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Barlow concerned about US company purchase of Rexall drug stores

Council of Canadians chairperson Maude Barlow is raising concerns about a US company acquiring Rexall drug stores in Canada.

The Toronto Star reports, “[San Francisco-based] healthcare services company McKesson Corp. snapped up 470 Rexall Health stores for $3-billion on Wednesday [March 2], adding retail operations in Canada to its burgeoning pharmaceutical portfolio. McKesson already supplies 1,900 pharmacies in Canada, but this is the first time the company will be operating a chain of stores, going head-to-head against Shoppers Drug Mart, which [now] has 1,310 locations. … McKesson bought the chain from the privately owned [Edmonton-based] Katz Group, whose founder and chairman, Daryl Katz, is also owner and governor of the Edmonton Oilers.”

The purchase also includes a group of family doctor clinics and ClaimSecure Inc., a healthcare management and technology firm.

Corporate concentration

The Globe and Mail adds, “The move also potentially puts more pressure on smaller regional players and independents, many of which are supplied by McKesson and see it becoming an even bigger retail competitor with the latest deal. …As one of just two major national distributors of drugs to pharmacies, McKesson is betting that its acquisition of Rexall, the second-largest pharmacy chain after Shoppers, will help it improve its financial situation and steal customers.”

McKesson Corp.’s $3 billion acquisition of 470 Rexall Health drug stores follows Loblaw Companies Ltd.’s $12.4 billion purchase of 1,242 Shoppers Drug Mart stores in 2013. McKesson had already purchased 1,000 IDA and Guardian drug stores from Katz in a $920 million sale in 2012 and 10 drug stores from Loblaws in 2014.

Corporate interests

The Globe and Mail notes McKesson and Shoppers Drug Mart have already been “pushing provinces to give pharmacists more authority to prescribe drugs and carry out other basic health care for customers. …At the same time, all pharmacies are feeling the pinch of provincial generic drug reforms that squeeze drugstore profits.”

And Doug Stephens, founder of Retail Prophet, says the deal will allow Rexall to expand into food and health services and “give it the infrastructure it needs to compete and help with that evolution toward a place where consumers go to be well, instead of just the old-time pharmacy where people go when they’re sick. That is an important evolution for Rexall to make.” The Financial Post adds, “Rexall and other pharmacies [already] run diabetes and high blood pressure clinics for customers and also dispense flu shots, services for which pharmacies are compensated.”

Concerns raised

In the Toronto Star report, Barlow says: “It’s not which company is doing the growing, it’s the continued growth of transnational power and concentration that is the problem.” And pointing out that US-based corporations can sue the Canadian government through the North American Free Trade Agreement’s Chapter 11 investor-state dispute settlement provision, Barlow adds, “McKesson isn’t just a drug store chain. It is a big pharmaceutical retailer that supplies drugs at retail prices. It also provides information technology, medical supplies etc. What if they don’t like a new Canadian law bringing in pharmacare?”

CBC notes, “The deal is expected to close in the first half of 2016, but will require numerous levels of regulatory and shareholder approval including the Competition Bureau and Industry Canada, which governs foreign takeovers under the Investment Canada Act since it is one that could potentially lessen competition in Canada.”

For more on the Council of Canadians health care campaign, please click here.