Canada’s federal competition watchdog is investigating Express Scripts Canada, a large player in managing insurance claims at drugstore checkouts, after a pharmacists’ group accused the company of anti-competitive practices.
Mississauga-based Express Scripts is the largest “pharmacy benefit manager” in Canada, a type of business that acts as an intermediary between pharmacies and insurance companies. PBMs handle claims processing for insurers, which allows drug coverage to be applied on the spot at pharmacies, and means that people who are insured do not have to pay out of pocket for the full costs of their drugs.
Express Scripts also operates four mail-order pharmacies in Canada.
But PBMs have been criticized for the amount of control they exercise over the pharmacy sector. Those concerns were heightened last year, when Express Scripts introduced a mandatory new fee for pharmacies to use its service. That led to criticism from industry groups who said that pharmacies would essentially be forced to pay the fee, because without the adjudication at checkout, they would lose customers who would be unwilling or unable to pay the full cost of their prescriptions and wait for later reimbursement from their insurers.
The Canadian Pharmacists Association (CPhA) filed a complaint with the Competition Bureau last year, alleging the fee was intended to “squeeze” profit margins of pharmacies that also compete with the PBM’s own operations, Express Scripts Canada Pharmacy.
Express Scripts Canada is a subsidiary of U.S.-based Express Scripts Holding Co., which is owned by U.S. insurance company Cigna Corp. The company’s clients include some of Canada’s largest insurers, including Manulife Financial Group, as well as large plan sponsors.
On Friday, the Competition Bureau announced it had obtained a federal court order to launch the investigation, which will require Express Scripts to hand over records and other information to the bureau, and to provide oral testimony.
The release specified that there is no conclusion of wrongdoing at this time.
“This is a significant step forward. PBMs have operated unchecked for far too long, and this investigation marks an important step toward greater accountability,” Joelle Walker, vice-president of public and professional affairs for the CPhA, wrote in an e-mailed statement.
Express Scripts Canada did not respond to a request for comment.
The issue of choice over where people get their medications has been in the spotlight since early 2024, when Manulife announced – and then walked back – a deal with Loblaw Cos. Ltd. that would have required chronically ill patients to receive specialty medications only at Shoppers Drug Mart and other Loblaw-owned pharmacies.
Such deals, known as “preferred provider networks” or PPNs, are not the same as the business relationships between insurers and pharmacy benefit managers. But they have both been criticized for their potential to steer patients to certain pharmacies.
The Competition Bureau’s announcement on Friday specified that it is looking into “patient steering” through PPNs that may “force or induce” Canadians to use pharmacies owned by or associated with Express Scripts, rather than allowing them to visit their pharmacy of choice.
Sherif Guorgui, co-CEO of OnPharm-United, a group that represents 600 independent pharmacies, said the investigation presents an opportunity to push for a more equitable and transparent system that puts patients rather than corporate interest at the centre of care.
“I expect this Competition Bureau investigation to be a critical turning point in the pharmacy landscape in Canada, because it brings much-needed and well overdue regulatory scrutiny to business practices that have long compromised patient choice, patient care, and directly impacted the viability of independent pharmacies,” Mr. Guorgui said in an e-mail to The Globe.
These deals are coming under increasing scrutiny. The Ontario government last year launched a consultation seeking input on whether to regulate PPNs. In its submission to that consultation, the Competition Bureau expressed the concern that PPNs could reduce Canadians’ choice in “a crucial area of healthcare.” The bureau’s submission cited previous Globe and Mail reporting on the issue.
Health care providers have urged the province to restrict these deals, while insurance companies have argued that PPNs are necessary to keep costs down. The terms of such deals are opaque.
In the investigation launched on Friday, the bureau is also looking into “margin squeezing” of pharmacy competitors through Express Scripts’s service fee, and through a “costly and burdensome audit process.”
In addition to processing claims at pharmacy checkouts, PBMs often conduct later audits of pharmacy transactions, and in some cases will reverse reimbursement claims. The CPhA’s complaint called these audits “unfair, opaque and abusive.”
Those audits often claw back reimbursements in cases where pharmacies have done nothing wrong, said Aly Haji, founder of RxLaw, a law firm specializing in health law and policy consulting.
“This is a real example of dissonance that occurs when PBMs get involved in patient care, because it turns into a relationship governed by contract rather than by patient care,” Mr. Haji said.
Pharmacy benefit managers first came about in the United States in the 1950s, but their presence and influence have grown significantly as health care spending has expanded, the CPhA complaint stated. While their role differs slightly in Canada, they have grown here as well.
In 2022, the U.S. Federal Trade Commission launched an inquiry into PBMs, which is continuing. An FTC report last July found that pharmacies affiliated with the three largest PBMs in the U.S. – one of which is Express Scripts – received 68 per cent of the dispensing revenue related to specialty drugs in 2023, a number that has grown in recent years.
The same report found that the six largest PBMs in the U.S. manage almost 95 per cent of all the prescriptions filled across the country.
In its release on Friday, the Competition Bureau noted that it was investigating Express Scripts’s conduct under the “restrictive trade” provisions of the Competition Act, which address “abuse of dominance” in business arrangements that could harm competition. “The bureau is committed to protecting competition in the pharmacy sector,” the press release stated.
The CPhA’s Ms. Walker applauded the launch of the investigation.
“This is a clear signal that Canadian regulators are prepared to examine practices that may be harming competition and limiting access to care – and we’re proud to support that effort,” she wrote.