Increased Cooperation between Generic Pharmaceutical Industry and Private Sector Payer Community Could Yield Significant Benefits

The Canadian Generic Pharmaceutical Association (CGPA) and its member companies have made it an important priority to be more active in reaching out to the private payer community across Canada. It is our strongly held belief that the generic pharmaceutical industry can do more to support the private payer community in Canada and that there are significant mutual benefits to be achieved through increased cooperation.

Many will know that, through an agreement reached between CGPA and the pan-Canadian Pharmaceutical Alliance, retail or reimbursed prices for generic prescription drugs have been dramatically reduced for both private and public payers across Canada over the past three years.

As a result of this agreement, top-selling Canadian generic pharmaceutical products are now priced at only 18 percent of the equivalent brand-name drug. In simple terms, this means that for the top-selling generic drugs in Canada, five patients can now be treated for the cost of treating one with the brand-name version. Based on sales data from IMS Health, we estimate that over the term of the agreement, the savings to public and private payers in Canada will be approximately $1.6-billion.

This also means that the potential reward for cooperation between CGPA, its members and the private payer community has never been greater.

According to sales data from IMS Brogan, the leading source for prescription drug sales information, generic drugs are dispensed to fill 69 percent of all prescriptions in Canada, yet account for only 22 percent of the $25-billion spent annually on prescription drugs. As these figures highlight, generic drugs are providing excellent value and those savings are increasing.

Given that retail or reimbursed prices have been dramatically reduced, the next step for ensuring the ongoing sustainability of drug benefit plans is examining utilization.

The use of generic drugs by provincial government drug plans in Canada is considerably higher than generic drug use by private sector payers. Data from IMS Brogan shows that generic drugs are dispensed to fill 74 percent of prescriptions paid for by Canada’s public drug programs but only 59 percent of private sector prescriptions. And in the United States, generics are dispensed to fill 88 percent of all prescriptions. While the reasons for these discrepancies are not entirely clear, the benefits of understanding and overcoming them are obvious.

Based on IMS Brogan data, it is estimated that for every one percent increase in the use of generic medicines, Canadian private sector payers save and an additional $216-million. If the use of generic medicine in Canada were equal to the U.S. levels, Canadians could save an estimated $8-billion annually.

By working more closely and cooperatively together, we have an unprecedented opportunity to put employer-sponsored drug benefit plans on a more sustainable footing.

By Jim Keon, President of the Canadian Generic Pharmaceutical Association (CGPA)