In pharmacies across Ontario, patients routinely pay more than the sticker price for their prescription medications. Beyond the cost of the pills themselves lies a lesser-known but consequential charge: the dispensing fee. It’s a line item that rarely appears in public discussions about healthcare costs but one that plays a central role in the economics of pharmaceutical care.
While dispensing fees may appear minor—often under $15 per prescription—the variation between pharmacies, combined with the number of prescriptions a patient may require over time, turns this into a significant burden for many. For patients, this can translate into hundreds of dollars per year in extra costs. For pharmacies, these fees are a lifeline, especially in an era of squeezed margins and rising labor costs. And for physicians, dispensing fees—though often outside their direct control—can influence whether patients follow through on treatment.
What Is a Dispensing Fee?
Dispensing fees compensate pharmacies for a set of professional services involved in preparing and delivering medications. These include reviewing the prescription, checking for drug interactions, verifying dosing instructions, packaging the medication, and counseling patients on its use. In short, the fee pays for everything except the drug itself.
In Ontario, these fees are not uniform. They can range from as low as $4.49 at Costco to nearly $13 at some Rexall locations. The difference can seem negligible on a one-time prescription. But for chronic conditions requiring multiple monthly medications, the cost adds up quickly.
The Economics of Dispensing Fees
Dispensing fees are a significant revenue stream for pharmacies. The mark-up on many generic drugs is slim due to price regulation and purchasing contracts. Dispensing fees help offset fixed costs such as labor, rent, software, and insurance.
Large retailers like Costco and Walmart often operate on a high-volume, low-margin model. By offering low dispensing fees, they attract price-conscious consumers, particularly those without insurance coverage. These pharmacies may also cross-subsidize the pharmacy business with profits from other parts of the store.
Conversely, standalone pharmacies and major chains like Rexall and Shoppers Drug Mart often charge higher dispensing fees. These businesses may offer more comprehensive health services, longer operating hours, and staff with specialized expertise. Their fee structures reflect both the cost of these services and the customer segments they target.
Ontario retailers with lowest average dispensing fee
Below are the five major retailers in Ontario with the lowest average drug dispensing fee:
- 🥇 Costco has the lowest average drug dispensing fee at $4.49 in Ontario. Costco is a multinational, membership-based warehouse retailer.
- 🥈 FreshCo ranks second at $8.99 for the lowest average drug dispensing fee. FreshCo is a discount grocery chain that is owned by Empire Company.
- 🥉 Walmart ranks third at $9.83 for the lowest average drug dispensing fee. Walmart is a multinational retail chain.
- No Frills ranks fourth at $9.91 for the lowest average drug dispensing fee. No Frills is a Canadian discount grocery chain that is owned by Loblaw Companies.
- Food Basics ranks fifth at $9.93 for the lowest average drug dispensing fee. Food Basics is a Canadian discount grocery chain that is owned by Metro Inc.
Ontario retailers with highest average dispensing fee
Below are the five major retailers in Ontario with the lowest average drug dispensing fee:
- 💎 Rexall has the highest average drug dispensing fee at $12.91 in Ontario. Rexall is a major Canadian pharmacy chain that is owned by McKesson Canada.
- 💰 Shoppers Drug Mart ranks second at $11.95 for the highest average drug dispensing fee. Shoppers Drug Mart (named as Pharmaprix in Quebec) is a leading Canadian pharmacy chain that is owned by Loblaw Companies.
- 💵 Longo’s ranks third at $11.39 for the highest average drug dispensing fee. Longo’s is an Ontario-based grocery chain that is majority-owned by Empire Company.
- Sobeys ranks fourth at $11.06 for the highest average drug dispensing fee. Sobeys is a major Canadian grocery retail chain that is owned by Empire Company.
- Metro ranks fifth at $10.79 for the highest average drug dispensing fee. Metro is a major Canadian grocery retail chain.
