Publication

This bulletin updates our commentary of April 2006^[1] in which we described proposed changes to the Drug Interchangeability and Dispensing Fee Act (DIDFA) and the Ontario Drug Benefit Act (ODBA). We focus on changes made by the government at the final stage of Bill 102^[2] and the draft amendments to the Regulations that were issued on July 24, 2006. A 30-day public consultation period on the proposed Regulations is now open. Comments are to be directed to the Ministry of Health and Long-Term Care^[3] by August 23, 2006.

The proposed Regulations represent the next step in the Ontario government's quixotic quest to reform the provincial drug system. The reforms, although publicly characterized by the government as increasing the transparency of Ontario's drug system, are intended primarily to reduce the cost of drugs to publicly funded and employer health plans. The changes accomplish this by expanding drug interchangeability and by controlling drug prices.

Expanded Interchangeability

In our earlier commentary, we noted that the government had proposed that drugs could be considered interchangeable where they had similar active ingredients and/or similar dosage forms. In response to public outcry^[4] the government relented and amended the final version of the Act to add a specific provision providing that "nothing in this Act shall be construed to permit therapeutic substitution". The draft Regulations go on to define "therapeutic substitution" as "the substitution of a drug that contains chemically different active ingredients that are considered to be therapeutically equivalent, without authorization from a person authorized to prescribe drugs within the scope of his or her practice of a health profession". In addition, the government amended Bill 102 to define "similar active ingredients" as meaning "different salts, esters, complexes or solvates of the same therapeutic moiety". The term "similar dosage form" remains undefined. Although the government has sought to clarify its position on expanded interchangeability and therapeutic substitution, issues of safety and efficacy continue to be a concern.

In addition, the government proposes to require that a manufacturer's list price be reported even though it is not proposed that the drug be designated under the ODBA. Manufacturers must also provide notice of any price changes for non-designated drug products. These provisions, although relating solely to price notification, have been characterized by the government as pertaining to off-Formulary interchangeability.

Lower drug prices

All manufacturers may be required to enter into agreements with the Executive Officer specifying volume discounts or other amounts payable to the government by the manufacturers. Certain conditions of any such agreements may be made public, including the subject matter of the agreement and the total amount payable to the government. Most significantly, the provision to make such agreements public appears to have been given retroactive effect.  

When Bill 102 was first introduced, the government stated that the price of generic drugs would be capped at 50% of the price of the original product. Conspicuous by its absence from the proposed Regulations is any amendment to the existing 70%/63% rule, which means that the current price levels of such drugs are maintained. Interestingly, a recent report by the Patented Medicine Prices Review Board notes that Canada's generic drug prices are among the highest in the world.

As expected, the draft Regulations decrease the mark-up on the drug benefit price of listed drug products from 10% to 8%.

Under the draft Regulations, manufacturers are prohibited from selling a listed drug product at a price higher than the drug benefit price listed on the Formulary.

Limitations on generic rebates and Code of Conduct

The Act prohibits any manufacturer from providing a rebate to wholesalers or owners/operators of pharmacies, including directors, officers, employees and agents of pharmacies. The draft Regulations propose exempting certain rebate-type activities from prohibition under the Act by delineating particular types of patient care and other educational activities as "professional allowances". To prevent abuse, a mathematical formula has been devised for determining when a "professional allowance" becomes a prohibited rebate. A Code of Conduct is also proposed as a Schedule to the draft Regulations in order to provide further guidance in this area.

Improved patient access to innovative medicines

Notwithstanding previous statements by the government that access to drugs would be enhanced by replacing the current Limited Use and Individual Clinical Review Systems with new conditional listings and provisions for exceptional access, the draft Regulations do nothing to this effect. They do, however, provide for more rapid review of breakthrough drugs by allowing manufacturers to apply for Formulary designation prior to receiving approval for sale by Health Canada.

Early applications can only be made where the product is a new chemical entity and a New Drug Submission has been filed with Health Canada. Applicants are required to demonstrate one of the following:  1) that the product is an effective treatment for an immediately life-threatening or serious disease, with significant advantages over available drug therapies or for which no treatment or no other effective drug therapy is currently available in Canada; or 2) if listed, the product would save the government an average of $2,500,000 per year; or 3) if listed, the product would save the ODB program an average of $250,000 per year. Early applications will also be subject to review by a panel of experts at the ODB program and will not receive final designation as listed products until final approval for sale is obtained from Health Canada.