4.16.2010

people before profits: stand up for public health care: ontario vs the pharmacies

When Shoppers Drug Mart, Pharma Plus, Rexall and the other big drugstore chains threatened to lay off staff, charge for delivery and reduce hours to compensate for proposed lower generic drug prices, it wasn't difficult to see through their blatantly transparent ploy. In the last three years, SDM's profits have increased by more than $250 million, from $300 million to $585 million. We don't need to further subsidize their profits with our health care needs.

Now we see that SDM, Rexall and Pharma Plus are already cutting services - before the Ontario reform plan has even been adopted! Charging $8.00 for delivery is an outrageous ploy that disproportionately affects seniors and low-income people, who rely on public transit (shoddy in non-urban areas) or can't easily get around.

Corporations protect their own profits; their only interest is their shareholders. But our publicly-financed health care system has to protect our interests. We must refuse and resist the pharmacies' tricks and lies, and call them out on every turn. We must insist that Ontario stand strong in the proposed changes to the drug system.

* * * *

When Allan and I moved to Ontario, we were shocked that pharmacies here charge a "dispensing fee" for their services. Dispensing is what pharmacies do. Don't we pay for their services through the costs of our drugs? How can they charge an extra fee for counting out pills and putting them in little bottles?

Now I understand that the cost of drugs is more strictly regulated in Ontario than it is in the US - as it should be. So because of the regulated markup, pharmacies are allowed to charge a fee (also regulated) for their services. But pharmacies can charge a "usual and customary fee" - currently set at a maximum of $7.00 - or they can jack up the prices. As you can see on this chart, the biggest drugstore chains in Ontario all charge the highest dispensing fees, with SDM and Pharma Plus taking $12.00 per prescription, and Guardian Drugs coming in at a whopping 13.50. (Guardian is owned by the Katz Group, which also owns PharmaPlus, Rexall and IDA.)

When we lived in Port Credit, we found an independent pharmacy called Hooper's Pharmacy, which has four locations in the GTA. They were very convenient, knowledgeable and helpful, and they happen to be a distributor for Metagenics supplements. I use several Metagenics supplements for my fibromyalgia, and the products are only available through practitioners and certain pharmacies (not over-the-counter but not by prescription). One of my concerns about moving to Canada had been the availability of their products, so I was happy and relieved to find a source so close to home. Hooper's charges a maximum dispensing fee of $9.00, but if you have prescription insurance coverage, they will accept whatever amount the insurance covers as the full fee.

Now that we no longer live in Port Credit, there's a SDM very nearby - much closer than Hooper's - but we won't use them for prescription drugs. $12.00 per prescription is just insane. We do shop at SDM for non-drug items, and collect their "Optimum" points. However, starting today, we will buy our non-drug products elsewhere and give up SDM altogether - until and unless the company stops obstructing drug system reform.

The London (Ontario) and District Labour Council is urging its 30,000 members to boycott SDM and Rexall pharmacies in the London area. I fully support them and will do the same in my own area.
"What a spectacle -- watching Shoppers and Rexall team up with huge generic drug companies to block the public's access to life-saving medicines," said Patti Dalton, president of the local labour council.

Shoppers Drug Mart announced shorter hours and delivery charges at its London stores earlier this week -- the home turf of Ontario Health Minister Deb Matthews.

OFL president Sid Ryan called the big chains' moves to charge for deliveries, shorten their hours and threaten layoffs "unconscionable."

"This is the height of corporate greed. A corporation like Shoppers Drug Mart that made $585 million in profits last year is using the most vulnerable people as pawns," Ryan said.

More from Sid Ryan in a bit.

* * * *

The proposed changes, from the Ontario Ministry of Health and Long-Term Care's website:
What reforms are the government proposing to the province's drug system?

The Ontario government plans to further reform the prescription drug system to provide better access to lower-cost generic drugs for patients, while continuing to increase annual funding to the drug system as a whole.

