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New Study: Proposed Removal of limit on professional allowance payments to pharmacies a form of ”tax” on generic drug manufacturers

NEW STUDY: PROPOSED REMOVAL OF LIMIT ON PROFESSIONAL ALLOWANCE PAYMENTS TO PHARMACIES A FORM OF ”TAX” ON GENERIC DRUG MANUFACTURERS

Proposed changes potentially detrimental to Quebec jobs, investments and exports

Montreal, January 19, 2016. – According to a study released today, the proposed removal of the limit on professional allowance payments to pharmacies would be a form of “tax” imposed on generic drug manufacturers that could potentially threaten jobs and investments in Quebec.

The study released today by Aviseo Conseil was commissioned by the Canadian Generic Pharmaceutical Association (CGPA) in preparation for government consultations on proposed regulatory amendments that would remove the current limit on manufacturers payments of professional allowances to pharmacies.

Today’s study demonstrates the risks posed by the removal of the cap on professional allowances to the generic pharmaceutical industry, the primary job creator in the Quebec pharmaceutical sector over the past decade,” said Jim Keon, President of CGPA.  “The list of potential economic impacts is lengthy and includes fewer jobs and reduced investments in R&D and manufacturing in Quebec We are calling on the Quebec government to consider these potential impacts and maintain a reasonable framework for professional allowances.”

A threat to the future of Quebec’s life sciences industry
In providing a factual, current picture of Quebec’s generic pharmaceutical industry, the study is useful in highlighting the industry’s importance to the growth and future of life sciences in Quebec.  Among other things, it emphasizes the fact that the generic industry represents $843 million in annual direct and indirect economic spinoffs for Quebec, with more than 4,100 quality jobs and capital investments of $147 million over the last five years alone.

The importance of local businesses in the industry is undeniable, as they account for approximately 35% of Quebec’s market share for generic prescription medicines. They rank high in the production of Canada’s top-selling drugs. Two-thirds of their revenues come from outside of Quebec, providing a positive push to Quebec’s trade balance.

In summary, the Aviseo Conseil study points to the following economic impacts:

  • lower profitability and portfolio rationalization (fewer firms producing fewer products in fewer plants);
  • restructuring (mergers and acquisitions, relocation of sales and production); and
  • reduced investment, particularly in R&D (research and quality jobs moving offshore).

Risks to the health care system
Aviseo Conseil’s analysis does not stop there. The study is states: “beyond the major impact on the economic health of a key Quebec industry, such a removal could have additional damaging consequences for the health system.”

These include:

  • heightened risk of generic drug supply shortfalls;
  • delayed introduction of new, cost-saving  generics resulting in extensions of periods of market exclusivity of  more expensive branded drugs;
  • and the steep rise in merchandising and marketing costs combined with weakened competition in the industry could eventually have an impact, which could lead to a possible rise of generic drug prices.

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The Aviseo Conseil study, titled Analyse des impacts possibles sur le système de santé québécois et l’industrie québécoise des médicaments génériques d’un déplafonnement des allocations professionnelles aux pharmacies[Analysis of the potential impacts on the Quebec health system and generic drug industry of removing the cap on professional allowances to pharmacies], is available on the CGPA website (in French only).

About the Canadian Generic Pharmaceutical Association (www.canadiangenerics.ca)
The Canadian Generic Pharmaceutical Association (CGPA) represents Canada’s generic pharmaceutical industry. The industry plays an important role in controlling health-care costs in Canada. Generic drugs are dispensed to fill 68 per cent of all prescriptions but account for account for only 22 per cent of the $24-billion Canadians spend annually on prescription medicines.

About Aviseo Conseil (www.aviseo.ca)
Aviseo Consulting is an independent firm offering strategic and economic advisory services contributing to the growth of Quebec’s organisations, from its offices in Montréal and Québec City. Aviseo was established in 2015 by five partners with extensive experience in industry and with reputable international advisory firms. Aviseo’s professionals are trusted advisers proposing innovative, accessible and sensible methodologies to help organisations understand their environment, reinvent themselves and conquer new markets.

For more information, please contact:
Leslie Molko
Vice President, Corporate Affairs

Tel: (514) 286-6033 x 244
Mobile: (514) 347-8584
Email: lmolko@octanestrategies.com
Website: www.canadiangenerics.c