Following the lead of Ontario (See, BLG Life Sciences Advisory - 2010 Ontario Drug System Reforms), British Columbia has taken steps to further reform its provincial policy with respect to pharmaceuticals. On July 7, 2010, the B.C. Ministry of Health Services (the "Ministry") announced that it had entered into an agreement with the B.C. Pharmacy Association (the "Association") and the Canadian Association of Chain Drug Stores (the "CDCDS") that will result in up to $380 million of annual savings for the Province (the "B.C. Agreement").
2008 Pharmaceutical Task Force Report
The B.C. Agreement implements some of the recommendations of the 2008 Pharmaceutical Task Force Report ("Task Force") with respect to procurement and service delivery options for pharmaceuticals.
Among other things, the Task Force recommended that the Pharmaceutical Services Division of the Ministry initiate a negotiation process with drug manufacturers and representatives of community pharmacy and pharmacists to establish price and reimbursement arrangements, and increase competition in respect of generic pharmaceutical products. In addition, the Task Force recommended that to increase the level of overall funding transparency, negotiations with pharmacists and community pharmacy should provide for a new framework for compensation in respect of dispensing and other professional services provided by pharmacists.
The B.C. Agreement
The key objectives of the B.C. Agreement are to reduce the cost of generic drugs to both the public and private markets in B.C. and, at the same time, to make provision for pharmacy to become less reliant on rebate revenues received from drug manufacturers. The B.C. Agreement can be seen as a successor to the interim agreement dated December 12, 2008 between the Ministry and the Association.
Generic Drug Pricing
Beginning on October 15, 2010 until April 2, 2012, the maximum accepted list price for all generic drugs, subject to B.C.'s lowest cost alternative policy, will be 50% of the branded list price for an existing generic drug and 42% for a new generic drug. Effective July 4, 2011, the maximum price for both existing and new generic drugs will be reduced to 40%, and effective April 2, 2012, the maximum price will be reduced to 35%. There is provision for the Province to grant exceptions to the maximum price regime set out above.
Fees and Drug Mark-Up
The maximum dispensing fee established by the Province to be reimbursed by PharmaCare will be increased to $9.10 effective July 28, 2010 (from $8.60 currently), and further increased to $9.60 effective October 15, 2010, to $10.00 effective July 4, 2011, and to $10.50 effective April 2, 2012.
Effective October 15, 2010, the Province will reimburse brand and generic drugs eligible for PharmaCare coverage to a mark-up of 8% of the manufacturers list price (from a maximum of 7.0% currently). It is noted that the Province intends to consult with wholesaler and manufacturer representatives prior to October 15, 2010, for effect by April 1, 2011, to establish a limitation on the maximum value of the mark-up reimbursed on any claim.
Additional Pharmacy Recoveries
Effective October 15, 2010, the Province will increase the capitation-rate paid to pharmacies providing services to long-term care facilities to a maximum of $43.75 per serviced bed for PharmaCare recipients.
Also commencing October 15, 2010, pharmacies that participate in the Province PharmaCare program will not be permitted to charge beneficiaries receiving full Pharamcare coverage any additional co-payment for full benefit medications.
Further, the Province intends to enhance and expand its Rural Incentive Program for pharmacies (single pharmacy outside a 30 km radius of another pharmacy in rural B.C. that dispenses up to 1,700 PharmaCare prescription claims a month).
Finally, the Province announced plans to transform the current pharmacy service model to "optimize" therapeutic patient care and outcomes, and invest up to $35 million over the next three years into new clinical pharmacy services.
The Pharmacy Service Agreement establishes an Agreement Management Committee with representatives of the Province and the B.C. Pharmacy Association, as well as a Joint Agreement Committee that includes representation of the Province, the B.C. Pharmacy Association and the CACDS.
The B.C. Agreement, like the recent changes in Ontario, seeks to regulate generic drug prices in both the public and private markets. In Ontario, the regime is embedded in regulations. In B.C., the approach is to establish new requirements through an agreement with certain key participants in the drug system.
While both the B.C. Agreement and the Ontario regulations extend the revised pricing regime for generic drugs for the public market to the private market, there is no such extension of the public market limitations on drug mark-ups and dispensing fees to the private market. In addition, B.C., unlike Ontario, has decided to not attempt to regulate rebates provided to the pharmacy sector by generic drug manufacturers.
The process of reforming the provincial drug systems that began with Bill 102 in Ontario in 2006, with subsequent encouragement from the Competition Bureau, is continuing. A number of other Canadian provincial jurisdictions, including Quebec and Alberta, are engaged in pharmaceutical policy review processes, assessing the status of current requirements and the impact of the changes being made in jurisdictions such as B.C. and Ontario. At the same time, group benefit plan sponsors and their advisors are engaged in the assessment of the impact of recent and pending changes to provincial pharmaceutical policy. The recent changes in Ontario and B.C. are a clear acknowledgement that Governments recognize that they must extend to the private market some of the generic drug price protections being established for the public market.
Finally, the impact of changes to various provincial pharmaceutical policies on the pharmacy sector cannot be overstated. The fact that the changes in B.C. were achieved through negotiation with representatives of pharmacists and community pharmacy is worthy of consideration by other jurisdictions.
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