June 27, 2014

Drug prices in Hospitals - Quebec

by Ghislain Gauthier, Director

The auditor general in Quebec is raising concerns about the price variance of drugs paid between hospitals.

In the annual report (2014-2015), the Auditor General of Quebec has revealed significant differences in prices paid for same drugs between Quebec hospitals. Before diving in further, let’s step back for a second to better understand how the GPO system works in Quebec.

There are 4 GPO’s (possibly moving to 3 in the near future) that are responsible for the tendering process in Quebec. Occasionally, the GPO’s will consult with each other to verify the contract prices on certain drugs or the prices paid by RAMQ. It does not appear to be a systematic or exhaustive procedure. Since 2011, the 4 GPO’s have met regularly to discuss common issues but have not yet established a common pricing strategy. It is also important to know that the Health Ministry has limited access by law to the contracted prices of the GPO’s. Hmmm….

Among the findings, the one that is highlighted is the fact that, in a sampling of 844 drugs where prices were compared between Sigma Santé and GACEQ, 33% of the drugs had a price differential of 10% or higher. Also, the Auditor noted that the prices of drugs sometime increase significantly from one tender to the other. There is always a reason behind this. The prices for single source or Brand products increase as manufacturers sometime make up for price increases that they did not take while under contract with the GPO. Also, with generic products, the prices can fluctuate depending on the number of generic suppliers who are bidding and have product available in portfolio of products. It appears some generic companies will not participate in some tenders for certain drugs. Hmmm…...

The Auditor raised concerns about why these drug companies are not participating in the tender process. The main reasons are: they already have a contract with a guaranteed price for a 3-year period and they may not be able to supply the volume the tender calls for and there are penalties when there is drug shortage (mostly a generic issue nowadays). He wants to better understand how significant this non-participation is and what impact it has on drug availability and pricing in hospitals.

The main recommendation to the Health Ministry by the Auditor General of Quebec is to put a system in place to monitor the prices of drugs paid by the hospitals. This means having comparable prices across the province, and ensuring that these prices are the lowest possible. This could be significant if the Health Minister moves forward with new rules imposed on the GPO’s. In a time where hospitals are under pressure to meet their financial obligations, this will not be left on the back burner for too long.

The annual report also highlights issues about control and usage of drugs in hospitals as well as how the drug pathway is managed in hospitals. More to come in future blogs. In the meantime, if you need to better understand the implication or assess your company’s situation with the Quebec GPO’s, "Contact Ghislain at":mailto:ggauthier@pangaea-consultants.com