These proposed changes include:

* Lowering the cost of generic drugs by at least 50%, to 25% of the cost of the original brand name drug for Ontario’s public drug system, private employer drug plans, and people who pay for drugs out-of-pocket

* Eliminating the system of ‘professional allowances’ - payments generic drug companies make to pharmacy owners to fund patient services and are being used by many pharmacies to fund employee benefits, bonuses, overhead costs and boost profits

* Ensuring pharmacists are fairly compensated for helping patients by increasing dispensing fees and paying for additional services provided to patients

* Supporting access to pharmacy services in rural communities and under-serviced areas with new dedicated funding

Why is the government making these changes?

To get lower prices for generic prescription drugs. The cost of generic drugs in Ontario is a lot higher than in most other countries around the world.

The main reason Ontario pays so much more for our generic drugs than other countries is professional allowances. Professional allowances are payments generic drug companies make to pharmacy owners intended to fund patient services

In 2009, generic drug manufacturers reported paying pharmacy owners more than $750 million in professional allowances. However, we know that:

* Pharmacy reports indicate that approximately 70 per cent of professional allowances have actually gone toward salaries, fringe benefits and bonuses instead of direct patient services.

* In 2009, 750 individual pharmacies either failed to disclose any documentation whatsoever related to these payments or filed incomplete documentation

* Audits have found that some pharmacies and wholesalers have been involved in a ‘re-sale’ scheme that triggers the payment of professional allowances multiple times for the same product.

Eliminating professional allowances would increase the accountability of Ontario’s drug system, enable the government to more effectively compensate pharmacists for the care they provide to prescription drug users and help reduce the cost of generic drugs.

Also from the Ministry's website, myths and facts about pharmacy reform:
Myth

If Professional Allowances were reduced or eliminated, there would be serious impacts on patient care and some pharmacies may even have to close.

Fact

Professional Allowances have directly helped to inflate the cost of generic drugs. These inflated costs are borne by patients, employers and taxpayers and it cannot continue.

The reform package that is being brought forward would directly pay pharmacists for providing a wider range of health care services.

Professional allowances are monies generic drug companies pay pharmacies for stocking their prescription drug products. These payments are estimated to be over $750 million in 2009.

Under the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act, drug manufacturers are required to report to the government the amount of professional allowances paid out to pharmacies. A payment of more than 20% on the ODB side is considered a "rebate" as well as any payment that is not for direct patient care. Rebates are not allowed under the Ontario Drug Benefit Act and the Drug Interchangeability and Dispensing Fee Act.

Since 2006:

* Pharmacies have reported that 70 per cent of professional allowances have actually gone toward fringe benefits, bonuses, profits and overhead costs instead of patient services as was the intent.

* As many as 100 individual pharmacies have failed to disclose any documentation whatsoever related to professional allowances collected, in the most recent reporting period.

* Audits have found that some pharmacies and wholesalers have been involved in a 're-sale' scheme intended to trigger the payment of professional allowances multiple times for the same product.

Myth

People in Rural communities won't be able to get prescriptions filled.

Fact

Once the reforms are in effect, dispensing fees paid by the Ontario government would increase by up to $4 for every Ontario Drug Benefit prescription filled in rural or underserviced areas of the province. The government is doing this because it knows how important it is to ensure that the people who live in these regions have a full-service pharmacy, close to home.

Myth

PAs do not increase the health costs for taxpayers.

Fact

This is simply not true. Professional allowances increase health costs for taxpayers by inflating the cost of generic drugs. Professional allowances are monies generic manufacturers pay pharmacies for stocking their prescription drug products.

Generic drug prices are significantly higher in Canada than in most other developed countries. One reason that prices are high is the amount of professional allowances paid.

These higher drug prices are borne by patients, employers and taxpayers.

Myth

Ontario pays the same as other jurisdictions for drugs.

Fact

Example: 4 generic drugs in 5 other countries; other jurisdictions pay 31% to 82% less than Ontario. (See chart here.)

