The Canadian Life & Health Insurance Association (CLHIA) in its recent submission to the Ontario Ministry of Finance on the proposed regulation of preferred provider networks (PPNs) in drug group insurance plans says it is important that employers and employees can continue using PPNs to help manage their drug costs.
“PPNs are not unique to the insurance market and are used across the healthcare sector. What is currently being proposed targets insurers. Hospitals, patient support programs run by manufacturers, pharmacy retailers and long-term care facilities also use PPNs. It is unclear what makes PPNs in the drug insurance sector different from other PPNs and why the government is focusing on PPNs administered by insurers,” they write.
The lengthy submission notes that some information provided during initial consultations on the matter is erroneous. From earlier submissions they point out that stakeholders saying independent pharmacies offer better pricing shared no data sources. “The cost savings claims are questionable, at best,” they write. “They have also indicated that PPNs benefit insurers and pharmacy benefit managers but not patients. That claim is untrue.” In addition to the Fair Treatment of Customers guidance requiring insurers to treat customers fairly, they note in multiple places that patients using PPN services report a 90 per cent satisfaction rate.
Finally, they say concerns heard by the government in the first consultation that PPNs have a role in limiting access to pharmacies, particularly for residents of remote or small communities is based on data from the United States. “The Canadian and American healthcare markets are vastly different and not comparable,” they write. "Canada has 40 per cent more pharmacies per capita than the United States. States that impose an AAWP (any able and willing provider) model likely did so to address concerns unique to the American context, such as the health maintenance organization model and significantly more vertical integration.”
According to the consultation documents published by the Ontario government at the end of May 2025, the two regulatory options being proposed included the AAWP option and the standardized and mandatory exemptions (SME) model.
The first model mandates that any pharmacy PPN be open to any pharmacy operator willing to meet a PPN’s terms. The CLHIA came out strongly against this model as a solution saying Canadians will not see the perceived benefits or lower pharmacy fees under the AAWP model as it would limit insurers ability to negotiate.
The SME option will standardize mandatory exemptions to pharmacy PPNs so plan members can access pharmacies outside of their network. The CLHIA preferred this approach, saying it would ensure all insurers operating mandatory PPNs apply the same exemption criteria which allows patients access to non-network pharmacies.
They also encourage the government to take a principles-based approach to the regulation and leverage existing regulatory processes and oversight to avoid duplicative red tape.
“PPNs are important tools for managing drug costs, especially for specialty drugs. Less than two per cent of claimants are for specialty drugs, yet specialty drug spending accounts for over 30 per cent of total private drug spending in 2024. Without PPNs, the cost of comprehensive drug coverage may be unsustainable for employers,” they warn. They also note that 77 per cent of employers are worried about drug costs while 44 per cent are under direct pressure to take action on high drug costs. “We do not believe that regulating PPNs will improve patient access or experience.”
