For the lucrative rights to dispense publicly funded drugs to Ontario nursing homes, pharmacies must pay the homes millions of dollars in secret per-resident “bed fees,” a Star investigation reveals.

Seniors advocates, presented with the Star’s findings, say this practice raises serious accountability questions.

“What is happening with that money? We have to know. There is no transparency,” said Jane Meadus, a lawyer with the Advocacy Centre for the Elderly. “It’s the dirty little secret of the industry that homes are requiring pharmacies to pay in order to get a contract.”

The 77,000 seniors in Ontario nursing homes are a captive market. Pharmacies compete for a share of an annual $370-million pool of public and resident money to supply and dispense drugs to 630 homes — medicines for ill residents, blood-thinners, antidepressants and a host of other drugs. It’s big business, and a small number of pharmacies have a monopoly at individual homes.

To secure these dispensing rights, pharmacies are typically asked by nursing homes to pay between $10 and $70 per resident per month, the Star found. Not all homes demand the payments. A conservative estimate by the Star, based on information from sources and documents, puts the total amount paid by pharmacies to secure nursing home contracts in Ontario at more than $20 million a year.

Neither the nursing homes nor the pharmacies would provide the Star with the amount of money that pharmacies pay nursing homes to get the contracts, or a detailed breakdown on how the money is spent. The pharmacies and nursing homes provided general comments on how the money is spent — for instance, on training, “nurse leadership sessions” and conferences — but little specific information.

Meadus said that, in her opinion, these are “kickbacks” that are detrimental to the system in Ontario that cares for seniors. “Now we have companies getting contracts based on what they can pay instead of what services they provide,” she said.

The high cost of providing and dispensing drugs to seniors in nursing homes is mostly paid by the taxpayer-funded Ontario Drug Benefit Plan, along with a “co-payment” of $2 paid by the resident for each drug dispensed in the first week of every month.

A recent Star investigation found that pharmacies charge more to dispense drugs in nursing homes than to seniors in the community, but provide less service — the drugs are couriered to the homes in blister packs and there is no daily on-site pharmacist to provide counselling on side-effects. Pharmacy executives have countered that argument, telling the Star they put significant resources into high-tech systems that provide quality control.

Industry sources say the terms “bed fees” or “resident fees” are used casually to describe the way the payments are structured: total fees are higher when there are more residents in the home. Speaking on the record, executives at both nursing homes and pharmacies prefer to use terms such as “patient program funding” or “rebates.”

Neither the nursing homes nor pharmacies would disclose how much money changes hands, saying it is proprietary information. Sources in the industry provided the Star with information on practices and payments related to the bed fees and provided estimates of between $10 and $70 per resident per month.

When the Star asked nursing homes about the practice of charging fees to pharmacies, executives at the homes said money collected is used in the homes.

Extendicare, a chain of 34 homes, uses the pharmacy payments for “training and education of staff, technology applications or other similarities,” president and CEO Tim Lukenda said in a written statement.

At Chartwell, a chain of 27 homes, chief operating officer Karen Sullivan said the pharmacy that services the chain, MediSystem, pays for “many additional valued-added services” such as employee education, nurse leadership sessions and conferences for leaders of homes. MediSystem also pays for Wi-Fi systems and therapeutic care equipment at the homes, Sullivan said in an email.

The Star asked pharmacies what they are told the money is used for.

Among the responses from pharmacies were “staff education,” “resident programs” and payments toward Wi-Fi systems. Classic Care, a pharmacy, said the money it pays covers monthly rent of an area in the nursing home, staff education, technology and “donations and sponsorships” for conferences and other training.

Other pharmacies, like Rexall, say their fees have paid for diabetes education, for example, or “sponsored a podiatrist to visit a facility to conduct a foot-care clinic.”

The largest pharmacies serving long-term-care homes in Ontario include Medical Pharmacies Group, MediSystem (owned by Loblaw), Classic Care (Centric Health) and Rexall.

The fees are not new. Pharmacies have willingly offered money or agreed to demands for years. But there’s a growing outrage among some who say homes are more interested in “inducements” than “clinical excellence” that pharmacies can provide seniors.

Last year, after the Ontario government cut each dispensing fee by $1.26 (it is now $5.57 per prescription in nursing homes), sources said some pharmacies wanted to stop paying the fees. The problem was, the sources said, that the homes refused to give up the extra cash flow and other drug companies were willing to pay, so nothing changed.

It’s usually the larger companies that can afford to pay. One insider said smaller pharmacies now ask the homes, “Do you want the money or do you want good service? Because we can’t afford to give both.”

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Sources said the Ontario Ministry of Health and Long-Term Care knows the money changes hands but does nothing to stop it. Instead, pharmacies are “held hostage” by the homes, the sources said.

One facility that no longer charges the fees is the John Noble Home in Brantford, a municipally operated 156-bed facility. The Star obtained a 2010 request for proposals that noted “only proposals with a minimum rebate of $20,000 annually will be considered for the Project.” That works out to a bed fee of just over $10 per bed per month.

A spokesperson for the city said the RFP “references a previously approved practice employed by several long-term-care homes.” A recent RFP did not ask for a rebate, though some companies offered to pay.

The city spokesperson, Maria Visocchi, said it chose a pharmacy that “demonstrated qualifications and experience, project understanding, approach and methodology, medication system processes and quality control.” This pharmacy did not offer a rebate.

Not all pharmacists pay. Teresa Pitre runs Hogan Pharmacy Partners in Cambridge and serves long-term-care homes that don’t ask for money.

Instead, she signed contracts with several homes in the PeopleCare chain to provide a “highly personalized approach.” Pitre sends a registered pharmaceutical technician into each home daily to relieve nurses of much of their work regarding medication, confusion over communications and extensive paperwork.

Her company also puts a bookshelf-sized dispensing machine in each home, which holds medication (pain relievers, antibiotics or insulin) that residents need on short notice but, in the traditional system, often can’t get for hours.

“I really wanted our pharmacy to be a partner with homes instead of servicing them and just meeting the requirements,” she said.

Meadus, the seniors advocate, says the added cost of bed fees means pharmacies have no reason to reduce their rates, either by lowering dispensing fees or not charging the $2 co-payment.

A recent Star story revealed that pharmacies serving nursing homes typically charge dispensing fees for drugs once a week, rather than once a month as they typically do in a community pharmacy. Long-term-care pharmacies told the Star they charge the weekly fee because the medication for frail residents can change weekly. That was a claim hotly disputed by some family members the Star spoke to, including Margaret Calver, who has spent years documenting the costs of dispensing fees at the Markhaven Home for Seniors in Markham, where her husband is a resident.

On the issue of the “bed fees,” Calver said she understands it may be the cost of doing business, but given how “lucrative” the contracts are, she would like to see government take a hard look at the issue.

“This needs oversight and that’s the problem,” she said. “Nobody is doing the checks and balances.”