Senior consultant at NFP argues why misinformation around preferred pharmacy networks largely stems from two different types
Preferred pharmacy networks (PPNs) have been a part of Canada’s benefits landscape for years, but according to one consultant, few plan sponsors understand their scope, value and even their potential risk.
Jeannette Makad has seen the evolution of PPNs from the inside, having decades of experience working with them. Makad believes the the lack of clarity around PPNs doesn't do them justice.
"PPNs are nothing new. They do drive people to work with certain providers but there is a huge lack of transparency around them. I feel like there's not a whole lot of clarity floating around out there. There’s so many different layers to it and there’s just so much going on in the background," noted Makad, senior consultant of group benefits at NFP.
She added that many sponsors already use PPNs in areas like dental and vision care, often offering added discounts in exchange for members using specific providers. But that information isn't always clearly communicated.
Consequently, Makad emphasized employers may already be participating in a PPN without realizing it, especially when it comes to specialty drugs. According to Makad, most carriers already embed these arrangements into their programs, even if they don't label them explicitly. For plan sponsors, the primary advantage is mitigating the financial risk associated with extremely expensive treatments - some of which can cost up to a million dollars annually.
She underscored how there can ultimately be “tremendous savings on the drug plan itself," although it’s entirely dependant on the structure of the agreement between the insurer and the pharmacy provider. These PPNs can significantly reduce costs through negotiated markups and caps on high-cost treatments, some of which start at $10,000 per year.
However, these savings aren't always visible to plan sponsors or members. The pricing agreements between carriers and pharmacy providers are confidential, making it difficult to see exactly how much is being saved.
Still, she acknowledged "they can negotiate some pretty great deals that can save sometimes hundreds if not thousands of dollars ultimately for the plan member."
Makad believes much of the confusion around PPNs stems from a lack of understanding that there are two distinct types, noting that one focuses on traditional maintenance medications, while the other is focused on high-cost specialty drugs. She believes the distinction is crucial as maintenance drug PPNs, which often involve mail-order pharmacies, are primarily about convenience and not cost.
"There isn't a whole heck of a lot of savings when you do the math behind the scenes. Not for the plan sponsor, not for the plan member. There can be an agreement for dispensing fees, but they're not always the lowest available. If you go to Costco, I think we all generally accept that that's the lowest dispensing fee out in the market and they're usually mid-range dispensing fees. What it's there for is to offer convenience for essentially the plan member,” she explained.
Where real savings emerge, however, is in the specialty drug space, where both cost containment and enhanced care intersect, explained Makad. Specialty drug PPNs also introduce a more clinical, hands-on approach to patient care. Patients prescribed high-cost therapies are typically assigned a nurse case manager who supports them through potential side effects or interactions.
She argues that PPNs play a crucial role in creating checks and balances within the drug pricing system particularly as no formal regulation exists to cap pharmacy markups.
She compared the situation to dental fee guides, which are more suggestive than binding. Similarly, pharmacies are free to set their prices, and without oversight, drug costs can escalate quickly, notably for high-cost specialty drugs. PPNs help keep that in check by leveraging volume in exchange for lower costs, said Makad.
"The pharmacy is going to really bank on the volumes that they're getting," she explained. "It's almost beneficial to have more people participate in any given PPN than not participate."
Additionally, part of the disconnect in understanding these programs is due to how infrequently they’re used, noted Makad. Notably, only about 1 per cent of the population is on a specialty drug at any given time. As a result, most plan members and many sponsors don’t have firsthand experience with how these networks function.
She also acknowledged the growing use of GLP-1 drugs, which some carriers now classify as specialty medications, is contributing to increased scrutiny. These drugs are more widely used than traditional specialty therapies, making the specialty classification more visible—and potentially more controversial.
While Makad typically avoids recommending traditional mail-order PPNs unless there’s a specific need, such as adherence or rural access issues, she consistently advises sponsors to explore managed formularies and specialty-focused networks as strategic cost-control tools.
Makad underscored that PPNs don’t give employers direct access to high-cost drugs because that’s determined by the drug formulary along with the list of medications covered under a benefits plan. Instead, PPNs support cost control through mechanisms like negotiated markups, dispensing fees, and caps on price increases.
While she acknowledged that she supports the use of PPNs, Makad admitted that they aren't without risks, noting that if a specialty drug PPN isn’t designed and managed properly, it can backfire and “actually end up costing the plan sponsor more money,” she said, pointing to issues she’s seen with poorly structured tiered formularies.
For non-specialty or maintenance drugs, she warns of a different issue: wastage. Auto-refill programs can lead to unnecessary stockpiling if patients' prescriptions change but medications continue to be shipped. However, convenience and improved adherence, especially for those who struggle to pick up prescriptions regularly, can offset some of these risks, she noted.
By clearly differentiating between the two types, she argues sponsors can begin to make more informed decisions. To that end, Makad believes better communication is key to addressing the confusion around PPNs. She encourages plan sponsors to work closely with consultants and advisors to get clearer answers.
“Demystify it and make it a topic of conversation… There are valid points to debate when it comes to PPNs and finding the common ground. What works for one plan sponsor may not work for another. There's a clear use and need for them and [plan sponsors] are clearly doing something right, because otherwise [PPNs] wouldn't still be in effect,” said Makad.
