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Executive Officer Communiqués

Notice from the Executive Officer

December 18, 2006

I am writing to provide you with an update concerning the most recent set of regulations filed and the implementation of the Transparent Drug System for Patients Act, 2006.

Amending Regulations under ODBA and DIDFA
The regulation amending Reg. 935 under the Drug Interchangeability and Dispensing Fee Act (DIDFA) has been filed as O. Reg. 558/06; and, the regulation amending O. Reg. 201/96 under the Ontario Drug Benefit Act (ODBA) has been filed as O. Reg. 559/06. The regulations have now been posted on the ministry's website. In summary, the regulations :

  • Expand the use of professional allowances to allow pharmacies to use the professional allowances for any of the activities in the definition of professional allowances; in other words, it is the Executive Officer's intention to permit pharmacies to use the professional allowances for counseling or communicating when dispensing a prescription, activities that may be defined as professional allowances.
  • Create exceptions to the 50% generic price rule where the product is the only generic product available on the market or where the product is the first generic product on the Ontario Drug Benefit Formulary/Comparative Drug Index (Formulary) and allow the Executive Officer to negotiate agreements for any drug benefit price lower than the original product price.
  • Extend the use of the Cost-to-Operator mechanism until March 1, 2007; thereafter, restrict the use of the Cost-to-Operator provision to cases where a pharmacy is unable to acquire a generic product and must dispense the original product or a higher priced generic product
Generic pricing As the biggest customer in Canada, we will continue to reimburse generic drug products at 50% of the price of the original drug product for ODB-eligible recipients, with the following exceptions:
  • The Executive Officer may negotiate an agreement for the drug benefit price with the manufacturer for a :
    • new generic drug, where it is the only generic drug on the Formulary
    • generic drug already listed on the Formulary where it is the only drug product of its type that is designated as interchangeable and where removing the product from the Formulary could result in significant patient safety or access concerns, or significant increased costs to the Government.

I am pleased to inform you that we are concluding our discussions with generic drug manufacturers concerning the pricing of generic products that are exempt from the 50% pricing rule, and are finalizing agreements with the manufacturers. These prices will be included in the next update, Update 14, of the Formulary, to be published on or around December 19, 2006.

Further to my November 1, 2006 Notice, I am again clarifying that the Executive Officer has no role in pricing other than as stated in the ODBA, for ODB-eligible recipients.

All manufacturers are required to sell their listed drug products at the drug benefit price listed in the Formulary, for ODB-eligible recipients. If any manufacturer does not comply with the published price – and therefore is violating the ODBA – I will take immediate and appropriate action as authorized under the ODBA. Any business transactions outside of the province for the purpose of avoiding the legislative provisions in the ODBA, such as importing drugs directly or indirectly into Ontario, or any communication or actions suggesting that persons or companies not comply with the Regulations, would be considered as violating the law.

Next update to the Formulary
I intend to publish Update 14 to Edition 39 of the Formulary on or around December 19, 2006. This Update shall include new listings of brand name products; the new negotiated prices for selected generic products; and the removal of over 400 discontinued products. The prices included in this Update will take effect on January 2, 2007.

Following Update 14, a full Formulary is scheduled to be published in January or early February 2007.

Cost-to-Operator claims
In the November 1st, 2006 bulletin, I stated that effective as of the next update to the Formulary, pharmacies will be able to purchase drugs from generic drug manufacturers at the product's listed drug benefit price. As outlined above, we have concluded our discussions with generic drug manufacturers and are now completing the agreements. Therefore, Update 14 to the Formulary will reflect the 50% generic pricing rule as well as the negotiated price for single source generic products. Recognizing that these prices will take effect as of January 2, 2007, the period that pharmacists will be allowed to submit the MI intervention code has been extended until March 1, 2007. However, this will only apply to claims that are dispensing inventory that has been purchased at prices higher than the drug benefit price as of October 23, 2006. Thereafter - that is, as of March 1, 2007 - cost-to-operator claims will be restricted to situations where a pharmacy is unable to acquire a generic product and must dispense the original product or a higher priced generic product.

Furthermore, since October 23, 2006, I recognize that pharmacists have lost revenue from the mark-up on ODB prescriptions. We are reviewing this problem and will provide more details on how we intend to address this situation in January 2007. Specifically, through our regular audit of pharmacies, we are aware that many pharmacies have been automatically adding the 10% mark-up to their Cost-to-Operator claims, despite this not being permitted - hence the reason that we are reviewing options to only compensate pharmacies that have lost revenue due to this situation. More information will be provided in the New Year.

Professional allowances
The definition of professional allowances has been expanded; I interpret this to mean that pharmacies may use the professional allowances for counseling or communicating when dispensing a prescription, in addition to the activities defined as professional allowances.

Reporting of the allowances will begin with payments made after January 2, 2007. The ministry is developing a reporting system for professional allowances, and will provide further communication related to the reporting requirements in the coming weeks.

Additionally, we have established a process in collaboration with the Ontario Pharmacists' Association (OPA) to regularly review requests for clarification around the definition of professional allowances. Pharmacists are encouraged to channel these requests through the OPA.

Price increase criteria
I had intended to publish the criteria for price increases in November. This timing has been further delayed to allow a multi-ministerial working group chaired by the Premier to consider broader factors, such as research and investment, as part of the criteria. This work will be completed by the end of March 2007, and the criteria published shortly thereafter.

Pharmacy Council
I am also pleased to report that the Pharmacy Council held its first meeting on Wednesday December 13, 2006. Through the Council, we will begin work immediately to implement the plan for pharmacy professional services.

Again, thank you in advance for your cooperation in working through the implementation.

Ronald Sapsford
Executive Officer
Ontario Ministry of Health and Long-Term Care

For further information on Bill 102, the Transparent Drug System for Patients Act, including the legislation, can be found here.

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