There have been several changes in the generic drug world over the last few months, including changes to generic drug pricing and Lipitor (and others) coming off patent protection. These changes could have an impact on plan sponsors of group benefits, and are outlined below. These changes are chronicled in Cowan's July 2010 Employee Benefits Bulletin.

Generic drug cost reforms take effect

As of July 1, 2010, the first in a series of rate reductions to generic drug costs took effect in Ontario. Drug cost reforms were finalized by Ontario's Ministry of Health and Long-Term Care in June following several months of debate. Many of the reforms are the same ones we talked about in our May 2010 Special Bulletin on generic drug costs with a few small changes. Below are further details.

Rate reductions for generic drugs reimbursed by the private sector (as a percentage of the original brand-name drug):

• July 1, 2010 - From approximately 65% to 50%
• April 1, 2011 - To 35%
• April 1, 2012 - To 25%

An exception will be made for non-solid dosage generic drugs - such as creams and patches. They may be priced up to 35% of the original brand name drug "in recognition of their higher manufacturing costs," says the Ministry's website.

Lipitor Goes Generic - Others to Follow

With sales of $1.2 billion in Canada and $12 billion worldwide, the release of a generic version of cholesterol-busting heavyweight Lipitor is expected to result in significant savings for plan sponsors.

Lipitor is one of several drugs that will be coming off patent protection shortly. Below we have prepared a list by year. In total these 24 drugs made up about 20% of prescribed medications paid in 2009.

Drugs Coming Off Patent Protection

Genericizing these medications will have an enormous impact on plan costs for group plan sponsors, especially if the pricing for generics gets down to 25-30% of the brand name cost. The Ontario government's goal for the lower pricing of generics is to get down to 25% of the brand cost by 2012.