1. Reviewing the Canadian Drug Landscape and Generic Pricing Models CGPA CONFERENCE - 26 OCTOBER 2011 François Joseph Poirier Partner Toronto - 161 Bay Street Not Peer Reviewed

2. MERCER 1 May 3, 2015 Agenda Overview of recent changes New legislations impact on generic pricing How are private plan sponsors adapting to changes The future ahead of us

3. OVERVIEW OF RECENT CHANGES

4. MERCER 3 May 3, 2015 Generic Prices in Transition British Columbia –Public and private at 40% to drop to 35% on 04/01/12 –Public mark-up at 8%, except on high cost drugs (5%) –Rising dispensing fees to $10.50 on 04/01/12 Alberta –Public and private at 56% for pre Oct. 2009 –Public and private at 45% for post Sep. 2009 Saskatchewan –Public and private at 45% to drop to 35% on 04/01/12 –Rising dispensing fees to $10.25 on 04/01/12 –Expanded prescribing authority

5. MERCER 4 May 3, 2015 Generic Prices in Transition Manitoba –Bill 41 to be implemented Ontario –Public at 25% –Private at 35% to drop to 25% on 04/01/12 –Professional allowances at 35%, 25% in 2012 then 0% Quebec –Public and private prices vary by drugs –Some drugs such as Lipitor are at 25% –Rebates still exist

6. MERCER 5 May 3, 2015 Generic Prices in Transition Nova Scotia –Public to drop to 35% on 07/01/12 –“In theory” applicable to private sector –Expanded prescribing authority New Brunswick –Tabled legislation setting generic pricing Prince Edward Island –Legislation being drafted Newfoundland and Labrador –Legislation being contemplated

7. MERCER 6 May 3, 2015 Generic Prices in Transition Additional consideration for generics –Variation in time to list from a few weeks in Western Canada up to 6 months in Quebec and Eastern Canada –Different approaches on professional rebating

8. MERCER 7 May 3, 2015 Provincial Regulation – Public Payer PracticesProvinces BCABSKMBONQCNBNSNFPE Fixed Generic Pricing (% of brand) Lowest price in Canada Lowest Cost Alternative (interchangeable drugs) Maximum Allowable Cost/ Reference Pricing (same therapeutic class) Limit Professional Allowances Competitive Tender (List price) Listing Agreements (Manufacturer Payments) Dispensing Fee/ Mark-Up Limits Implemented Proposed P P Blank = Not Implemented

9. MERCER 8 May 3, 2015 Provincial Regulation Impact – Private Payer PracticesProvinces BCABSKMBONQCNBNSNFPE Fixed Generic Pricing (% of brand) * Most Favoured Nation Lowest Cost Alternative (interchangeable drugs) Maximum Allowable Cost/ Reference Pricing (same therapeutic class) Limit or Eliminate Professional Allowances Competitive Tender (List price) Listing Agreements (Manufacturer Payments) Dispensing Fee/ Mark-Up Limits Implemented Blank = Not Implemented

10. IMPACT OF GENERIC PRICING

11. MERCER 10 May 3, 2015 Pharmacist’s Perspective Reduced revenue for pharmacies forcing current business model review –From pills dispenser to pharmaceutical consultant Increased fees –In Ontario 32% of pharmacies increased dispensing fees –Generic mark-up increase from 10% up to 19% Increased generic pricing –Generics not listed on formulary –Some generics increased to new limit

12. MERCER 11 May 3, 2015 Pharmacist’s Perspective Reduced services No apocalyptic store closures as expected

13. MERCER 12 May 3, 2015 Private Sponsor’s Perspective Generic drugs spend has decreased but … –Relatively small percentage of total drugs spend – 8.2% of Great West Life GroupLine 2010 … offset by other Rx cost adjustments Prescribing pattern to replace brand name coming off patent by another brand name drugs instead of the generic version –Lipitor ® with Crestor ® (Cholesterol) –Effexor ® with Cipralex (depression) –Neurontin with Lyrica ® (Nerves pain and seizure) –Napraxen with Celebrex ® (Inflamation)

14. PRIVATE PLAN SPONSORS RESPONSES

15. MERCER 14 May 3, 2015 Private Sponsors’ Perspective The Generics manufacturing industry is creating cost savings opportunities through new medications but retail pharmacies scooping most of overall net savings Generics penetration still represents significant savings opportunities but need to implement cost management strategies

16. THE FUTURE

17. MERCER 16 May 3, 2015 Not to Sound Too Rosy but … Generics industry is well positioned to increase market share if: –Help promoting greater use of generic substitution ­Introduction of managed formularies ­Tiered formulary – higher reimbursement for cost-effective drugs/two-tier pricing structure to further encourage generics –Cautious about “expected” patent cliffs of coming years –Keep “pounding” the message that generics substitution is safe and a cost effective way to improve health

18. MERCER 17 May 3, 2015 Not to Sound Too Rosy but … Generics industry is well positioned to increase market share if: –New marketing techniques to “influence/educate” physicians prescribing habits and pharmacists – more and more –Innovative ways, i.e. financial rewards, to encourage plan sponsors to promote generic utilization –Limit the shortage issue compared to brand names –Get involved with “Biosimilars” to ultimately offer alternative solutions to the biologic drugs –Further lobbying…

19. Mercer (Canada) Limited