The province's prescription drug plan is estimated to cost taxpayers about $313 million this year, according to the provincial budget. (CBC)

The Saskatchewan government is keeping a wary eye on the manufacturers' drug rebates being paid to pharmacies — an estimated $30 million to $40 million a year.

According to Health Ministry officials, the money — which the makers of generic prescription drugs routinely pay to pharmacy companies — should be going toward reducing the overall drug bill for taxpayers.

There are about 350 pharmacies in the province, so $35-million worth of rebates would work out to an average of $100,000 for each one.

For years, the province has liked generic drugs, because they're cheaper than their brand-name equivalents — and keeping drugs costs under control has been a priority.

Kevin Wilson, the executive director of the Health Ministry's drug plan branch, says the impact of rebates on drug costs is a problem the government is just trying to get a handle on now.

"It's more challenging as this has started to come to light," he said. "Our focus would be to focus on getting the lowest reimbursement price on generic drugs … and at the same time providing fair compensation to pharmacists."

Ontario drug case

Other provinces are also grappling with drug rebates.

Last month, the Ontario government exposed a scheme in which generic drug manufacturers were allegedly funnelling millions of dollars in secret rebates to wholesalers or pharmacies.

According to The Canadian Press, fines totalling $33.8 million were issued to seven drug companies, four wholesalers and one pharmacy for receiving excessive rebates for drug purchases following a five-month investigation by the Ontario Health Ministry.

Officials said the scheme was dramatically driving up the cost of generic drugs.

University of Calgary economics professor Aidan Hollis, who has done extensive research on pharmaceutical finances, says the Ontario case is another example of a national problem.

"Payers for generic drugs are paying at least hundreds of millions of dollars extra per year in Canada because of rebates … and the fact that retail prices are much much higher than they should be."

Pharmacies say rebates needed

Saskatchewan pharmacists are paid though regulated sources of revenue — dispensing fees and a markup on the price of drugs.

The rebates, known in the pharmaceutical industry as "professional allowances," are not regulated.

Some pharmacists, like Larry Preddy in Estevan, say dispensing fee and markups are simply not enough to run his business.

"If it wasn't for these allowances I would guess 35 per cent, 40 per cent of the rural pharmacies in Saskatchewan would close," said Preddy. "We use them to pay our pharmacist, we use them to pay our staff, we use them to keep our lights on and we use them to provide service to our customers."

Rebates part of the debate

Saskatchewan pharmacists are in the middle of negotiating a new contract with the provincial government. According to the provincial officials, the issue of rebates could become part of the discussion.

The government says it wants to get a better handle on what the pharmacists are actually taking in so that they can make a better decision about what to pay them. Preddy said he's not impressed with that approach.

Preddy said he'd be willing to forego all rebates, if the provincial government increased the dispensing fee by $4 prescription, going from $8.43 to $12.43.

Based on the current volumes of prescriptions filled, that would give pharmacies tens of millions of dollars extra every year.