January 18, 2013 / 10:35 PM / 5 years ago

Canada provinces set strict caps on generic drug prices

TORONTO (Reuters) - Canada's provinces and territories have agreed to tighter caps on the prices of six of the most widely prescribed generic drugs, and that's just the beginning of a coordinated effort to hold down costs, Saskatchewan Premier Brad Wall said on Friday.

Aiming to cut high cost of generics for private and government health programs in Canada, the jurisdictions will allow drugstores to charge no more than 18 percent of the price of the brand-name equivalent.

"This is a start. There's a lot more work that can be done on generics," Wall, the Prairie province's top elected official, said in an interview with Reuters.

The new price restrictions - set by an interprovincial policy group that Wall leads with Prince Edward Island Premier Robert Ghiz - are likely to ratchet up pressure on Shoppers Drug Mart Corp and other big chains.

Canadian pharmacies are already feeling the impact of efforts by individual provinces to cut generic drug prices. Shoppers Drug stock dropped 5 percent on Friday afternoon.

Wall said he and Ghiz would discuss next steps with health ministers this spring.

"We'll say, let's move again on the next tranche of generics, perhaps, but let's engage with industry. Maybe it's not a price point - maybe industry has some ideas," he said. "So I don't think we'll rule anything out."

The agreement is the first coordinated effort in a broad push by individual Canadian provinces to cut the prices they pay for generic drugs. The changes began in Ontario and spread, to varying degrees, across the country.

The working group said in July that it would start by cutting the costs of three to five generic drugs, but Wall said they made more progress than expected.

The province of Quebec is not participating in the initiative, although Quebec already matches its prices to the lowest rates available elsewhere in Canada.

The Canadian Association of Chain Drug Stores said it was pleased the provinces had stopped short of setting up a national bidding process for generic drugs, the mechanism proposed in July. Still, the industry group said it was concerned about the price caps.

"Prescription drugs provide the greatest value to improving the health of Canadians and reducing future healthcare costs," said the group's chief executive, Denise Carpenter.

The first group of six drugs accounts for 20 percent of public spending on generic drugs in Canada, the provinces said in a statement. Current caps limit payments to between 25 and 40 percent of the branded equivalents. The new rates will take effect in all participating jurisdictions by April 1.

Previous reforms curbed the growth of prescription sales at Shoppers Drug Mart and Quebec-based rival Jean Coutu Group Inc.

HIGH GENERIC DRUG PRICES

Canada has a reputation for relatively cheap brand-name prescription drugs. However, a flurry of studies in the mid-2000s found its generic drug prices were unusually high.

Under Canada's taxpayer-funded medical system, provincial governments spend billions of dollars a year on drug programs for the elderly and for people with low incomes or particularly high costs, and high deficits have fueled the drive to cut costs. The statement said governments may save up to C$100 million a year once the new caps are in effect.

The six drugs are atorvastatin, the generic version of Pfizer Inc's cholesterol-lowering Lipitor; ramipril, a blood pressure medication; venlafaxine, the generic version of antidepressant Effexor; amlodipine, a cardiac drug; and omeprazole and rabeprazole, both used to treat ulcers and acid reflux.

Shares of Jean Coutu closed down 3.6 percent at C$14.89 on the Toronto Stock Exchange on Friday. Shoppers Drug Mart dropped 5.2 percent to C$41.83.

Editing by Frank McGurty, Dale Hudson, Janet Guttsman and Peter Galloway

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