Monday, 17 May 2010

Canada - What effect will recent pricing changes in Ontario have on the generic pharmaceutical industry?

There is concern that generic price cuts will make it harder for manufacturers to produce low-cost generic medicines currently on the market, not to mention develop and manufacture new ones.

In April 2010, Ontario announced plans to reform its prescription drug system, including cutting the price of generic drugs to 25% of the cost of the brand-name originator, and ending the practice of professional allowances paid to pharmacists by generic drug companies, often used for rebates instead of patient care. Other provinces are expected to follow Ontario’s lead with these new measures.

Ontario officials have dismissed claims that the new regulations will lead to job cuts, shorter opening hours and store closures. However, the Canadian Generic Pharmaceutical Association (CGPA) has expressed concern that the generic price cuts could undermine the ability of manufacturers to produce and supply low-cost generic medicines currently on the market, as well as developing and bringing to market new ones. The CGPA is also concerned that the moves could jeopardise jobs within the industry. In addition, Shoppers Drug Mart, the largest pharmacy chain in Canada, has claimed that the withdrawal of professional allowances would force it to close stores and shorten opening hours. Shares in the company have fallen by 12% since the government’s announcement.

Further reading - An in-depth analysis of the Canadian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Canada (published May 2010)

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