Pangaea Express: Final Amendments for ODB Act and DIDFA

December 17, 2019

By Beverley Herczegh

It has taken significant time to mend the relationship between pharmacy and the Ontario government since the 2010 pharmacy rallies at Queen’s Park in response to the elimination of professional allowances. But as a result of active advocacy and perhaps the passage of time, the following changes are the final amendments to the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act:

January 1, 2020

  • Removal of the cap on ordinary commercial terms (OCT) - in other words no regulation on professional allowances (currently OCT is capped at 10% in Ontario).

  • Long Term Care (LTC) fee-per-bed capitation model implemented starting at $1500/year in 2019/20 and going to $1200/year by 2023/24. This fee intended to reimburse for all the services currently provided to LTC (MedsCheck), which are expected to continue. Elimination of the $2 copay for LTC residents.

  • Implementation of a time-limited reconciliation adjustment (reduction in payments to pharmacy) as communicated already:

  • Up to 16% (maximum) for approved claims of $1000 or more.
  • Up to 4% (maximum) for approved claims under $1000 until target savings are met for each year until March 31, 2023.
  • For the period January 1, 2020 to March 31, 2020 the percent adjustment will be set at 15% for the higher cost category and 4% for the lower cost category with percentages communicated for subsequent years.
  • Cumulative target savings January 2020 to March 31, 2023 = $180.1M.

July 1, 2020

  • Private label generics will be eligible for designation as listed drug products or as interchangeable products on ODB (reduction in regulatory burden).

These changes and the process to arrive here are significant.

The LTC fee per bed capitation model and the time limited reduction in payments to pharmacy will allow the Ministry to extract more value ($) from pharmacy. The time-limited reduction in payments was negotiated as a short term solution to replace a tiered mark-up and limitation to MedsCheck while longer-term solutions are identified collaboratively. Enabling the formulary listing of private label generics will advantage some in the landscape while harmonizing that business across Canada. Removal of the OCT cap will help support both wholesalers and pharmacy, including smaller independent pharmacy that cannot exploit the private label opportunity. This will harmonize Ontario, with respect to generic rebates, with the other provinces (except QC). Of course, with the reduction in generic prices the professional allowances won’t be what they once were, but then again, what is? There is more to come as pharmacy shifts from pills to skills to deliver value to the system.

For more information, please contact Bev Herczegh.