Healthy Skepticism Library item: 4543

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: news

Walkom T.
Can Ontario stand up to Big Pharma?
Toronto Star 2006 Apr 29
http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1146261012039&call_pageid=968332188774

Keywords:
Ontario

Notes:

Ralph Faggotter’s Comments:

“ Most Ontario governments blink when confronted by Big Pharma. “

Trans-national corporations characteristically threaten to shift their factories/offices elsewhere if they don’t get their way.

But the gap can usually be filled by other less petulant companies, and, if the government does not lose its nerve, ultimately the people of Ontario will be better off.

Full text:

Can Ontario stand up to Big Pharma?
Brand-name drug firms deliver threat
Apr. 29, 2006. 01:00 AM
THOMAS WALKOM

Is Premier Dalton McGuinty willing to face down the multinational drug industry? If so, he will be unusual. Most Ontario governments blink when confronted by Big Pharma. The Tories routinely did so. So did David Peterson’s Liberals. Bob Rae’s New Democrats caved in entirely.

As always, the latest battle is over money. Two weeks ago, Health Minister George Smitherman announced a package of reforms designed to curb rising health-care costs. In particular, he took aim at the spiralling cost of drugs.

As reforms go, Smitherman’s package seems eminently reasonable. First, he wants the government’s Ontario Drug Benefit Plan – the largest single purchaser of pharmaceuticals in the country – to use its considerable market power to win better prices from pharmaceutical suppliers.

Australia does something similar. So does the U.S. Veterans Administration, which runs a vast array of hospitals in that country. The practice is called volume discounting and it makes sense.

Second, Smitherman would give pharmacists more authority to replace pricey brand-name drugs with cheaper generic equivalents. The key here is the word equivalent. Generics are chemically identical to the brand-name version from which they have been legally copied. Why not save money by using the cheaper drug?

Third, he wants to regulate the prices of these generics to ensure that someone buying a copycat drug is paying no more than half the price charged by its brand-name equivalent. That, too, is reasonable. Generic drugs are unduly expensive in Canada, largely because the copycat companies try to set their prices just marginally below those of their brand-name competitors.

Most of Smitherman’s cost savings are aimed at the province’s drug plan, which provides subsidized pharmaceuticals to roughly 40 per cent of the population, including welfare recipients, those over 65 and people suffering from specific diseases that involve unduly expensive drug therapy.

Last year, the government spent $3.4 billion on its drug plan; it faces annual cost increases in the neighbourhood of 10 to 15 per cent.

Intriguingly, Smitherman’s reforms would also save money for private, workplace drug plans. That’s because he wants to let pharmacists replace brand-name drugs with generic equivalents for members of these plans, too.

In the long run, this is something that will benefit a great many people. More than 40 per cent of Ontarians are covered by some kind of workplace drug plan. But under the pressure of rising drug costs, employers are scaling back these plans. A curb on drug prices could help to reverse that trend.

All in all, Smitherman’s reforms could end up directly benefiting roughly 80 per cent of Ontarians.

But not everyone. Brand-name companies in particular are miffed at the health minister’s temerity. If he manages to make drugs more affordable, they won’t make as much money.

On Thursday, the multinationals levelled their first public broadside. Paul Lucas, the Canadian head of GlaxoSmithKline, warned that Big Pharma firms might pull their branch plants out of Ontario if McGuinty and Smitherman insist on forging ahead.

This is a standard brand-name threat. As usual, the multinationals are lining up local political support. In this case, Mississauga Mayor Hazel McCallion has been enlisted to lobby the province on behalf of Big Pharma.

McCallion is worried that drug companies, some of which operate in her city, will leave Ontario if the government presses ahead.

Indeed they might. Big Pharma is unusually vindictive. The brand-name firms never forgave Australia for introducing a national drug-buying scheme after World War II and still refuse to invest there.

But it should also be noted that even without GlaxoSmithKline and its friends, Australia has managed to thrive.

There is much mythology surrounding Big Pharma. One myth is that multinationals do important groundbreaking basic research in Canada and that any move to thwart these firms will hinder the country’s high-tech future.

In fact, the multinationals do almost no basic research in this country. The most recent figures from the federal government’s Patented Medicine Prices Review Board show that pharmaceutical firms made $14 billion in 2004 and spent only $222 million of this, or 1.6 per cent, on basic research designed to come up with new drugs.

The vast bulk of so-called research done by drug firms in Canada is aimed at the clinical trials and other measures legally required to have their products certified domestically.

Yet, even when all of this is counted in, Big Pharma spent only 8.5 per cent of the money it made in Canada on so-called research here.

In short, Ontario’s burgeoning high-tech economy could easily survive a walkout by brand-name firms that do little real research. I suspect that even Mississauga would survive.

But does McGuinty know this? Even if he does, will he be willing to stand up to the combined pressure of both Big Pharma and Hazel McCallion? We shall watch with interest.