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pharmacy fight

Consumers are about to feel the brunt of pharmacies' battle with the Ontario government over generic drug pricing as the country's largest drugstore chain prepares to slash store hours and staff in a bid to escape a massive profit hit.

Shoppers Drug Mart is moving quickly to scale back the number of stores it keeps open around the clock and until midnight; shut some stores' pharmacy sections early; ditch free services such as deliveries and patient counselling or charge for them; and chop a program to hire 350 pharmacy students this summer.

"There will be things we don't like to do but we have to do," Jurgen Schreiber, chief executive officer of Shoppers Drug Mart, said in interview Thursday, even before the government's sweeping changes are enacted.

"There's no more time to waste ... We are just moving forward now."

Drug stores across Ontario are contemplating employee cutbacks, store closings and even prescription dispensing fee hikes as they face what they estimate will be a $1-billion shortfall in revenue in 2011 because of the proposals, which threaten to spread to pharmacies across Canada as other provinces look to Ontario as a model.

"That's cutting below the bone," said Nadine Saby, president of the Canadian Association of Chain Drug Stores.

Still, Ontario Health Minister Deb Matthews said she's convinced that the changes will ultimately benefit consumers.

"It's about getting lower prices for people," Ms. Matthews said in an interview. "We knew when we made the decision that pharmacies would have to adjust their business model ... There is no question in my mind that this is the right thing to do."

The pharmacies' dire predictions follow the Ontario government's move on Wednesday to introduce proposals that would slash the price of generic prescriptions in half, to 25 per cent of the equivalent brand-name drug, from the present 50 per cent level.

Ontario says the cuts will save it more than $500-million annually because it will pay less under the Ontario Drug Benefit Program, which covers elderly and disabled patients.

While the changes will lighten the burden for consumers, they will also squeeze pharmacies that count on generic drug sales for their profits. Now Mr. Schreiber warns that consumers will end up paying the price with less convenient store hours, longer waits at the pharmacy counter, fewer pharmacist consultations and possibly extra charges for them and higher dispensing fees.

"There is nothing any more that is untouchable," Mr. Schreiber said. "The changes that will come will be traumatic."

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He said he's moving ahead with reductions in store hours, staff and services at Shoppers even before legislation is enacted because he already "wasted" nine months negotiating with the Ontario in what was essentially "an artificial negotiation."

Already Thursday the company decided it will drop plans to open new stores in Ontario this year unless it already has a deal to do so, and shift investments to more pharmacy friendly provinces, he said.

The retailer, which has more than 1,170 stores - almost half of them in Ontario - had plans for as many as 40 new outlets this year, although he didn't say how many of them were slated for that province. "We will try to do absolutely our minimum investment in Ontario."

Alberta and British Columbia are examples of provinces that compensate pharmacies for such things as counselling patients and even providing consumers with flu shots, an official at Shoppers said.

Still, retail analysts warned that other provinces could follow Ontario's lead. "This could cascade to other jurisdictions," analyst Perry Caicco at CIBC World Markets said in a report.

Mr. Schreiber warned that in Ontario, consumers will soon find fewer Shoppers stores where they can pick up a prescription as they do their late-night shopping at night. He will find savings by keeping some stores open late but shutting their pharmacy area, borrowing a page from grocers.

"We will have separate opening hours for stores and separate opening hours for pharmacies within our stores."

And consumers may find that they have to wait longer at the pharmacy counter because of anticipated staff cuts, he said. He will reduce the chain's Ontario work force of about 25,000 in the next while, although he didn't provide details.

The company is also scrapping its plan to hire 350 pharmacy students this summer in the province. "There is no need any more," he said. "In the future, we will have less need for pharmacists. We will adjust our business model accordingly ...

"With any kind of change like that you have a different profit situation. Some of this we will overcome with changes in investments and changes in costs, and some we will not. Changes in investments and costs will be absolutely significant, really significant."

Follow Marina Strauss on Twitter: @MarinaStraussOpens in a new window

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