Pubdate: Wed, 24 Feb 2016
Source: Globe and Mail (Canada)
Copyright: 2016 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Authors: Grant Robertson & Greg McArthur
Page: A1

COUNTRY'S LARGEST DRUGSTORE CHAIN SHOWS BUDDING INTEREST IN SELLING MEDICAL POT

Shoppers Drug Mart Weighs Move That Could Put It into Conflict With 
Provinces Seeking Profits in a Legalized Recreational Market

Canada's biggest drugstore chain is exploring the possibility of 
getting into medical-marijuana sales in a move that would 
dramatically alter the landscape of the new industry, bringing one of 
the country's best-known retailers into the business if the strategy 
went ahead.

Shoppers Drug Mart Corp. has held multiple meetings and phone 
conversations with licensed medical-marijuana producers across Canada 
over the past year about carrying a variety of brands in their 
drugstores, according to people involved in those conversations.

The chain, which has more than 1,300 locations across Canada, is also 
said to be in talks with suppliers about a generic line of the drug 
that would be sold under the drugstore's own brand, according to 
people present during the conversations.

A small team of executives from Shoppers is said to have been touring 
the sites of medical-marijuana growers over the past several months, 
holding talks with several of the 29 federally licensed producers. 
Reached Tuesday, a spokeswoman for Shoppers Drug Mart said the 
company sees pharmacies as a logical option for selling the drug.

"Pharmacists are medication experts and play a significant role in 
the prescribing and monitoring of medication to ensure safe and 
optimal use," spokeswoman Tammy Smithson said. "We believe that 
dispensing medical marijuana through pharmacy, like other 
medications, is the safest option."

For now, the discussions involve medical marijuana, but the talks 
come as the federal government is planning to eventually legalize the 
drug for recreational use. Supply deals with some of the country's 
largest legal grow operations, and a licence to distribute the 
product in pharmacies, could position Shoppers as a major national 
force should legalization occur.

However, Shoppers isn't the only drugstore chain interested in the 
industry. Mark Gobuty, the chief executive of Peace Naturals Project 
Inc., one of the producers licensed by Health Canada to grow medical 
marijuana, said over the past six months he has been approached by 
two of Canada's largest pharmacy chains about becoming a potential supplier.

"What they wanted to do was to lock up a certain amount of supply at 
a guaranteed price," said Mr. Gobuty, whose privately owned company 
is based in Stayner, Ont., north of Toronto. Mr. Gobuty declined to 
name which companies reached out to Peace Naturals, but said he 
turned down both offers because, at this stage, his firm wasn't 
prepared to meet the demands that come with supplying a major retailer.

Some sources inside the medical marijuana industry say they have also 
been contacted by drugstore chain Rexall, which is Shoppers' biggest 
rival. However, the company said Tuesday it is not actively looking 
at the market. "Rexall is not exploring any options or initiatives 
related to medical marijuana," company spokesman Derek Tupling said.

It's natural for pharmacies to gravitate toward this market because 
of the decision, released by the Supreme Court of Canada in June, 
that allowed producers to sell marijuana in the form of oil, rather 
than a "bulky, smelly flower," Mr. Gobuty said.

"The stigma has come down significantly and you're got a delivery 
system now that doesn't require smoking. It's obviously highly 
counterintuitive to physicians to prescribe something that you have 
to smoke," he said. "This to [ the drugstore chains] is in their 
wheelhouse. This they can deal with. If you get a dollar or two, or 
four dollars per bottle, it's an incremental source of revenue. It's 
organic growth for them. And everybody's looking for that."

Drugstores were initially opposed to the idea of selling medical 
marijuana in the early days of the industry, but appear to have 
joined the rush to stake out a place in the growing sector. Were 
Shoppers to enter the market, the move would set up a potential 
battle with the provinces, which are also eyeing the profits that 
could be made from selling various forms of the drug once Ottawa 
creates a regulatory framework for the recreational industry. Ontario 
Premier Kathleen Wynne has touted her province's LCBO liquor stores 
as an ideal model for legal marijuana sales, and is no doubt drawn by 
the profit margins the province could make.

Industry sources who spoke to The Globe and Mail on condition of 
anonymity, because the talks are confidential, said some licensed 
producers would benefit from a deal to supply their name brand 
products to Shoppers, given the chain's reach in Canada. An 
arrangement to supply the chain with marijuana for its own white- 
label brand could potentially be lucrative as well, but would likely 
only be available to larger producers.

In order to sell marijuana, companies require a distribution licence 
from Health Canada. Under current regulations, the product can only 
be sold online, since there is no regulatory regime for retail sales 
in a storefront pharmacy such as Shoppers. However, it is possible 
the federal government could make changes to that legislation as it 
designs the framework for legalization.
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MAP posted-by: Jay Bergstrom