Inside This Issue - News
Jean Coutu mulls drug reform impact
July 19th, 2010
LONGUEUIL, Quebec – Jean Coutu Group, which posted increased profit in the first quarter, is waiting to see how provincial drug reform will affect its future earnings.
Coutu posted a profit of $43.2 million (Canadian) for the fiscal quarter ended May 29, an increase of 12.2% compared with the prior-year period. Revenue increased 3.8% to $642.9 million, and same-store sales rose 2.9%.
Much of the talk in the company’s post-earnings conference call, however, centered not on the drug store chain’s performance but on the potential impact of health care reform in Quebec.
Effective July 1, the province of Ontario reduced the reimbursement it pays for generic drugs to 25% of the original brand product price, down from 50%. Pharmacy operators there say that and related changes will cost them about $500 million a year.
Quebec, where most of Coutu’s 376 outlets are located, is expected to follow suit next month. The province has postponed action while it consults with pharmacy operators, as well as drug makers and distributors.
“We strongly believe that the government of Quebec must recognize that a reduction in the price of generic drugs must be adopted concurrently with offsetting measures in order to assist market participants with the transition to lower generic drug prices,” said Coutu Group president and chief executive officer Francois Coutu.
Coutu said he is hoping for an agreement before the new reimbursement rules take effect in Quebec. He said the company hopes increased volume will help offset some of the impact of lower generic drug prices.
In addition to selling generic drugs through its pharmacies, Coutu owns the generic drug manufacturer Pro Doc Ltd.