Myth

Pharmacies provide a wide range of services that the government does not pay for.

Fact

The government recognizes the valued work that pharmacies and pharmacists provide to their communities and patients across the province. This commitment was demonstrated in 2006, with the passage of The Transparent System for Patients Act. Among other things, the government has created the MedsCheck program to compensate pharmacists for the advice and guidance they provide patients. Since 2007, some 465,000 Ontarians have had a MedsCheck review with their pharmacist, and the government has dedicated $50 million a year in reimbursement to pharmacists for this program.

The reform package that is being brought forward would pay pharmacists for providing a wider range of health care services. A compensation model will be developed in consultation with stakeholders to pay pharmacists for providing these new services. Again, the government realized that pharmacists have skills and expertise that provide value to Ontarians and it is acting to continue paying for specific services provided to patients. These proposed reforms will boost direct financial support for the valued services pharmacists offer to patients.

Myth

Pharmacies lose money every time they dispense prescription drugs (both brands and generics) to patients in Ontario.

Fact

In fact, pharmacies were paid more than $950 million for dispensing brand and generic prescription drugs under the province’s drug program. (Approximately $695 million in dispensing fees and $264 in mark-up)

The proposed reforms include an increase in the dispensing fee paid by the Ontario government to pharmacies.

Myth

These government actions will result in cuts to services to seniors, chronic care patients and families.

Fact

This is not true. The proposed drug reforms would result in increased access to lower-priced generic drugs and reimburse many services provided by pharmacists. In addition, the government plans to protect access to pharmacy services in rural and underserviced areas.

Myth

The reforms introduced in 2006 – including a cap of 20% on professional allowances in Ontario's Drug Benefit Program, have had a negative impact on pharmacy revenues.

Fact

This is not true. Stores owned by publicly identified members of the Independent Pharmacists of Ontario have all received an increase in total dollars received per month from the ministry since the implementation of Bill 102 in 2006. (From the Ontario government in dispensing and mark-up fees.)

The government spends about $4 billion on providing drug benefits to Ontarians. Of this, more than $950 million is spent on dispensing fees and drug cost mark-ups that are paid directly to pharmacies.

There are more than 140 new pharmacies in Ontario since Bill 102 became effective in October 2006. As of February 2010, there are some 3,306 pharmacies in Ontario.

Myth

The government is planning to reduce the number of drugs currently covered under Ontario's Public Drug Programs.

Fact

There are no plans to discontinue any classes of drugs that are currently on the formulary (the list of drugs covered under Ontario's Drug Programs).

In fact, Ministry intends to continue investing savings generated into new innovative drugs.

The Ontario Federation of Labour is calling on SDM to stop obstructing pricing reform (Facebook group here).
Tell Shoppers Drug Mart to stop trying to make us all pay more for less and stop using us as pawns!

The Ontario Federation of Labour today issued an Open Letter to Shoppers Drug Mart blasting its lead role in undermining a government initiative to lower the cost of generic drugs by 50 per cent for the people of Ontario; threatening its workforce, and using patients and customers as pawns in its battle with the Health and Long Term Care Ministry.

OFL President Sid Ryan has called on unionized workers in London, Ontario, the site of the current Shoppers Drug Mart protest, to take their business elsewhere. The OFL is also is urging the general public in that city to vote with their feet. Shoppers has imposed charges for delivery -- a move that targets the most vulnerable people in the community and has cut back hours in it stores.

"In its determined effort to sink a government reform that would see generic drug prices cut by 50 per cent, Shoppers Drug Mart is fast becoming one of Ontario’s worst corporate citizens," says OFL President Sid Ryan.

"We remind Shoppers that it enjoys the PRIVILEGE of, not the right to, consumer loyalty. We urge this corporation to align itself with the public interest, rather the interests of the generic drug companies."

