The Ontario Ministry of Health and Long-Term Care (the Ministry) introduced changes to regulations (collectively, the Regulations) made under the Ontario Drug Benefit Act (ODBA) and the Drug Interchangeability and Dispensing Fee Act (DIDFA). These changes will remove the financial caps on ordinary commercial term (OCT) payments made by drug manufacturers to pharmacies and allow private label products to be listed as benefits or be designated as "interchangeable". The amendments to the Regulations come into force on January 1, 2020.
Removal of OCT benefit financial cap
OCT benefits are payments made between manufacturers, wholesalers or pharmacies that relate to an ordinary commercial relationship, specifically a prompt payment discount, a volume discount, or a distribution service fee. There is a current cap of 10% of the value of the generic drug, as set out in the Ontario Drug Benefit Formulary.
As we reported, the Ministry originally proposed raising the OCT benefits cap to 25%. Following consultation, the cap was removed entirely. The changes apply equally to those drug products listed on the formulary as a benefit and for those designated as off-formulary interchangeable.
Private label products can now be listed as benefits and designated as interchangeable
Private label products are those which a pharmacy acquires from a manufacturer that did not fabricate the drug itself, and which is not at arm's-length with the pharmacy. Since 2010, private label products have been barred from listing on the formulary or being designated as interchangeable. The prohibitions were designed to prevent pharmacies from purchasing the fabricated product at a lower price than the amount reimbursed by the Ontario government, without passing these savings on to the government and private payers.
The new Regulations permit private label products to be listed as benefits or be designated as interchangeable.
The Ontario Government's press release announcing the amendments to the Regulations can be found here.
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