Fertile ground? Exploring the roots of public funding for pharmacy services in Canada

On the surface, community pharmacy’s growth as health hubs appears to be flourishing. Expansions to scope show no signs of slowing and, unlike a decade ago, most new authorities today are backed with public funding from the get-go. Positive trends in claims data substantiate pharmacies’ ability to operationalize the new services and Canadians’ acceptance of pharmacists’ expanded roles.When we dig deeper, however, long-term sustainability is far from assured. Vulnerable reimbursement models, regulatory barriers and administrative burdens are among the pockets of clay that prevent pharmacy’s evolution from taking deep root.As the association representing the business of pharmacy, one of Neighbourhood Pharmacies’ primary objectives is to work with governments to deploy enablers so that community pharmacy can sustainably scale services that are vital for a more resilient healthcare system.“Community pharmacy gained a lot of ground during the pandemic and we are much more likely to have a seat at the table,” says Shelita Dattani, Neighbourhood Pharmacies’ Senior Vice President, Pharmacy Affairs and Strategic Engagement. “Neighbourhood Pharmacies’ pan-Canadian perspective has become especially important and we are making inroads in connecting the dots so policymakers can understand the unintended consequences of some of their decisions.”In this article, the Gazette focuses on the enabler of remuneration by providing an overview of where funding currently stands, drawing from Neighbourhood Pharmacies’ Remuneration and Services report and the Canadian Foundation for Pharmacy’s annual Services Chart. We summarize the wide variations that exist between provinces and territories. In the case of fees for dispensing services, some jurisdictions have not seen an increase in more than a decade. At the same time, cutbacks and caps on markups have become more frequent in the past decade.“We need to step back and modernize the funding model so that it reflects the complexity of the service as well as the complexity of the drug,” says Dattani. “We can learn from best practices around the globe and in other healthcare sectors.”Dispensing fees and markupsCommunity pharmacies rely on dispensing fees and markups for more than 80% of their revenue, notes Dattani. The fee and markup not only reimburse the clinical and technical tasks associated with the filling of each and every prescription, but they are also essential to pay for staff, maintain inventory and cover operating costs.As summarized in this article, these core sources of revenue have reached a critical crossroad. “The traditional pharmacy funding model of dispensing fees and markups is vulnerable and no longer sufficient or appropriate to sustain pharmacy operations in the way it once did,” says Dattani.Publicly reimbursed dispensing fees are largely stagnant. In 11 years (from January 2014 to December 2024), dispensing fees increased only once or not at all in six provinces and all three territories. Manitoba’s fee of $6.95 for beneficiaries of the Employment and Income Assistance plan has not increased since the 1990s. While Manitoba pharmacies can bill remaining public plans up to $30, that seemingly high amount shrinks significantly when you consider it includes the markup, which can’t be billed separately in that province.Ontario lays claim to the lowest dispensing fee for all prescriptions covered by all provincial plans, at $8.83. The fees paid to rural pharmacies are more in line with the rest of the country, ranging from $9.93 to $13.25—but have not increased in a decade. It’s also worth noting that, prior to 2015, Canada’s largest province had increased its reimbursement for the dispensing fee by 2.5% each year for five years, from 2010 to 2014 inclusive.Observations of note in other jurisdictions:While Alberta’s publicly paid dispensing fee is relatively high at $12.15, it is lower than it was in 2014 ($12.30).Governments in Saskatchewan, Quebec and Prince Edward Island increased the dispensing fee reimbursed to pharmacies three or more times since the start of 2014.Nova Scotia distinguishes itself as the only jurisdiction with an annual increase to the dispensing fee for at least 10 years, from $11.50 at the start of 2014 to $12.84 today (an increase of 12% over 11 years).According to the Bank of Canada’s inflation calculator, inflation pushed the cost of goods up by just shy of 32% during the 11-year period from October 2013 to October 2024. That means a dispensing fee of $10 in 2014 (the 2014 and current fee in British Columbia) would need to be approximately $13.15 today to maintain its reimbursement value for pharmacy operators.A growing number of pharmacy agreements in other countries—for example, Denmark, Spain, Australia and New Zealand—allow for annual increases to account for changes in the consumer price index. Over the past five years, New Zealand has reported an average annual increase of 3%, notes Dattani.