Want to buy a $100 coffee?
Sounds absurd, doesn't it? However, it's equally absurd that this is how much more Albertans pay for some generic drugs than people in other countries.
Take, for instance, 20mg of the cholesterol-lowering drug simvastatin. Albertans pay 90 cents for each tablet. In New Zealand, the government drug plan buys the same drug for 1.8 cents, or 50 times cheaper. And simvastatin is not alone: Albertans currently pay more than other countries for 93% of widely used generic drugs.
The good news for Albertans is that some relief is coming. In this month's budget, the government reduced their maximum price for generic drugs from 35% of the equivalent brand name drug to 18%. In effect, this means they cut prices in half, and will save $90 million every year as a result.
This is a positive move for two reasons. First, it will make life easier for the 1 in 12 Albertans who currently can't afford their prescription drugs, and also benefit Alberta's employers by significantly reducing their employee benefits costs.
Second, it will save money that is being unnecessarily spent from public coffers. Across Canada, provincial governments are spending hundreds of millions of dollars more then they would at international prices every single year. This move will put some of those funds back into the public purse.
A dollar saved, of course, has to come from somewhere. And thus, pharmacies and generic drug manufacturers have voiced their entirely predictable objection to this move.
Pharmacies have claimed that the loss of revenues from Alberta's move will lead to reduced access to pharmacy services. We need only look across the country to find strong evidence that this is not the case. In 2010, Ontario also halved the price of generic drugs. Back then, pharmacy chains in Ontario claimed the price cuts would force them to close outlets. In reality, the number of pharmacies has increased in both years since the change. The Alberta government has also increased the funding for pharmacy services and rural pharmacies to help this transition.
Generic drug manufacturers have rightfully pointed out Alberta could benefit from using generic drugs more often. While 80% of prescriptions are for lower-cost generics in the United States, they are just 60% in Canada. However, what they neglect to point out is that you will save even more if you buy them at a fairer price.
The real question isn't whether Alberta should go forward with this move. The evidence is clear that they should.
The real question is what Alberta should do next. Our answer: introduce true competition into this market.
You see, other countries obtain lower prices by getting generic manufacturers to compete against one another to offer a high-quality product at the best price. That's how New Zealand gets simvastatin at such a great price.
Other generic drugs used by hundreds of thousands of Albertans are also purchased in other countries for a fraction of the price. Even at the new 18% prices, Albertans will still pay 14 times more for atorvastatin, 11 times more for amlodipine, and 5 times more for metformin. These are not cherry-picked examples: even with Alberta's change, the prices available in other countries will still be lower for 82% of commonly used generic drugs.
Other nations can provide a wealth of experience with competitive contracts: this is how public drug programs in the U.S., New Zealand, and a number of European countries buy generics, and how they ensure a secure and stable supply of medicines. The claim that lower prices will result in drug shortages is simply not based on evidence: even a report commissioned by Canadian generic manufacturers found that European countries using competition have not experienced drug shortages as a result.
Alberta should seize the opportunity to become a true national leader. The province should couple lowering prices with improving drug coverage. Instead of just lowering prices, the government should use this opportunity to introduce universal coverage--Medicare coverage--for some widely used generics for chronic conditions like hypertension and diabetes. The beauty of such a policy is that it would improve health, and save money at the same time. It would be a win-win for Albertans, and an example for the rest of Canada.