Preferred provider networks (PPNs) in the pharmacy sector save plan sponsors and members money and assure high-quality patient care, say insurance companies—yet independent businesses beg to differ.
These are among the views presented to the Ontario Ministry of Finance as it gathers stakeholders’ feedback on the role of preferred provider networks (PPNs) in the private drug-insurance sector. As stated in its notification of a public consultation, the Ministry is investigating in response “to growing public discussion and media coverage regarding the impact of PPNs on consumer choice” and to determine if government action is required to regulate PPNs.
In its document to guide the content of submissions, the Ministry outlined three approaches under consideration:
- status quo, i.e., the use and design of PPNs would essentially remain business decisions;
- any-willing-provider (AWP) legislation to regulate the parameters of PPNs; and
- the restriction of PPNs by the Ontario College of Pharmacists (OCP), the regulatory body for pharmacists and pharmacies.
Take 5 for Wellness summarizes the written submission from Benefits Alliance and from the insurance, small-business and pharmacy sectors. This article also presents the situation in Quebec—where PPNs are prohibited—as both a possible model and a cautionary tale for other provinces.
Benefits Alliance
As Canada’s leading organization of independent benefits advisory firms, representing more than 13,000 small to mid-size employers with health benefits plans, Benefits Alliance (BA) focussed its comments on PPNs for high-cost specialty drugs—and “urges the government not to regulate this activity.”
In its letter to the Minister of Finance Peter Bethlenfalvy and Minister of Health Sylvia Jones, BA explained that specialty-drug PPNs “are a valuable tool to help contain ever-increasing drug costs, and help stretch an employer’s budget for employee benefits. Without these savings, some employers may have to reduce their specialty drug coverage or other benefits within their plan.”
BA also noted that these PPNs “deliver high-quality pharmacist care” and that participating pharmacy operators “agree with carriers to exceed minimum regulated standards [for care].”
Insurance
The Canadian Life and Health Insurance Association (CLHIA), the national trade association for life and health insurers in Canada, is also against the regulation of PPNs, stating it “will not improve patient access or experience…[and] could lead to higher costs and reduced access to needed medications.”
Like BA, CLHIA focussed its comments on PPNs for high-cost specialty medications, which have operated for more than a decade. Specialty PPNs result in “substantial savings for employers and patients” through reduced mark-ups charged by participating pharmacies. Reductions in mark-up can be as high as 70 per cent in closed and mandatory PPNs, it noted, adding that most PPNs in Ontario today are closed, i.e., limited to selected pharmacies (although CHLIA did not specify if most are also mandatory for patients).
As well, CLHIA noted that pharmacies in PPNs must fulfill insurers’ service level agreements (SLAs), which “introduce additional oversight for enhanced services that are not strictly required and governed by standard pharmacy practices.” It stated that complex cases often require a level of expertise, monitoring and outcome reporting not readily available in non-PPN pharmacies. “As you open the PPN and add more participants, it becomes more challenging to monitor and enforce the SLA standards,” stated CLHIA.
Small business
The Canadian Federation of Independent Business, representing 38,000 small- and medium-sized businesses in Ontario and 97,000 nation-wide, challenged the assertion that PPNs generate savings for employers.
“While CFIB is generally very supportive of measures that reduce business costs, it is extremely unclear that PPNs deliver on that promise. Based on feedback from businesses that would be directly impacted by an expansion in PPNs, the real anti-competitive costs seem to outweigh theoretical benefits,” it stated in its submission.
A recent survey of its members found that 68 per cent of Ontario businesses cited insurance costs “as a major cost constraint, 17 points above its historical average.” On average, insurance costs have increased by 83 per cent since late 2018, noted CFIB.
PPNs create “an uneven playing field that most often excludes small, independent businesses in favour of large operators,” stated CFIB. While concerns have come mainly from independent pharmacies, other healthcare businesses, such as physiotherapy clinics, have also raised “red flags” with CFIB.
The federal Competition Bureau also made a submission, available on its web site. The Bureau stated it has received complaints and requests to investigate [PPNs], including from members of Parliament, due to “the growing prevalence of business arrangements or practices that could limit competition between pharmacies…. Closed and mandatory PPNs have been identified to us as particularly worrisome.”
