10/14/2014 05:49 EDT | Updated 12/14/2014 05:59 EST

Generic drugs overpaid for by provinces, study finds

Canada’s provincial drug plans pay more than twice as much as they could for a handful of common generic drugs because of a countrywide purchasing plan agreed to by nine of the provinces in April 2013, according to a new study.

The provinces, except for Quebec, agreed at that time to a formula that allows them to pay 18 per cent of the original name-brand drug price for six generic drugs commonly used for hypertension, depression and other diseases.

Amir Attaran, a University of Ottawa professor and researcher in law and health policy, calls that arrangement  uniquely Canadian stupidity.”

“No one else does it this stupid way,” Attaran said in an interview with CBC’s The Exchange with Amanda Lang.

“What they do is negotiate prices with competing companies or they put it to tender — where the government announces how much medicine they want to buy and companies bid to supply it,” said Attaran.

He said the provinces together have the economic clout to demand much lower prices from the generic companies.

Canadians pay billions more

In a study published in Open Medicine, he worked with other researchers to compare what the Canadian drug plans pay to public agencies in Germany, the U.K., U.S., New Zealand and Sweden.

He found the cost per unit of each of the six drugs remained markedly higher in Canada than in these other countries.

This is a loss to the Canadian taxpayer in the billions of dollars a year, Attaran said.

The six drugs included under the plan — amlodipine, atorvastatin, omeprazole, rabeprazole, ramipril and venlafaxine — represented 20 per cent of publicly funded spending on generic drugs.

The premiers estimated that their countrywide plan would save up to $100 million.

But the 18 per cent price threshold they chose was totally arbitrary, Attaran said.

“What the premiers have done is anything but competition. It’s quite the opposite, it’s setting an arbitrary price, a percentage of the full price,” he said.

“They chose 18 per cent because they thought if you were paying that, you’d probably be paying what other countries pay.”

Attaran agreed the 2013 plan has saved money, but said Canada’s practice of setting generic drug prices at a percentage of name-brand drugs results in excessive prices.

He points to the example of New Zealand, which uses a system of competitive tenders for drug companies that want to sell to the public health system. That resulted in much lower prices.

The provinces had considered that option, but could not agree on an alliance for bulk purchasing.

The U.K. and Germany set price ceilings, but review them more often with vendors, negotiating constantly on drug prices.

“What can happen is the premiers can go back to their original plan — a pooling of all the drug plans and negotiate with that additional buying power, so that whatever generic supplier can offer the best deal,” Attaran said.