Ontario government takes action against generic firms

In late April, the Ontario government’s Ministry of Health and Long-Term Care announced it was taking legal action against seven generic firms, along with a number of pharmacies and wholesalers, for allegedly massaging professional allowances by re-selling drugs. Professional allowances are monies that generic drug manufacturers pay pharmacies for buying their prescription drug products, and the Ontario government has alleged that a number of firms were involved in a scheme whereby pharmacies bought greater stocks than they needed, claiming the monies against the stock, then returning what was not needed to wholesalers, which then also claimed monies for the returned stock. The seven companies involved included Taro Pharmaceuticals, Cobalt Pharmaceuticals, Genpharm, Teva’s subsidiary, Novopharm, Pharmascience, Sandoz Canada and ratiopharm. In total, the seven received Rebate Penalty Orders worth C$3.5 million (US$3.0 million), with Taro penalised the least, at C$22,512.68, and Genpharm and Novopharm the most, at C$1,791,957.71 and C$1,202,958.88, respectively.

The Ontario government explained that the professional allowances system had been shaken up as part of changes made by Bill 102 to the legislation that governs Ontario’s publicly funded drug programmes. For the Ontario Drug Benefit market, manufacturers could provide and pharmacies receive up to 20% of generic drug product sales per pharmacy in professional allowances. The allowances must then be used for activities outlined in the regulations, such as patient care that benefits customers. There was no limit on the amount of professional allowances relating to the private market. Drug manufacturers are required to report to the Ministry of Health and Long-Term Care the amount of professional allowances paid, and pharmacies the amount received. Pharmacies are also required to report on how the allowances are spent. Any professional allowance payment not meeting the regulated requirements would be regarded as a rebate, and prohibited. The Ministry reviewed these reports and found discrepancies between the figures being given by generic firms and those being given by pharmacies, and this led to a series of audits being carried out at 14 locations, including three generic drug firms, five wholesalers and six pharmacies.

According to local reports, manufacturers claimed to have paid C$332 million (US$284 million) in rebates, whilst pharmacies claimed to have received only C$145 million (US$124 million). In view of this, the decision to fine the seven generic firms just C$3.5 million in total and all parties involved C$33.8 million (US$28.9 million) surely does not serve as much of a disincentive.

Ian Platts - Editor, World Generic Markets