patients pay for them directly or through private or employer plans. Previously, the generic equivalents of these drugs were not designated as interchangeable with the brand drug. The Transparent System for Patients Actchanged that by bringing in what is called "Off-Formulary Interchangeability." Since that change, 262 new generic drugs have been listed under Off-Formulary Interchangeability classifications, resulting in estimated savings of $30 million for employers who fund private plans and cash-paying Ontarians.

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