Pharmacies wary of NHF competition

Some local pharmacists describe as gold-plated the National Health Fund programme under which private pharmacies collect a fraction of the cost of drugs from clients but are repaid the full cost of the medication on a weekly basis.

The system has created a steady stream of business for the private dispensers of pharmaceuticals by making drugs more affordable for elderly and financially vulnerable consumers.

It currently represents a $6-billion market for pharmacies.

However, some pharmacy operators also note that other NHF programmes are causing them to lose money and that the state agency, which operates a drug – network called Drug Serv, is also competing with the private sector for talent.

Salary and benefits paid by the NHF to its pharmacists and pharmacy technicians are said to be “way above” what many private pharmacies can afford.

The NHF, meanwhile, has rejected the claims of business competition, saying that its initiatives have resulted in the growth of the private-pharmacy sector, with National Health Fund CEO Everton Anderson noting that pharmacies are earning billions through the NHF card programme.

The more pressing issue for pharmacies, however, is the derth of talent in a market where it is illegal to operate without a pharmacist for dispensing drugs.

“The most recent publication of NHF salary scales has created an extremely difficult dynamic for private pharmacies,” said Anne Chang, CEO of Fontana Limited, a large pharmacy chain.

“We are already dealing with an extremely tight labour market and brain drain with the compounded effects of the recent salary increases announced by Drug Serv pharmacies,” Chang told the Financial Gleaner.

New salary scales for pharmacists indicate that public-sector employees received a $2 million to $3 million pay hike in 2023.

At the top end, public-sector pharmacists earn as much as $10 million annually while at the lower end, many grades have been tripled, based on the 2023 upgrade for the group.

The group that represents pharmacy operators, which says it works cooperatively with National Health Fund, had no complaint regarding business rivalry, adding that a clear distinction needed to be made between NHF subsidies and the Jamaica Drug for the Elderly Programme, known as JADEP.

The Jamaica Association of Pharmacy Owners (JAPPO) said the NHF is a subsidy programme that operates like insurance under which pharmacies are fully reimbursed for dispensation of particular prescription drugs. The drugs distributed under JADEP meanwhile are supplied by the NHF to pharmacies free of cost, which they then sell to persons over the age of 60 at a subsidised rate.

However, like Chang and others, JAPPO, too, has issues with the competition over pharmacists.

“The significant salary increases in the public sector without consultation have caused considerable hardship and consternation for pharmacy owners in the private sector,” the group said in written comments to the Financial Gleaner.

“This situation highlights the challenges faced by private businesses when government actions affect the labour market and compensation expectations.”

Chang said that private pharmacies cannot compete with those salaries and cited it as one of the reasons some pharmacy operators have elected to shutter their businesses. Another is the migration of trained pharmacists to foreign countries in search of greener pastures.

Among the operators who have downsized their businesses is Milton Wray. He says he has closed one of three outlets.

“My pharmacists have resigned and gone to the NHF. The NHF outcompetes for pharmacists and pharmacy technicians. They are driving up labour costs in the market. We cannot compete. We do not collect taxes to fund our business,” he said.

The NHF is not only said to pay better salaries, but offers benefits such as insurance, pension, and access to the 20 per cent motor vehicle duty concession that is available to public sector workers.

“They all want to work for NHF because of salary benefits,” said Wray.

“After COVID, a lot migrated. Of those that are left in the sector, many have gone over to the NHF ... The Government via the NHF has cannibalised the entire private industry,” he charged.

There are about 495 pharmacies in Jamaica. The National Health Fund operates about 106 Drug Serv windows, at last disclosure, which are primarily located in state-run hospitals and health centres.

The state agency was formed in 2003 to deliver medicines to the populace at affordable prices. In the decade that has since elapsed, some private operators claim that they have lost 80 per cent of their clientèle, noting as well that pharmacists who participate in JADEP are not paid back in full. The reimbursement is $400 or less for drugs delivered to patients under JADEP.

Under the programme, elderly patients pay between $40 and $240 for prescribed drugs, and pharmacy owners are compensated by the NHF for each patient served.

One pharmacist noted that there is no means test for JADEP and other NHF programmes, which ends up subsidising both rich and poor.

The NHF, which took over operations from the Health Corporation of Jamaica two decades ago, has sought to improve drug access for the population through its programmes. The agency, as Wray noted, imports drugs at a fraction of the cost to private pharmacies.

The NHF typically outsources the procurement of drugs to private-sector companies. Its most recent round of contracts, valued at $27 billion, was issued to 34 distribution companies to procure 1,820 drug items over three years, ending 2026.

The largest contracts were issued to the pharmaceutical division of Lasco Distributors Limited, the Cari-Med Group, and Facey Commodity, which are Jamaica-owned and operated businesses.

“In bringing in drugs, they have a tender process where overseas manufacturers bid, and they [NHF] get drugs on preferential terms at a very low cost. The difference in pricing can be as wide as 900 per cent,” Wray said.

“They are giving away for free the same things we are selling,” he charged.

Additionally, the business owner said the majority of prescriptions filled in Jamaica are for patients from public hospitals and public health centres. That business generally migrates to Drug Serv, which “sells pharmaceuticals for a very small fraction of the price to what we are selling in the private sector”, said Wray.

“My position is not that the Government should not help poor people. The Government should help and should provide drugs. However, it should do it in a way which does not cripple the private sector,” he said.

In that regard, he is suggesting that the Jamaican Government develop a contributory national health insurance scheme, to which employers would also contribute, and for the scheme to operate alongside the NHF card programme.

Still, NHF CEO Anderson has rejected assertions that the agency is negatively impacting the private-pharmacy market, citing a 92 per cent satisfaction rate with the NHF card subsidy programme among pharmacies, based on an independent survey done in March 2023.

Additionally, since 2014, there has been a 30 per cent increase in the number of private pharmacy providers on the NHF card programme, moving from 355 then to 464 at the end of October 2023,”

Anderson said that the NHF support to the private pharmacy trade to provide services to NHF card beneficiaries has grown over the years, doubling in the past decade from payouts of $3.41 billion in FY2014 to $6.43 billion in FY2023.

As for JADEP, he added, while the programme is promoted by Government, it is not mandatory.

“The Ministry of Health established the Jamaica Drugs for the Elderly programme in September 1996, and NHF was mandated to assume responsibility for the management of the programme in 2004,” said the NHF chief executive.

Participation is voluntary by pharmacies that “elect or apply to distribute select drugs” to the elderly population. The programme involves a specific set of drugs that are “distributed to the provider pharmacies free of cost. These drugs are sent to the provider pharmacies for dispensing to JADEP patients only,” he said.

Under the programme, the elderly patient pays $40 for each item or up to a maximum of $240 for six items or more. NHF then pays $300 to the pharmacy for each prescription filled.

Currently JADEP accounts for only three per cent of NHF card transactions, Anderson told the Financial Gleaner.

“The suggestion that NHF should pay participating pharmacies for the cost of the JADEP drugs would require a different arrangement,” he said.

“The NHF has established a strong relationship with private-pharmacy owners over the last 20 years, with an increasing number of business owners continuously applying for and obtaining provider status annually,” Anderson added.

“Any suggestion that the NHF management of its pharmacy services is negatively impacting pharmacy owners in Jamaica is not true.”

JAPPO meanwhile says one of the “major” challenges for the sector is the shortage of medications, for which it is suggesting that the Government undertake a revision of the drug importation process, including digitising the submission and processing of importation and registration documentation.

avia.collinder@gleanerjm.com