Bulk Purchasing

As the proposed national Pharmacare gets closer to becoming a reality, the term “bulk purchasing” is one that comes up for frequent discussion. This is because bulk purchasing appears to be central to the approach used in delivering the Pharmacare program.

I get asked about bulk purchasing a lot. People have a sense of what it means, but they don’t always understand where it fits in the context of something like a national Pharmacare program. This is the first of two posts I will be writing about bulk purchasing – what it is, what it might look like in the context of national Pharmacare, and what that could mean for private drug plans across Canada.

At its simplest, bulk purchasing is the buying of a particular item in large, bulk, quantities to obtain the lowest possible price. For example, buying one quart of strawberries for $7, and a flat of 6 quarts for $35. That’s bulk purchasing, and while we may not be aware of it, we encounter it, and benefit from it, in many aspects of our lives.

Consider Costco. The third largest retailer in the world. Costco primarily focuses on bulk purchasing, selling its products at low-profit margins and passing on substantial savings to its members.?We Ontarians also know about the LCBO, whose workers are currently on strike; the LCBO is one of the largest alcohol purchasers in the world, using that purchasing power to leverage better prices and greater supply.

In the healthcare world, a less well-known but extremely important organization would be Mohawk Medbuy, a national shared services organization that supplies hundreds of hospitals and community-based health care facilities with high-quality medical supplies, life-saving drugs and other services. Because of the volumes in which it deals, Mohawk Medbuy has significant purchasing power to negotiate better contracts, terms and pricing with vendors, and passing the benefits on to hospitals and other customers.

Here in Ontario, there is a great example of what purchasing power can accomplish in healthcare. Or at least there used to be. Until October 1, 2023, the Ontario Government Pharmaceutical and Medical Supply Services (OGPMSS) distributed certain non-prescription drugs such as aspirin and multi-vitamins to long-term care (LTC) homes and LTC home pharmacy service providers, at no cost to residents. It was able to do this because the Ontario government enjoys significant purchasing power in this area. Ontario discontinued this program last year – I don’t know why – but I wonder if it might result in higher prices. ?

Similarly, back in 2007, through major drug system reforms, we (Ontario Public Drug Programs) leveraged our position as the biggest single payer of drugs in Canada to negotiate discounts with pharmaceutical companies – the genesis of Product Listing Agreements (PLAs).

My point here is that bulk purchasing is nothing new, and likely nothing to worry about. It is simply a tool, and one that can be used by a government, or, on a smaller scale, an organization such as ours, looking to provide medicine to people at the best possible price. In the context of the proposed national Pharmacare program, which might see Ottawa purchasing and making available prescription drugs to Canadians, bulk purchasing could be foundational to the viability of such a program.

Next up: variations on bulk purchasing, and how they might be used to obtain better prices for prescription drugs, and better access for Canadians.