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August 2010
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Drug reform and what’s the buzz!

Monday, August 23, 2010 @ 06:08 PM

I was a key note speaker this past week at the International Foundation of Employee Benefit’(IBEF) Conference on Public Sector Pensions and Benefits.  It was a well attended conference  in picturesque Whistler BC, with delegates from across Canada and Chaired by Murray Gold – the most experienced legal expert, in my opinion,  in Canada on pensions and benefits.

My message was clear – the sustainability of drug benefit plans is in jeopardy IF plan sponsors, consultants, employers and employees don’t recognize that the status quo with respect to drug pricing, plan design, formulary management and prescription drug distribution is no longer an option.  There are other ways to look at predictable and sustainable savings for plans –  and they my include some tough medicine for traditional business approaches to the practice of pricing, dispensing, adjudicating and distributing generic prescription drugs.

The thesis I purport is that the current practice of two tiered drug pricing  (one for the public sector and one for the private sector) and one which I may have helped to initiate on the first place in my former role, is the rationale for the reform measures under consideration and adopted in several provinces.  The measures are not unique to Canada – several G20 nations have adopted drug reform to manage burgeoning costs of prescription medications.  In Canada, the increase of generic medications to replace branded medications whose patents have expired has created a profit boon for chain pharmacy.  What was widely unknown or ignored by plan sponsors or designers is that, in some cases, the massive rebates paid to chain pharmacy actually contributed to the higher costs Canadians paid for the generic medications that they believed  would help save money.  The head of the Competition Bureau of Canada reckoned that some $800 million (Cdn) is paid to pharmacy to dispense certain generic molecules over others.  The net result is that annualized increases in drug benefit plan premiums and drug prices have plagued the system across Canada for years.  Finally, governments are waking up to that reality and doing something about it.  The province f Ontario passed legislation in June to lower generic drug prices over tome to 25% of the brand. The province of BC has followed suit with an agreement to lower prices to 35% of brand in a similar timeframe.  Obviously these reforms have jurisdiction in the public sector plans and, in the case of Ontario, the private sector too. The truth is, the rebating game may never end.  What ever organization controls the means of  distribution and dispension controls the price(s) plans and organizations will pay.

The IBEF is on the right track rigorously educating its membership as to this reality and the options available to them.  For my part I will continue with advocating on behalf of private sector multi employee organizations –  it’s  the right thing to do.

- Marc Kealey
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