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Adam Radwanski

Ontario to prescribe a bitter pill for pharmacies Add to ...

The last time Dalton McGuinty's Liberals attempted pharmacy reform, they were largely scared off by the prospect of drugstores shutting down.

Don't bet on that happening again.

Unless the Ontario government is preparing for a massive climb-down - and there's absolutely nothing to suggest that's the case - it's fully prepared to make do with fewer pharmacies if that's what it takes to help rein in health costs.

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The Liberals are trying to blunt concerns about communities being forced to do without pharmacies altogether, by providing a special premium - as much as $4 per prescription filled - to rural and small-town stores. But officials estimate it will be made available to only 250-300 stores, which is less than 10 per cent of the province's market. The rest will be forced to fend for themselves.

Best of luck to them.

The main way that pharmacies currently make their money is through professional allowances, the sums paid by generic drug manufacturers in return for selling their products. The government's plan to abolish those payments on sales to the province's public drug plan, for which the allowances are currently capped at 20 per cent, will take about $750-million out of the system annually. But its four-year plan to also eliminate the allowances on private sales, on which there's currently no cap at all, promises to take out much more than that.

In return, the government will give most pharmacies an extra $1 in dispensing fees for each prescription they fill, and offer an extra $100-million in return for taking on new services. Even if there's some room for negotiation on those fronts, the new funds will be a relative drop in the bucket.

It seems like awfully harsh medicine. But the Liberals, who are in the early stages of a war to flatten the health-care cost curve, see pharmaceutical costs as an early battle that - relative to fighting with doctors or hospital boards - is easy to win. And they don't believe they can fully realize savings unless they dig in much further than they did four years ago.

Back then, the government settled for only tackling the prices paid by its Ontario Drug Benefit, which mostly covers seniors and accounts for about half the province's prescription sales. Under pressure, it backed off plans to regulate other sales - leading to both prices and professional allowances going way up for drugs bought by private insurance plans and cash-paying customers.

This time around, the Liberals seem entirely sold on the argument that they have to get the same deal - generics being sold for 25 per cent of the equivalent brand drug - for everyone. That's partly because it seems unfair to push costs onto employers and individuals so the government can save money. It's also because generic manufacturers have argued they won't be able to sell drugs cheaper to the public plan if pharmacies find new ways to squeeze them on private sales.

But at some level, it's also because the Liberals think the province has more drugstores than it needs.

Not for nothing do officials note that there are more pharmacies in Ontario (3,306, by the government's count) than there are Tim Horton's across the entire country (3,015). They plainly believe that overly generous allowances have distorted the market, and that nobody would especially suffer from fewer Shoppers Drug Marts.

The unpleasant reality is that it's not Shoppers - despite its aggressive expansion - that'll face the worst pain. Unlike big chain stores, smaller pharmacies don't use their drugs to lure in grocery consumers. So while independent pharmacies in small towns might be protected by the new premiums, their counterparts in urban centres are in big trouble.

That's a point that industry advocates - ironically funded mostly by chain stores trying to protect their profits not just in Ontario, but in other provinces that might follow its lead - will drive home over and over.

The Liberals yielded to the parade of aggrieved mom-and-pop pharmacy owners last time. Soon, they'll likely find out if there's much cost in ignoring them.

 

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