Retail News Breaks Archives
Canadian drug chains squeezed as provinces cut back
October 25th, 2010
by Alasdair McKichan
TORONTO – For most of the past decade, community pharmacy has been one of Canada’s fastest-growing retail sectors. Not so in the first half of 2010.
Health and personal care stores, the category that embraces pharmacy, had growth of only 2.4% in a period that saw total retail sales increase by 3.8%. Publicly held drug chains showed better results than the official Statscan figures, but most feel that situation reflects continued market share growth by the larger companies and corresponding declines among independents.
Retail pharmacies in Canada’s four largest provinces face sharply reduced income from their dispensing operations as a result of the new pharmacy reimbursement schemes being put in place by provincial governments. However, none of those changes would have affected first half sales figures.
The short-term focus of community pharmacy’s leaders during the year to date has been focused on responding to the moves of the governments in Ontario, Alberta, British Columbia, Nova Scotia and Quebec to rein in the costs of their drug plans and, in some cases, those of private payers.
The main thrust of the reforms has been to restrict the income that community pharmacy derives from dispensing.
The components of how this is achieved vary by province, but all involve some mix of restricting or prohibiting the professional allowances that generic drug makers pay to pharmacies for such services as consumer education, establishing price ceilings on generics and setting new dispensing fees.
Quebec limited the level of professional allowances two years ago. It has not changed that regulation, but it has indicated that it will apply an existing protocol establishing that the provincial drug plan will not pay pharmaceutical manufacturers more than the lowest price that is obtained elsewhere in Canada.
That implies that prices for generics in Quebec will be the same as in Ontario. By the end of a phase-in period in April 2013, generics prices in Ontario for publicly and privately financed products will be 25% of the branded equivalent price.
Ontario was the only province to prevent retail pharmacies from introducing generics under their own private brands.
The provinces that moved to restrict dispensing income have all announced that they will be moving ahead with their plans to enable pharmacists to undertake new clinical pharmacy services. Two of them have set up schemes that provide transitional fees for pharmacies until the time when it is expected that they will be earning income from those new services.
The pharmacy sector — through the Canadian Association of Chain Drug Stores (CACDS), other local and national pharmacy associations, and professional organizations — were involved in the negotiations leading up to the final determinations of policy, and the tone of discussions across the country varied widely.
In Alberta and British Columbia, for instance, pharmacy providers felt that their input was well considered. If the regulations that emerged were not exactly what they had hoped for, the organizations involved knew their point of view had been taken into account.
Yet in Ontario, pharmacy advocates felt their views were ignored and what emerged was what the government had in mind from the outset.
“What happened in Ontario was essentially an imposed solution,” says CACDS president and chief executive officer Nadine Saby. “However, there are some positives in the revised regulations and the expanded application of MedsCheck.
“We are keen to move forward with the working group, providing advice on the way the new remunerated pharmacy services will be provided and compensated,” Saby adds. “The challenge now is for community pharmacies to revisit their business models and develop financial plans that meet the new reality.”
Saby reports that her organization will also be involved in continuing discussions on the new schemes and the phasing in of the new professional services in British Columbia, Alberta and Nova Scotia, while a new set of discussions has opened with Newfoundland and Labrador.
In Quebec, a dialogue also continues. Retail pharmacy hopes there will be a move by the government to introduce some fee changes that will go some way, at least, to compensate for the revenue forfeited as a result of the price reductions for generics.
Spokespeople for the industry campaign in Ontario suggested that pharmacies would be obliged, because of the reduction they faced, to slash services to patients by shortening opening hours, eliminating such free services as delivery and reducing professional staff.
It turns out those things have not happened. Competition appears to have ensured that whatever cost reductions are being undertaken are not directly affecting the patient.