TORONTO — Ontario pharmacies were in a state of suspense for three weeks after May 15 when the province’s minister of health and long-term care postponed a decision on the implementation of new regulations that would slash prescription drug income.

Pharmacists hoped it meant the government was having second thoughts about its plans. However, they were severely disappointed.

The changes in the draft regulations announced earlier this month were minimal, and the scale of the revenue shortfall pharmacies will face beginning July 1 — estimated at $500 million (Canadian), or $300,000 per pharmacy — was altered little.

“This past Monday was a very disappointing day for our organization and the industry as a whole,” Russell Cohen, executive vice president of industry and government affairs at the Katz Group, said shortly after the final decision was announced. “These cuts will impact patient care as we know it today, and the result will be a poor outcome for Ontario patients and Canadian health care.

“We will need to reevaluate our service model and the operations of our pharmacies,” Cohen noted. “For example, we began charging patients for prescription delivery in April, which in the past was a free service.”

Commenting on what emerged after the long and largely fruitless struggle, Ontario Pharmacists’ Association chairman Dean Miller said, “It’s just minor tweaking. We were expecting something more, something that valued pharmacy services.”

The most drastic changes are the prohibition of the payment of “professional allowances” by generic drug manufacturers on prescriptions dispensed under the Ontario Drug Plan (ODP) beginning July 1 and the phasing out of such payments by April 2013 for drugs purchased through private insurance plans or by individuals. Pharmacies have relied on those payments to compensate for what they regard as economically unrewarding ODP dispensing fees.

The amended regulations also set limits on the price of generic drugs. The new ceilings are expressed as a percentage of the cost of the original brand-name medication. For most drugs dispensed under the ODP as of July 1, the limit is set at 25%. Nonsolids, constituting about 8% of generics, may be priced at 35% of the branded equivalent. For purchases made through insurance plans and by individuals, the limit is set at 50% beginning July 1 and will decline in stages to 25% by April 1, 2013.

A study done for the Canadian Association of Chain Drug Stores found that the average cost of dispensing a prescription in Ontario was $14. Pharmacists had hoped that if the government decided to stick to its proposed action on generics it would make meaningful upward adjustments on dispensing fees. That did not happen.

The draft regulations announced in April had modestly increased the dispensing fees for all except rural and remote pharmacies by $1 to $8. Rural pharmacies were to be reimbursed on an ascending scale over a four-year phase-in period up to $12.14. The revised regulations maintain the $8 fee for all but rural and remote pharmacies. The latter are to be classified with fine distinctions among them based on density rather than geography.

Where the distance between pharmacies is less than 5 kilometers and there are more than two of them in a town, the fee will stay at $8. Where there are no pharmacies within 5 to 10 kilometers, the fee will be $9. Where there is no other pharmacy for 10 to 25 kilometers, the fee is $11. Where there is no other pharmacy for more than 25 kilometers, the fee is $12.

The government is slated to give $75 million in transition fees to pharmacies to provide support until they are able to obtain the additional paid professional services that the regulations contemplate.

There were some other minor adjustments. Lipitor, which recently went off patent, is due to be priced at 25% of the branded price immediately — presumably because of its volume and perhaps to signal to other provinces that unless they move on pricing in sympathy with Ontario, arbitrage may be encouraged.

The draft regulations provided that the restrictions on rebates were not intended to apply to such “ordinary commercial terms” as prompt payment or volume discounts. That provision has been tightened up. Such discounts have been capped at 10%.

There was speculation that the government might abandon a proposed ban on pharmacy companies introducing their own private label generics. Shoppers Drug Mart (SDM) had announced in February that it planned such a move, and other companies were expected to follow suit. But those plans will have to be scrapped, as the prohibition on private label generics is in place.

The government confirmed it will follow through on the commitment to invest $150 million in 2010/2011 in fees for professional services delivered to patients by pharmacists. The MedsCheck program, now paying for annual one-to-one consultation for patients who have chronic conditions and take multiple drugs, will be expanded to include pharmacist reviews for patients with diabetes, quarterly medication reviews for long-term care residents, and in-depth reviews for housebound patients. Funding is also to slated to be provided for deliveries to patients in rural areas who have financial need and limited mobility.

“There are a number of significant transition issues resulting from the regulations and, with the effective date of July 1, we are seeking immediate clarity so that we can begin to prepare for the changes,” Katz’s Cohen commented. “Transition issues relate to the transition fee, variable dispensing fees, professional services funding, Meds­Check, generics pricing rules and commercial terms.”

He reported that the sector’s concerns about those issues have been communicated to health minister Deb Matthews, and she has been asked to establish a joint implementation committee, as was done in 2006 when the previous reform legislation was introduced.

“Many of the senior management team at Katz are pharmacists who entered the profession to provide patient care,” Cohen added. “As a pharmacy-first organization, we refuse to accept reduced care for our patients and will continue to advocate on their behalf.”