Opinion: Ontario’s pharmacy regulator undermines drug affordability

PPNs were invented as a way for drug insurance plans to lower the cost of the drugs they buy. The Ontario College of Pharmacists ' zero-tolerance policy would have eliminated this possibility. Photo by Colin Perkel/The Canadian Press/Postmedia files

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Economists who study industry regulation worry about “regulatory capture,” an often subtle process in which the regulator becomes a protector of the interests of the companies it is supposed to be regulating. The worst effects of such protection are unnecessary entry barriers and slower innovation in the industry.

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We generally attribute capture and its effects to lobbying by the regulated firms. But sometimes the regulator’s own enthusiasm produces the same effects. Consider the recent actions of the Ontario College of Pharmacists (OCP) regarding “preferred pharmacy networks” (PPNs), which are voluntary arrangements between pharmacies and drug-insurance providers seeking to bundle their plan members’ prescriptions for certain high-cost critical drugs.

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The independently owned and managed community pharmacy has long been the OCP’s ideal. In 1954, Ontario passed a law requiring pharmacies to be majority-owned by pharmacists, while allowing corporations that already owned pharmacies to continue. Out of concern for potential business conflicts, the OCP imposed regulations on pharmacies to ensure that local customers’ needs would always be pharmacists’ first priority. The same concern led the OCP to be suspicious of franchised and banner stores because, while owned independently, they raised concerns about the independence of local-pharmacy manager/owners in regard to patient care.

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In January 2024, Manufacturers Life Insurance announced it had left Bayshore HealthCare’s PPN to start its own network with Loblaw Companies and its wholly-owned Shoppers’ Drug Mart subsidiary. Four months later, the Ontario Teachers Insurance Plan announced MemberRx, its own in-house pharmacy, with head office in Mississauga.

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Members of these drug plans would henceforth submit their prescriptions for certain high-cost critical drugs to an affiliated PPN member or in-house pharmacy. If they didn’t, their insurance plans wouldn’t reimburse them for those drug costs.

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Public opinion exploded. There were angry allegations of market power and anti-competitive conduct and claims of “steering” and of PPNs taking away the “right” of customers with drug insurance coverage to submit their prescriptions to the pharmacy of their choice.

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None of the critics seemed to care about long-standing government efforts to control the growth of prescription drug costs, which are now the second-largest health-care cost, exceeding even physician compensation. They evidently saw no value in insurers bundling prescriptions for critical drugs in order to obtain bigger volume discounts on their purchases from drug manufacturers.

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None of this mattered to the OCP, either. In July 2024, arguing that PPNs put patients at risk, disregard patient autonomy and interfere with a pharmacist’s duty to put patient interests first, it announced a “zero-tolerance” policy. In December 2024 its board considered a motion to prohibit participation in PPNs and give OCP-accredited corporations and licensed pharmacists 12 months to leave any PPN they belonged to or find themselves in violation of the OCP’s “ethical principles” and subject to review by its discipline committee.