Shoppers Drug Mart's profits have increased from $300 million to $585 million over the last three years, yet they are cutting hours of their employees and threatening to lower services and charge more for them.

The media release headline urges Ontario to "follow the Irish example and contemplate publicly run pharmacies". A brilliant idea whose time has surely come.

12 comments:

Greg said...

I agree with much of what you've written, although most of the things listed as "Myth" are not arguments I've heard from pharmacists.

The pharmacists I have corresponded with have stated that they don't like the professional allowances either (it was the gov't that put those in place in 1990 rather than keep dispensing fees in line with inflation). The question is: will the gov't raise dispensing fees enough to make being a pharmacist a profitable vocation?

Also, given the situation that the government intentionally created professional allowances as compensation for low dispensing fees, I think it's really disingenuous to compare "drug prices" with other jurisdictions.

That's just plain deceptive. To make things fair, the comparison ought to be "drug price + dispensing fee" across jurisdictions as Ontario has lower dispensing fees to compensate.

If it could be shown that Ontario is more expensive even after accounting for lower dispensing fees, then the point would be valid.

L-girl said...

That's just plain deceptive. To make things fair, the comparison ought to be "drug price + dispensing fee" across jurisdictions as Ontario has lower dispensing fees to compensate.

If it could be shown that Ontario is more expensive even after accounting for lower dispensing fees, then the point would be valid.


I'm still trying to work this out; I'm not sure what you mean but I'm thinking about it.

However

The question is: will the gov't raise dispensing fees enough to make being a pharmacist a profitable vocation?

Why do we have to be concerned if being a pharmacist is profitable? Health care in Canada is not supposed to be profitable, it's supposed to be equitable. Pharmacists have to earn a salary, of course, but the dispensing of drugs does not have to be profit-making enterprise.

M. Yass said...

To hell with Shoppers and the rest of their overpriced ilk. As is so often the case, Costco is your friend once again.

Greg said...

I'll put it another way: the cost of a drug isn't important. It's the cost of getting the correct drug in to your hands.

This requires an educated pharmacist to acquire it and give it to you. So the cost of the drug in your hand is: dispensing fee + drug price.

Our dispensing fees have been frozen, by gov't mandate, since 1990. That means that we pay lower dispensing fees than elsewhere. To keep a living, generic manufacturers have increased their drug prices to pay professional allowances. That means drugs are more expensive.

So, is Ontario really a more expensive place to get drugs based on "dispensing fee + drug cost" or not?

I wasn't really talking about corporate profit, but, yes, a pharmacist does have to make more money than he pays out, otherwise no one will be a pharmacist. Just like GPs and surgeons and what not, they are paid per service to the public.

L-girl said...

To hell with Shoppers and the rest of their overpriced ilk. As is so often the case, Costco is your friend once again.

That may be, but most people don't live anywhere near a Costco, whereas SDM and Rexall are everywhere. Also, many people need delivery, and I don't think Costco will do that (although I can't say for sure).

L-girl said...

Greg, thanks for the explanation, I see what you mean now.

I wasn't really talking about corporate profit, but, yes, a pharmacist does have to make more money than he pays out, otherwise no one will be a pharmacist. Just like GPs and surgeons and what not, they are paid per service to the public.

But corporate profit is what's at issue here. Pharmacists have to earn a living, of course, as do doctors. But just as the earnings of all kinds of other public employees are regulated, pharmacists' income under a public system must also be regulated. I understand they are not actually public employees but their profits directly affect into the public system. SDM and the Katz Group pharmacies have to pay their pharmacists a decent salary, but they can't be allowed to heap massive profits on top of that.

Greg said...

Right, so the next problem is that, according to the numbers published by the pharmacists (so take with a grain of salt), it's the smaller indie pharmacies that make 80% of their income off prescriptions while the bigger stores make most of their money from the "front of the store".

If that's true, then the whole thing is very confusing because apparently the big stores are charging higher dispensing fees?

