Decisions in a Time of Change: New Frontiers in Health Policy, HTAS, and Methods

Abstract

Background:

Public drug program pricing po licies for generic drugs typically rely on price ceilings that determine the maximum amount payable. While administratively simple, this approach has been criticized for eliminating price competition and establishing excessively high prices. Tendering or “bulk purchasing” is widely used in the hospital environment, yet rarely used by public drug programs. In the mid- 2000’s, Cancer Care Ontario (CCO) adopted a new pricing policy that leverages competition in existing hospital group purchasing organization te ndering. CCO will reimburse listed products at what is identified as the best available price in the province. The effect of this policy on generic pricing has not been previously described. Objective: To evaluate the effect of CCO’s generic pricing policy on reimbursement prices for drugs funded by the New Drug Funding Program (NDFP).

Approach:

NDFP reimbursement prices were reviewed between 2004 and 2014 for nine drugs with generic equi valents to examine initial and cumulative price reductions, time to pr ice reduction, and the current estimated cost savings.

Results:

Reimbursement prices initially decreased by an average of 57.6±20.8% over 0.5±0.4 years from the date the first NDFP generic was approved on the Canadian market. Reimbursement prices at the e nd of 2014 were on average 10% of the original NDFP list price. Based on 2014 utilization volumes, this model delivered an estimated $68 million in savings in the 2014 calendar year.

Conclusions:

CCO’s generic drug pricing policies have delivered substant ial price reductions for generic drugs. This model may be applicable to other drug reimbursement settings.