More than meets the eye in pharmacy fight
Published On Sun Apr 18 2010. By David Olive, Business Columnist
Do we really need three drugstores at a single intersection?
In my next life, I want to come back as a pharmacy operator.
Last year, during in the most severe downturn in the North American economy since the Great Depression, Shoppers Drug Mart Corp. posted record profits of $585 million. Its two giant U.S. peers, Walgreen Co. and CVS Caremark Corp., chalked up revenue gains of 34 per cent and 125 per cent, respectively, in the past four years.
Within a 10-minute walk of my High Park home there are 11 pharmacies. I’ve yet to see one fail in my 24 years living here. The local Guardian closed about five years ago, a victim, I assumed, of one of the three Shoppers megastores in the neighbourhood. But it reopened two weeks later, remodelled and flourishing still.
In Premier Dalton McGuinty’s high-profile plan to cut generic-drug reimbursements to Ontario pharmacies to 25 per cent of their price from 50 per cent, some salient facts seem missing from the debate.
Fact: Ontario’s generic drug prices are far higher than those in Europe. With its new reimbursement scheme, matched by an increase in pharmacists’ dispensing fees, Queen’s Park hopes to save about half a billion dollars in taxpayer funds.
And this is going to happen, because Ontario already is going broke. It will get worse as skyrocketing healthcare costs rise to consume most of the Ontario budget. More money for healthcare is less for police, school supplies and fresh water. It’s that simple.
Every one of the 30 rich-nation members of the Organization for Economic Cooperation and Development is struggling to find solutions to this same crisis. The corridor talk at Queen’s Park is that McGuinty’s run at the pharmacists is setting the stage for titanic battles with Ontario’s hospitals, doctors, nurses and other caregivers.
Fact: Drugs are the second-largest driver of the stunning increase in healthcare costs, after hospitals. Hospital spending has shrunk as a portion of the total healthcare bill, from 45 per cent in 1975 to 28 per cent in 2008, the latest year for which figures are available from the National Healthcare Expenditure Database. In that same period, drug costs soared from 8.8 to 17.4 per cent of total health spending.
Fact: The drug industry is recession-proof. Americans spent a record $300 million on drugs last year. Canadians spent an average of $897 on drugs in 2008, the latest figures available from the Canadian Institute for Health Information. (CIHI).The cost of flat-screen TVs and camera-equipped cellphones keeps dropping. But the average Canadian’s spending on drugs jumped 16.5 per cent over two years. “Spending on pharmaceuticals has more than doubled over the past 10 years, outpacing growth in health spending by hospitals, physicians and other health professions,” says Michael Hunt, manager of pharmaceutical programs at CIHI.
Fact: There’s scant relation between heavy use of the most costly drugs and improved health care. Canada had the second-highest per capita drug spending of OECD nations in 2006, trailing only the U.S. Yet neither country leads in quality healthcare outcomes. That honour goes to Japan, Italy and other nations.
Why do we spend so much on drugs? Baby Boomers, the biggest generation in Canadian history, is entering its most drug-use intensive phase of life. Docs with burgeoning caseloads often cope with patient volume by prescribing a pill and little else. Many are accosted by patients demanding a brand-name cure-all. Big Pharma encourages ever wider applications of existing drugs for remedies they were not designed for. The antidepressant Prozac is now routinely prescribed for insomnia.
Fact: We have too many pharmacies. The U.S. has about 56,000 of them. As of Jan. 1, Canada has 8,718. Using the standard 10 to 1 rule in Canada-U.S. comparisons, either the U.S. should have 87,000 drug stores or we should have 5,600. Judging from the three drug stores within 160 metres of each other at the intersection of Bloor Street West and Dundas Street West, I’m inclined to believe things are out of whack in the Great White North.
Almost everyone sells drugs, from Wal-Mart and Zellers to Loblaws and Honest Ed’s. And why not? There are few easier ways to maximize a store’s sales-per-square foot than by installing a small but lucrative drug counter. And in this business, supply drives demand. Grocery shoppers see drugs and they want them. How often have you gone to Metro for meat and emerged with 24 caplets of Extra Strength Tylenol? Drugs are poised to become even more of an impulse buy. On Tuesday, the Star’s Rob Ferguson reported on an Oakville firm, Pharma Trust Inc., that makes a high-tech drug vending machine.
McGuinty told reporters Wednesday that “the responsibility of our government is not to ensure that we have a particular kind of pharmacy industry in place.”
Just so. It’s not the purpose of the taxpayer-financed Ontario Drug Benefit Plan to act as a come-on to customers who boost Shoppers’ sales volume of Doritos, eyeliner, tobacco (yes, tobacco!) and other “front of store” items. These high-margin goods account for more than 51 per cent of sales at Shoppers, accurately described in a recent Toronto Life profile as “Canada’s new general store.”
Fact: All drugs have side-effects, and many don’t work. A one-month course of Lipitor, the widely prescribed anti-cholesterol drug, costs most users more than $300. That sum either comes out of everyone’s taxes, if it’s covered by a government plan, or in the form of less take-home pay if paid by your employer plan.
In 2007, the venerable British medical journal Lancet found that “statins,” marketed as Lipitor, Crestor, Zocor and so on, have only a minimal impact in reducing risk of heart disease and stroke. Another of the most widely prescribed classes of drugs, the current generation of antidepressants – including Prozac, Effexor and Serotax – was found by a 2008 study headed by researchers at Britain’s University of Hull to have no clinically significant effect except on a very small group of people suffering extreme depression.
Finally, it’s time we took more control of our health. The likes of Lipitor and Prozac can be a useful component of a get-well regimen. But nothing beats fitness, proper diet (lots of fibre, smaller portions), and proper sleep. We live in a sleep-deprived North American society of stress puppies where many Canadians and Americans don’t take even the few days of vacation (by European standards) to which they’re entitled.
So take a lengthy walk each day, like your doc has been bugging you to do. She’s right. Just don’t head for the nearest drug store. It’s likely too close by.
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