Healthy Skepticism Library item: 15868

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: report

The Use Of Secret Rebates By Provincial Drug Insurance Agencies: What Impact On Patients?
: Department of Economics and Institute for Advanced Policy Research 2008 Jun
http://www.iapr.ca/files/iapr/iapr-pb-08001_0.pdf

Abstract:

British Columbia’s provincial drug insurance plan, PharmaCare, has recently introduced
a novel mechanism to obtain price reductions for PharmaCare. It has instituted a solesourcing
arrangement for a generically available drug in which a single firm is contracted
to be the only listed supplier for all of British Columbia (BC). The single supplier may
charge a high price but must pay a rebate to PharmaCare for every sale made which is
fully or partly insured by PharmaCare. The rebate amount is confidential under the
agreement.
This mechanism is now in use for one product – olanzapine, which is used to treat
schizophrenia and other mental disorders. Olanzapine is generically available everywhere
else in Canada, but in BC, only the branded product, known as “Zyprexaâ€ and made by
Eli Lilly, is available, because Lilly was awarded the sole-sourcing arrangement with the
province.1
This short paper assesses this mechanism. It first demonstrates that the approach to solesourcing
used by BC results in substantially higher prices for consumers whose purchases
are not 100% insured by PharmaCare. While the sole-sourcing has been defended as
being similar to that employed in New Zealand, this paper shows that in fact the approach
employed in BC, with its secret rebates to the province, is completely different from that
used in New Zealand. Finally, the paper discusses the effects of sole-sourcing with secret
rebates on competition in generic drug markets. There are reasons for concern that solesourcing
combined with secret rebates may undermine competition in generic drug
markets and ultimately result in higher costs to patients and insurers.

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Far too large a section of the treatment of disease is to-day controlled by the big manufacturing pharmacists, who have enslaved us in a plausible pseudo-science...
The blind faith which some men have in medicines illustrates too often the greatest of all human capacities - the capacity for self deception...
Some one will say, Is this all your science has to tell us? Is this the outcome of decades of good clinical work, of patient study of the disease, of anxious trial in such good faith of so many drugs? Give us back the childlike trust of the fathers in antimony and in the lancet rather than this cold nihilism. Not at all! Let us accept the truth, however unpleasant it may be, and with the death rate staring us in the face, let us not be deceived with vain fancies...
we need a stern, iconoclastic spirit which leads, not to nihilism, but to an active skepticism - not the passive skepticism, born of despair, but the active skepticism born of a knowledge that recognizes its limitations and knows full well that only in this attitude of mind can true progress be made.
- William Osler 1909