Preferred pharmacy networks have become increasingly common in Canada. But the Federal Competition Bureau has expressed concerns about exclusive deals between insurers and pharmacies could reduce choice for Canadians.Ryan Remiorz/The Canadian Press
The Competition Bureau is expressing concern that exclusive deals between insurers and pharmacies could reduce Canadians’ choice in “a crucial area of healthcare.”
The federal competition watchdog provided a public response on Monday to the Ontario government’s consultation seeking input on whether to regulate these deals, known as “preferred pharmacy networks” or PPNs.
“At a time when there is a clear need for more health care professionals across the country, the Bureau is concerned that payor-directed care agreements could be putting obstacles in the way of pharmacies that are competing to serve patients in the communities where they live and work,” the bureau wrote in its submission to the Ontario Ministry of Finance’s consultation.
PPNs have become increasingly common, but gained widespread attention in January when Canada’s largest insurer, Manulife Financial Group MFC-T, announced a PPN arrangement with the country’s largest pharmacy owner, Loblaw Cos. Ltd. L-T. Manulife cancelled the PPN in February following public criticism.
That deal would have restricted Manulife plan members to receiving certain high-cost specialty medications exclusively through Loblaw-owned pharmacies, including Shoppers Drug Mart. Before Manulife walked back its plans, the Competition Bureau “received numerous complaints” asking for an investigation of the agreement, according to the submission made public on Monday, which cited Globe and Mail reporting on the issue.
In their own submissions to the Ontario consultation, health care providers urged the province to restrict these deals. Insurance companies, meanwhile, have argued that PPNs are necessary to keep costs down. The terms of such deals are opaque.
“At time of writing, the Bureau believes more information would be required to determine what benefits, if any, PPNs might deliver, and how the use of PPNs in the employer-sponsored drug insurance sector may be impacting patients and competition,” the bureau wrote in the submission. “Obtaining information regarding PPNs is a crucial first step in understanding the extent of the issue and how to craft policy solutions to address it.”
PPNs can take various forms. “Open” or “voluntary” PPNs provide plan members with a list of approved pharmacies where they can fill prescriptions for certain specialty drugs. In these arrangements, people can still go to an out-of-network pharmacy, but it may be more expensive. “Closed” or “mandatory” PPNs restrict plan members to using only approved pharmacies, if they want to be reimbursed for their prescriptions.
“The use of PPNs, and in particular closed and mandatory PPNs, appears on its face to reduce patient choice by effectively limiting the sale of certain drugs to specific pharmacies, and may lessen competition,” the bureau wrote in its submission.
Some pharmacists and pharmacy groups have expressed concern that these deals could take away customers that help them to stay in business. They have also raised safety concerns about PPNs, since patients receiving specialty medications at an in-network pharmacy may get other medications from a different pharmacy, without complete records of possible drug interactions being accessible to the pharmacist.
“Even if PPNs result in overall cost savings, these arrangements could also disproportionately impact certain participants in insurance and pharmacy markets, including independent pharmacies, seniors, and patients who live in rural or remote parts of the country,” the bureau wrote.
Bradley Callaghan, associate deputy commissioner at the Competition Bureau, said the agency is open to the possibility that PPNs could provide benefits to insurers and plan sponsors, but that a lack of transparency in these deals make that unclear.
“An important question is who gets the dollars?” he said in an interview. “Where do those savings go to?”
The submission noted that the bureau has not yet done an in-depth study on PPNs, but said that it is aware of “broad and significant concern among the public and interested parties” about these deals.
“If pharmacy markets become more concentrated and less contestable as a result, then Canadians could be deprived of the benefits of competition in a crucial area of healthcare,” the submission said.