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Spilled pills (Andrew Soundarajan/iStockphoto)
Spilled pills (Andrew Soundarajan/iStockphoto)

The battle to bottle up drug costs Add to ...

Shoppers is no corporate weakling. Canada’s largest drugstore chain, it generated annual double-digit profit increases until a few years ago when major drug reforms arrived. In 2011, its profit rose 3.7 per cent to $614-million, which is nothing to sneeze at but lower than what it produced in its heyday. Now, it and other major chains are rushing to rev up their non-prescription businesses to make up for the shortfalls.

But drugstores also face private plan sponsors that increasingly are raising red flags about their mounting drug costs. The spending will continue to climb in an aging work force that uses more drugs. And new specialty drugs can set back a company’s plan by tens of thousands of dollars or more annually for an individual’s single prescription. The numbers are daunting: While less than 1 per cent of private benefit plan members use these expensive new drugs, spending on them makes up 17 per cent of drug plan expenditures, according to drug benefit consultancy Cubic Health. And it will reach 26 per cent within three years.

For years, employers have teamed up with pharmacies to get a break on prescription dispensing fees or on the prices of over-the-counter medications.

But those traditional discounts are no longer enough for Toromont and others. Mike Sullivan, president of Cubic Health, recently scouted major chains – including Shoppers, Katz Group/Rexall and Costco – on behalf of Toromont. Costco offered prescription prices that were about 12 per cent lower than those at other retailers, along with other services such as free workplace clinics, blood-pressure tests and other screenings, he said.

But Shoppers and other major specialty chains “didn’t bite” on providing lower prices or additional services for Toromont plan members to match those that Mr. Sullivan found.

In an e-mail, Shoppers said it recognizes the importance of price, noting that it offers generic and other substitutes to keep down costs. And the drugstore chain said it offers both convenience and services that “resonate with payers and patients alike.”

Mr. Pilla said earlier this year that his team is trying to convince employers to use its pharmacists to help ensure patients stick to their drug regimes in “getting employees to be more productive, less absenteeism. Less long-term care costs and total health care costs.”

Shoppers already provides free deliveries and counselling on such health matters dealing with heart disease, asthma and diabetes, he said. Drugstores are negotiating with provincial governments to get additional funding for providing more free pharmacist services.

If those negotiations are successful, Shoppers and other traditional drugstores will add to their consumer appeal. But Mr. Pilla envisages that, at some point, patients may have to start paying for pharmacists’ extra services out of their own pockets.

THE HOME DELIVERY JUGGERNAUT

Even as Mr. Pilla develops a strategy for private plan sponsors, Express Scripts is ramping up its home delivery pharmacy. Already it is reshaping how and where U.S. consumers purchase their prescriptions, prompting pharmacy groups to warn that the company’s market clout (it’s estimated to have nearly a third of the U.S. prescription market) will limit competition.

Express Scripts cites a third-party study that found that actively managed drug plans in the United States cut costs by an average of 29 per cent in 2010.

Now, it is intent on delivering those kinds of savings to Canada. So far this year it got the regulatory nod to open four pharmacies in each of Ontario, British Columbia, New Brunswick and Manitoba to serve all of Canada except Quebec, where it also is working on setting down roots.

“This could change the face of the benefit program in Canada, and we’re just starting,” said Michael Biskey, president of Express Scripts Canada. “We’ve got lots more we’re going to do.”

Its strategy is to entice members of plans that sign on with it for other management services to buy from its home delivery pharmacy their “maintenance” prescriptions: those used repeatedly for chronic conditions such as asthma and diabetes, together representing about 60 per cent of prescriptions sold today.

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