Deep into the murk

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One hears a lot about the murkiness of the pharmaceuticals industry. But until you take a close look for yourself, it's hard to get a sense of just how murky it is.

Today's column hopefully provides a decent set-up of what's likely to be a pretty bitter fight between Ontario's government and the province's pharmacies over generic drugs. But because the issue is so complex, and I had a limited number of words to work with, it may still be a little confusing for those unfamiliar with the industry.

The obvious question - and you'll need to read the column before you read this, or else you'll be really confused - is why the government thinks it could save hundreds of millions of dollars by regulating sales of generic drugs to private plans. If pharmacies responded to the limit on rebates for sales to the Ontario Drug Benefit by putting the squeeze on everyone else, what does that have to do with the government's bottom line?

The answer, at least as some officials would have it, is that - with the rebates on private sales often exceeding 80 per cent of the drugs' price - they're by far manufacturers' biggest cost of doing business. As a result, they wind up driving up the cost of their products for everyone, even the government.

The other consideration is the degree to which lines between public and private sales become blurred. Are pharmacies really buying two different sets of pills, for the public and private plans, and meticulously distinguishing between the two when they ask for rebates? If not, then it's awfully difficult to consistently enforce the 20 per cent cap on rebates for the public sales.

The government's argument, more or less, is that greater transparency would allow it to know that its dollars are being well spent - and the only way to achieve full transparency is by doing away with the rebates altogether.

All of this is very much up for debate. If the 20 per cent cap really is being enforced properly, then you could argue government is actually getting a decent deal, considering that it hasn't increased dispensing fees in an awfully long time.

What seems less up for dispute, and from a public policy perspective might justify new regulations even if there isn't any budgetary upside for the government, is that people who aren't on the public plan - i.e. those who are under 65 and aren't on social assistance - are getting a raw deal.

Because pharmacies now make most of their money off the rebates on private sales, stories abound of heavy-handedness in demanding them. There are complaints that in at least one instance, a big chain refused to honour the cards of customers whose private plans had switched to a brand-name drug that was actually being offered cheaper than the generic.

Like I said, it's all pretty murky. It's a topic I hope to return to shortly, and keep an eye on as the battle plays out in 2010.

(Photo: An Ottawa pharmacist helps a customer with her prescription last year. Sean Kilpatrick for The Globe and Mail)