Understanding a decision

Important news came on Friday to those working in the pharmaceutical industry in Canada. After the drastic price reduction of generic drugs in Ontario, the Quebec government announced that those prices would also be in effect here.

 

The government expects to save about 164 million yearly and Quebec residents can expect to pay less for their generic drugs. Due to competition, even innovator drugs that have a generic counterpart might see a price drop. This is significant change and is something that seems beneficial to the citizen.

 

From the generic industry’s point of view, however, this is catastrophic. The reduction in the profit margins will be substantial and, frankly, jobs are in danger. I’m part of that industry and I wondered what this meant and how much of an impact that would have on Quebec’s society. Even though most drugs sold are generics, the industry itself accounted for 23 percent of all of the biopharmaceutical industry’s workers. Even though the recent recession probably increased its weight, the fact remains that it was not central to the sector in the province. In fact, the strengthening of the innovator industry against the generics has been key to the development of the strong biopharmaceutical growth in Montreal. At this point, I also want to point out that this strategy meant that qualified people would be retained or come to the Montreal region and that in turn, this would mean that the area would become a prime pool of workers for the generic industry. The end result made Montreal a strong innovator and generic pole. The focus of the provincial government, however, was innovators.

 

With this in mind, we need to go back to March 2010 and the much talked-about Bachand budget. The budget, asking for sacrifices from the general population was, in the early days, very unpopular. Even if the government announced in it that they would do all the heavy lifting, people did not believe them. In the meantime, Ontario was announcing that they would slash the prices of their generic drugs, something much better received by the population. The Liberal government here saw this as an opportunity. It could cut from an obscure and relatively small industry, something that would not have strong repercussions.

 

So we are here. The government saving money and gaining political sympathy at the expense of the generic’s industry. Politically, this seems to be a good move and, as I said before, as a citizen, it means that it’ll cost less to buy drugs (whether it is through taxes or through private insurance). Economically however, I’ll direct you to this Fraser Institute article saying how the price setting done by the Ontario government might have been the problem in the first place, a problem that still remains.