This is probably the best article i've read that has to do with pharmacy and government! Read the original editorial from the May.14th edition of the Tribune here
Written By BARRY RAY
As a semi-retired pharmacist who has 40-plus years of retail experience, I have seen the evolution of pharmacy including the development of drug insurance plans including the Ontario Drug Benefit plan in the 1970s.
Prescription drug insurance is now the norm for about 85% of the population of which perhaps 50% is based on provincial government coverage. Similar to any public benefit, we Ontarians have developed a sense of entitlement to prescription coverage paid by the province which even I look forward to the day I am 65 years of age.
What we usually ignore however is the growing cost of such benefits and like all health care provided by the government, they have become a political football. Since provincial deficits have began to mushroom, government bureaucrats are looking for ways to chop expenses. The Ontario Drug Program (ODP) is a large part of provincial spending and this number has grown enormously since inception but especially in the past ten years. This growth is certainly not due to pharmacists' dispensing fees which have changed little (far less than inflation) since the plan began. Expanded numbers of those covered, increased and perhaps over-utilization and the spiralling cost of new drugs are the real reasons. Pharmacists are providing more and higher quality input to patient care than ever before. Pharmacists are also the most accessible member of the health care system.
Despite the superficial appearance of being windfall revenue, generic rebates have been part of the pharmacy revenue model for a long time and were not conceived by pharmacists. They were a product of the pricing structures developed by the generic manufacturers and the government and due to a fusal by the province to allow even an inflationary increase in the Ontario Drug Programs dispensing fee, these rebates became a necessary part of the operation of a pharmacy. Indeed, pharmacists probably could have managed the professional side of their businesses all along without the rebates had the wholesale mark-up on cost remained about 10% and the fee properly adjusted to account for increases in operating costs. A fee which some consultants suggest should now be at least $14.
Pharmacy is one of the few businesses where a significant percentage of the professional advice is given free of charge. This can be result of face-to-face discussion with the patient or via telephone consultation with patient or the physician. This advice can include prescription medication, over-the-counter medication, treatment of minor ailments and first aid, possible allergies to food or medications, and drug interactions.
Most pharmacies provide free training on a number of medical devices including blood glucose monitors and blood pressure meters. It is definitely worth noting that this advice and training saves the health system time and money and allows many other health professionals to address more important priorities. When was the last time you spoke in person to your doctor or dentist for advice without a third party paying the bill?
Pharmacy staff perform several other services for which no compensation is received. As often as several times per day, the technician or the pharmacist must clarify validity and
coverage issues with a third party drug plan before the prescription can be processed. This process can amount to five to 10 minutes on the telephone and in reality is a free service to the patient and the insurance company.
In many instances this advice is given at a time which could be considered "off hours" because the physician's office is closed or the emergency department is doing what it should be: dealing with true emergencies. This would not happen if a large number of pharmacies closed or if many reduced their operating hours to a more cost effective level to compensate for reduced revenue.
Despite the fact that many non-pharmacists including some in the news media have the impression that pharmacies are hugely profitable businesses overall. Pharmacy gross margins are usually around 25% to 28% with the pharmacy alone generating 18% to 22% excluding generic rebates. If the rebates are included pharmacy margins would climb by perhaps 5 to 7% to no more than 30%, not an unreasonable figure given the department's high labour costs and large inventory investment. Do not forget that these numbers are gross margins before expenses not net margins. Like any retail business today, a pharmacy's real expense numbers can surprise a lay person. Rents from $50,000 to $500,000; utility costs of $25,000 to $100,000; business and realty taxes of $10,000 to $120,000. These are realities even before wages. Small prescription only stores may have smaller numbers but as a percentage of revenue the numbers are often the same or sometimes less favourable.
Most members of the public are unaware that some ODP prescriptions are filled at little or no profit. Medications for HIV, injections for rheumatoid arthritis and cancer drugs can fall into this category. It is not unusual to see a $1,500 to $2,000 prescription for such meds go through the Ontario Drug plan where the profit amounts to only the $6.47 dispensing fee. Perhaps the profitability of generic drugs makes supplying these newer and vital expensive medications more feasible.
Perhaps some of the responsibility for the large increase in prescription drug costs to the government should be borne by those involved in waiving or reducing ODP co-pays of $2 or $6.11. Receiving prescription medication at no cost may create a lack of financial accountability. The nasty health care concept of a user fee may be necessary after all in our province. Overutilization of health care services in a public system is a key factor in the cost of that system.
If current proposals become the norm, generic manufacturers may take a hard look at their business model, too. Setting the generic price at 25% of the brand name price could cause some to discontinue some drugs because they are uneconomic to produce and market thus driving patients and physicians back to the brand name at a much higher cost. Shortages and back-orders would be another result thus inconveniencing patients, physicians and pharmacists. In what other industry are manufacturers told what to charge?
Usually competition and the free market sets the price. What happened to the government's clout if they are one of the highest payers for prescription drugs in North America? The government designed the current system not the community pharmacist.
With brand names comprising about half of the drug usage on the ODP even name brand manufacturers contribute to the spiralling costs. High research cost is usually the brand name manufacturers' answer to the high price of new medications and they do deserve a decent return on their investment. Whatever the case, big pharma companies have always been stock market darlings for their growth and profits. Do economies of scale mean that Lipitor (the world's highest volume drug) should still cost the pharmacy 25 cents per tablet? Should they be promoting their products in the mass media such that Cialis is on television more often than Florida orange juice?
The public insists that new medications, especially those for serious illness, be brought to market as quickly as possible perhaps rightly so when existing treatment has proven ineffective. There is a growing cost to this especially to the Ontario Drug Program and it is not surprising that big pharma probably spends more on litigation to protect their interests than they do on research.
Citing generic rebates as the key contributor to the province's drug cost problem is really ignoring the bigger picture. Changes are necessary but it is totally unfair to assign so much of the amount to community pharmacy. The health minister has only focused on cost reductions with little regard to potential negative impact on patient care and the significant benefits provided by your community pharmacist.
The province's proposals require another look before being implemented.
Barry Ray is a semi-retired community pharmacist practising in Welland.
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