Ontario’s signal that it may restrict or eliminate preferred pharmacy networks has created urgency for plan sponsors that rely on these arrangements to manage drug plan costs and access.
Preferred pharmacy networks have been used in private drug plans for more than a decade. A PPN is a group of pharmacies selected because they offer lower drug costs, the amounts actually paid, and consistent dispensing fees or specialized support. Members can still fill prescriptions anywhere, but reimbursement may vary depending on whether a preferred pharmacy is used.
Read: A closer look at preferred pharmacy networks
Since drug pricing and actual cost differ between pharmacies, PPNs have helped reduce plan spending and members’ out-of-pocket expenses. Many plans also encourage use of the network through lower copays or by making the PPN a condition of reimbursement for certain medications.
Private health plan strategist Suzanne Lepage says PPNs support sustainability without cutting coverage. “If plan sponsors encourage plan members to use lower cost pharmacies, the plan can remain sustainable and continue to offer a high level of coverage while minimizing costs instead of limiting or restricting coverage,” she says, noting some PPN models allow members to use any pharmacy, but reimbursement rules may differ.
Ontario’s proposed PPN framework may change how plan sponsors manage costs. If employers can no longer direct members to preferred pharmacies, they may need to consider reimbursement caps or redesign their plans to offset rising claims. Lepage says clarity around what the framework could mean for private plans will be important for plan sponsors.
Read: Ontario taking steps to end preferred pharmacy networks, introducing VPLA framework
Specialty drugs often require more clinical support and Lepage says insurers conduct due diligence when selecting preferred pharmacies to ensure they can meet these needs.
Affordability remains a priority as the province develops its approach. “Canada’s life and health insurers look forward to working with the Ontario government and the Financial Services Regulatory Authority of Ontario on implementing the new ‘any willing provider’ framework and exemption standards,” said Stephen Frank, president and CEO of the Canadian Life and Health Insurance Association, in an emailed statement to Benefits Canada. “Our priority is ensuring that any approach continues to deliver high-quality care and keeps medications affordable and accessible.”
Drug manufacturers are also monitoring developments in the legislation. “We are closely watching the situation to understand its potential impact,” said Christina Antoniou, director of external communications at Pfizer Canada, in an emailed statement to Benefits Canada. “Our priority remains ensuring patients can continue to access the treatments they need. As an organisation committed to patient care, we support solutions that safeguard access to medications and adherence to treatment, regardless of changes to pharmacy network models.”
Quebec is often referenced because it prohibits PPNs but Lepage notes its regulatory model requires private plans to match the public formulary and cost-sharing structure, which shapes how cost containment works.
Read: Sounding Board: Why do Quebec’s private drug plans pay higher pharmacy fees?
Lepage recommends employers assess the cost impact of removing a PPN, determine whether the plan can absorb it and review alternative plan designs if needed. She also suggests gathering employee feedback on pharmacy choice, cost and continuity of care.