Regulation - LGIC
Changing Mark-ups Paid to Dispensers under the Ontario Drug Benefit Program
Regulation Number(s):
201/96
Instrument Type:
Regulation - LGIC
Bill or Act:
Ontario Drug Benefit Act
Summary of Proposal:
• As proposed during Budget 2019, the Ministry of Health (the ministry) and the pharmacy sector committed to achieving savings for the sustainability of the Ontario Drug Benefit (ODB) program. To that end, a pharmacy payment reconciliation adjustment was implemented on January 1, 2020 as a time-limited measure. It will end on or before March 31, 2024.
• Modernization of the mark-up payment framework is proposed as a measure to support sustainability of the ODB program. Under the ODB program, a mark-up is paid to pharmacies and dispensing physicians ("dispensers") for supplying drug products to eligible recipients. The mark-up is a percentage of the cost of the drug supplied for the ODB program recipient and is intended to account for a dispenser's costs incurred within the distribution chain, such as wholesaler mark-up and inventory carrying charges.
• The mark-up framework is set out in Ontario Regulation 201/96 made under the Ontario Drug Benefit Act (ODBA) and was last updated in 2015. Claims for drug costs under $1,000 are eligible for an 8% mark-up, and claims for drug costs equal to or in-excess of $1,000 are eligible for a 6% mark-up.
• Amendments to Ontario Regulation 201/96 made under the ODBA are required to implement a new multi-tiered mark-up payment framework based on drug costs. The percentage mark-up for lower-cost drugs would be increased and the mark-up percentage for higher-cost drugs would be decreased.
• The proposed changes take into account the fast growth rate in the use and number of high-cost drugs over $2,000. Drugs over $1,000 made up only 0.6% of all claims but contributed to 38% of total mark-up expenditure.
• Modernization of the mark-up payment framework is proposed as a measure to support sustainability of the ODB program. Under the ODB program, a mark-up is paid to pharmacies and dispensing physicians ("dispensers") for supplying drug products to eligible recipients. The mark-up is a percentage of the cost of the drug supplied for the ODB program recipient and is intended to account for a dispenser's costs incurred within the distribution chain, such as wholesaler mark-up and inventory carrying charges.
• The mark-up framework is set out in Ontario Regulation 201/96 made under the Ontario Drug Benefit Act (ODBA) and was last updated in 2015. Claims for drug costs under $1,000 are eligible for an 8% mark-up, and claims for drug costs equal to or in-excess of $1,000 are eligible for a 6% mark-up.
• Amendments to Ontario Regulation 201/96 made under the ODBA are required to implement a new multi-tiered mark-up payment framework based on drug costs. The percentage mark-up for lower-cost drugs would be increased and the mark-up percentage for higher-cost drugs would be decreased.
• The proposed changes take into account the fast growth rate in the use and number of high-cost drugs over $2,000. Drugs over $1,000 made up only 0.6% of all claims but contributed to 38% of total mark-up expenditure.
Analysis of Regulatory Impact:
• The ministry does not anticipate any additional administrative or operating costs for small businesses resulting from the proposed mark-up modernization.
• The proposed mark-up payment framework would have a positive impact on community and retail pharmacies that process mostly lower-cost claims and a neutral to minimal impact for specialty pharmacies and hospital-affiliated outpatient pharmacies that process more of the high-cost claims.
• There is no anticipated fiscal or quality impact to Ontario Drug Benefit (ODB) program recipients from the proposed changes.
• The proposed mark-up payment framework would have a positive impact on community and retail pharmacies that process mostly lower-cost claims and a neutral to minimal impact for specialty pharmacies and hospital-affiliated outpatient pharmacies that process more of the high-cost claims.
• There is no anticipated fiscal or quality impact to Ontario Drug Benefit (ODB) program recipients from the proposed changes.
Further Information:
Ontario Drug Benefit Act
Ontario Regulation 201/96
Consultation Draft Regulation
(Download Adobe Reader)
Proposal Number:
24-HLTC005
Posting Date:
February 9, 2024
Comments Due Date:
March 10, 2024
Contact Address:
Ministry of Health
Health Programs and Delivery Division
5700 Yonge St, 3rd Floor
Toronto ON M2M 4K5
Health Programs and Delivery Division
5700 Yonge St, 3rd Floor
Toronto ON M2M 4K5