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Ensuring Better Value for Money

Enforcing Drug Pricing Progress

The government is enforcing drug benefit prices to ensure that manufacturers fulfill their pricing commitments and to protect pharmacists from unauthorized price increases for products listed on the Formulary.

Highlights :

  • Ontario Public Drug Programs conducted a massive review of the Formulary that resulted in the removal of 330 discontinued products that will save $11 million in claims
  • Agreements have been signed with 99.8% of companies
  • Cost-To-Operator mechanism is now restricted to a list of less than 20 drugs and to situations where a generic product is out of stock and the pharmacist must dispense the original brand name product or a higher-priced generic product

Background

The government's amendments to the Ontario Drug Benefit Act (ODBA) and the Drug Interchangeability and Dispensing Fee Act (DIDFA) include provisions that enable the ministry to enforce drug benefit prices more effectively, as well as to consider drug benefit price increases based on defined criteria.

In the past, there were situations where manufacturers increased the price of their drugs and pharmacists were unable to directly purchase the drug at the drug benefit price (DBP). Through the Transparent Drug System for Patients Act, 2006, the ministry is enforcing the drug benefit price to ensure that pharmacists are able to purchase the drug at the drug benefit price plus applicable wholesale costs, thereby protecting pharmacists from unauthorized price increases. This correction of Formulary prices has put back an estimated $62 million into pharmacies' revenue.

Ontario Public Drug Programs has reviewed the prices of products listed on the formulary. Unless there is a satisfactory justification for a price increase, (if a manufacturer's market price was greater than the ministry's drug benefit price (DBP)) manufacturers had the option to enter into an agreement with the ministry so that a change to the drug benefit price published in the formulary would not have a cost impact to the ministry. As a result of this work, the ministry published adjusted drug benefit prices for most drug products in the October 23, 2006 update to the Formulary (Update 13 and 13A). Increases for other products were made in subsequent updates.

Penalties for non-compliance

In the past, many manufacturers did not comply with the agreed-upon drug benefit price and instead, sold at a higher price to pharmacies. In order to ensure that agreed-to prices are adhered to, the enforcement provisions are as follows:

  • Manufacturers will be notified that they are price non-compliant and may be required to:
    1. Pay a financial penalty to the government immediately; and
    2. Become price compliant within 30 days.
  • If the manufacturer is not price compliant within 30 days, the ministry may consider not reviewing any new products for listing.
  • If the manufacturer does not comply with the drug benefit price on a continuous basis, the Executive Officer may de-list the product.

Cost-to-operator provision

A cost-to-operator claim can be submitted by pharmacies if the pharmacy is unable to purchase the drug at a cost less than the DBP plus the 10 per cent markup. The Cost-To-Operator (CTO) claim is for the acquisition cost of the drug. On March 1, 2007 the use of the cost-to-operator provision was restricted to cases where a pharmacy is unable to obtain a generic product and must dispense the original product or a higher-priced generic product. The ministry has established criteria for exceptional cases where the cost-to-operator exemption is appropriate.

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