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Quebec Health Minister Gaetan Barrette responds to the Opposition during question period Wednesday, March 29, 2017 at the legislature in Quebec City.

Jacques Boissinot/The Canadian Press

Quebec's plan to open up the generic prescription drug market for bids started with a letter to the federal Competition Bureau for a reason: The province's Health Minister says it was a warning to pharmaceutical companies to not take the Canadian public hostage.

The free market in prescription drugs is broken, according to provincial Health Minister Gaétan Barrette, and he says the July 1 launch for the first calls for tender on generics will restore healthy competition and get lower prices for Canadian consumers, insurance companies and taxpayers.

If all goes according to plan, Mr. Barrette and experts in the field anticipate the system spreading across Canada. In Quebec alone, the province's annual $800-million bill could be cut by 25 per cent to 35 per cent, according to analysts. The industry, meanwhile, is warning of potential drug shortages and suggesting each player will have to decide if they want to go along with the new system.

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"If they don't bid, it's a slap in the face to all Canadians," Mr. Barrette said in an interview. "The message will be very clear from the industry: 'You pay more, Canadians, because we think you should pay more.' It would be unacceptable."

Other provinces including British Columbia, Saskatchewan and Ontario have tried tendering before, efforts that have mostly failed after generic companies refused to submit bids.

"To me, this is absolutely abnormal," the minister said. "It shows the industry is taking the public health-care system and the government hostage."

Each company will have a decision to make, according to Jim Keon, president of the industry group in Mr. Barrette's sights, the Canadian Generic Pharmaceutical Association.

"They clearly will be between a rock and a hard place. If they don't bid, they'll be out of the market. If they do bid, they're encouraging the Minister's process," Mr. Keon said. "We think it's a mistake to go ahead with a risky drug-tendering system."

The industry group warns Quebec's plan to create competitive bidding for drug contracts to single companies for multiyear periods could lead to drug shortages and choke off new products. Some companies will leave the market or move out of Canada, he said.

"With tendering, they won't be able to cover their costs for creating new generic drugs and make some kind of return on it," Mr. Keon said.

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Currently, most provinces negotiate with generic companies a price that is a percentage of the cost of the equivalent brand-name drug, while pharmacists select which pill to prescribe to their patients. Under Quebec law, the province pays the lowest of the prices negotiated by the other provinces.

Right now, pharmacies receive rebates from the companies ranging up to 70 per cent of the price, which is worked into the cost the government, consumers and insurance companies pay. Quebec is limiting those rebates to 15 per cent as part of the reform.

Michael Law, Canada Research Chair in Access to Medicines at the University of British Columbia, has long called for a tendering process in generic drugs, saying it is a sure money-saver for provinces and will bring more transparency to the system.

"There's very good evidence internationally that we're still paying way too much for drugs. We've paid too much for too long," Dr. Law said. "It's a very broken market. If Quebec can squeeze more money out of this, there's no reason to believe it will be limited to Quebec."

The professor said Quebec has some advantages the other provinces didn't have in their tendering experiments. Quebec's bidding plan is on a much larger scale than the other projects, making the province a hard market for companies to ignore.

Provinces have been squeezing the drug companies with other reforms for a decade, so generics are already not the cash cow they were years ago. The stakes are lower and companies are slightly less likely to resist, Dr. Law said.

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"But you're still breaking decades of pricing history and money flows. You're going to have to figure out ways to make sure the system operates properly, particularly at the pharmacy level."

Christophe Augé, president of the Association professionnelle des pharmaciens salariés du Québec, which represents salaried pharmacists in the province, said he applauds the government's goal of trying to win lower drug prices but the decision is being made with no consideration of its impact on pharmacists.

Pharmacists will have to explain to patients why their drug brands are being changed and why certain drugs are no longer available, Mr. Augé said. Managing drug ordering will also become more complex for pharmacists. Typically now, a pharmacy gets all or almost all its drugs from one wholesale distributor, he said. If the government requires specific drug suppliers for specific drugs, as is being proposed, pharmacies would be forced to buy from more than one supplier.

"They make the decisions and leave us to assume the consequences," Mr. Augé said. "That's what's irritating."

Mr. Augé said he believes the change will force smaller drug makers and wholesalers out of business, many of them Quebec-based firms. "There are players that will not be able to play in this game, that's obvious," he said.

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