Tuesday, April 28, 2009

Generic Drug Scandal Hits Wholesalers and Drug Makers in Canada

While the world is focused on swine flu, some well-known wholesalers and manufacturers are being accused of participating in a drug recycling and reimbursement scheme in Canada.

According to Monday's press release from the Ontario Ministry of Health and Long-Term Care:

"The audits found that some pharmacies have been purchasing a greater amount of generic drugs than they require, collect professional allowances on the full amount, and then return what they don't need to the wholesaler. The wholesaler then re-sells the product, triggering a second professional allowance payment. This scheme enables professional allowances to be collected multiple times."


Four wholesalers – AmerisourceBergen Corp. Canada, Kohl and Frisch Ltd., A.O.C. Company Ltd. and Pharmastop – are facing fines totaling $26 million. Generic 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. (Source)

Keep in mind that generic drugs are significantly more expensive in Canada than the U.S. according to a study by the Fraser Institute (Canada's Drug Price Paradox 2008). A 2004 FDA white paper draws the same conclusion (Generic Drug Prices in the U.S. Are Lower Than Drug Prices in Canada). However, this report from the Canadian Generic Pharmaceutical Association disputes the Fraser results.

I assume more details will be forthcoming.


  1. Very interesting... this should be interesting to watch unfold, what other companies will end up being named... Just think if they had an ePedigree identifying each transaction and then compared the transaction to the professional allowance payments made this might not have happened... ah ePedigree...

  2. Interesting. It seems that making payments based off purchases is not in the best interest of anyone. Payments off shipements/scripts makes more sense. But wait, don't manufacturers in the US pay on purchases made by wholesalers and then complain about the quality of the shipment data? Seems if payments are made on actual usage, netted out for returns things might improve. Just a thought.

    Al Godley

  3. We always knew there were problems with generics in Canada. They (sometimes) had the cheaper brand drugs, but always had far more expensive generics because of protectionist policies. And now this.

  4. Great picture!

  5. You can find an update with the company names here.

  6. AnonymousMay 04, 2009

    If allowances are based on purchases then the returns are subtracted from the purchases when processed. The problems takes care of itself. There is no double anything. We do business with Mckesson, Amerisource and Morris Dickson and that is how it works. Maybe everyone should do a little home work before making comments or blogs