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Alberta Health and Wellness Pharmaceutical Strategy (February 2011)

Reduced Pricing for Generic Prescription Medication

Effective April 1, 2010, new generic drug products entering the market were reduced to 45% of the brand name. The prices for those generic medications already listed as of March 31, 2010, remain at 56% of the brand name, as implemented in October 2009 (previously, generic prescription medication was priced at 75% of the brand name)

Impact to YOU, the Covered Member

Under ASEBP’s EHC plans, prescription medication is covered to a percentage (e.g., 100% under EHC Plan 1) based on the cost of the lowest cost alternative (LCA) for similar active ingredient and dosage. Often, the LCA is the generic medication. As such, most covered members have not experienced any change when getting a prescription filled.

Pharmacy Transition Allowance

Effective April 1, 2010, Alberta Health and Wellness also introduced a three-year temporary transition allowance program for every prescription under $75 to allow pharmacies time to adjust to the changes introduced by the reduced pricing for generic prescription medication. The transition allowance is structured as follows:

Date Transition Allowance Amount
April 1, 2010 $3 per prescription under $75
April 1, 2011 $2 per prescription under $75
April 1, 2012 $1 per prescription under $75
March 31, 2013 Last date of transition allowance program

The allowance does not apply to insulin, oral contraceptives, injectables, and diabetic supplies.

Impact to YOU, the Covered Member

The transition allowance is paid under ASEBP’s EHC plans (and is not subject to the dispensing fee maximum).

Pharmaceutical Strategy, Phase Two – Example of its Impact

Atorvastatin, the generic drug product for Lipitor, became an interchangeable LCA on July 1, 2010, a development which had a significant impact on ASEBP’s EHC plan.

Lipitor is a cholesterol-lowering prescription medicine. It costs approximately $1.79/tablet. Atorvastatin has the same active ingredient. It costs roughly $0.80/tablet.

In 2009, ASEBP paid $2.4 million in claims for Lipitor, about 5% of total drug costs. The introduction of the generic Atorvastatin is expected to reduce ASEBP’s costs for Lipitor/Atorvastatin by roughly half. So why aren’t costs being reduced to 45% as per the new generic pricing formula? For every prescription of Lipitor/Atorvastatin under $75, ASEBP pays a $3 transition fee, which will fall to $2 on April 1, 2011.

Net Impact of Alberta’s Pharmaceutical Strategy

The transition fee is paid on ALL prescriptions under $75, not just those for Lipitor and Atorvastatin. While significant, the savings related to Atorvastatin are not expected to immediately offset all of these additional costs.

After the announcement about the introduction of a transition fee and the reduced first-entry generic pricing formula, ASEBP predicted these changes would likely result in increased costs to ASEBP in the first year. ASEBP will be assessing the net impact to the EHC plan once the first year draws to a close on March 31, 2011.

On April 1, 2011, the transition fee is set to fall to $2 for each prescription under $75. Savings should begin to build as lower generic pricing remains in force and the transition fee begins to decrease.

However, the overall degree of savings to ASEBP’s EHC plan is dependent on when new generic medication is able to come to market. At this time, there are no dates for when the next blockbuster brand will come off patent. Without the introduction of cost-effective generic medications, the EHC plan will continue to see costs increase due to inflation and more people using prescription medicines.

About the Alberta Health and Wellness Pharmaceutical Strategy

In December 2008, Alberta Health and Wellness announced the Alberta Pharmaceutical Strategy. This strategy is being implemented in two phases and is designed to help make drug coverage more accessible, sustainable, and affordable for all Albertans.

Health in Action

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Posted: Feb 15 2011

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