The Ontario government has followed through on its plans to regulate Preferred Provider Networks (PPNs) for employer-sponsored drug benefit plans in the province. After broad public consultation, the government announced in its 2025 Fall Statement that it will introduce legislation to enable an Any Willing Provider (AWP) framework, along with “a standardized, transparent process for patients to seek exemptions from PPNs where appropriate.”
Under that framework, any pharmacy willing to match the financial terms of an existing PPN would be permitted to join that network. This will enable “expanded consumer choice and competition in the pharmacy sector, while maintaining cost-effective access to medications,” says the province.
“The great advantage, I think, will be patient choice,” says Mark Kempf, a benefits industry advisor and author based in Paris, Ontario, who notes that this will allow patients to use their own pharmacists again.
One of the efficiencies that preferred provider networks were supposed to provide was ties to specialty pharmacies that would better understand the patient’s condition, be able to explain that to the patient, and then provide better adherence to medications that would lead to improved outcomes, says Kempf.
But pharmacies in PPNs have not always provided that special expertise, he adds, recalling how he has seen a few employees that had a very poor experience dealing with a junior pharmacist without the requisite skills, and who didn’t even review the medication with them as they always should.
“My experience has been that these Preferred Provider Networks don't go over well with people in Canada,” says Nigel Ottley, managing partner of Benefits Architect Group in Toronto. “People really just like to go to their own pharmacy, and have a relationship with the pharmacist.”
Through the regulation of PPNs, “we want to put all the pharmacists on a level playing field,” says Ottley, who explains that if a discount has been negotiated through one pharmacy, the goal is to allow another pharmacy to offer the same discount.
“The advantage [will] probably get eroded over time as the other chains react to it,” he adds.
Employers face challenges
While the regulation of preferred provider networks should theoretically control consumer costs, the employer typically absorbs the cost through the claim, says Ottley. One way the consumer could be impacted is if the plan design calls for a capping of the dispensing fee at, say $10, and a particular pharmacy is charging $15, and the consumer is required to pay the difference, he explains.
Kempf says it is impossible to determine the impact of regulation of PPNs on consumer costs, noting that in theory the preferred provider networks would be offering something in the vicinity of a 10 to 30 per cent less markup to the group plan on the claim side. The employee wouldn’t notice that if they were being fully reimbursed by their group plan. But if only getting reimbursed for, say 80 per cent of the cost, that 20 per cent payable could amount to a lot of money.
Roger Thorpe, president of Thorpe Benefits in Toronto, says regulation of PPNs offers several potential disadvantages for employers.
“If the original objective of these networks was to give an employee a potentially more convenient, maybe even a safer, but ultimately more cost sustainable system, I'm not sure the employer is going to win on this. I think the employer is going to lose opportunities to sustain their plan,” he says.
Thorpe says he hopes regulating PPNs will create more competition in the pharmaceutical industry, but “I'm not sure that other pharmacies are going to always be able and willing to step up and compete...to create the competition and the price impact that the province thinks it will,” he warns.
“If, at the end of the day, the employer is the one paying the bill, they should have the choice to put in appropriate controls that allow them to sustain their drug plans. Health plans are getting very expensive, and they're rising quite steadily. So, I don't think that this solution is really in line with the challenges that they have,” he says.
Furthermore, "we're not seeing a lot of reduction in the markup and dispensing fee area. We're seeing, more often, an increase in those areas right now,” Thorpe says.
What is likely to happen is that employers will need to pass on some of that cost increase to the employee, he adds, noting this might act as an incentive for employees to shop around, especially if they have to pay a percentage of that claim or pay the dispensing fee itself.
“I like PPNs because [they] keep the cost down, especially on the expensive drugs,” says Chris Gory, principle of Orchard Benefits in Toronto. “I see value in it. Conversely, I also see where the smaller pharmacies are coming from and why they want to get involved through the AWP program,” he says.
Many more drugs are coming into the market, and these are very expensive, especially to small employers, who need to be protected. “You need to take as much of the drug costs off them as possible, and you can do so through PPNs,” says Gory.
Insurers also impacted
Regulating PPNs in Ontario could also have a significant effect on insurance companies.
If controls and networks related to the dispensing of specialty medications are removed because of regulation, these cost impacts will hit insurance companies within their pooling or stop loss ratios, Thorpe predicts.
Furthermore, he notes, insurance companies generally design systems that benefit consultants or brokers, then pass that on to the client as an option. Removing these options will make it more difficult to manage cost within the insurance company’s book of business and ultimately make it difficult for the advisor to help their client manage a benefits budget, Thorpe says.
Ottley says the “whole purpose of the PPN is to get a price advantage for drugs over $10K. If they cannot get this, then I believe the insurers will abandon the field and leave the choice with individual consumers.”
Ontario appears to be a pioneer among Canadian jurisdictions in the regulation of PPNs, which also exist in other provinces.
Quebec does not allow PPNs
Quebec is an exception. Its regulations do not allow PPNs, resulting in higher costs, although Régie de l'assurance maladie du Québec (RAMQ), the organization responsible for Quebec’s insurance plan, limits out of pocket expense, Gory explains.
“We don’t have that [in] Ontario. If we lost the PPNs, our drug costs would go up. Employers would be covering more drug costs because we don't have the limitations that RAMQ does,” he elaborates.
Gory notes that much still needs to be determined in order for the Ontario government to implement the AWP framework for the regulation of PPNs. For example, the future legislation must determine what qualifies as a specialty drug in order to standardize costs that smaller pharmacies will have to match in order to be part of the program, he says.
Once that is done, it will open up a lot of value, predicts Gory, who says that some people might, for example, not want to go to a large pharmacy for their weight loss drug. “People need choice, selection, opportunities. Maybe there are other pharmacies where the drugs are being dispensed,” he stresses.
“There’s a lot of work to be done, but [the regulation of PPNs] has the potential to be great,” says Gory.
