Study: Supermarket pharmacies could benefit from drug patent expiries

Moody's report finds new generics could boost gross profits

NEW YORK — Supermarket pharmacies could see a slight rise in gross profits next year as branded drugs lose patent protection and go generic, according to a new report by Moody's Investors Service.

The report, released Wednesday, noted that while the lower prices of generic drugs depress pharmacies' revenue growth, they also can help to drive margin expansion. As such, the report found that Kroger, Safeway and Supervalu could see increases in profitability as they fill more generic prescriptions. Still, reimbursement pressure from pharmacy benefit managers looking to reduce reimbursement rates for generic prescriptions could limit gains, according to the report.

"We project a low single-digit percentage increase in 2012 gross profit dollars for the three largest supermarket chains," Moody's VP and senior analyst Mickey Chadha said. "But the overall impact of the upcoming generic drug wave on supermarkets' bottom lines will depend on their ability to manage inflationary pressures, increasing competition from alternative food retailers and operating costs."

A number of branded drugs will come off patent over the next 14 months, including two of the top-selling drugs in the world, Pfizer's cholesterol-lowering drug Lipitor (atorvastatin) and Bristol-Myers Squibb's and Sanofi's anticlotting drug Plavix (clopidogrel); these drugs had respective sales of $7.2 billion and $6.1 billion last year, according to IMS Health.

See the report here.


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