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Canadians Could be Paying Less for Generic Drugs, Competition Bureau Study Finds

Ottawa, October 29, 2007 – Strong competition exists in the supply of many generic drugs, but the benefits of this competition are not reaching the Canadian public in the form of lower prices, the Competition Bureau concluded in a Generic Drug Sector Study released today.

The Bureau found that to compete for space on pharmacies' shelves, generic manufacturers offer rebates or other payments to pharmacies in most provinces. Public sources and information provided by parties interviewed for this study indicate that these are on average 40 per cent of the price the pharmacy is invoiced. Under the present system, in most provinces, pharmacies have limited incentive to pass on these cost savings to those who pay for them - public and private plans, people paying out of pocket, and taxpayers.

“Canadians deserve to reap the benefits of the competition we observed,”said Sheridan Scott, Commissioner of Competition. “This study helps to explain why they are not, and points to possible solutions.”

Pharmaceuticals are the second-largest and fastest-growing source of health care costs in Canada.
Generic drugs play an important part in helping to control prescription drug costs and provide competition for brand-name products when their patent protection ends. Despite this, several studies have found the price of prescription generics to be high in Canada compared to other countries.

Shifting the focus of generic competition from the pharmacies to public and private insurers and consumers could provide Canadians with large savings. In its study, the Bureau says measures for accomplishing this goal may include:

• Providing manufacturers with incentives to compete to be listed on provincial and private plan lists of drugs that will be reimbursed;
• Having plan providers decide which versions of generic drugs will be dispensed at the pharmacy based on a bidding process by manufacturers;
• More in-depth monitoring of the net price paid by pharmacies for generic drugs to ensure the price paid by the plan reflects the rebates given to pharmacies; and
• An increased role for private plans in obtaining lower prices for their customers.

The Competition Bureau will continue its work in the generic drug sector by examining possible options for obtaining the benefits from competition and the impediments to their adoption.

For a summary of the Bureau’s key findings, please refer to the Generic Drug Sector Study Backgrounder.

The Competition Bureau is an independent law enforcement agency. We contribute to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.

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