Jurgen Schreiber, chief executive officer of ShoppersDeborah Baic/The Globe and Mail
Jurgen Schreiber struck a more conciliatory tone Thursday about the need for Shoppers Drug Mart Corp. to close stores, chop services and charge extra pharmacy fees in the face of sweeping new generic drug proposals in Ontario.
The chief executive officer of the country's largest drugstore chain told shareholders that it supports the government's goal of reducing spiraling generic drug prices and banning "professional allowances." They are controversial rebates that pharmacies count on from generic drug makers in exchange for shelf space.
He said the need for Shoppers to re-think its business model - and reduce costs - is "not a bad thing." But he also called on the government to increase its dispensing fees because the current $7 to cover purchases under public drug plans - which would rise to $8 under the proposals - doesn't cover the $14 of costs to dispense a medication, he said. He noted that in Alberta the fee is $15 per prescription.
And Shoppers wants to go ahead with its plan to launch lower cost private label generic drugs with easier-to-handle packaging for customers, he said. The proposals forbid pharmacies from producing their own private label generics. The province fears that pharmacists may have a conflict of interest to dispense their company's own brand rather than any other.
His comments followed the announcement by grocery giant Loblaw Cos. Ltd. this week that it would dramatically step up its pharmacy hours and services as a result of the Ontario changes. They are expected to be adopted eventually by other provinces in the country.
Thursday, Mr. Schrieber's conciliatory tone marked a contrast to his angry response when Ontario introduced the dramatic changes on April 7. The reforms would slice generic prices in half and phase in a ban on professional allowances, which amount to $815-million a year in the province. At the time, he spoke about cutting back store hours, closing the pharmacy counter early, scaling back services and staff.
And he quickly went ahead and cut store hours in stores in London, Ont., where Health Minister Deb Matthews' riding is located. In some of those stores, the pharmacy now closes hours before the entire outlet.
"There will be things we don't like to do but we have to do," he told The Globe and Mail April 8, the day after the changes were introduced. "There's no more time to waste … We are just moving forward now."
He added: "There is nothing any more that is untouchable."
Thursday, however, Mr. Schreiber said he hasn't declared formally how Shoppers will move forward under a new generic landscape. He said he is waiting until the new regulations are enacted before setting down the company's strategy. The rules are expected to become law in mid-May.
If the reforms are passed in their current form, "it will have a traumatic impact on the industry," Mr. Schrieber told reporters after Shoppers' annual meeting in Toronto Thursday. "Stores have to be closed and I think services have to be changed ...
"We have never declared our strategy going forward. People think we have declared the strategy. Our strategy will be declared after the reforms" are enacted, he said.
But he also suggested that Shoppers may have opened too many 24-hour and open-until-midnight stores over the past several years in its rapid store expansion initiative. "Is the customer appreciating that or does the customer need that?" he asked. "It's a much more strategic question."
Thursday, he told shareholders that Shoppers' focus is now on expanding and improving existing stores rather than building new ones.
It was a mistake that pharmacies didn't address the fundamental problem of inadequate government funding of pharmacy services over the past two decades, he said. But he said pharmacies now need fair fees-for-services and the ability to enjoy a "normal, free commercial relationship between private parties" with suppliers.
He also acknowledged that Shoppers has to adjust its business model and has to "responsibly" manage its costs and investments while still ensuring safe patient service.
He said Shoppers wants to provide additional services and install new technology to free up pharmacists' time to deal with customers.
Last week, in response to the drug reforms, Shoppers lowered its outlook for prescriptions sales in fiscal 2010, saying they will grow at about half the pace - between 2 and 3 per cent - of its original forecast of between 4 and 5 per cent at stores open a year or more.
It cut its capital spending for the coming year by $100-million to $460-million, including abandoning or deferring retail development projects. It now expects that selling space will increase by about 7 per cent in the coming year, down from its earlier estimate of between 8 and 9 per cent.