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Major changes to Ontario Drug Benefit Program announced
On Thursday, April 13, the Drug System Secretariat of the Ontario Ministry of Health and Long-Term Care announced a number of intended changes to the Ontario Drug Benefit Plan as a result of their system wide review. A number of the changes are policy matters and can be implemented without additional processes. Others will require legislative and regulatory changes to the Drug Interchangeability and Dispensing Fee Act and the Ontario Drug Benefit Act.
The Transparent Drug System for Patients Act was introduced by Ontario's Minister of Health and Long-Term Care, George Smitherman on April 13 to enable the legislative changes required.
The recommendations of the DSS were grouped into five areas:
- Improving access for patients to drugs
- Strengthening the position of the MHLTC as a customer to get value-for-money
- Promoting the appropriate use of drugs
- Rewarding innovation
- Strengthening the governance and operations of the public drug system.
Reference-based pricing is not being implemented and no changes to patient copays and deductibles are intended at this time.
These policy changes will result in one of the most significant shifts in the pharmaceutical industry in many years. While the government has provided extensive briefing material, there are many details to be worked out, including regulations and operational policies. As with any change of this magnitude, the impact of the new policy will be hard to estimate until these details are worked out. It will therefore be very important how the government approaches consultations with the many stakeholders affected by this legislation.
The following is a summary of the most significant changes. We have divided up the changes based on the party most affected, Innovator Companies, Generic Companies, Pharmacy, and Patients and Physicians. We have also provided comments where applicable.
For Innovator Companies
The Limited Use category will be eliminated and replaced by Conditional Listing. It appears that all listed products will be treated as General Benefit products from the perspective of the prescriber and pharmacist. The Conditional Listing will require certain criteria to be satisfied by the manufacturer to maintain a listing. The criteria are not stated.
Section 8 drugs with high approval rates will be moved into the formulary. Section 8 will become Exceptional Access and revert to the original concept of Section 8 but with streamlined approval processes.
Breakthrough drugs (definition not yet determined) will be eligible for expedited review possibly starting before NOC.
Agreements with manufacturers will be sought before listing new drugs in order to negotiate favourable prices for the ODB. Price commitments will be enforced.
Comment: The elimination of Limited Use removes the administrative barrier to using these drugs but the possibility exists that a Conditional Listing drug will be withdrawn if inappropriate usage or higher than anticipated costs occur. Movement of Section 8 drugs to the formulary will have the same issues. In general, the changes appear beneficial to access to branded drugs. What remains to be seen is what criteria will be attached to the Conditional Listing drugs and what obligations manufacturers will be faced with in demonstrating they are meeting the criteria.
The potential for agreements with manufacturers may signal the introduction of rebates from brand companies to the Ministry. This concept has always been rejected in the past. However, the proposed legislative changes in Quebec also include the potential for this mechanism.
For Generic Companies
The generic price will be reduced to 50% of the equivalent brand product; this rule replaces the current 70/90 rule. (The 70/90 rule requires the price of the first generic copy of a brand to be 70% or less of the price of the brand and that subsequent entrants be a further 10% lower.)
Promotional allowances paid by generic manufacturers will be eliminated and a code of Marketing Practices will be introduced to control this.
Off-formulary interchangeability will be permitted. The standard for interchangeability will rely on a definition using "similar" rather than "same" for dosage form.
Comment: The reduction of prices to 50% will have a major impact in Ontario where about 20% of the value of generics paid by ODB has been eliminated. If the price reductions are reflected nationally and in the private sector, about $500 million in value will be removed from the generic business in Canada. Off-formulary interchangeability will increase the potential for generic drugs overall
It is not clear how the government will monitor and control promotional allowances as a practical matter.
For Pharmacy
The ODB dispensing fee is increased to $7.00. The mark-up is reduced to 8% with a $25.00 cap.
Price commitments by manufacturers will be enforce to protect the pharmacist from unauthorized price increases.
A cognitive service fee for pharmacy will be established
A new payment model for long-term care pharmacy will be implemented.
Long-term care pharmacies will be able to access government stocks of drugs.
A Pharmacy Council will be created to give pharmacy a voice in policy development.
Comment: The net impact of the dispensing fee and mark-up changes was not included in the government information packages. The other features are very supportive of pharmacy in general. The impact of the provisions regarding long-term care pharmacy is unclear. It is expected however, that the government will seek to alter the practice of paying a full fee for seven-day prescriptions provided to some institutions.
It appears the draft legislative changes will result in the elimination of "cost to operator" claims. This mechanism may not be required with rare exception if there is a practical balance between controlling price increases and adjusting the prices listed in the formulary.
For Patients and Physicians
A new position of Executive Officer, Drug Programs will be created. This will have the allow additions and changes to the formulary more quickly than the cabinet approval currently required.
The DQTC will be changed to the Committee to Evaluate Drugs and will add two patient representative members.
Elimination of Limited Use and movement of some Section 8 products to the formulary will ease the administrative burden for prescribers.
Expedited review of breakthrough drugs will facilitate early access to new medicines.
Comment: The changes are very helpful to prescribers, eliminating most of the administrative barriers that exist in the current system and adding breakthrough drugs quickly to the formulary. The perspective of the patient will be accounted for in the approval process.
Overall comments and outstanding issues:
Assuming the government will permit and encourage rebate pricing under agreements with brand manufacturers, it is not clear how this will affect PMPRB pricing matters?
Will the ODB price be for just ODB or will the price apply to all customers in Ontario? How will this reduction be implemented?
What will a Conditional Listing actually look like? How will compliance with the conditions be measured and what will be the consequences of non-compliance?
The elimination of Promotional Allowances to pharmacy by generic manufacturers will have major impact on this market segment. It is unclear how the ODB proposes to enforce this and to what extent this can be policed.
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