TORONTO - Ontario is scrapping an allowance pharmacists receive on generic drugs in a bid to reduce drug costs by half and make prescription medications available to more people, Health Minister Deb Matthews said Wednesday.

While Matthews said the move will eliminate abuse of the system, pharmacists warned it will have a negative impact on the way services are delivered.

"Professional allowances tremendously inflate the cost of drugs. We are paying far too much," said Matthews.

The allowance - payments generic drug companies make to pharmacy owners for stocking their drugs - are intended to fund patient services. The government claims they are instead being used by many pharmacies as rebates to fund fringe benefits, bonuses, overhead costs and boost profits.

"I will not go so far as to call them kickbacks or rewards, but I can tell you there are people who would do that," Matthews said.

"One thing is for sure, they're very, very large payments."

The payments amount to $750 million reportedly paid to pharmacy owners by generic drug manufacturers in 2009. Pharmacy owners have conceded that 70 per cent of the allowances were used as rebates instead of patient care.

Scrapping the allowance would lower the cost of generic drugs by at least 50 per cent - to 25 per cent of the cost of the original brand-name drug for Ontario's public drug system, private employer drug plans, and people who pay for drugs out-of-pocket, Matthews said.

"These reforms would enable us to maintain annual funding increases to Ontario's prescription drug system (and) offer patients wider access to lower-cost medicines."

While pharmacists would earn less in dispensing fees, the government plans to balance that loss by paying them a fee for doing more one-on-one work with patients.

The Ministry of Health said it will continue to ensure pharmacists are fairly compensated for helping patients by increasing dispensing fees by at least $1 for every Ontario Drug Benefit prescription filled. There will also be $150 million, including a new $100-million fund, to compensate pharmacy owners for the professional services they provide.

The province also promised to pharmacy services in rural communities and under-serviced areas with new dedicated funding in the budget, and said it will increase dispensing fees in those areas by up to $4.

Pharmacists shot back Wednesday, saying the compensation is not enough.

"When you take $3 out and put $1 back in... I don't think so. These dollars were used for professional services that pharmacists do everyday, in every town in this province," said Donnie Edwards, a pharmacist in Ridgeway, Ont.

"What I'm afraid of is my patient who calls me on a Saturday night with cancer and is sick to their stomach and needs medication, and it's going to be hard to be available. I won't be able to have the phone line to answer them."

Changing the business model would affect patients because pharmacists would no longer be able to spend time with a patient for consultations, he added.

During the past year, at least 100 pharmacy owners failed to provide any documentation related to the payments they've collected and 650 pharmacy owners provided incomplete reports, the government said.

Some pharmacies have also allegedly been involved in a re-sale scheme in order to receive professional allowances multiple times for the same product - a practice that has resulted in the government taking legal action against them.

The ministry's proposed changes build on steps taken in 2006 when the government sought to lower generic drug prices to 50 per cent of the price of the original brand name drug, and helped fund access to 150 new prescription drug products.

The Liberals promised to lower generic drug prices in their March 25 budget, but didn't release any details about how or when that plan was to be rolled out until now.