False hope for private-plan savings in Quebec?

The recent decision by the Quebec government to require manufacturers of generic drugs to sell their products at a maximum of 25% of the price of the original drugs has likely led plan sponsors to believe their drug insurance premiums for private plans will fall. This is not the case, says a press release from Aon.

The company explains that as an incentive for the pharmaceutical research industry, the Régie de l’assurance maladie du Québec (RAMQ) fully reimburses original drugs for a period of 15 years from the drug’s registration date on the RAMQ formulary (BAP + 15 rule), even if a generic alternative is available at half the cost. Once this protection expires, the RAMQ limits its reimbursement of the original drug to the price of its generic counterpart, regardless of the 68% minimum rule governing the Basic Prescription Drug Insurance Plan (RGAM). As a result, policyholders who wish to buy the original drug must pay the difference between the price of the original and the price of the generic drug.

“This same law prohibits private plans from adopting the same control approach as the RAMQ,” says the Aon statement. “Indeed, private plans are obligated to reimburse an original drug at a minimum of 68% of the amount claimed, even if the generic drug is sold to the pharmacist at a maximum of 25% of the price of the original. Therefore, the current rules governing the RGAM deny private plans a significant portion of the savings associated with generic drugs.”

Conversely, the price paid by the RAMQ is determined according to an agreement negotiated between the government and the Association des pharmaciens propriétaires du Québec (AQPP). “The ‘ingredient cost + 6% (maximum $24.00) + $8.41 in fees’ algorithm guarantees that prices do not fluctuate among pharmacies, and that the RAMQ automatically benefits from any price reduction. So far, the government has refused to let private plans benefit from its agreement with the AQPP. Free competition is the only factor that restricts pharmacists in terms of the prices they can charge to patients who are covered by private plans.”

Johanne Brosseau, senior consultant for Aon in Montreal, says this explains why the amount charged to a policyholder is often higher than the amount charged to the RAMQ for the same drug at the same pharmacy. “In addition, prices for the same drug vary from one pharmacy to the next, and actual competition among pharmacies exists only if policyholders are aware of this fact,” she says.

The bottom line: The amount charged for a generic drug purchased at a lower price doesn’t necessarily translate to a reduction in the amount charged to policyholders who are covered by private plans. Aon adds that there’s a concern pharmacists will exploit this situation in order to compensate for the loss of revenue resulting from the sale of drugs to RAMQ policyholders and reduced rebates paid by generic manufacturers.