Generic Drug Prices in Canada Drop by Almost 40%

The real story behind the sudden drop in Canada's drug prices

CBC News 

The industry group representing Canada’s generic drug makers announced Monday they had

reached a new pricing deal with the federal, provincial and territorial governments (except Quebec).

(Tero Vesalainen/Shutterstock)

Big Pharma blinked. But why?
By Vik Adhopia

Something unprecedented happened this week in the opaque world of Canadian drug pricing.

Some generic prescription drugs just got a lot cheaper for everyone — and the actual prices are no longer a secret. The sudden price cut is a big deal because Canada is near the top of the list in drug spending per capita compared to other industrialized countries.

The news broke on Monday when the industry group representing Canada's generic drug makers, the Canadian Generic Pharmaceutical Association, announced they'd reached a new pricing deal with the federal, provincial and territorial governments (except Quebec).

The deal means lower prices for 70 of the most commonly prescribed generic drugs. These drugs cover conditions such as high blood pressure, depression, high cholesterol, epilepsy and heart conditions. And they will be 25 per cent to 40 per cent cheaper as of April 1.

But why would Big Pharma suddenly agree to lower prices? Fear of something worse?

Part of the story is the power of bulk buying. For the last few years, provincial governments have been negotiating together, using the clout of their collective bulk buying power to lower prices they pay under public drug plans. (Those plans usually cover seniors, Ontarians under 25, welfare recipients, Indigenous people, Mounties and military personnel.)

But negotiations were different this time. The governments brought a big stick to the table — the threat of tendering. Tendering happens when governments spend tax dollars to buy goods, from office chairs to fighter jets. They make sellers submit offers, to see who can offer the lowest price. However, governments don't do this when they buy drugs. At least not in Canada.

But thanks to Quebec, the rules of the game changed last year.

Frustrated by escalating health plan costs, Quebec decided it would play hardball with generic drug companies by making them submit tenders for the most commonly prescribed medications.

"And everybody started to panic," said Marc-André Gagnon, a pharmaceutical policy researcher at Carleton University.

The drug companies knew that once Quebec got drug discounts, the rest of the provinces would want a similar deal. And that would start a cascade, with private insurance plans and people with no drug insurance also demanding lower prices.

In the end, Quebec didn't have to resort to making companies compete with each for the lowest price. The generic companies blinked. They voluntarily lowered their prices. And for the first time they published the true prices — which are normally kept confidential, so that no one is certain what anyone else is paying.

"Just the threat of tendering made all generics manufacturers get together and say 'OK we agree to reduce prices by 38 per cent across the board,'" said Gagnon.

"Whether they are covered under a public/provincial drug plan or an employer-sponsored drug plan or if they have no drug plan at all — the new prices apply to them," said Jeff Connell, vice-president of corporate affairs for the Canadian Generic Pharmaceutical Association.

So what do the generic drug companies get in return for dropping their prices? They don't have to worry about being forced to compete with each other during the five years that the deal is in place.

"We know what the rules are, we know what the prices are … so that's important," Connell said.

But are we getting the lowest prices possible for these 70 drugs?  Not compared to New Zealand which is noted for its skill at squeezing the lowest prices out of drug companies with its competitive bidding process, although there are drawbacks.

When we compared the new Canadian prices with New Zealand's list, we found many examples where Canadians will still pay two to 10 times more than the New Zealand government under its universal drug plan.

All of that suggests that prices are lower when companies are forced to compete and submit tenders. And that's why generic companies will probably blink again in five years when the new deal expires.

This is great, although it seems it could have been better still. Also, it has nothing to do with non-generic drugs which pharmaceutical companies can use to bleed us dry. It's a good step, but a humble start to a long journey.

Here's how some of the Canadian and New Zealand drug prices compare under the new deal:

Generic Drug                 Condition     New Canadian Price/100 pills  New Zealand Price/100 pills

Atorvastatin 80mg   High cholesterol                $23.42                                      $6.58 Cdn

Amlodipine 5mg   Blood pressure/Heart           $13.43                                      $1.21 Cdn

Metformin 850mg     Diabetes - Type 2               $3.39                                       $1.42 Cdn

Candesartan 32mg      Blood pressure               $22.81                                     $10.75 Cdn

Olanzapine 10mg Depression/Schizophrenia    $70.88                                       $5.35 Cdn

Finasteride 5mg    Prostate Enlargement          $41.38                                       $4.37 Cdn