Canada high court lets Shoppers challenge proceed

Thu Aug 30, 2012 11:01am EDT
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OTTAWA (Reuters) - The Supreme Court of Canada agreed on Thursday to hear a challenge to Ontario's ban on private-label generic drugs, a ruling that could boost the fortunes of Canadian pharmacy chains.

The court gave top pharmacy chain Shoppers Drug Mart Corp and closely held Katz Group leave to challenge a province of Ontario regulation that forbids drugstores from selling their own private-label drugs.

Part of a package of regulatory changes that have weighed on pharmacies' earnings, the rule was upheld by Ontario's highest court in December 2011, and has kept Shoppers from selling its Sanis private-label drugs in the province, its biggest market.

Closely held competitor Katz Group, which operates Rexall drugstores, wants to launch a similar business.

In a release, Shoppers said it was pleased with the outcome. Shares rose as the news broke, and the stock was up 0.8 percent at C$42.51 by mid-morning on the Toronto Stock Exchange, though the broader market was lower.

Shoppers' Quebec-based rival Jean Coutu Group Inc sells its own Pro Doc generic drugs in Quebec, but the chain has relatively few outlets in Ontario.

A Supreme Court ruling against Shoppers and Katz could inspire similar bans in other provinces, which have already followed Ontario's lead in cutting prices for generic drugs.

But a decision in the companies' favor would help offset the impact of those price cuts, which along with changes in reimbursement rules have weighed on earnings.

No date has been set for hearing the case.

The cases are Shoppers Drug Mart Inc. et al. v. Minister of Health and Long-Term Care et al. (34649) and Katz Group Canada Inc. et al. v. Minister of Health and Long-Term Care et al. (34647).

(Reporting by Randall Palmer; With additional reporting by Allison Martell; Editing by Peter Galloway and Jeffrey Hodgson)