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Normandin Beaudry

Potential cost savings with the arrival of generic drugs


There, in black and white

NB Bulletin Vol. 13 N. 5, June 2010

Generic versions of many popular drugs will be hitting pharmacy shelves by 2013. The generic version of Lipitor (cholesterol pill), the best-selling drug in the world, was recently launched on the Canadian market. Apotex, a generic drug manufacturer, is the first to make the generic version available (Apo-Atorvastatin). Other generic drug manufacturers should follow suit. In fact, even Lipitor's manufacturer, Pfizer, announced that it will produce a generic equivalent of its best-selling drug.

Individuals covered under the public plan

In Quebec, drugs included on the public plan's formulary are subject to the 15-year rule. This rule stipulates that once a patented drug is listed on the public plan's formulary, it will be reimbursed for 15 years even if a less expensive generic version is included on the formulary. At the end of the 15-year period (for example July 2012 for Lipitor), the RAMQ will reimburse the drug, whether it is a brand-name version or a generic version, based on the cost of the least expensive drug.

Individuals covered under private plans

The arrival of new generic drugs could quickly have a positive impact on private plan costs.

First, it is important to know that in Canada, the price of generic drugs varies greatly from province to province. For example:

  • In Quebec, the cost of generic drugs for private plans is currently around half of that for brand-name drugs.
  • In Alberta, generic drugs have cost around half the price of brand-name drugs since April 2010, as compared to 75% prior to this date.
  • In Ontario, the cost of generic drugs is set at around 65% of the cost of that for brand-name drugs. An Ontario government reform will take effect on July 1, 2010 to set the price of generic drugs at 50% of the price of brand- name drugs. This percentage will be reduced to 25% in 2012.

Other provinces could follow Ontario's lead in the next few years.

Close to 12 %(1) of drug expenses in Canada are currently associated with brand-name drugs whose generic versions will hit the market in 2010. Lipitor itself accounts for 6 %(1) of total drug expenses. In Quebec, the arrival of generic versions of these drugs could reduce private medical insurance plan costs by around 2%. Potential savings for your plan will be influenced by several factors: the proportion of claims paid for brand-name drugs whose generic will become available, the generic drug reimbursement percentage, the geographic distribution of employees and the use of generics by employees.

Because drug expenses represent a significant portion of your group benefits plan costs, you could optimize cost savings for your plan by informing employees about the use of generic drugs. You could encourage them to ask their pharmacist for generics, and use this opportunity to make employees more aware of the fact that their consumption habits can generate savings for their group benefits plan. Given that employees often pay a portion of plan premiums or, in the case of Quebec employees, pay income tax on the premiums paid by their employer, everyone saves in the end.


(1) Source : ESI Canada


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