“Annual indexation of dispensing fees needs to be table stakes for pharmacy,” summarizes Dattani. “The costs to operate are going up and we can’t pass the growing costs on to patients.”Closer look at markupsWhen we turn our lens to markups, community pharmacies simultaneously face inflationary and deflationary pressures. On the one hand, operating costs to maintain inventory steadily increase; on the other hand, governments—and private plans that follow governments’ lead—have reduced or capped markups, and lower drug prices mean that markups generate less revenue.“It’s a constant struggle,” says Dattani. “In other sectors, markups more or less keep pace with inflation because as the price of the good goes up, revenue from the markup goes up. That doesn’t happen in pharmaceuticals, where pricing is carefully controlled.”While pricing controls help protect consumer access to medications, they have a significant downstream impact on community pharmacies and pharmacy distributors. For example, when the pan-Canadian Pharmaceutical Alliance implemented the Generic Tiered Pricing Framework in 2014 to reduce the prices of generic drugs, an analysis by Neighbourhood Pharmacies calculated that the pharmacy sector lost more than $375 million in funding over four years due to the reduced revenue from markups.Legislated price compression remains very much on the horizon with coming reforms to the pricing framework of the Patented Medicine Prices Review Board (PMPRB) and the new pharmacare legislation. “We strongly support the need for affordable drugs for Canadians, but community pharmacies cannot continue to absorb the unintended consequence of less revenue from markups resulting from lower drug prices,” says Dattani.As well, during the past two decades most jurisdictions have reduced and/or capped—and in one case clawed back—revenue in response to higher-cost specialty drugs. For example:B.C.’s markup of 8% declines to 5% for drugs on its high-cost list, to 2% for hepatitis C drugs and to zero for drugs to treat rare diseases.In Saskatchewan, pharmacies can bill a markup no higher than $20 once the drug’s acquisition cost exceeds $200.In January this year, Yukon capped its markup at $100.In Ontario from 2020 until April 2024, the government clawed back revenue from markups through “reconciliation adjustments.” It then replaced its two markups of six percent or 8% with a six-tier payment structure, where the lowest tier of 5% is applied to drugs costing $4,000 or more.To complicate matters further, pharmacies in Manitoba and Quebec cannot bill public plans for markups at all. Instead, the dispensing fee is expected to account for the costs associated with stocking medications. The no-markup policy in Quebec is especially difficult to fathom considering its dispensing fee of $10.12 or $10.82 (based on prescription volume) is at the low end compared to other provinces. Pharmacies are able to make up the revenue shortfall somewhat by billing dispensing fees more often; that is, they are able to routinely dispense 30-day supplies of chronic medications, whereas policy in other provinces has come to require or encourage 60- or 90-day supplies.There’s more. Wholesalers bill pharmacies an upcharge or markup to cover their costs for distribution—which may exceed the markup that pharmacies are allowed to bill their provincial drug. “It’s happening more often that the government’s markup is less than the wholesaler’s, which means that pharmacies are operating at a loss,” says Dattani. “They have no recourse short of turning away patients—which they won’t do because it goes against pharmacists’ professional duty of care.”The bottom line is that policy changes and revenue compression are happening on too many fronts in both the public and private sectors. Add to that the growing expectations from both patients and governments for medication management and other services in primary care and public health, and pharmacy’s position is “increasingly untenable,” says Dattani.“We are raising awareness of the need for a whole-of-government, multistakeholder approach and the benefits of funding models that reflect the value and complexity of care and are not totally dependent on the price of the drug,” concludes Dattani.Funding for servicesFor services outside of dispensing, only three provinces currently negotiate funding under separate contractual agreements.Alberta’s Compensation Plan for Pharmacy Services took effect in 2012, followed by Nova Scotia’s Pharmacy Service Agreement in 2019 and Quebec’s decision in 2021 to move funding for non-dispensing-related pharmacy services out of the drug insurance plan and into budgeting for all healthcare services included in the Health Insurance Act.As pharmacists’ scope of practice increasingly overlaps the scopes of other healthcare professionals—such as in the areas of immunizations, assessments for minor ailments and chronic disease management—funding models between providers should also align, notes Dattani. It’s essential to take funding for expanded services out of the drug plan for two reasons, she continues. “First, to protect the drug plan’s ability to pay for drugs, dispensing fees and markups. Otherwise, we are always squeezing the balloon and new funding for one area threatens to take funding away from another area.”Second, a dedicated source of funding for non-dispensing-related services enables equitable allocations between healthcare providers. “Governments will have far greater visibility. Budgeting can be system-wide, which aligns well for them to be far more responsive to patients’ needs and expectations,” says Dattani.Scoping out service feesAs with dispensing fees, public funding for services outside of dispensing varies widely across Canada. And outside of Quebec, increases do not happen often—if at all. For example, Saskatchewan’s reimbursement of $6.00 for renewals and adaptations is well below other provinces—and hasn’t changed since day one in 2011.