In Canada, the provincial government of Ontario has announced that the maximum price at which pharmacists will be able to sell generic drugs is to be slashed from 50% of the price of the branded original product to no more than 25%.

The government is also abolishing “for good” the high-level rebates, or “professional allowances,” paid by generic drugmakers to pharmacies and drug stores which, according to government officials, total at least C$800 million a year.

Announcing the moves, Health Minister Deb Matthews said that she would not go so far as to call the rebates “kickbacks or rewards,” but added: “there are people who would do that.” The changes, which will apply immediately to drugs covered by the provincial government’s drug plan and within three years to the private sector, are forecast to save the province more than C$500 million a year.

"I have a simple message for big pharmacies: the days of artificially high drug prices paid on the backs of patients and taxpayers are gone, and they are gone for good,” said the Minister, who insisted that the measures are not about saving money but getting better value.

However, local pharmacy groups and drug store chains say the professional allowances enable them to fund patient services and warn that these could suffer, as businesses may now have to cut costs including numbers of pharmacists on staff. And the Canadian Generic Pharmaceutical Association (CGPA) cautions that the curbs could lead generics firms to stop making certain products available, which would mean the provincial government having to supply the much more expensive branded versions.

Generic drug prices in Canada are higher than in many industrialised countries and, with the rebates having long been identified as a major reason for this situation, Canada’s other provinces and territories could well be planning similar moves to Ontario’s, say observers. In late November 2008, the federal Competition Bureau estimated that Canada could save up to $800 million a year if generics were sold in a more competitive market. Currently, the system does not pass on the full benefits of competition among generic drug manufacturers to those who pay for the drugs, said the Bureau.

Canada’s research-based drugmakers’ group, Rx&D, has welcomed the Ontario Liberal government’s announcement, but the CGPA points out that while generics are now used to fill 63% of all prescriptions paid for by the government of Ontario they account for just 26% of the C$6 billion which the province spends each year on prescription drugs.

If the use of generic drugs in Ontario increased to US levels, it would save all Ontarians who pay for prescription drugs an additional C$440 million in the first year alone, according to the CGPA.