Andrew Tolson
On April 7, six months to the day after she took over as Ontario’s health minister, Deb Matthews kicked off what she must have known would be an epic battle over the price of generic drugs. She was taking on a powerful group—Ontario’s 3,306 drugstores and its pharmacists. The Ontario government is one of the world’s biggest buyers of prescription drugs—it pays for drugs for seniors, low-income people and many others—and it spends one-quarter of its money on generic drugs, which are supposed to be a lot cheaper than the brand-name ones. But instead, she says, Ontario is paying some of the highest prices for generic drugs in the world. “We are not getting the deal we deserve,” Matthews told a packed room of reporters.
With that, she announced Ontario was chopping the price it will pay for generic pills in half, to a maximum of 25 per cent of the brand-name price, one of several moves that will save the government $535 million per year. But that was only the start. The government will also regulate generic prices for the private sector—people who pay cash or are insured by their employers. Right now, they pay whatever the market will bear, but by 2014, they’ll pay the same price for generic drugs as Ontario will later this spring.
No other government in Canada has gone this far to cut generic drug costs and, if it is implemented as planned, the big financial losers will be Ontario’s pharmacies, and the drugstore chains. Shares of Shoppers Drug Mart Inc. fell with the news. An industry coalition warned that Matthews’ “reckless” health care reform will cost them the equivalent of three pharmacists from every store. It will hit independent pharmacists like Donnie Edwards, who co-owns a couple of pharmacies in the Niagara area. “We’re front-line health care providers doing the best for our patients,” he said. “Who’s hurt when there’s a gap? It’s the patient who gets hurt, the patient.”
The pharmacists say Ontario is depriving them of a key source of revenue, one that keeps many drugstores afloat. Pharmacies get paid a dispensing fee plus a markup to fill prescriptions and offer professional advice to patients. But they also get a second stream of money that nearly doubles their revenues. It comes from their own suppliers—manufacturers of generic pills—who pay pharmacists to stock their products behind the counter. These rebates, or “professional allowances,” as they were renamed a few years ago, were worth $815 million to Ontario pharmacies last year. (Drugstores get rebates for generic drugs—not for patented drugs like Viagra.)
Standing in front of that news conference, Matthews hammered these payments. “I will not go so far as to call them kickbacks,” she said, but whatever you call them, they’ve turned into a “scheme to enrich pharmacies.” According to a government handout, they’re one reason why Ontarians, and not just the provincial government, pay, for instance, 82 per cent more for a gastrointestinal drug like ranitidine than Americans do. So it wasn’t enough to just slash the price of the generic pills, Matthews indicated. She reiterated what was in the recent budget: Ontario plans to do something no other province has dared to do—outlaw professional allowances. “These days of artificially high drug prices,” Matthews said, “are gone, gone for good.”
Well, maybe. Pharmacists are pushing back as the proposals move through the legislative process. This week, a coalition of Ontario’s pharmacies called any suggestion they’ve abused the system “provocative and wholly offensive.” It’s shaping up to be a tough fight.
No one knows that better than the senior bureaucrat in the slim grey suit who briefed reporters at the press conference. She is Helen Stevenson, the driving force behind this aggressive legislation. At 46, she is the Health Ministry’s $280,000-a-year assistant deputy minister and executive officer of the $4.1-billion Ontario Public Drug Programs, the second-largest single payer for drugs in North America. Among other things, she decides which drugs are funded for seniors, the poor, and cancer patients requiring intravenous drugs; she negotiates with drug companies and monitors the pharmacists. It is a complex job, but hardly the kind that should merit danger pay. Yet of all the senior bureaucrats in the Ontario government, Stevenson may be the only one who has a security guard at some public outings and a panic button under her desk.
She started advising Ontario on its drug policy as a health care consultant in 2005. (She formally joined the bureaucracy in 2007.)At the time, the province was on a mission to eliminate rebates, but the pharmacists fought hard to keep them. They needed the rebate money, they said, to counsel patients. Their position held, in part: under the law enacted in 2006, the government cut the price it paid for generic drugs to 50 per cent of the brand price. Pharmacies would still get a dispensing fee and a markup, but their other source of revenues—the rebates—would be restricted. Henceforth they could only ask generic manufacturers for a maximum rebate of 20 per cent of the price the pharmacy paid for the pills. These new rules only applied to generic pills paid for by government. In the private sector—which spends just as much money on prescription drugs as government does—there were no limits set. Pharmacies could still charge what they thought appropriate to people who paid at the counter, or for drugs funded by employers or insurance companies. As well, pharmacists now had to report the amount of their rebates and prove they were used for patient services.
Stevenson’s troubles began soon after the law was passed. “I received a couple of death threats,” she told Maclean’s. “One of them came to me in a phone call. A pharmacist was unhappy and blamed me for the changes. He had just put his pharmacy up for sale, and he said, ‘If we had a gun, we’d come and kill you.’ ” She reported the threat to the OPP, but declined to press charges. “At the end of the day, he was truly disgruntled. I called him back and told him it’s not acceptable to speak to me in this way.” Then Stevenson was told another pharmacist had said in public that ‘he was going to come by and chop my head off.’ ” The police paid him a visit but didn’t press charges. Stevenson was assigned a security guard to protect her on public outings—the OPP says it was based on a “threat assessment.”
