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Shoppers applauds ruling on generics Add to ...

Shoppers Drug Mart Corp. is hailing an Ontario court ruling that will allow it to substitute its own discount brand of prescription drugs for those made by big pharmaceutical companies.

An Ontario court ruled in a decision released Thursday against a provincial regulation that bars the sale of private-label generic drugs on the same basis as other generics.

The rule had prevented pharmacies like Shoppers and Katz Group - owner of Rexall pharmacy chain and another challenger of the ruling - from selling their own lower-priced versions in place of popular name-brand drugs.

"While we are encouraged by this decision, we assume that all parties are reviewing the ruling and considering their options/next steps," Shoppers spokeswoman Lisa Gibson said in an e-mail.

"Accordingly, we do not wish to discuss the matter further at this time."

Shoppers announced in July as part of its second-quarter earnings that it had launched a legal challenge against the ban, which did not prevent pharmacies from using no-name generic versions of popular drugs but only those sold under one of its own brand names.

The ban on private-label prescription drugs was part of a controversial package of reforms to cut drug costs introduced by the provincial government last year.

The debate over private-label drugs was largely overshadowed by opposition to the government's plan to prohibit professional allowances that pharmacists had accepted from generic drug vendors in exchange for stocking their products.

The government plan sought to reduce generic drug prices to 25 per cent of the price of patented drugs - down from a previous 50 per cent - and said cutting those professional allowances was the way to do it.

Shoppers and other drug stores opposed the changes, saying cutting professional allowances would cost an estimated $750-million a year in revenue.

After the reforms were introduced, Shoppers abandoned a project to introduce its line of generic drugs in the province.

Shoppers shares, which were battered after the Ontario government introduced generic drug reforms, climbed 5 per cent, or $1.62 Friday to close at $38.77 on the Toronto Stock Exchange.

Last month, Shoppers chief executive officer Jurgen Schreiber made a surprise announcement that he will leave the company in the middle of this month.

Mr. Schreiber had been a vocal opponent of the Ontario government's move to cut the price of generic drugs paid for by the provincial drug plan and reduce the payments generic companies make to pharmacists - measures that will squeeze the industry's revenues.

After a nearly month-long campaign against the changes, which included in-store petitions and ads in large newspapers, Mr. Schreiber told shareholders in May that the drug-store chain would support the elimination of professional allowances paid to his company if Ontario amends its legislation to reduce costs for pharmacies.

Shoppers, where prescription sales make up about half of its business, has been able to offset some of the losses in its pharmacy business through a plan to transform into a diversified department-like store.

Earlier this year, Shoppers slashed its outlook for growth in its prescription sales this year to between 2 and 3 per cent, from earlier guidance of between 4 and 5 per cent.

 
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