MONTREAL – The cash-strapped Quebec government’s move earlier this week to lower generic drug prices has ignited a debate that risks spreading across the country.
In its latest bid to reduce health-care spending, the province plans to introduce a tendering system to decide which generic drugmakers would become exclusive suppliers for specific medications.
Quebec is the fourth province to take a stab at implementing such a bidding system after unsuccessful attempts several years ago in Saskatchewan and Ontario. British Columbia launched tenders for seven drugs earlier this year.
Although generic drug prices have decreased significantly in recent years, Quebec Health Minister Gaetan Barrette said the province is still paying far too much.
“We believe we can get significant savings if we go through a group purchasing process,” he said in an interview Friday, adding lower prices would also be passed on to private insurers.
The minister declined to provide details of the process, including how many drugs would be subject to tendering or potential cost savings. But he believes other provinces will be watching very closely and will follow suit if the effort is successful.
“The issue here is about public finances and the capacity of provincial governments to provide drugs at a price that we can afford. It is a very, very significant issue across this country.”
But Quebec’s association of pharmacy owners says it is prepared to launch “a big battle” against changes that it says would hurt local drug manufacturers and cost pharmacies, threatening the survival of some.
“It’s dangerous how the minister has simplistic solutions to complex problems,” said Jean Thiffault, president of the association quebecoise des pharmaciens proprietaires.
Thiffault said he believes low-cost manufacturers in India or China would likely win the tenders, addling that Quebec pharmacists have suggested alternative ways to achieve savings that don’t run the risk of leading to shortages or quality issues.
Barrette said he disagrees with the association’s position but is prepared to deal with its concerns.
“There are ways to prevent any financial harm in the process,” he said, refusing to say if that would involve financial compensation.
Previous moves to lower drug prices prompted large protests at legislatures in Ontario and Alberta. But Mike Law, associate professor of the University of British Columbia’s School of Population and Public Health, believes Quebec has the greatest chance of succeeding and it could prompt other provinces to follow.
“Were this to succeed and other provinces to follow, you’re potentially talking about hundreds of millions of dollars in public sector savings every year,” Law said in an interview from Rwanda, where he is on sabbatical.
In a 2013 study, Law found that 90 per cent of the top 82 generic products were less expensive outside Canada. New Zealand launched drug tendering in the late 1990s and the move as been copied by several countries in Europe, as well as in Australia and by the U.S. Veterans Affairs Department.
About $4 billion is spent annually on generic drugs in Canada, representing 65 per cent of prescriptions filled and 25 per cent of dollars spent. Quebecers spend the most on prescriptions but use the lowest number of generic alternatives.
The Canadian Generic Pharmaceutical Association said Quebec’s tendering proposal is “inconsistent” with the tiered pricing framework adopted across the country.
“Tendering is a risky approach in Canada with the potential for exacerbating drug shortages, delaying the introduction of new cost-saving generic medicines, and reducing jobs and economic activity in the generic pharmaceutical sector in Quebec and Canada,” it said in an email.
University of Calgary economics professor Aidan Hollis said savings from tendering could be offset by delays in getting generic medications to market. Without the incentive of being first on the market, generic companies may avoid launching legal battles with patented drugmakers.
The current formula results in high profits on some drugs and minimal or no profits on others, said Keith Howlett of Desjardins Capital Markets, who described Quebec’s legislation as a “surprise proposal.”
He said it would hurt Jean Coutu’s Pro Doc generic manufacturing business. Pro Doc is the legal manufacturer of many of the most profitable drugs, often subcontracting production to others.
Jean Coutu (TSX:PJCA.A) declined to comment. Its shares sunk to a 29-month low at $17.50 in Friday trading on the Toronto Stock Exchange.