Despite PPNs, Canada is still ‘far from U.S.-style coverage’

The topic of preferred provider networks (PPNs) has been controversial for a while. While some healthcare stakeholders like insurers call them a tool for managing drug costs, many pharmacists have called out PPNs as a way of limiting patient choice and disrespecting informed consent, especially if they limit patients’ ability to access medications from their pharmacy of choice. But, think tank C.D. Howe Institute has published a report that finds little evidence of widespread harm by PPNs in Canada. The report, Friend or Foe? Preferred Pharmacy Networks and the Future of Drug Benefits in Canada, looked at whether PPNs harmed patients and independent pharmacists. Analysis by University of Toronto pharmacy professor Paul Grootendorst found “no independent data” to confirm risks to patients and only modest impact to small pharmacy revenues. Notably, Grootendorst found that because Canada’s healthcare system is structurally different from that of the U.S.—notably that Canada has federal drug price regulation and less vertical integration—it’s unlikely that PPNs would lead to the same kind of dysfunction as they do in the U.S.The study found that while there aren’t public statistics on the use of PPNs or what kinds of medications are provided through PPNs, these provider networks typically distribute specialty medications that cost more than $10,000 per person per year. Specialty medications like these are used by less than 2% of private drug plan claimants in the country, but they do account for 28% of total drug plan spending in 2025. Some of the most expensive specialty drugs can cost over $1 million annually. Grootendorst also analyzed the impact of PPNs on small and independent pharmacies (SIPs), saying that he thinks that “a highly concentrated community pharmacy market, where a few corporate chains accrue most sales and SIPs have very small shares, is undesirable.” The Competition Bureau of Canada also had this view in their look at PPNs. But Grootendorst found that, in Ontario, the community pharmacy sector is not overly concentrated: 70% of pharmacies in Ontario are SIPs and they fill close to half of the prescriptions in the province because they operate at a smaller scale. However, he adds, it’s possible that the sector becomes more concentrated over time because of the growth of specialty medication use—though he adds there isn't data to back this up.That being said, the study did find that PPNs can make the pharmacy sector more concentrated because of how it will lead to a bigger share of specialty medications being distributed by PPN pharmacies and having specialty medications account for a bigger share of privately paid pharmacy revenues. The analysis also found that there is "conflicting evidence” on the impact that closed PPNs have on health outcomes. Crucially, the report looked at how likely PPN expansion—notably, to fill prescriptions for all drugs, not just specialty drugs—is in Canada. Grootendorst’s suggested it’s unlikely for “public sector or unionized employees, who are accustomed to a generous drug benefit, would be willing to accept expansions of the types of drugs that are only available through PPNs,” and pointed to some recent employer attempts to introduce closed PPNs for all drugs that have been opposed by unions and employee associations. In private sectors, the expansion of PPNs also seems “unlikely,” his analysis found, citing employee demand for benefits is higher the more an employee is paid. That being said, Grootendorst didn’t touch on how employers or governments might want to use PPNs regardless, even if employees don’t care for them. “Is Canada moving towards a US-style system, as pharmacy stakeholders suggest?” Grootendorst asks in the conclusion. “If it is, it has a long way to go to reach the dysfunction of the U.S. system.”

Despite PPNs, Canada is still ‘far from U.S.-style coverage’

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