“The good news is more jurisdictions recognize the fundamental need to fund these services in the first place, to get the most value for the healthcare system. Minor ailments are a big example of that,” says Dattani.Six years ago, three out of eight provinces reimbursed pharmacies for assessing and prescribing for minor ailments. Today, 10 out of 10 have at least some funding in place. “The data is coming in to prove the value of these services, including fewer visits to the ER and high patient satisfaction,” notes Dattani.Ongoing objectives for Neighbourhood Pharmacies are equity with other community-based healthcare providers and fees that accurately reflect the resources required, such as time.“Most current fees enable pharmacies to get their foot in the door, which is fantastic. But that door can’t open wide until funding is sufficient to enable long-term planning in the allocation of resources,” says Dattani.Nova Scotia may be a forerunner in determining a funding model that accurately reimburses not only the pharmacist’s expertise, but also resource allocation. Its 18-month Community Pharmacy Primary Care Clinic pilot project, which became permanent this fall, includes extensive data collection, including times required for services. “We know that some services took a lot more time than was budgeted, and other services took less time. We’re hopeful that these findings will be incorporated during current negotiations to renew the Pharmacy Service Agreement,” says Dattani.Restrictions are another factor. For example, some provinces cap the number of billings per patient per year or limit reimbursement to certain drug classes or conditions, or to beneficiaries of public drug plans only.“We recognize it’s a difficult balance between what’s available in public funds and what’s needed to see enough of a return on investment for both governments and pharmacies,” says Dattani. “But the fact is that restrictions like this prevent pharmacies from scaling up enough to make the service worthwhile not just for the pharmacy but also for patients and payors.”Using data from provincial pharmacy associations and CFP’s annual Services Chart, Neighbourhood Pharmacy Gazette pulled together the following historical synopses of fees paid by public plans for pharmacy services outside of dispensing.Vaccinations for influenza and COVID-19Fees range from a high of $17.26 in Quebec to a low of $8.50 in Ontario (for flu shots).Ontario’s original fee for influenza was $7.50 in 2012, increasing to $8.50 in 2021.Manitoba’s original fee was $7 in 2014, increasing to $13 in 2023.Alberta’s original fee was $20 in 2012, decreasing to $13 in 2018. Alberta’s original fee for COVID-19 vaccines was $25 or $35, decreasing to $17 in 2023 and $13 in 2024.Since pharmacists in Quebec gained authority to administer vaccines in 2020, the fee has increased annually. Renewals, adaptations, therapeutic substitutionsFees for renewals range from $20 in Alberta and the four Atlantic provinces to $6 in Saskatchewan.Quebec has increased its fee for renewals six times since the initial fee of $12.50 in 2015. The current fee is $15.53.In B.C. ($10), Alberta ($20) and Saskatchewan ($6), fees for renewals and adaptations have not increased since 2012.Ontario and Manitoba do not reimburse pharmacies to renew or adapt prescriptions and New Brunswick does not reimburse for adaptations. Authorities for these services have been in place for more than a dozen years in all three provinces.Quebec pharmacists gained authority to adapt prescriptions in 2015. Public funding began in 2018 at $20.10, the highest fee in Canada, and has since increased five times (to $26.25 as of April 2024).Fees for therapeutic substitutions range from $26.25 in Nova Scotia to $11.96 in Newfoundland and Labrador.B.C. ($17.20) and Alberta ($20) were the first to reimburse for substitutions, in 2012, and fees have not changed since then.Pharmacists in Manitoba and Ontario do not have the authority to do therapeutic substitutions.Minor ailments & common conditionsFees to assess and possibly prescribe for minor ailments or common conditions (e.g., contraception) range from $25 in Alberta, Saskatchewan and Prince Edward Island to $15 (virtual) or $19 (in person) in Ontario.Alberta and Saskatchewan were the first to reimburse pharmacies, in 2012 (fees of $25 and $18, respectively); however, pharmacies can submit