Grant: Project Grant

A generic drug is identical to a brand name drug in terms of dosage form, strength, safety, quality, performance and intended use, but its price is much lower. In Canada and worldwide, regulations setting the maximum allowable price for a generic drug, relative to its branded counterpart, have been used to make generic markets more competitive and to reduce costs for individual consumers and publicly-funded drug plans. In 1998, Ontario imposed a 70/90 price cap which meant that the first generic had to be priced at =70% of the associated brand-name price, and subsequent generics had to be priced at =90% of the first generic. The price cap was subsequently lowered to 50% in 2006, and 25% in 2010. Other provinces soon followed suit, with similar price-cap regulations. On April 1, 2014, a nationwide generic pricing framework developed by the pan-Canadian Pharmaceutical Alliance (pCPA) was introduced, which requires new generic drugs to be priced at 75% (85% if no product listing agreement with brand), 50% or 25% of the brand name price, depending on the number of generic competitors. Furthermore, 18 commonly-used generic drugs have now been priced at 18% of brand. Our study will be the first to evaluate the performance of these new Canadian generic drug pricing policies. This research is important because setting the maximum allowable price at the wrong level can lead to the inefficient use of public funds, such as high provincial drug plan expenditures in the case where a generic drug price is still too high. On the other hand, setting prices too low might create drug shortages, since fewer new generics would enter the market while other generics would cease production. Our goal is to assess the impact of price-cap regulations on different Canadian generic drug market outcomes and especially the supply and availability of generic drugs. The findings will be used to guide policy-making to ensure fair pricing and reduced risk of generic drug shortages in Canada.