Upcoming legislative changes that will affect the cost of generic
drugs, and how this will impact private plans
MONTRÉAL, Aug. 9 /CNW/ - Recently the media confirmed the government's
intention to require manufacturers of generic drugs to sell their
products at a maximum of 25% of the price of the original drugs.
Therefore, if one tablet of an original drug costs the pharmacist $1.00,
the generic copy must cost a maximum of 25cents. The current maximum is
60% for the first generic copy and 54% for subsequent copies. This
information may lead one to believe that the resulting reduction in
costs will in turn reduce drug insurance premiums for private plans.
On the one hand, it is important to understand that, as an incentive for
the pharmaceutical research industry, the RAMQ fully reimburses original
drugs for a period of 15 years from the drug's registration date on the
RAMQ formulary (BAP + 15 rule), even if a generic alternative is
available at half the cost. This protection is granted in addition to
the protection that is conferred by the federal patent law. Once this
protection expires, the RAMQ limits its reimbursement of the original
drug to the price of its generic counterpart, regardless of the 68%
minimum rule governing the Basic Prescription Drug Insurance Plan
(Régime général d'assurance médicaments - RGAM). A policyholder who
wishes to buy the original drug must pay the difference between the
price of the original and the price of the generic drug.
This same law prohibits private plans from adopting the same control
approach as the RAMQ. Indeed, private plans are obligated to
reimburse an original drug at a minimum of 68% of the amount claimed,
even if the generic drug is sold to the pharmacist at a maximum of 25%
of the price of the original. Therefore, the current rules governing
the RGAM deny private plans a significant portion of the savings
associated with generic drugs.
On the other hand, the price paid by the RAMQ is determined according to
an agreement that is negotiated between the government and the
Association des pharmaciens propriétaires du Québec (AQPP). The
"ingredient cost + 6% (maximum $24.00) + $8.41 in fees" algorithm
guarantees that prices do not fluctuate among pharmacies, and that the
RAMQ automatically benefits from any price reduction. So far, the
government has refused to let private plans benefit from its agreement
with the AQPP. Free competition is the only factor that restricts
pharmacists in terms of the prices they can charge to patients who are
covered by private plans.
According to Johanne Brosseau, Senior Consultant for Aon in Montréal:
"This explains why the amount that is charged to a policyholder is often
higher than the amount that is charged to the RAMQ for the same drug at
the same pharmacy. In addition, prices for the same drug vary from one
pharmacy to the next, and actual competition among pharmacies exists
only if policyholders are aware of this fact."
The amount charged for a generic drug that is purchased at a lower price
does not necessarily translate to a reduction in the amount charged to
policyholders who are covered by private plans. There is some concern
that pharmacists will take advantage of this situation in order to
compensate for the loss of revenue resulting from the sale of drugs to
RAMQ policyholders, and reduced rebates paid by generic manufacturers.
Ms. Brosseau warned that, unless the government amends the Act with
respect to the minimum reimbursement of 68% imposed by the rules
governing the RGAM, and unless private plans introduce appropriate
control measures, which several Aon clients have successfully done in
Québec, the benefits for private plans of reducing the cost of generic
drugs to 25% will be negligible compared to those enjoyed by the RAMQ.
Ms. Brosseau reiterated that, in 2005, Aon formed an association of
private plan sponsors for the purpose of speaking out against these
inequities in a brief respecting the draft Drug Policy that was
presented to the Commission des affaires sociales
(in French)- Association of Private Plan Sponsors, May 11, 2005 /Length:
To date, the government has turned a deaf ear, and we must ask why the
organizations that are responsible for defending the rights of employers
and unions have not insisted on securing the reforms that have become
necessary since the introduction of the RGAM in 1997. "We hope that
employers and unions will now mobilize and join this association with a
view to bringing about the necessary changes and obtaining the right to
use the same tools as the RAMQ in order to control the cost of private
drug plans in Québec."
About Aon Consulting Canada
Aon Consulting is one of Canada's leading integrated human capital
consulting and outsourcing firms. Our more than 800 Canadian
professionals in 12 offices coast-to-coast offer benefits, talent
management and rewards strategies and solutions to help clients attract,
retain and develop world-class talent. Driven by inspired and
independent thinking, Aon Consulting is committed to delivering
innovative and personalized business solutions with tangible value to
help clients shape their organization into the workplace of the future.
For more information, visit http://aon.ca.
SOURCE AON CONSULTING CANADA
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