Source: From a Toronto Star article by Dana Flavelle and Rob Ferguson [http://www.thestar.com/news/ontario/article/794340--rexall-joins-shoppers-in-ontario-drug-fee-spat]
A measure aimed at providing lower costs for generic drugs in Ontario is attracting the ire of national chains such as Shoppers Drug Mart and Rexall Pharmacies. The well known pharmacies are announcing an increasing set of drastic measures to impose their will upon a Liberal Government preparing for a 2011 election.
The reforms being proposed will decrease revenue by eliminating a set of “allowances” from generic drug manufacturers that pay out to the tune of $750 million per year to pharmacies. Shoppers and Rexall say that not only will this hurt their bottom line, but force them to cut services to patients and begin charging for delivery fee’s.
Shoppers Drug Mart reported sales of almost $2.5 billion during the last fiscal quarter, and during 2009 made close to $10 billion. Almost one and a half billion dollars were prescription sales, with generic drugs representing 54 per cent. All in all, generic drugs make up roughly a quarter of Shopper’s business.
Keep in mind that they will not be losing that profit, it will merely be lessened as the Ontario Government only wishes to see the cost of generic drugs decreased. Will Shopper’s profit take a hit? Of course. Will it be a sizeable hit, capable of ruining a national brand past the point of no return? Not likely.
The ones who are in real danger are the independent pharmacies, who have thus far not weighed in on the issue. With the majority of their business relating directly to pharmacy and prescription sales, the cut in allowances will hurt them more than would be able to take. The Government has stated they will create a $150 million fund to aid the ma and pop operations that can’t depend on front store sales to keep them afloat.
Are the actions taken by Rexall and Shopper’s Drug Mart really about helping out the little guy? It’s not likely. But stranger things have happened.
