Regulation - LGIC

Improving Value of Pharmacy Payments

Regulation Number(s):
O. Reg. 201/96
Bill or Act:
Ontario Drug Benefit Act
Summary of Proposal:
• For background information and context on this proposal, please see the attachment in the Supporting Materials section below.
• Following public consultations and collaborative engagement with the Ontario Pharmacists Association and Neighbourhood Pharmacy Association of Canada on the Budget 2019 proposals, the ministry is proposing, pending introduction and passage of required legislative changes to the Ontario Drug Benefit Act, to replace the tiered mark-up and MedsCheck Budget proposals with a time-limited (until March 31, 2023) reconciliation adjustment process.
• The reconciliation would entail an adjustment (reduction) made to biweekly payments to pharmacies for dispensing drug benefits for Ontario Drug Benefit program recipients, other than long-term care home residents. This reconciliation proposal would achieve some of the savings from the previous tiered mark-up and MedsCheck proposals.
• The reconciliation adjustment annual savings targets would be as follows: $13.1M (2019/20), $54.1M (2020/21), $55.6M (2021/22) and $57.3M (2022/23). This results in cumulative savings targets of $13.1M (2019/20), $67.2M (2020/21), $122.8M (2021/22) and $180.1M (2022/23).
• The ministry would deduct a percentage from the sum of the dispensing fee and mark-up for all drug claims. The reconciliation adjustment would be two-tiered, with adjustments based on the cost of the drug.
o Up to 16% for drug costs equal to or over $1,000; and
o Up to 4% for drug cost under $1,000.
• The reconciliation percentages listed above are maximums that would be allowed under the regulations. Before each fiscal year, the ministry would forecast what percentages would be needed the upcoming fiscal year to achieve the cumulative target for that fiscal year. The cumulative savings target for a fiscal year would be equal to the annual savings target, unless the annual savings target the previous fiscal year had not been achieved; these amounts would be rolled over to the following year, up until the March 31, 2023 end date. The percentages would be communicated to the pharmacy sector through Executive Officer Notices. The time-limited reconciliation proposal is meant to be a short-term solution and would provide time to consider longer-term solutions which improve patient outcomes.
• The proposed regulatory amendments are conditional on the introduction and passage of legislative amendments to the Ontario Drug Benefit Act.
Analysis of Regulatory Impact:
• As communicated following Budget 2019, the ministry proposed four reforms to pharmacy reimbursement which would have required policy, legislative and/or regulatory changes. Budget 2019 committed annual savings of over $140M by 2021-22, and cumulative savings of $791M by 2023-24 for these initiatives.
• Following stakeholder engagement, the ministry is proposing regulatory changes which, pending introduction and passage of required legislative changes to the Ontario Drug Benefit Act, would replace the tiered mark-up and MedsCheck Budget proposals with a time-limited (until March 31, 2023) reconciliation adjustment.
• The reconciliation adjustment proposal is estimated to achieve cumulative savings of $180.1M by 2022-23.
• While the cumulative savings under the reconciliation adjustment proposal would not meet the original savings commitments, they would still be a significant amount that the industry would be able to absorb under existing business models in the near-term while providing time for the industry to reorganize itself to achieve longer-term, sustainable savings.
o The pharmacy sector has committed to achieving ~70% of the original savings commitment for the tiered mark-up and MedsCheck proposals through the reconciliation adjustment and ongoing collaboration to identify longer-term savings initiatives.
Further Information:
Proposal Number:
19-HLTC034
Posting Date:
October 28, 2019
Comments Due Date:
November 30, 2019
Contact Address:
Ministry of Health
Drugs and Devices Division
5700 Yonge St., 3rd Floor
Toronto ON M2M 4K5