(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.
Related: Jean Coutu Slumps Most in 7 Years on Proposed Drug Reform)
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.