The Ministry of Finance in Ontario is following up on its 2024 consultation on the role of pharmacy preferred provider networks (PPNs) in the employer-sponsored drug insurance sector with the publication of two potential policy options for regulating the use of pharmacy PPNs.
The consultation is open until July 28, 2025.
“Either option may require legislative or regulatory changes to the insurance or pharmacy related legislation. Should the government decide to proceed with either policy option, the ministry will undertake the necessary analysis to identify direct compliance costs or benefits,” the consultation’s preamble states.
They describe a pharmacy PPN as a contractual agreement between an insurer and pharmacy operators providing discounts, preferential or exclusive access and specialized handling and case management for high-cost medications. The consultation paper, Preferred Provider Networks in Group Insurance Plans discusses both open and closed PPNs.
Four policy objectives
The four policy objectives outlined include consumer choice, cost and coverage (maintaining affordability by ensuring that regulatory intervention does not impact the cost or affordability of coverage), health outcomes and the support of appropriate competition within the pharmacy sector.
“PPNs intersect both the financial services and pharmacy sectors, which are governed by separate regulatory frameworks. In Ontario, both the insurance and pharmacy sectors are subject to regulation. However there is currently no single regulatory body overseeing both sectors and the regulatory frameworks governing each are significantly different,” they state. “Currently pharmacy PPNs are not directly regulated in Ontario.”
They continue, saying that under the two different acts governing the pharmacy sector, pharmacies are prohibited from entering into arrangements which limit a person’s choice without their prior written agreement. “However, with PPNs, plan members provide the requisite agreement when enrolling,” they write. “The Insurance Act does not currently contain any provisions regarding pharmacy PPNs.”
Quebec’s experience
In looking at other jurisdictions, they say Quebec’s move to ban pharmacy PPNs in 2021 may have led to consolidation of the sector, allegedly leading to higher pharmacy mark-ups. “In the longer term, the government has heard from stakeholders that the legislative ban may unintentionally lead to less competition among pharmacies.”
The two potential regulatory options proposed include: The any able and willing provider (AAWP) option and the standardized and mandatory exemptions (SME) model.
The AAWP option will mandate that any pharmacy PPN be open to any pharmacy operator willing to meet a PPN’s terms. Insurers and intermediaries would be permitted to use PPNs but would be required to accept any pharmacy operator able and willing to meet such terms.
The SME option, meanwhile, will standardize mandatory exemptions to pharmacy PPNs so plan members can access pharmacies outside of their network. “While SME does not have a precedent in other jurisdictions, this proposed approach is informed by concerns that the government heard during the initial consultation regarding the lack of consistency in existing exemption processes,” they write. “Circumstances under which plan members are exempt from a PPN’s requirements would be standardized and mandated.”
The consultation paper concludes by asking 18 questions. Among them, they ask if insurers should be required to demonstrate the reasonableness of terms in a PPN and questions how standardized exemptions should be set and by whom. The paper also asks what challenges stakeholders could face in implementing either option.
