Pangaea Express: Ontario Pharmacy Reimbursement and Payment Policies

April 29, 2019

By Beverley HerczeghMarla Weingarten

Ontario’s Ministry of Health and Long-Term Care (MOHLTC) has proposed legislation regarding pharmacy reimbursement and payment policies. The Ministry is planning to establish an administration fee of $0.10 for the processing and payment of all drug claims and a tiered pricing framework for drug mark-up. In relation to pharmacies supplying medication to long-term care homes, the government proposes to introduce and to substitute the dispensing fee for drugs supplied to LTC with a professional fee based on the number of beds.

The introduction of an administration fee of $0.10, will be deducted from each claim for payment submitted by a pharmacy for every drug funded under the Ontario Drug Benefit Program. The Ministry feels they should not be bearing the entire cost of processing these claims and predict that this will cost pharmacies between $1,000 to $9,000 annually.

The current mark up framework provides 8% of the drug benefit price for drugs with costs under $1,000 and 6% for those over $1,000. The proposed amendments would increase the mark-up for lower cost higher volume drugs and decrease the mark-up for more expensive medications. See Tiered Framework for Drug Mark-Up for specific percentage per claim.

The replacement of a dispensing fee for drugs dispensed by a pharmacy service provider retained by a long-term care home with a standard fee per bed (i.e. professional fee) will be introduced over the next year (2019/20) at $1,800 per bed with the fees gradually decreasing by $200 annually so that by 2022/23, the fees would be capped at $1,000 per bed. According to the Ontario Auditor General, these capitation models are used in other provinces and will help bring the dispensing fees for long-term care homes closer to those for seniors living in the community.

*The new tiered pricing framework will have the most impact on specialty pharmacies and those supplying long-term care homes. Currently Ontario allows for an 8% mark-up for publicly reimbursed drug claims and 6% for claims >$1,000. This policy will bring in a cap of 4% for claims over $500 (which the government predicts will be approximately 0.7% of claims). This tiered framework is not a total surprise as many provinces have some sort of tiered pricing including those with flat fee payment caps. Of course the planned standard fee per bed will further reduce the amount pharmacies bring in from dispensing drugs to patients in long-term care homes. Will these cuts have follow-on consequences for value-added services to long-term care homes? *

For more information, please contact Bev Herczegh or Marla Weingarten.