UPDATE 1-Canada provinces to set strict caps on generic drug prices

Fri Jan 18, 2013 2:32pm EST

* Research found unusually high generic prices in Canada

* Regulatory crackdown has hit Canadian pharmacy growth

TORONTO Jan 18 (Reuters) - Canada's provinces and territories will cap the prices of six widely prescribed generic drugs at 18 percent of their branded equivalents, an interprovincial policy group said on Friday, in a move that will cut costs for private and government health programs.

The current caps for the drugs limit payments to between 25 and 40 percent of the branded equivalents, according to a statement by the Council of the Federation, which said the changes will take effect in all jurisdictions by April 1.

The agreement is the first coordinated effort in a broad push by individual Canadian provinces to cut the prices they pay for generic drugs. The changes began in Ontario and then spread, to varying degrees, across the country.

The new cap may put further pressure on Canadian pharmacy chains such as Shoppers Drug Mart Corp. The earlier reforms curbed prescription sales growth at Canada's top drugstore chain.

Shoppers Drug, whose stock slipped 25 Canadian cents to C$44.12 on Friday afternoon, could not be reached immediately for comment.

Canada has a reputation for relatively low prices of branded prescription drugs. However, a flurry of studies in the mid-2000s found that generic drug prices in the country were unusually high.

Under Canada's taxpayer-funded medical system, provincial governments spend billions of dollars a year on drug programs for the elderly and people with low incomes or particularly high costs. Cash-strapped governments are motivated to cut costs.

The province of Quebec is not participating in the initiative, according to the release. Quebec's "most-favored nation" regime, however, matches prices to the lowest rates available elsewhere in Canada.

The six drugs are atorvastatin, ramipril, venlafaxine, amlodipine, omeprazole and rabeprazole.