Canadian province moves to cut generic drug prices

* Price cut to 35 percent of branded from 65 percent

* Province says health care costs to drop C$380 million

* Sides said they wanted negotiated, not legislated deal.

By Allan Dowd

VANCOUVER, July 9 (BestGrowthStock) – British Columbia and the
pharmacy industry unveiled an agreement on Friday they said
will cut generic drug prices and avoid the battle that erupted
after Ontario slashed prices there.

Prices for generic drugs will be capped at 35 percent of
that of the equivalent brand name drug, down from the current
average of 65 percent. The lower prices will be phased in over
three years.

The change is expected to lower health care costs in
British Columbia, Canada’s westernmost province, by C$380
million ($369 million) annually.

Prices for brand name drugs in Canada are federally
regulated, but there have long been complaints that Canadians
pay more for generic drugs than do residents of other

“It is indisputable that generic drug prices in Canada need
to be lower,” British Columbia Health Services Minister Kevin
Falcon said in a joint news conference with representatives of
the drugstore industry.

Pharmacies will be partly compensated with an increase in
the fee the province pays them to dispense drugs, and by
allowing them to offer more clinical services to customers.

Falcon and industry representatives both said that reaching
an agreement was not easy, but they wanted to avoid the kind of
fight that would have erupted had the province unilaterally
legislated the price cuts.

Ontario triggered a nasty fight with drugstore chains such
Shoppers Drug Mart Corp (SC.TO: ) this year when it slashed the
price of generics to 25 percent of branded equivalents and
eliminated the rebates stores receive from the drug makers.

Quebec health officials have warned the industry that its
laws require generic drug prices there to be the lowest in
Canada, and analysts have said that could hurt drugstore chain
Jean Coutu Group Inc. (PJCa.TO: ).

“I did not want to do a legislated deal as was done in
Ontario,” Falcon said.

Representatives of the retailers said British Columbia’s
agreement recognized they need to make a fair profit on generic
drugs, especially to support stores in rural areas.

The Canadian Generic Pharmaceutical Association, which
represents the manufacturers, said it supported the agreement,
which it said recognized that it was the stores, not the drug
makers, that were mostly responsible for higher prices.

“The generic industry itself is quite competitive,” said
Jim Keon, the association’s president.

“What happened was that there were competitive prices going
into pharmacies but because of price regulations those prices
weren’t necessarily being passed on,” he said.

Keon said the industry would still like the province to
allow higher prices for new generic drugs, to cover the costs
of bringing them to market.

He also said that with consumers now paying less for
generic drugs, stores can expect to receive smaller rebates
from drug makers when they negotiate supply contracts.

Major drug store chains in British Columbia include
Shoppers Drug Mart, Pharmasave and London Drugs.

($1=$1.03 Canadian)
(Reporting Allan Dowd; editing by Rob Wilson)

Canadian province moves to cut generic drug prices