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VANCOUVER (Reuters) - British Columbia and the pharmacy industry unveiled an agreement on Friday they said will cut generic drug prices and avoid the battle that erupted after Ontario slashed prices there.
Prices for generic drugs will be capped at 35 percent of that of the equivalent brand name drug, down from the current average of 65 percent. The lower prices will be phased in over three years.
The change is expected to lower health care costs in British Columbia, Canada's westernmost province, by C$380 million ($369 million) annually.
Prices for brand name drugs in Canada are federally regulated, but there have long been complaints that Canadians pay more for generic drugs than do residents of other countries.
"It is indisputable that generic drug prices in Canada need to be lower," British Columbia Health Services Minister Kevin Falcon said in a joint news conference with representatives of the drugstore industry.
Pharmacies will be partly compensated with an increase in the fee the province pays them to dispense drugs, and by allowing them to offer more clinical services to customers.
Falcon and industry representatives both said that reaching an agreement was not easy, but they wanted to avoid the kind of fight that would have erupted had the province unilaterally legislated the price cuts.
Ontario triggered a nasty fight with drugstore chains such Shoppers Drug Mart Corp this year when it slashed the price of generics to 25 percent of branded equivalents and eliminated the rebates stores receive from the drug makers.
Quebec health officials have warned the industry that its laws require generic drug prices there to be the lowest in Canada, and analysts have said that could hurt drugstore chain Jean Coutu Group Inc..
"I did not want to do a legislated deal as was done in Ontario," Falcon said.
Representatives of the retailers said British Columbia's agreement recognized they need to make a fair profit on generic drugs, especially to support stores in rural areas.
The Canadian Generic Pharmaceutical Association, which represents the manufacturers, said it supported the agreement, which it said recognized that it was the stores, not the drug makers, that were mostly responsible for higher prices.
"The generic industry itself is quite competitive," said Jim Keon, the association's president.
"What happened was that there were competitive prices going into pharmacies but because of price regulations those prices weren't necessarily being passed on," he said.
Keon said the industry would still like the province to allow higher prices for new generic drugs, to cover the costs of bringing them to market.
He also said that with consumers now paying less for generic drugs, stores can expect to receive smaller rebates from drug makers when they negotiate supply contracts.
Major drug store chains in British Columbia include Shoppers Drug Mart, Pharmasave and London Drugs.
Reporting Allan Dowd; editing by Rob Wilson