The Bureau also mentioned the growing importance of community pharmacies. “At a time when there is a clear need for more healthcare professionals across the country, the Bureau is concerned that payor-directed care agreements could be putting obstacles in the way of pharmacies…. Competition, not exclusion, is the best way to drive down costs while also meeting the needs of patients.”
Pharmacy
The Ontario Pharmacists’ Association (OPA) supports AWP legislation to mandate that PPNs be open to any willing provider, with reasonable terms, and voluntary for patients.
“In recent years, a troubling trend has emerged in which closed and/or mandatory PPNs are becoming increasingly common,” OPA noted in its submission. “Patients are neither consulted nor asked about such plan changes and typically, small, truly independent pharmacies are not invited to participate.”
While legislation in Ontario prohibits agreements that restrict a person’s choice of pharmacist or pharmacy without the person’s consent, it is unenforceable in the case of PPNs since plan members provide consent when enrolling for coverage from their benefits plan. “However, whether this ‘consent’ is informed and/or the patient’s true choice is questionable,” stated OPA.
OPA, the National Association of Neighbourhood Pharmacies and OCP, the regulatory body, called on the Ministry of Finance to broaden its investigation to include the practices of pharmacy benefits managers (PBMs), many of which operate their own pharmacy and/or are owned by an insurer. Unlike insurers and pharmacies, PBMs are not regulated.
“While there may be advantages to vertical integration…there are also significant concerns, including harms to competition and conflict of interest,” stated OPA.
Neighbourhood Pharmacies recommended a regulatory framework that includes the regulation of PBMs and extends beyond AWP legislation to “enable intelligent PPN design” that protects patient autonomy and supports pharmacies’ ability to provide care through fair competition.
In its submission, OCP stated that “payer-directed care models can be associated with patient harm” due to the fragmentation of care and risk of negative health outcomes.
It called on plan sponsors to be more accountable. “What matters is the policies, procedures and decision-making criteria that the plan sponsors put in place…. All models where payers determine where and how a patient must receive their care are potentially problematic.”
In response to complaints already received from patients, OCP is considering its options as a regulator to restrict payer-directed care, protect patient autonomy and obtain informed consent.
The Quebec example
Interestingly, organizations on both sides of the debate mentioned Quebec as a source of learnings. The province is the only one in Canada with legislation that prohibits insurers or employee benefits plan from restricting beneficiaries’ freedom to choose a pharmacist, effectively prohibiting PPNs.
Despite that law, “a good proportion of patients [taking specialty drugs] in Quebec are only served by a handful of providers,” noted CLHIA, which added “these pharmacies charge significantly higher than other pharmacies for the same drug.”
Martin Papillon, President and CEO of AGA Benefit Solutions in Quebec, agrees that market concentration is unfolding in a very different way in Quebec. “It is happening at the practitioner level. Healthcare practitioners are directing patients to the pharmacy they know has the specialty drug.”
The Association québécoise des pharmaciens propriétaires (AQPP), the trade association representing pharmacy owners, has stated that fewer than one per cent of pharmacies distribute more than 40 per cent of specialty medications in Quebec. In June this year, AQPP began the process for a class-action lawsuit against 10 of its members, owners of six pharmacies. It charges these owners with “patient steering” using “wrongful business methods in collaboration with PSP patient support program managers and infusion clinics,” and is seeking compensation for financial losses suffered by the remaining members of the AQPP.
The question remains: are plan sponsors in Quebec paying more for specialty medications than in other provinces? Yes and no, says Papillon. “Essentially PPNs are established to negotiate lower markups. Because they don’t exist in Quebec, presumably the costs are higher.”
That said, other forms of government intervention protect both plan sponsors and plan members. “The Quebec Drug Insurance Pooling Corporation picks up a lot of the cost of these drugs once plan sponsors reach their pooling threshold…so awareness is fairly low that the drugs may be pricier,” says Papillon.
And the government caps plan members’ out-of-pocket costs for drugs. The cap is currently $1,196 annually. “If the drug costs $10,000, which is at the lower end for a specialty drug, it’s most likely the employee will max out and government will cover anything beyond the cap,” says Papillon.