03 August 2011

Why drug store owners - and some politicians - will lose

Shills might like you to believe that their party is on the side of the angels by backing some drug store owners in the province, but  all they are doing is showing how little they know about the drug store business and consumers in Newfoundland and Labrador.

Drug store owners will lose in the battle over generic drug pricing.

Late last week, the provincial health department issued a news release that gave the simple reason.  Follow the money and you will find the trail leads you to consumers, including the major private sector drug plan providers. As the release put it:

The policy will result in lower priced generic prescription medication for out-of-pocket payers, those receiving private insurance and beneficiaries of the provincial drug programs, creating savings that will be reinvested into the health care system.

The reason is a simple one:  under provincial law, the price for generic drugs in this province is not just the price paid by the provincial government’s drug plan for senior citizens and those on income assistance.

Everyone will pay the cheap rate.

It’s been like that since the provincial government allowed the sale of generic prescription drugs in the province almost 40 years ago.

The government release is long-winded and hard to understand but the point is in there. Here’s a bit of extra backstory

Historically, the Ontario government set the best price simply because its drug program is the largest in the country.  A Quebec policy of accepting only the lowest cost anywhere ensured that every provincial government wound up paying the Ontario rate.

The provincial government release talks about generics costing 75% less than brand name drugs.  In some instances, the cost to consumers has been less than 60% of what the brand name drug costs.  Consider as well that many of the brand name manufacturers sell their original, brand name drug through generic drug companies.  What you are paying for at a discount price is actually the original pill.

But to get back to pricing, remember that what they are talking about, though, is the retail price to consumers, often called the formulary price. 

While that may have been fixed at 75% or 60% of the brand name price, competition in the market allowed drug companies to lower the actual cost to drug stores through a variety of discounts and other payments.  The end result for drug stores was a mark-up on generic drugs that rivals anything they sell in their front store.

Starting in 2010, and faced with skyrocketing health care costs, some provincial governments started eyeing the real wholesale cost drug stores were paying and not the notional prices set under the old policy. The savings for the people paying the bills could reach into the tens of millions annually.

Ontario started the wave.  But backlash there has been muted, largely because the pricing scheme only covered the provincial government’s clients.

In Newfoundland and Labrador, though, a change to formulary pricing will benefit anyone who pays for generic drugs.

And for that reason alone, the provincial government will likely stick to its guns in an election year.

They will win.

You don’t even have to consider that the drug store owners’ argument about lay-offs and loss of rural pharmacies is bullshite. 

And Lorraine and Yvonne and anyone else shilling for them will look like dorks in the process as they wade into the battle and attack the government. 

After all, how can you claim to be standing up for consumers when you are siding with what most people are likely to see as just another aspect of the profit-rich, international pharmaceutical industry?

- srbp -

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