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April 23, 2013

There has been quite a bit of debate recently in Canada about the pros and cons of regulation.  Some of the highlights of this debate have included announcements by the Competition Bureau that it is stepping up its advocacy efforts in certain regulated sectors (e.g., health, wireless, etc.) (see: here), calls by some policy groups (e.g., the CD Howe Institute) to more closely scrutinize anti-competitive restraints insulated by the “regulated conduct doctrine” (see: here) and a vigorous ongoing debate in the wireless sector about the level of appropriate regulation and extent to which Canada’s large three incumbent carriers should be insulated from foreign competition.

In this context, this note in the Edmonton Journal caught my eye discussing an ongoing debate in Alberta about whether to allow or block loyalty programs for drug purchases (e.g., Air Miles, Aeroplan, Optimum points, etc.): Frills for pills tarnish profession, say Edmonton pharmacists who support ban.

According to the Journal, the debate has involved some large retailers on one side (e.g., Safeway, Shoppers Drug Mart, etc.) who support inducements/loyalty programs for drugs, while others oppose the idea based on potential adverse impacts on patient care, pharmacist workload or the image of pharmacists in the province.

I thought this debate was interesting for a few reasons (according to the Journal, the Alberta College of Pharmacists, which regulates pharmacists in Alberta, is planning to move ahead with a prohibition of some kind on inducements for drugs).

The story highlights the fact that advertising restraints (like other types of competition restraints, such as relating to price, output, etc.) can be insulated from competition challenges when they are lodged in valid provincial or federal legislation (based on Canada’s “regulated conduct doctrine”).  As such, this pharmacist marketing debate in Alberta raises the question of whether legislation should be used to remove market forces that would otherwise allow innovation or changes in pharmacists’ marketing.

In this regard, the Competition Bureau has argued at times (for example in its 2007 Self-regulated professions report) that regulatory initiatives that are not subject to direct competition/antitrust enforcement should be reviewed critically through a “competition lens” to consider whether other potential justifications for legislative restrictions on competition are more important than competition and market forces.

Over the years, the Competition Bureau has made a variety of regulatory interventions including in relation to legislated restrictions on discounts and rebates.  For example, in 2006, following representations by the Bureau, the Real Estate Council of Alberta agreed to eliminate rules prohibiting Alberta real estate brokers from offering cash incentives to buyers and to remove restrictions on the payment of referral fees in certain circumstances.

The Bureau has also issued submissions and studies and advocated for legislative changes in relation to the regulation of accountants, dental hygienists, lawyers, optometrists, paralegals, pharmacists and real estate agents, among others (see: here and here).

I also thought that the story raised the question of the legitimacy of some of the argued justifications for a loyalty program ban on drugs (e.g., increased pharmacist workload, “image” of the profession, etc.).  Should legislation and a ban on pharmacist loyalty programs be used, for example, as a justification (or insulation) for some pharmacist models that don’t wish to market their services more vigorously, adapt their businesses to changing market conditions, etc.?

Years ago, lawyers seldom marketed their services much and provincial law societies also routinely imposed advertising restrictions on lawyers.  If lawyers are now “retailers”, should pharmacists or other health professionals be different?

On the other hand, despite the worldview of competition lawyers (sigh), competition and markets are of course not always the only considerations.  In this regard, it will be interesting to see how this anticipated new legislation will develop and whether the “for” or “against” pharmacists will prevail in this advertising regulation tussle in Alberta.

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