British Columbia Lowers Generic Drug Prices
On July 8, 2010, British Columbia Health Services Minister Kevin Falcon announced that a new Pharmacy Services Agreement had been signed with the B.C. Pharmacy Association and the Canadian Association of Chain Drug Stores.
The new agreement came into force on July 28, 2010, and will remain in force until March 31, 2013.
Under the agreement, generic drug prices will be lowered for public and private plans, as well as for customers who pay out of their own pockets. In addition, the agreement provides for an increase in the Pharmacare dispensing fee and allowable drug mark-up.
Generic Drug Pricing
Currently, generic drug prices in B.C. are approximately 65% of the brand name price. Over the next three years, generic drug prices will be subject to price reductions.
|Effective Date||Drugs Affected||Price Change|
|July 28, 2010||Generic drugs added to the
Pharmacare formulary since
|A cost reduction factor equal to the
difference between the
manufacturers’ list price for the
drug and 42% of the brand name
price will be applied to the generic
|October 15, 2010||New Generics
Generic drugs included on the
Pharmacare formulary prior to
January 1, 2009
|42% of brand name price
Reduced to 50% of brand name
|July 4, 2011||All generics||Reduced to 40% of brand name
|April 2, 2012||All generics||Reduced to 35% of brand name
In an effort to subsidize the reduction in revenue from generic drugs, the agreement provides for an increase in the Pharmacare maximum dispensing fee from the current $8.60.
|Effective Date||Maximum Dispensing fee|
|July 28, 2010||$9.10|
|October 15, 2010||$9.60|
|July 4, 2011||$10.00|
|April 1, 2012||$10.50|
In addition to increasing the maximum allowable dispensing fee, the agreement provides for the maximum drug mark-up to increase from the current 7% to 8% as of October 15, 2010.
The “mark-up” is the percentage that is added to the manufacturer’s price by the pharmacist to cover such items as the pharmacist’s profit.
Potential Impact of the B.C. Agreement
It is expected that the regulation of generic drug prices in the private market will have a positive impact on drug costs.
However, the provision for an increase in the maximums for dispensing fees and mark-ups under the public plan could result in pharmacies increasing both dispensing fees and mark-ups in the private market, which could reduce savings from the reduction in generic drug costs for private payers.
Therefore it is too early to state what the possible level of cost savings for plan sponsors will be as a result of the reduced generic drug pricing.
For more information on the changes to the B.C. Pharmacare Program, go to the B.C. Pharmacare site at: http://www.health.gov.bc.ca/pharmacare/newsletter/10-007news.pdf
If you have any questions about the changes to the British Columbia Pharmacare Program and the impact on your group benefits plan, contact your benefits advisor or your Industrial Alliance group account executive.