The Canadian Life and Health Insurance Association argues that exclusive arrangements with pharmacies are needed to control the rising cost of group benefit drug plans.Cole Burston/The Globe and Mail
Canada’s life insurance industry is opposing proposed restrictions on exclusivity deals between pharmacies and insurers – guardrails that pharmacists say are necessary to curb risks to patients’ health.
During a second public consultation by the Ontario government on whether to restrict what are known as preferred pharmacy networks, or PPNs, the Canadian Life and Health Insurance Association argued that those exclusive arrangements are necessary to control the rising cost of group benefit drug plans – in particular, coverage of specialty drugs that typically cost north of $10,000 annually.
PPNs came under review last year after a public outcry when Manulife Financial Corp. MFC-T announced it was providing Loblaw Cos. Ltd.’s L-T pharmacies the exclusive right to fill prescriptions on certain specialty medications. Manulife later cancelled the deal.
Access to medication is increasingly being dictated by preferred pharmacy networks
The consultation, which closed on Monday, sought input on potential regulations the Ontario government is considering that could restrict insurance companies’ use of PPN deals. Various groups have raised concerns about PPNs reducing patient access to care and introducing anti-competitive pressure on the pharmacy sector, while others have said too much regulation could curtail potential cost savings.
Colin Blachar, a spokesperson for Ontario’s Finance Minister, said in a statement that the ministry is now reviewing submissions and will collaborate with partners across the sector to determine next steps.
One option the government is considering is to introduce “any able and willing provider” (AAWP) legislation, which would enable any eligible pharmacy to join PPNs. The model would essentially end what are called “closed” PPNs, in which patients can only get medication reimbursed if it comes from specific pharmacies that have deals with their insurance company.
An “open” PPN allows more pharmacies to join these networks if they can show they can meet certain quality and pricing standards.
However, in its submission, the insurance association said this model would “diminish insurers’ ability to negotiate costs savings” for employers and employees who are members of group benefit plans.
Rather, the Canadian Life and Health Insurance Association continues to oppose any type of regulation of PPNs, saying any changes to the status quo could reduce drug coverage and contribute to making plan costs “unsustainable” for employers.
But if the government decides to move forward with regulation, the association said the implementation of a “standardized and mandatory exemption” (SME) model would be the least disruptive. This model allows insurers to continue to use closed PPNs but introduces a set of standardized and transparent exemption rules to allow patients in certain circumstances to access a pharmacy outside of the network.
For example, exemptions could be set for patients who geographically cannot access an in-network pharmacy, or where mail order may not be feasible.
The Neighbourhood Pharmacy Association of Canada, which represents large chains as well as independent pharmacies, opposes the SME model. In its submission to the consultation, the pharmacy association warns that such a system would undermine patient autonomy and risks a U.S-style system in which insurers can dictate people’s choice of health care providers.
“We oppose any framework that requires patients to apply for exemptions in order to access their pharmacy of choice,” the submission states.
The association says it is in favour of an “any able provider” model and warns the networks should not have “coercive financial terms” for the participating pharmacies.
The Ontario Pharmacists Association also opposed the SME model in its submission, saying that while it prefers a full ban on PPNs, it would support an AAWP system that includes safeguards to ensure the terms of such deals are fair and uphold patient choice.
The Canadian Federation of Independent Business, which represents more than 39,000 small and medium-sized businesses across the province, said PPNs should be banned altogether.
The CFIB called both options “ill-advised,” and said neither would resolve the “systemic PPN issues” that exist today.
“PPNs are anti-competitive,” the group said in its submission. “They concentrate market power in the hands of a few large insurance providers and big pharmacy chains, creating a monopolistic playing field that shuts out small, independent pharmacies.”
CFIB pushed back on the findings reported in government’s first consultation that said employers may choose to reduce coverage or cut benefits altogether if PPNs were not available. The organization said that was not accurate and employers would not drop drug plan coverage solely because PPNs no longer exist.
Competition Bureau says preferred pharmacy networks may reduce patient choice
The Ontario College of Pharmacists, the province’s professional regulator, said it could not advise on either model as there was limited public and objective information on whether either would improve health outcomes or increase the affordability of medications generally.
“Without necessary patient-centred safeguards, we believe that risks will remain with any agreement that does not permit patients from accessing their medications from a pharmacy of their choice or respect the principles of informed consent, or that interferes with the delivery of timely, safe, equitable, unfragmented and ethical care,” the college said.
Cost savings that trickle down to employers and their employees have been one of the main reasons provided by insurance companies to support PPN arrangements. Yet, individual insurers and the insurance association have yet to publicly disclose any financial details on what those cost savings are.
The cost savings provided by PPNs are targeting pharmacy costs, such as markups and dispensing fees, Canadian Life and Health Insurance Association chief executive Stephen Frank said in an interview.
“That’s what the PPN element is. It’s going into pharmacies and saying ‘we want to negotiate or set some limits on the percentage, on top of the cost of the drug that is set,’” he said.
Mr. Frank told The Globe that the organization is working on collecting cost-savings data from its members to provide an aggregate figure to the public. He added that individual members have already disclosed certain cost savings to the government in private submissions.
OnPharm-United, a group that represents 600 independent pharmacies, said the primary justification for PPNs around cost control is “unfounded” because pharmacies in Ontario do not set their own prescription prices.
“The true function of PPNs is not to lower costs for employers but to consolidate insurer market power and extract hidden fees,” OnPharm said in its submission.