Ontario should scrap its ban on pharma kickbacks to even playing field, independent pharmacies say

Ontario should scrap its ban on pharma kickbacks to even playing field, independent pharmacies say

A coalition of more than 1,550 independent pharmacies is asking the Ontario government to consider scrapping regulations put in place to keep down the prices of generic prescription drugs.

The anti-kickback regulations, first introduced in 2006, ban drug companies from paying pharmacies “rebates” as an inducement to stock their prescription medications. The government reasoned these payments unfairly inflate the price consumers pay for prescription drugs.

In a letter recently sent to the premier, the coalition says a rollback of the regulations would level the playing field if the Ford government goes ahead with its proposal to allow large pharmacy chains to sell their own, private-label, generic prescription drugs.

A previous Liberal government had barred private labels — when pharmacy chains slap their own logo on generic prescription pills made by other companies — because they offered corporations a back door to “circumvent” the anti-rebate regulations.

Small community pharmacies, which don’t have the sales volume to justify the expense of a private label, say if the Ford government lifts only the restrictions on private label drugs, they will be at a disadvantage as they will still be handcuffed by the strict rebate rules.

“Those restrictions are unnecessary red tape regulations that have been introduced in Ontario under the previous government and since then have created a significant burden on pharmacy operators,” the independent pharmacies letter reads.

The letter encourages Ontario to align itself with other provinces, “where there are no restrictions related to the business relationships between pharmacies and manufacturers.”

One of the architects of the regulations says they have helped public drug plans save hundreds of millions in taxpayer dollars.

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Here’s how a rebate worked: If a pharmacy bought a pill from a drug manufacturer for $1 (a price set by the government) the pharmaceutical company could rebate — or pay back — the pharmacy 80 cents as incentive to stock its product over a competitor’s. This would make the actual cost for the pharmacy 20 cents — about a fifth of what will ultimately be charged to a public drug plan or private insurer.

In 2010, the province introduced related regulations, these ones prohibiting pharmacy chains from selling their own “private-label” prescription drugs that were made by another company. A large chain could essentially give itself a massive rebate behind closed doors while billing public drug plans or other payors full price, the province said.

The regulations sparked a high-stakes court battle between the province and two chains: Shoppers and Rexall. In 2013, the Supreme Court of Canada ruled that the private label ban was a legitimate tool in the quest to reduce drug costs.

Fast forward to October 2018, when Premier Doug Ford’s government proposed reducing the “regulatory burden for private label companies” by removing the requirement that a private label company must actually fabricate its medications. A spokesperson from the premier’s office said no decision has yet been made.

The change would make it easier for pharmacy chains to dispense prescriptions under their in-house brands (but which are made by another company) and get those drugs covered under public drug plans.

The change would also threaten the commercial viability of independent pharmacies across Ontario, said pharmacist Ben Shenouda, a signatory of the letter and executive director of a buying group representing 360 independent pharmacies.

“If you allow private label, you must scrap the rebate restriction because we’d like to be able to compete with the chains,” Shenouda said.

The province already protects consumers by regulating the price of medications, he said, so it should “leave the market open” and let drug manufacturers and pharmacies work out the commercial transaction amongst themselves.

In a statement, a spokesperson from Loblaw, which owns Shoppers Drug Mart, said removing restrictions of private labels “would result in fewer drug shortages” by allowing more companies to bring generic products to market, and offers “the potential for significant savings for payors.”

McKesson, a drug wholesaler that now owns the Rexall chain but also supplies products to many independent pharmacies, said lifting the private label ban would also offer supply stability.

Sivem, McKesson’s private label sold in other provinces, is currently the only generic supplier for three medications currently in shortage, a spokesperson said.

The premier’s office would not say if the province is also considering lifting the prohibition on rebates.

Helen Stevenson, former assistant deputy health minister and an architect behind the anti-rebate and private label regulations, questions how the public would be better served doing away with the restrictions.

“The policy reason behind it was keeping taxpayers’ interest at heart,” said Stevenson, now the CEO of Reformulary Group, a health care technology company. “We, the Ontario drug benefit program, are the largest payer in Canada. If anyone is going to get the benefit of lower prices, it should be us.”

Jesse McLean is a Toronto-based investigative reporter. Follow him on Twitter: @jesse_mclean

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