What Is The Real Impact of Alberta Generic Price Reductions?

Apr 10, 2013Posted By: igorUnder: General News, Pharmacy Industry News, Pharmacy Profession

Just the Facts!

The March 7th Alberta Provincial Budget introduced a number of changes that many have described as “austerity” measures.   These represent a long list of spending cuts including healthcare cuts.  As a healthcare professional who is also a small business owner, fiscal responsibility or economic responsibility is a term that all business owners understand.   No different than a business or a family household, you can’t spend more than what you make unless you have some substantial cash reserves and even then, you can only go back to those funds so many times before the cash must be replenished.  Furthermore, we have asked the provincial government to maintain a balanced budget, making certain that spending does not exceed government revenues.  This year’s budget introduced a deficit budget 0f some $4.2 Billion.

As part of this March 7th Budget, the provincial government introduced additional cuts to healthcare that did not receive the media attention it deserves.  These cuts to the healthcare budgets are not the first but instead are one more of many cuts that have taken place over the past 3 years.   Although the Alberta Government has “reinvested” in pharmacy by reimbursing pharmacists for some of the valuable patient services previously provided without any compensation, the economics are still such that those dollars represent only a small portion of that taken from pharmacy and possibly more important is the timeline of these cuts.  Most pharmacists and in particular pharmacist owners will explain that they have been scrambling to accommodate the original funding cuts that took place in what was referred to as, “Phase 1″ of the Province’s Pharmacy Strategy in 2010/2011.

Pharmacists across the province have for the first time in their history raised the alarm, explaining that these cuts are too severe -that they will negatively affect patient care.

To give Albertans the background information necessary to understand what has occurred and to help separate Myth from Fact, we have prepared a series of briefs.   These have been done with the help of the Alberta Pharmacists Association who have been meeting with Alberta Health Representatives in an effort to resolve some of the serious consequences that will impact Alberta citizens in the coming weeks and months.

 

MYTH

  • Alberta is the only province to provide transition funding from Generic Price Reductions

FACT

  •   Ontario provided 3 years of transition funding expiring March 31, 2013
  • Nova Scotia provided transition funding expiring June 2014
  • Newfoundland and Labrador implemented a transition allowance ending on April 1, 2015
  • British Columbia, Saskatchewan, Ontario, Nova Scotia, New Brunswick, Newfoundland all increased dispensing fees using savings from generics
  • Unlike transition fees these dispensing fee increases do not expire
  • Most recently, New Brunswick has announced generic price reduction from 35% to 25% and is expected to reinvest in Community Pharmacy with a $0.10 increase in dispensing fee and an increase in markup on Generic Drugs from 4% to 8% and Brand markup of 8% on Manufacturers Lowest Price
  • No dispensing fee increase in Alberta since 2005

 

MYTH

  • The Alberta Government has provided $95M in transition funding to pharmacies

FACT

  • $70.2M has been spent by Government to March 31, 2013 at which time transition fees are eliminated
  • Estimates from Alberta Health Pharmaceutical Funding and Guidance department for transition fees are:
    •  $34.8M in year 1 of agreement
    • $23.5M in year 2 of agreement
    • $11.9M in year 3 of agreement (ending March 31, 2013)

     

MYTH

  • Alberta has offset the generic price reduction with significant reinvestments into pharmacy

FACT

  •  Since 2010 government savings have exceeded $300M while reinvestment (Transition funding, Remote Access Grant and Pharmacy Services) is:   $89.2M including the $70.2M in transition fees

 

MYTH

  • Limited financial impact of generic price reduction to pharmacies

FACT

  • Since 2010
    • Total Annualized reduction in Pharmacy Revenue (public/private) is $627M
    • Average Revenue reduction per Pharmacy in Alberta = $607K

 

 MYTH

  • Ontario has withstood significant generic price reductions and more pharmacies have opened

FACT

  • Ontario has a different billing system that allows separation of private and public billings
    • The average dispensing fee on the private book of business is significantly higher than on the public book of business
    • Changes to Generic Drug Prices have resulted in significantly reduced pharmacy wages and a reduction in pharmacists’ hours, resulting in an abundance of pharmacists looking for work.
    • Generic drug pricing is at 25%, not 18%, and decreased over a longer period of time

 

MYTH

  •  Pharmacists are happy with the Alberta Pharmacy Services Framework as a new reimbursement system that compensates pharmacists for providing professional pharmacy services

FACT

  • Pharmacists are generally pleased to receive recognition for performing services within their full scope of practice, but admit that that the Framework is difficult to implement and cannot be a replacement for lost revenue
  • The Framework was implemented in July, 2012 with no assistance for change management or IT infrastructure to support the services in the community
  • The current Framework is a work-in-progress that requires significant modifications to allow easier implementation and permit a greater number of Albertans to qualify for the services
  • Many of the “free” services offered by pharmacists are still not reimbursable through the Alberta Pharmacy Services Framework, for example:
    • Free Prescription Delivery
    • Consulting with other health care professionals on a patient’s care
    • Compliance Packaging
    • OTC Counseling
    • Triaging of patients
    • Answering drug information questions

 

MYTH

  • The Remote Access Grant has $10.6M unallocated

FACT

  • The original Rural Access Grant of $5M was allocated in 2010/11
  • A Remote Access Grant was re-introduced in July 2012 with $5.3M allocated for each of 3 years.  The unallocated $10.6M is set to be spent in 2013/14 and 2014/15 using defined criteria established by Alberta Health.
  • Government of Alberta is now recommending the $10.6M be re-purposed to assist with Stabilization.

 

Now you know the facts behind this continuing story.  It is far from being over, as government, industry, pharmacists and the pharmacy profession continues to work through what has turned out to be a very poorly planned attempt to save a few dollars at the expense of Alberta’s already struggling healthcare system.

 

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