Not just an Ontario problem
The fallout from this will certainly be felt across the country. The pharmacies with the largest market shares are the pan-Canadian chains. It would be short-sighted to think that higher brand drug mark-ups, generic mark-ups and possibly overall higher ingredient costs will not be seen in other regions to compensate for lost revenue elsewhere. These pharmacies are well within their rights to look for increased revenues streams elsewhere in their businesses across the country.
The other issue is that if BC follows suit with more aggressive pricing on generic drugs, and Quebec soon exercises its “Most Favoured Nations” clause to get the same deal as Ontario, pharmacies across the countries will be scrambling to look at new revenue streams. Ideally for pharmacy, those new revenue streams would come in the form of new professional services that would be paid in addition to a dispensing fee for the physical dispensing of a medication (and the services around that core function), but until pharmacy and third-party payers decide what new professional services (if any) will be reimbursed and under what circumstance, the only revenue opportunity is through increased fees and mark-ups. We fear that will be the sole initial focus.
The good news – for plans that are properly positioned, there are some great partnership opportunities ahead as pharmacies will be forced to finally start taking the private sector seriously as a business partner. The bad news – much like pharmacies that are seeing revenues fall in the short-term, this won’t be an easy process for plans that are not prepared for what is taking shape.
Mike Sullivan is President of Cubic Health Inc., a Toronto-based drug plan management company.
