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Concerns over the skyrocketing cost of health care, particularly prescription medication resulted in laws to regulate the industry. One such law prohibits manufacturers of generic drugs from paying professional allowances (rebates) to pharmacies. Rather than fight the ruling, large discount pharmacies such as Shoppers Drug Mart are instead focusing on boosting their own private-label drug offerings. For now, Ontario Superior Court is siding with their right to do so. If the practice continues, it could effectively squeeze out small independent pharmacies, but may also invite other large retailers, such as Wal-Mart Canada and Loblaws, to compete.

QUESTIONS:

  1. What dynamic forces in the general environment (for pharmacy companies) are involved in this situation? Identify all that are relevant and discuss the impact they have.
  2. Does Shoppers Drug Mart’s decision to enhance its Sanis line of private-label drugs represent value creation? Why or why not?
  3. In what ways is the development of a strong private label a competitive advantage?

SOURCE: M. Strauss, “Pharmacies Face Upheaval with Private-Label Drug Ruling,” Globe and Mail (Retrievable online at http://www.theglobeandmail.com/globe-investor/pharmacies-face-upheaval-with-private-label-drug-ruling/article1902970/)

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