Pushing Drug Plans

bh IN BRIEF

A slate of singular though important changes affecting drug plans has occurred across Canada in recent months. Three older brand-name drugs have replaced their formerly low-cost generic competitors in both public and private plans. The BC and Ontario governments are making their own deals with brand-name manufacturers. And pharmacists are passing on the cost of concessions either negotiated or thrust upon them to employers and plan members.

Employers may not be aware of the effects these changes will have on their plans, even if those changes have occurred in another province.

Over the last decade, various blockbuster drugs have come and gone, biologics have established themselves and will continue to grow, and paying for cancer drugs will increasingly challenge payers whether public or private. But that's old news. Recent market developments indicate a much more fluid environment for drugs and private drug plans.

Here are some of the changes:

1. Zyprexa™, an anti-psychotic drug known as olanzapine, was genericized last year. But in late 2007, it was revealed in documents of the Supreme Court of British Columbia that Pharmacare and Eli Lilly, the brand-name pharmaceutical company, have a "confidential agreement", but no further details were released. This appears to make Lilly the sole supplier of olanzapine for BC Pharmacare beneficiaries. The generic is available elsewhere in Canada at a 25% discount to the brand product.

Comment: Similar to Ontario, transparency and the public interest must be questioned. Will employers and patients pay the same presumably lower price as the government, and if not, why not?

2. There are many generic competitors to GlaxoSmithKline's well-known ulcer product, Zantac™. Between the April 2007 and January 2008 editions of Alberta's Drug Benefit List, GSK slashed the price of its product. For example, the 150 mg version went from $1.1676 to $0.18, undercutting eight generic products all priced at $0.4042. The price has also been lowered in Atlantic Canada, but not yet in Ontario, where the price actually increased slightly to $1.1676 from $1.1447. The generics all remain at $0.4042.

Comment: There is no longer a stringent one-price rule for all products, and for now, Ontario residents and private plan members are paying more than Albertans. Aggressive price changes to older brand products can undercut generic prices that tend to be higher in Canada than elsewhere. Such action can restore dominant market share for the original manufacturer, though not revenue.

3. In April 2007, Ontario's Transparent Drug System for Patients (TDSP) Act, formerly known as Bill 102, introduced an arbitrary reduction in how much the government would pay for generic drugs. The new level is 50% of the brand-name cost, but this rule does not apply to the first generic on the market. It also began a series of secret (vs. "transparent") negotiations with brand-name drug companies to seek "list" price rebates for the government.

Comment: Companies and individuals do not benefit from these negotiations, and may in fact pay more to pharmacies to compensate. The government plan will save money, but transparency and fairness are lacking.

4. In January 2008, Green Shield issued a Bulletin in response to significant (20% – 90%) price increases for 30 popular generic antibiotic products, and the subsequent decision by the Ontario Drug Benefit Plan to no longer pay for those products. Just one generic product remains ODB-eligible in each of the five classes of antibiotics.

Comment: Price increases of that magnitude should be resisted, but keeping just one reference product ODB-eligible makes pharmacy inventory management tough in the short-run. If that product is out-of-stock, the substitute will be more expensive.

5. In December 2007, Medavie Blue Cross announced a "preferred arrangement" with Abbott Labs regarding their antibiotic Biaxin™. The brand-name product has replaced all generic 250 mg and 500 mg versions on its standard formulary plans in Atlantic Canada only.

Comment: Medavie's ASO and experience-rated clients will benefit directly and in full from the price reduction. Patients will pay the full list price of Biaxin™, which according to Medavie will cost them $2 – $4 more per 10-day script. While not published, the price offered Medavie's clients is not exclusive. Pharmacy has aggressively resisted this trial arrangement because it is inconsistent with the provincial plan mandatory generic substitution rules, and because they risk losing volume-based discounts and free product from generic manufacturers.

Overall, these changes point to greater risk-taking and experimenting in the prescription drug market. Governments are aggressively moving to control costs, and both brand and generic drug companies are struggling for market share and revenue. Pharmacies are shifting costs to private payers to limit the financial damage of reduced generic sales revenue to provincial plans.

Your insurer, pharmacy benefit manager, and advisor are monitoring these changes. It's a great time to strike up a conversation and stay current.