Drug Reforms Reduce Profits
Shoppers Drug Mart has suffered a loss in profit as a result of the Ontario reforms that cut the amount it pays for generic Canadian drugs in half, though not as much as the retail giant was initially expecting.
The company, which fought against changes to the Canada drugs, has also increased its profits when it comes to cosmetics, non prescription Canadian drugs and private label generic Canada drugs sales.
The reforms are expected to hit smaller independent outlets harder than Shoppers Drug Mart. President and chief executive officer of the company, Jurgen Schreiber, remained cautious about the less than expected losses, however, and noted that its gains were at the expense of other retailers. “The market didn’t change,” he observes.
Thomson Reuters says that despite the company’s fears, earnings fell just over two and a half percent as a result of the drug reforms, far less than expected. Sales of prescription drugs actually increased by around an eighth of a percent, although sales were also hit – by around three and three quarter percentage points – as a result of several brand name products, including the anti cholesterol drug Lipitor, losing patent protection and coming under fire from cheaper generic alternatives. “That’s pretty damn big,” says Toronto based Octagon Capital analyst Bob Gibson. Sales of non-prescription drugs nonetheless grew by just under four and a half percent.
While results were better than anticipated, the results of the next few quarters are still going to be watched keenly by Shoppers Drug Mart analysts.
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