CICPO and Medavie Blue Cross Reach New Agreement

NEWS RELEASE

CICPO and Medavie Blue Cross

New Contract seeks to Maximize Health Outcomes while Controlling Costs

2012-07-06 St. John’s NL – For Immediate Release 

The Council of Independent Community Pharmacy Owners NL and Medavie Blue Cross are pleased to advise they have reached a new 3 (three) year agreement.  This is the second successful negotiation of a contract between the two parties and includes financial terms that address the recent generic drug pricing reforms.

This agreement comes at a time when independent pharmacy revenues are being eroded by changes to generic drug pricing at the governmental level. “We are pleased to see Medavie Blue Cross participate in a process of real negotiation and meaningful recognition of independent pharmacy in Newfoundland and Labrador,” says Director of Third Party Relations CICPO, Phil O’Keefe.

“Medavie Blue Cross recognizes the impact of rising drug costs on the industry and our clients”, said Laurier Fecteau, Senior Vice President, Medavie Blue Cross. “We have worked with CICPO’s independent pharmacies to develop unique agreements to ensure all our members have access to the best value at their local pharmacy.”

O’Keefe adds, “Our Council represents local pharmacy service and product delivery in all regions of our province and Medavie Blue Cross recognizes the importance of our role in front-line health care – whether located in rural communities or inner-city neighbourhoods. This continued progressive relationship will achieve best health outcomes at the least possible cost.”

Fecteau continued, “We recognize the important role of Pharmacy in servicing our clients and plan members.  We understand the unique circumstances of independent pharmacies and are pleased we were once again able to negotiate a contract that recognizes the importance of rural and neighbourhood pharmacies in the communities where they do business.”

Both parties continue to develop best practices in their respective responsibilities of health benefits provision and pharmacy collaborative care, and are working jointly on initiatives in the areas of medication and disease management, and collaborative care between pharmacist, physician and patient.

 “Medavie Blue Cross demonstrates an understanding of our unique geography, demographics and pharmacy model – which results in knowledgeable discussions about improving front-line health care delivery. As a result, the people we both serve benefit from a cost perspective and by maximizing best-health outcomes”, concludes O’Keefe.

Both parties also look forward to continued development of pilot projects in the areas of medication and disease management, and the promotion of collaborative care between pharmacist, physician, and patient. 

Medavie Blue Cross, based in Moncton, New Brunswick, offers health, life, and travel products to individuals and employers in Atlantic Canada, Quebec and Ontario.  The Council of Independent Community Pharmacy Owners is a trade body for local pharmacies in Newfoundland and Labrador.

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About the Council of Independent Community Pharmacy Owners

A progressive trade organization representing the majority of independent pharmacies in Newfoundland and Labrador, the Council offers its members business support, third party negotiations, research and development of pilot projects and advanced policy positions. Additionally the Council works with industry partners to ensure the continuity of equitable front-line health care services in all regions of our province.

At a time when Atlantic Canada is experiencing an aging population with escalating occurrences of chronic disease, the Council is dedicated to maximize best health outcomes at the least cost through medication and disease management programs.

About Medavie Blue Cross

With roots dating back to 1943, Medavie Blue Cross provides health, travel, life and income

replacement products to group and individual customers, administers various provincial and federal government-sponsored health programs and, through subsidiary companies, manages ambulance services in New Brunswick, Nova Scotia, Prince Edward Island and the Muskoka and Chatham-Kent

regions of Ontario.

A member of the Canadian Association of Blue Cross Plans, Medavie Blue Cross operates from offices in Moncton, Dartmouth, Montreal and Toronto as well as Quebec City, Halifax, Fredericton, Saint John, Bathurst, Charlottetown and St. John’s.

Why CICPO will Not sit with Drugstore Chains

Please read below: This is in part is why Newfoundland and Labrador Independent Drugstores must not sit with mass retailers.

Why CICPO must not sit at a table with the chains!

Shoppers Drug Mart Corporation

Excerpts from 2010 Annual Report

Shoppers Drug Mart Corporation is the licensor of full-service retail drug stores operating under the name Shoppers Drug Mart® (Pharmaprix®in Québec). 

Leading Through Change   A message from David Williams, Chair of the Board of Directors

There is no doubt that the implementation of drug system reform initiatives in Ontario and in other provinces across the country will continue to have an impact on our industry and our business into 2011 and beyond, resulting in structural changes to both the competitive landscape and the private payer market.

