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									       Pharmacy in Canada:
         The Retail Scene
            A presentation to the
        Rotman School of Management

Christina Bisanz
President & CEO
CACDS                           July 12, 2005
• Context
  – CACDS and the retail pharmacy industry
• Key industry trends and issues
• Implications
• The only national association representing
  community chain pharmacies that brings
  together all components of the pharmacy
  supply chain
• Mission: To ensure a strong chain drug store
  sector which provides Canadian consumers
  with access to high quality products and
  health care services
• 2005: a decade of achievements
CACDS Members’ Impact
• Operate 5,602 stores – 74% share of the
• Employ almost 15,000 pharmacists – more
  than 70% of community pharmacists in
• Dispense 78% of the total 381.6 million
  annual prescriptions in Canada
• Employ 97,293 Canadians in total
CACDS Members’ Share of Industry
Number of Stores

Atlantic   662

Quebec           1218

                           2285                        CACDS
                                  2896                 Industry

  West             1561

Canada                                   5602
Economic Impact
• Industry is part of strong household sector
  and continues to be a key contributor to
  Canadian economy
• Pharmacies will continue to be a strong
  contributor to GDP and will be a source of
  growth in retail sales, innovation and
• Drug store purchases in 2004 = $13.8 billion
   – up 9.7% from 2003
   – expected to surpass $20 billion by 2009
      Rx customers add total basket profits
                                 Total Dollars Value per Household - Net of Rx items

                           Trips Not Including an Rx Item      Trips Including an Rx Item




% Lift when                  Grocery                   Mass                       Drug
Rx products                      +41%                   +86%                      +54%
are in the basket

Source: ACNielsen Homescan Total U.S. -- 2003
Community Pharmacy A Unique Channel
 • Core Business is Health Services and
   – Rx, OTC, pharmacist counseling services,
     medication management services

 • Convenience destination for health and
   beauty aids, sundries
 • Fills gaps in geographic areas which are
   under serviced by other health
 • Operates in a regulated price environment
 • Public-private blend
The competitive story
•   Chains
•   Banners
•   Franchises
•   Independents
•   Food/mass

• Chain pharmacies (e.g., Pharma Plus,
  Lawtons) employ pharmacy managers
  who are salaried employees of head
• Head office directs all marketing,
  merchandising, buying, professional
  programs, etc.
• Pharmacies that are affiliated with a central
  office and pay fees for the right to use a
  recognized name (e.g., I.D.A., Uniprix,
• Participate in centralized buying, marketing,
  professional programs, etc.
• Stores themselves still independently owned
  and the owners retain a high level of
  autonomy as far as local marketing,
  professional services, etc.
 • Franchise arrangements vary widely
 • Two largest: Shoppers Drug Mart, Jean Coutu
 • Franchisees (or ‘associates’) do not necessarily
   own physical store or fixtures, and master leases
   are usually held by the franchisor
 • Some form of revenue-sharing with head office
 • Centralized buying, marketing, professional
   services, training, etc.
 • Some autonomy in local marketing, buying and

• Pharmacy departments within a
  supermarket or mass merchandise
  outlet (e.g., Canada Safeway, Zellers)
• Employ salaried pharmacy managers
  (except in Québec), who follow the
  direction of head office for all
  marketing, merchandising, buying,
  professional activities, etc.
Pay system
• Federal
• Provincial
  – 10 provinces and 2 territories determine
     • formulary price
     • margin/mark-up
     • dispensing fee
• Third party/private
• Cash
 Key Industry Trends
   and Issues for
Community Pharmacy
Changing business landscape
 •   Changing needs/demands of customer
      – More involved consumer
      – Greater emphasis on beauty and wellness
      – Aging population
      – New and emerging health care needs
 •   Increasing regulatory issues/government intervention
      – Health Care Reform
      – Cost management approaches
      – Measures to protect public safety
      – E-health
 •   Changing channels of distribution
 •   Staffing and human resources
More involved consumer
•   Health care consumer is better informed and discriminating
     – From “passive patient” to “active consumer”
     – 1/3 of Canadians are informed consumers – well educated
       information seekers, feel they must be involved in decisions about
       their health and the health of family members (Ipsos-Reid)
•   Want complete health solutions, not just dispensing
     – Natural health supplements number one fastest-growing category in
     – Specialty counseling services from diabetes management to smoking
       cessation are in demand
•   Actively seeking unlimited health information
     – Approx. 110 million North American adults are “cyberchondriacs”
     – 80% of adults who are online search for health information
Pharmacist role is growing
•   Governments, consumers value growing role of pharmacists in
    health, wellness and medication management
•   Romanow and Kirby see pharmacists as core primary health
    care providers
•   Pharmacists are professionals most trusted by Canadians
    (Ipsos Reid 2004)
•   The community pharmacy has become a neighbourhood health
    and wellness centre
     – Over 8 million Canadians visit their pharmacy each day for
        their health and personal care needs, more than they see
        any other primary health care provider.
     – Community pharmacies offer the access to health care and
        convenience consumers want and are often first point of with
        the health care system.
Pharmacies increasingly offering more
professional services
Home delivery                                        82%
In-store blood pressure monitoring                   78%
In-store screening/risk assessments                  67%
Patient library                                      64%
In-store educational seminars/programs               51%
Trial prescriptions                                  49%
Patient call-back system                             43%
In-store disease management                          36%
Home visits                                          24%
Out of store educational seminars/programs           23%
Documented care plans                                15%
Source: Pharmacy Post 2003 Survey of Pharmacy Owners and Managers
At the same time …
• Increasing demand for dispensary
  – 381 million prescriptions filled annually –
    up 20M from 2003
  – 60% of Canadians get a prescription from
    a visit to a physician
             Average Prescription Costs in
             Canadian Retail Pharmacy ($)

           Canada          BC      Prairies    Ont      PQ      Atlantic
2000        $36.22        $37.65   $35.79     $43.66   $28.95   $35.98
2004        $44.72        $47.72   $47.75     $56.13   $32.55   $49.49
IMS Health, CompuScript
• Pharmacy faces balancing act to
  provide services and manage workload
• Governments are trying to keep costs
  – Prescription drugs continue to be fastest-
    growing health expenditure
  – Average prescription costs grew $1.50 in
    one year
  – looking at efficiencies (e.g.) increasing role
    of the pharmacy technician
Creates critical role for trade
• Convincing governments to engage
  pharmacy in cost management solutions
   – Educate on best role for pharmacy
• Eliminating non value-add costs and
  inefficiencies in the supply chain
• Advocating for fully integrated role of
  pharmacist in primary care
• Championing solutions to health human
  resources shortage
Questions and discussion

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