a claim only when assessments result in a prescription. In all other provinces, pharmacies can bill per assessment with or without prescribing.The number of conditions for which pharmacies can bill for services ranges from one in Manitoba (out of 13 conditions that pharmacists are authorized to assess) to full professional autonomy in Alberta (by pharmacists with additional prescribing authority).In Quebec, the fee was initially $16 for 19 conditions in 2016. The fee increased six times since then and split into two tiers in 2020. The higher fee ($21.25 in 2020, $24.60 today) is to assess and possibly prescribe for shingles, influenza and COVID-19.Funding in New Brunswick, Nova Scotia and Newfoundland and Labrador includes follow-ups for contraception (fees of $12 and/or $20) and, in New Brunswick, for mild acne ($12).Alberta case study: care plansA recent analysis of Comprehensive Annual Care Plans (CACPs) in Alberta by the Canadian Foundation for Pharmacy dramatically illustrates not only the importance of public funding, but also the constant tension between investment and cost containment.Funding for CACPs began in 2012. Pharmacists with additional prescribing authority (APA) could bill $125 for an initial CACP and $25 per follow-up for up to 12 follow-ups annually. Pharmacists without APA billed $100 and $20.For the first four years, uptake climbed exponentially as pharmacies scaled operations, more pharmacists obtained APA and public acceptance grew. The number of follow-ups per CACP reached 4.9—a promising trend for the health outcomes of patients with chronic disease.Near the end of fiscal year 2017-2018, the provincial government removed the higher fees for pharmacists with APA. Billings dropped by 14% for CACPs and slowed significantly for follow-ups. The average number of follow-ups per CACP dropped to 4.6.Pharmacies rallied, enough so that double-digit growth rates for CACPs returned by the end of 2018-2019 and continued until pharmacists had to focus their time on mass vaccinations for COVID-19 in 2021. However, follow-ups never did rally, declining further and appearing to plateau at about 4.3 per CACP throughout the pandemic.Growth rates resurged starting in 2022, propelled in part by referrals from other healthcare providers and the emergence of pharmacy-led clinics for primary care services. The average number of follow-ups per CACP regained its upward trajectory, climbing to 5.2 by early 2024.“By this point elected officials were publicly crediting pharmacy with improving access to primary care and mitigating the impact of the physician shortage,” recalls Dattani.However, as noted in the Gazette’s Fall cover story, Alberta’s funding agreement for pharmacy services became a victim of its own success.Cost containment returned to the fore. Alberta Blue Cross’s October newsletter to pharmacies announced amendments to the Compensation Plan for Pharmacy Services “so expenditure controls can be introduced and cost overruns can be prevented.”As of November 1, fees for CACPs dropped by 30% to $70 and billings for follow-ups were capped at four annually. “This is a huge blow not only to the pharmacies that were becoming successful in building a business model around clinical services, but also for patients needing regular support for chronic disease management. People with complex needs will be hardest hit because four follow-ups are often simply not enough,” says Dattani.The fact that this happened in Alberta, a pioneer of expanded scope and funding for services in Canada and around the world, is a sombre reminder of the competing priorities between improving access to healthcare and managing costs. “Leaders in government commend pharmacy on our value, but that value is always at risk of being reduced to a ledger-line expense,” says Dattani.Stronger rootsMembers of Neighbourhood Pharmacies well understand governments’ need for a return on investment on taxpayers’ dollars. “Time and again community pharmacy has proven itself to be a cost-effective solution to mitigate challenges in the healthcare system especially with respect to key primary care and public health services,” says Dattani.A whole-of-government approach is prerequisite to take discussions to the next level and ensure all participants—including all sectors of healthcare providers, not just the pharmacy sector—realize adequate returns on respective investments for the foreseeable future. That approach entails breaking down silos within governments and between government agencies.“Governments can’t publicly champion pharmacy on the one hand, then limit funding on the other. I believe we’ve come to a crossroad, and public opinion will help ensure we choose the right path. Governments will realize they can’t afford not to take a system-wide approach that will nurture pharmacy’s integral role in building a better healthcare system,” says Dattani. Karen Welds is a healthcare journalist and has written about community pharmacy for more than 30 years.

Fertile ground? Exploring the roots of public funding for pharmacy services in Canada

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