… we are poised to capitalize on the expected consolidation of the marketplace, which we view as another attractive opportunity to gain market share and increase profitability.

Associate-owned Store Network

As at January 1, 2011, there were 1,182 Shoppers Drug Mart/Pharmaprix retail drug stores owned and operated by the Company’s licensees (“Associates”). An Associate is a pharmacist-owner of a corporation that is licensed to operate a retail drug store at a specific location using the Company’s trademarks. The Company’s licensed stores are located in prime locations in each province and two territories, making Shoppers Drug Mart/Pharmaprix stores among the most convenient retail outlets in Canada.

The Company operates in Québec primarily under the Pharmaprix® and Pharmaprix Simplement Santé® trade names. Under Québec law, profits generated from the prescription area or dispensary may only be earned by a pharmacist or a corporation controlled by a pharmacist. As a result of these restrictions, the licence agreement used for Québec Associates differs from the Associate agreement used in other provinces.

Under the licensing arrangements, the Company receives a substantial share of Associate store profits. The Company’s share of Associate store profits is reflective of its investment in, and commitment to, the operations of the Associates’ stores.

The success of the Company and the reputation of its brands are closely tied to the performance of its Associate-owned drug stores. Accordingly, the Company relies on its Associates to successfully operate, manage and execute the retail programs and strategies of the Company at their respective locations. 

The Company supports the operations of its Associates in many ways, including the provision of training and continuing education programs, as well as assistance with various administrative tasks. In addition, each Associate agrees to comply with the policies, marketing plans and operating standards prescribed by the Company, as specified in the Associate agreements with individual Associates. As well, through head lease control, the Company maintains control of all locations in its Associate owned store network.

Under the Canadian Institute of Chartered Accountants’ (“CICA”) Accounting Guideline 15, “Consolidation of Variable Interest Entities”, the Company consolidates the Associate-owned stores. The individual Associate-owned stores that comprise the Company’s store network are variable interest entities (“VIE”) and the Company is the primary beneficiary. 

The Company’s business strategies are designed to drive sales growth, maximize gross margin dollars and operating cash flow, leverage cost reduction opportunities and build customer loyalty. The Company believes that proper execution of its strategies will strengthen its position as the licensor of Canada’s leading drug store group, thereby generating increased revenue and profitability, which, in turn, should enhance long-term shareholder value. 

The dedication of the Company’s Associate-owners, combined with its ability to recruit, develop and retain talented pharmacists and technicians, has been, and continues to be, the primary contributor to the Company establishing itself as a leader in the practice of community pharmacy and health. Going forward, the Company intends to build upon this leadership position by continuing to deliver innovative pharmacy products, services and programs, including the introduction in 2010 of its own private label generic drug products marketed under the trademark SANIS™, that aim to improve patient health outcomes, build loyalty with patients and third-party payers, increase market share and enhance profitability. 

The Company plans to allocate $360 million to capital expenditures in 2011, with approximately 75% of this amount to be invested in the store network, including any related investments to acquire drug stores, prescription files and land. 

Competition

The Company faces competition from many retailers in the front store merchandise and non-prescription drug categories. The Company’s competitors in the retail pharmacy business include independent operators, banner groups, retail chains, mass merchandisers and larger supermarket chains with combination food/drug retail operations. These competitors may reduce prices in front store merchandise or reduce dispensing fees to increase market share, which could have an adverse impact on the Company’s market share and/or earnings.

Third-party Service Providers

The Company is reliant upon third-party service providers in respect of certain of its operations. It is possible that negative events affecting these third-party service providers could, in turn, negatively impact the Company. While the Company has no direct influence over how such third parties are managed, it has entered into contractual arrangements to formalize these relationships. In order to minimize operating risks, the Company actively monitors and manages its relationships with its thirdparty service providers. 

Real Estate

Successful implementation of the Company’s growth strategies is dependent upon the Company’s ability to increase the selling square footage of its Associate-owned store network through new store openings and acquisitions, expansions of existing stores and relocations of other stores to superior sites. The availability of suitable store locations and redevelopment opportunities with respect to existing stores, and the lease terms that the Company is able to negotiate in connection with new leases and store upgrading, may impact the Company’s ability to execute its strategic plan to the extent that desirable locations and/or redevelopment opportunities are not available on reasonable commercial terms.