I think I'd like to nail everyone's feet to the floor and not let them have the claw hammer until they answered my questions and provided solid evidence for every claim they made.

L-girl said...

it's the smaller indie pharmacies that make 80% of their income off prescriptions while the bigger stores make most of their money from the "front of the store".

Logically, this makes sense. People don't buy a lot of non-drug items at smaller pharmacies, because it's incredibly expensive (b/c the stores can't buy in huge quantities). Small pharmacies live on their Rxs.

OTOH, the giant chains might subsidize their prescription business through the rest of the stuff they sell. But... they also might turn a good profit on both.

If that's true, then the whole thing is very confusing because apparently the big stores are charging higher dispensing fees?

That shouldn't be confusing - it's usually the way capitalism works. The big chains have a disproportionate share of the market - because in many areas they've driven smaller stores out of business, or the smaller stores can't afford rents anymore, or because the big stores also stock so much other stuff people want/need to buy, so there isn't enough financial incentive to order your Rxs in one place and do the other non-drug shopping in another (for many people).

So having so much market share, practically a monopoly in many areas, the big chains abuse this by overcharging their semi-captive customers.

I think I'd like to nail everyone's feet to the floor and not let them have the claw hammer until they answered my questions and provided solid evidence for every claim they made.

I'm all for that! I express similar thoughts when we hear (for example) how baseball teams are bleeding money paying high salaries, and so must raise ticket prices and plaster the game with advertising. They say this, but no one ever sees their books. Not ever. But I'm sure they would never lie! Oh no! ;)

impudent strumpet said...

Things I don't understand: why would eliminating the professional allowances make drugs cheaper?

If I need a certain software to do my job, I have to buy it and the cost is passed along to my clients so I can make enough money to live on. If the software company decides to give me some money for buying the software for whatever reason (rebate? to bribe me into blogging about it? because I'm so fricking awesome they want to gloat that I use their software?) then either my overhead is less or my income has been supplemented (depending on how I decide to account it) so I could then charge my clients less. I might choose not to charge my clients less, I might choose to keep the money and spend it on shoes instead, but I could. There's no possible way the money from the software company would make me have to charge my clients more, and there's no possible way eliminating the money from the software company would make me charge my clients less.

So what am I missing and/or how would it be different for pharmacies?

Things They Should Invent: single central website telling you alternate sources for products you normally buy from the place you're supposed to be boycotting. I buy a lot of stuff from Shopper's by default. "Where can I get one of those?" "Oh, Shopper's has them." Problem solved, on with life. For about half the stuff I buy there, finding an alternative is hit and miss (e.g. Some Loblaws have it, some don't), and for about 10% I have no idea where else to go. (Especially if we're boycotting PharmaPlus too, and especially especially if we add Walmart). To make this boycott work, they really should help people out.

L-girl said...

Things I don't understand: why would eliminating the professional allowances make drugs cheaper

I guess because the drug price itself is controlled. The pharmacy can't pass along costs to the consumer.

But I may be mis-reading this.

Things They Should Invent: single central website telling you alternate sources for products you normally buy from the place you're supposed to be boycotting. I buy a lot of stuff from Shopper's by default. "Where can I get one of those?" "Oh, Shopper's has them." Problem solved, on with life.

Me too. But almost everything I buy there will be available at Loblaw's, where we do our grocery shopping. It might be more difficult for you.

I hope SDM gets their act together, because I prefer them to any alternative. Plus I collect tons o' points and get lots of free stuff. I'd like to continue that.

Scott M. said...

I love the Quebec market, where Jean Coutu, Pharmaprix/Shoppers Drug Mart and Familyprix all fight for about the same amount of the market.

In the rest of the country, SDM really owns the market and folks have very little choice if they want a full-service drugstore. (Jean Coutu is better than SDM at almost everything).

L-girl said...

In the rest of the country, SDM really owns the market and folks have very little choice if they want a full-service drugstore.

Yes, and they're abusing their near-monopoly status, as giants will do.