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B.C. tearing up its generic drug pricing deal

The B.C. government and the pharmacy association and drug stores signed a deal 18 months ago to lower the cost of generic drugs to 35 per cent of brand-name drugs by this April.

Brett Gundlock for the Globe and Mail/brett gundlock The Globe and Mail

The B.C. government is tearing up its generic drug pricing deal with the B.C. Pharmacy Association and the Canadian Association of Chain Drug Stores, saying the agreement is saving far less money than hoped.

Health Minister Mike de Jong said Wednesday he will introduce legislation this spring to ensure the government buys generic drugs at 25 per cent of the cost of brand-name drugs.

He said the B.C. legislation will be modelled on an Ontario drug pricing bill adopted in April, 2010.

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"It is equally appropriate to acknowledge the agreement hasn't worked," Mr. de Jong said. "It hasn't reaped the benefits for PharmaCare and for families that it was intended to. That can't continue and it won't continue."

The B.C. government and the pharmacy association and drug stores signed a deal 18 months ago to lower the cost of generic drugs to 35 per cent of brand-name drugs by this April.

Mr. De Jong said the deal fell short because of the high number of requests from drug manufacturers to exempt certain drugs from price reductions.

The Health Ministry estimated the deal would save $329-million in gross drug costs, but now forecasts a net savings shortfall of $91-million.

The ministry said PharmaCare, which provides drug-cost coverage to British Columbians, is one of the fastest-growing areas of the health-care budget. Since 2001, the PharmaCare budget has increased by approximately 74 per cent, from $654-million to more than $1.1-billion for 2011-12.

Mr. De Jong said the current generic drug pricing agreement was costing the government rather than delivering the cost savings it was supposed to.

"The fact that there is an ability to apply for exceptions, the fact that there are rebate programs in place between the pharmacies and the generic drug manufacturers, at the end of the day all contribute to where we find ourselves today," he said.

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He said B.C. expects to use the new generic drug pricing legislation to reinvest savings into health care and keep drug costs affordable.

B.C. Pharmacies Association spokeswoman Kate Hunter said the association is reviewing Mr. de Jong's announcement and plans to address the legislation when it is introduced.

"It came as a surprise," she said. "We are disappointed."

Ontario's 25-per-cent generic drug pricing law prompted legal battles last year between the province and pharmacies, which started stocking their own store-brand drugs to recover profits lost when the Ontario legislation banned rebate programs.

A rebate program is a payment to a pharmacy from a drug company in exchange for stocking its products.

Earlier this month in Nova Scotia, pharmacies were campaigning against the government's 35-per-cent cap on generic drug prices, saying it's gradually affecting their bottom line and some businesses are already considering cutting hours for some employees.

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B.C. Opposition New Democrat Leader Adrian Dix, who blasted the original Liberal deal as too rich for the drug companies, said he was heartened to see the Liberals changing course.

"When the deal was announced, I said that B.C. was getting a raw deal," he said. "Let me give credit where credit is due."

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