(Bloomberg) — Quebec will seek lower generic drug prices through a bidding process starting July 1 after negotiations over a compromise plan with pharmaceutical companies fell through, according to the government.
After months of discussions that brought parties close to a “balanced” agreement, the companies withdrew their offer, Health Minister Gaetan Barrette said in a phone interview Wednesday. He declined to give the names of the targeted drugs and said bidding will focus on manufacturing, leaving distribution out at this stage.
The move sent shares in Jean Coutu Group Inc. down 2.8% to C$20.79 by the close of trading in Toronto, the biggest drop in two months. The Quebec pharmacy chain, headquartered outside Montreal, also runs a generic drug business, Pro Doc.
“We’re expecting substantial savings,” Barrette said of the decision. “The only way this wouldn’t bring results is if companies weren’t participating, and that would be a slap in the face of the Canadian people.”
Canada’s second-most populous province spends about C$800 million ($614 million) on generic drugs each year and has been trying to get a grip on health care costs by shaking up the system with reforms affecting everyone from doctors to pharmacists. In a March interview, Barrette warned he would enable the competitive bidding unless pharmaceutical companies made a convincing case to reduce the cost of medicine.
The competition will be closely watched in Canada, where there’s been only a handful of similar attempts. Given Quebec’s market size it could make a difference, especially if foreign manufacturers line up, said Marc-Andre Gagnon, a professor of public policy at Carleton University in Ottawa.
An initial agreement “was very beneficial for Quebec’s population,” Barrette said. “At the last minute they withdrew the offer without any warning, nor any explanation.”