Charges laid in alleged generic drug resale scheme
Apr 27, 2009 06:28 PM
Several pharmacies, drug makers and wholesalers in Ontario are facing criminal charges and $34 million in fines in an alleged scheme that saw them profit from reselling generic prescription drugs – a practice that may be at work in other provinces, health officials said Monday.
The scheme not only endangered public safety by making it difficult to track the products, but also drove up the cost of many prescription drugs through illegal rebates, said assistant deputy health minister Helen Stevenson.
"This is a national issue, that generic prices are so high," she said in an interview with The Canadian Press.
"The reason that we can't get lower prices is because (drug manufacturers) are paying such huge allowances to pharmacies."
Seven drug companies and four wholesalers based in Ontario and Quebec were fined for allegedly paying for or receiving excessive rebates for drug purchases, which were discovered during a five-month probe by Ontario's Health Ministry.
Wholesalers Amerisource Bergen Corp. Canada, Kohl and Frisch Ltd., A.O.C. Company Ltd. and Pharmastop are facing fines totalling $26 million.
The province has also filed complaints with Health Canada against A.O.C., Kohl and Frisch, Amerisource, Pharmastop and RxSource over suspected violations of regulations related to public safety.
Drug makers Taro Pharmaceuticals Inc., Cobalt Pharmaceuticals Inc., Genpharm Inc., Novopharm Ltd., Ratiopharm Inc., Pharmascience Ltd. and Sandoz Canada Inc. were also fined by the province.
One pharmacy – Kohler's Drug Store Ltd. in Hamilton – is facing $4.4 million in fines and four charges for allegedly providing false or misleading information, or obstructing an inspection.
Sixteen other charges were laid against Ratiopharm, a wholesaler whose name was not immediately disclosed, and three people – charges that could lead to jail time if they're convicted in court, officials said.
The Ontario College of Pharmacists has also been asked to investigate the conduct of A.O.C, Best Drug Mart, Markland Wood Pharmacy Ltd. and Symington Drugs.
There may be more fines and charges to come, as the investigation is not yet complete, Stevenson said.
"We don't yet know exactly how extensive a problem it is that we've uncovered, but we do most certainly know that it's a problem," she said.
Ontario, like other provinces, allows generic drug makers to pay pharmacies a fee for buying their prescription drugs.
In 2006, the government tabled a bill that capped the so-called ``professional allowances" to 20 per cent of sales for public drug plans, and required that the money be spent on activities that benefit patients, such as blood pressure clinics. There are no caps on allowances paid on drugs dispensed under private plans.
The probe found that some pharmacies and wholesalers were allegedly abusing the system by ordering more drugs than they needed and collecting the rebates from manufacturers, only to sell the drugs they didn't need back to wholesalers.
The wholesalers then sold the drugs to another pharmacy, triggering another rebate.
Manufacturers reported they paid out $332 million in such fees over six months, while pharmacies said they'd received only $145 million, Stevenson said.
In one case, a drug maker reported it had paid $5 million to one pharmacy, but the pharmacy said it got nothing. Another pharmacy claimed it spent the money on 1,600 clinic days – five clinics for each day of the year.
The system was designed so that drug companies, wholesalers and pharmacies all made money, while patients had access to drugs at ``manageable prices," Stevenson said.
"I believe the system was working until corporations and some individuals decided to undermine it," she added.
Similar schemes could very well be at work in other provinces, Health Minister David Caplan said.
Ontario is working with other provinces to develop a co-ordinated strategy to deal with the problem, he said.
"We will be sharing the result of these audits with counterparts from around the country," he said. "As I say, this is a pan-Canadian problem."
Three pharmacies may have their licences to dispense drugs under the public plan revoked, and full-scale audits may be ordered for 51 pharmacies, as well as one wholesaler and a generic drug maker, Stevenson said.
Consumers should not be concerned that the drugs they've purchased aren't safe, she said. The main concern was that in the event of a product recall, the scheme would make it difficult to track individual batches of drugs.
Caplan said the province is considering several options to improve the system, including eliminating the professional allowances.
"The implications of these revelations are considerable," he said.
"The ill-gotten rebates come from the pockets of taxpayers, our public drug plan and employers already struggling in the midst of an incredible economic challenge."