How Dispensing Fees Are Regulated
Ontario regulates dispensing fees through the Ontario Drug Benefit (ODB) program, which serves eligible residents including seniors, social assistance recipients, and people with high drug costs relative to their income. Under the ODB, the maximum allowable fee pharmacies can charge is $8.83, as of 2024. Some rural pharmacies are permitted to charge slightly more to offset the cost of providing services in underserved areas.
However, this cap only applies to drugs covered under the ODB for eligible patients. For the majority of Ontarians who do not qualify, including those with private insurance or paying out of pocket, pharmacies can set their own fees. These fees are not mandated by law but are influenced by competition, operational costs, and consumer behavior.
What Patients Should Consider
For patients, choosing a pharmacy involves more than just convenience. Dispensing fees can significantly impact annual medication costs, especially for those on long-term therapies.
One key consideration is the quantity of medication dispensed. A pharmacy that charges a low fee but provides only a 30-day supply may be less cost-effective over time than one that dispenses a 90-day supply with a higher fee. Multiply this across multiple prescriptions and the price gap widens quickly.
Patients should also consider whether the pharmacist provides value-added services, such as medication reviews, drug interaction checks, and health counseling. These services can prevent complications, reduce hospital visits, and improve medication adherence.
Patients without insurance should make a point of asking for the dispensing fee upfront and comparing it across several pharmacies. In some cases, pharmacies may be willing to reduce the fee upon request, particularly for those paying cash.
What Pharmacies Should Think About
For pharmacies, dispensing fees are more than just a revenue line—they’re a business strategy. Pharmacies must decide whether to compete on price, service, or both. Low fees can bring in volume but may strain staffing or reduce time spent with patients. Higher fees can support a broader range of services, but only if patients perceive value in them.
Independent pharmacies, in particular, face pressure from chains and big-box stores. Their survival often depends on differentiating through personalized care, clinical expertise, or community trust. Some are exploring innovative models like medication synchronization, home delivery, and virtual consultations to stay competitive.
Pharmacies must also navigate the complex billing systems of private insurers, public plans, and out-of-pocket payers. Transparency in fee structures and communication with patients is increasingly important.
What Doctors Should Keep in Mind
Physicians play a central role in the medication journey, but they often lack visibility into dispensing costs. Yet these costs can influence whether a patient fills a prescription—or sticks with it over time.
Doctors should consider discussing pharmacy options with patients, especially those managing multiple prescriptions or on a tight budget. Prescribing 90-day supplies when clinically appropriate can reduce the frequency of dispensing fees.
Collaborating with pharmacists can also improve patient outcomes. Pharmacists may identify issues like duplicate therapies, dangerous interactions, or poor adherence. A collaborative approach can reduce errors, improve care continuity, and lower healthcare costs.
How to Choose the Right Pharmacy
Choosing a pharmacy is ultimately a personal decision. Cost is important, but it’s not the only factor. Patients should ask themselves:
- Is the location convenient?
- Are the pharmacists accessible and knowledgeable?
- Does the pharmacy offer extended hours, delivery, or online refills?
- What is the average duration of supply per prescription?
- Can I get medication reviews or chronic disease support?
In some cases, a higher dispensing fee may be worth it for the added service. In others, the best option may be the lowest fee available, especially for short-term or uncomplicated prescriptions.
The Bigger Picture
Dispensing fees sit at the intersection of commerce and care. For patients, they are part of the hidden cost of staying healthy. For pharmacies, they are a vital source of revenue in an increasingly competitive market. For doctors, they represent a blind spot that can quietly undermine treatment adherence.
As prescription drug use continues to rise—driven by aging populations, chronic conditions, and new therapies—understanding the economics behind dispensing fees becomes essential. Transparency, competition, and informed decision-making will help ensure that Ontarians receive not just the medications they need, but the value they deserve.
Whether you’re filling your first prescription or your fiftieth, it pays to look beyond the bottle. The difference between $4.49 and $12.91 may not sound like much—until it’s multiplied month after month, drug after drug. And in a healthcare system where every dollar counts, that difference could be the one that keeps someone on treatment, or pushes them off it.