Are small independent pharmacies at risk under new insurer rules?
A new study suggests concerns about Canada’s drug benefits system becoming like the dysfunctional American model may be overblown, despite growing use of preferred pharmacy networks across the country.
The C.D. Howe Institute report, released Thursday, examined preferred pharmacy networks (PPNs) and their impact on patient care and independent pharmacies. Author Paul Grootendorst found no independent data confirming risks to patient care and no signs of widespread harm to Ontario patients.
“Given the extreme differences in drug pricing, concerns about Canada adopting a US-style drug benefits system are understandable,” said Grootendorst, a University of Toronto pharmacy professor. “But when you compare both systems, you find that Canada’s structural safeguards – from federal price regulation to less vertical integration, as well as the currently limited scope of PPNs – make that scenario highly unlikely.”
All private drug insurers in Canada now use PPNs, where member pharmacies charge discounted fees and provide additional patient supports for certain medications. In return, insurers encourage patients to use these pharmacies through lower copayments. Networks can be open to any pharmacy or closed to select participants only.
The networks primarily distribute specialty medications for complex chronic conditions, such as multiple sclerosis, cancer, and rheumatoid arthritis. While these drugs serve less than 2% of private drug plan users, they account for about 28% of total private plan spending.
Grootendorst found PPNs have modestly affected small independent pharmacy revenues, reducing core pharmacy sales by 5%. However, he stressed this decline is not enough to threaten most pharmacies’ financial viability.
“Even without PPNs, most SIPs would earn only a small portion of their revenues from this segment,” the report noted.
The research addressed patient care concerns, including potential treatment fragmentation when patients obtain medications from multiple pharmacies. Grootendorst suggested regulators and insurers should consider improving information-sharing systems and exploring insurers’ willingness to pay for more inclusive networks.
Pharmacy stakeholders have petitioned to ban or regulate PPNs amid worries about the system’s direction. The study recommends balanced implementation that considers patient access, insurance costs, and competition effects.
“PPN regulation is gaining momentum, with consultations, investigations, and potential sanctions underway,” Grootendorst said. “My hope is that these consultations will find a fair, low-cost way for insurers to negotiate fees with pharmacies and explore how barriers for small and independent pharmacies in the specialty drug market might be overcome.”
The report suggests monitoring pharmacy sector concentration remains important as specialty medication spending continues rising.
