TORONTO - Eliminating $750 million in so-called professional allowance fees paid to pharmacists by generic drug companies will lower the cost of medications for consumers, but dispensing fees will rise, Health Minister Deb Matthews said Monday.

Matthews announced the government will ban pharmacists from accepting the fees in an effort to lower drug prices, despite warnings the move could lead to new charges for patients, service reductions and even the closure of some pharmacies.

“For too long Ontarians have been paying too much for generic drugs,” Matthews told reporters.

The fees will be eliminated July 1 for government-purchased drugs, and will be phased out over three years for people who buy their own medications.

“Let's be clear about this: on July 1, the price of generic drugs for all Ontarians will decrease,” said Matthews. “For those who pay cash, they currently pay about 65 per cent of the brand price, that will be down to 50 per cent.”

The government said the current system had driven drug prices in Ontario up to five times higher than some other provinces and U.S. states. It wants the price of generic drugs to be no more than 25 per cent of the cost of the original brand-name medication.

In exchange, the government will invest $224 million a year in pharmacies, the bulk of that to raise dispensing fees for government purchases by $1 to $8 per prescription.

The government does not regulate dispensing fees for patients who pay cash or are covered by private insurance. Pharmacists said those fees and the price of drugs will likely rise, and quickly.

“There's a strong possibility that we're going to see an overall increase in the price of both services and drugs,” said Dean Miller, chairman of the Ontario Pharmacists Association.

“Our ways to increase revenues are few and far between, and dispensing fees is one of them. We'll probably see that rising over the next few months.”

Rita Winn, who operates 11 pharmacies in the Peterborough area, said the loss of payments from generic drug companies will make it hard for some stores to stay in business.

“How are we going to continue to keep our doors open?” wondered Winn. “We're certainly going to have to look at things like increasing our dispensing fee for the people not covered under the Ontario Drug Benefit Plan.”

The New Democrats also want lower prescription costs, but said the government is going after the wrong drug manufacturers.

“Seventy-five per cent of the costs are on patented drugs and she's going after the little fish, the 25 per cent,” said NDP health critic France Gelinas.

The government's $245 million includes $25 million to pay for even higher dispensing fees in rural and northern communities, up to $12 per prescription if there is no other drug store for 25 kilometres.

The professional allowances have been at the centre of a bitter dispute between the province and pharmacists, with white-coated protesters dogging Premier Dalton McGuinty and Health Minister Deb Matthews at many of their public appearances.

“Despite the fact Big Pharma fought this with one of the most expensive, politically-charged, American-style PR campaigns in this province's history, I can tell you that our resolve never wavered,” said Matthews.

In April, as Matthews announced the changes, some Shoppers Drug Marts in downtown Toronto stopped filling prescriptions for several hours. Later, Shoppers reduced store hours and even closed the pharmacy sections at its stores in Matthews' London-area riding.

Other provinces are keeping a close eye on the dispute between the pharmacists and the Ontario government - the largest single purchaser of prescription medications in the country.

Quebec has said it would be in line for big savings if it followed Ontario's example to rein in drug costs.

Matthews issued a letter to her federal, provincial and territorial counterparts in April warning that pharmacy chains could bulk purchase lower-cost generic drugs in Ontario and sell them to consumers in other provinces at regular prices.



Correction - June 8, 2010, 4:39 p.m. EST: A previous version of this story, headlined “Drug prices set to spike” and published in the June 8 issue of Metro, provided incorrect information. In fact, generic drug prices in the province of Ontario are expected to drop on the 1st of July. Metro regrets the error.