Over Half of Europe's Pharmacies are Grouped into Wholly Owned or Affiliated to Chains - Says New Report

The European consumer health sector is undergoing a period of structural consolidation and reshaping the supply networks which serve 473 million people living in 20 European countries with €29 billion worth of consumer health products. As a result, all the players are facing increasing challenges from newly emerging threats and opportunities.

07 Dec, 2015, 09:08 ET from James Dudley Management

KIDDERMINSTER, England, Dec. 7, 2015 /PRNewswire/ -- The European consumer health sector is undergoing a period of structural consolidation and reshaping the supply networks which serve 473 million people living in 20 European countries with €29 billion worth of consumer health products. As a result, all the players are facing increasing challenges from newly emerging threats and opportunities.

So says a major new 20 Country study of Europe's consumer healthcare market from James Dudley, which is published this month.

The report, 'OTC Distribution in Europe - the 2016 edition - Facing the Challenges of the New Global Agenda,' covers 20 countries in Europe: Austria, Belgium, Bulgaria, Czech Republic, Finland, Denmark, France, Germany, Hungary, Italy, Netherlands, Norway, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.

The Dudley report found 145,143 pharmacies in the 20 countries under study, of which 85% are owner managed independent businesses. 36% pharmacies in the 20 countries in the study are independents affiliated to so-called 'virtual pharmacy chains' i.e. entities which allow pharmacists to be a member of a group of pharmacies in order to gain procurement and marketing advantages and gain access to consumer loyalty packages whilst remaining independent. The remainder are unaffiliated independents.

The Dudley study shows that there is a clear drift towards pharmacy groupings. While only 13% of pharmacies are presently owned by chains, the number would rise if all markets were free to permit such groupings. Large, wholly owned chains are permitted in half of the twenty countries in the study.

Small groups of up to four pharmacies are permitted in four countries: Bulgaria, Denmark, Germany, and Italy. However, in Italy, publically owned municipal pharmacies are allowed to own multiple pharmacies. Celesio, Alliance Boots (Alliance Healthcare Italia) and Phoenix acquired majority holdings in a number of municipal chains in the early 2000's but have since been prevented from further expansion under pharmacy ownership restrictions in that country. The limit on the number of pharmacies that can be owned by a single owner in Bulgaria is four, yet the largest operator controls 320 outlets.

Multiple pharmacy ownership is not permitted in Finland, although there is an exception given to University Pharmacies. In Austria, a single branch pharmacy is allowed. Pharmacy chains are not permitted in France and Spain. In Slovenia, only state pharmacies are allowed multiple branches.

The Netherlands, Norway and Sweden have reregulated pharmacy ownership in the last few years. This has led to a growth of wholly owned chains in these countries.

In 2009, Sweden diluted its State retail pharmacy monopoly by selling off 450 of its 960 Apoteket pharmacies and relaxing the law with regard to pharmacy ownership and the opening of new pharmacies. This has led to pharmacy chains taking over 56.6% of Sweden's non-State-owned pharmacies.

More recently, the Slovakian Medicines Law was amended to permit companies to run pharmacies.

Along with these more recently deregulated territories, retail pharmacy chains are permitted in Belgium, Czech Republic, Poland, Romania, Switzerland and the United Kingdom.

In Poland, the law restricts the number of pharmacies that one owner can have to 1% of total pharmacies in a province ('voivodeship'). This is based on Article 99, paragraph 3 of the Act - Pharmaceutical Law passed into Law in 2004. Few chains comply with the rule. However, the authorities are beginning to crack down on the practice with some chains being refused new licenses in some provinces since the beginning of the year.

Having reregulated pharmacy ownership in 2006, Hungary has re-imposed restrictions to prevent new chains being formed by third parties and to progressively restore pharmacists as the majority shareholders of their stores by 2017.

Retail Pharmacy in Europe - Growth of Groupings of Affiliated Independent Pharmacies or Virtual Chains

Over the last decade there has been a phenomenal growth in affiliate groupings of independent pharmacies or so called 'virtual' chains. While these have existed in France and the UK for many years, the pace of growth has been greater in Germany, the Netherlands, Poland and Switzerland. Virtual chains have formed to provide independent pharmacists with levels of procurement, pharmacy management systems and customer loyalty packages. This gives independents a competitive edge and efficiency economies to compete as a chain, while remaining independent.

The three international wholesalers Alliance Healthcare (WBA), Celesio (McKesson) and Phoenix are the main drivers behind this form of retail grouping. The three companies between them control a third of independent pharmacies affiliated to groups and 17% of pharmacies overall in the 20 countries in the Dudley study.

It is fully expected that virtual chains will expand across the whole continent by the end of the decade. Already, in the twenty countries under study there is an estimated membership of 53,900 affiliated independent pharmacies. This is equivalent to over a third of pharmacies in the study.

Along with the major European-wide operators, local players such as Pharma Privat in Germany, Galenica in Switzerland and Hungaropharma in Hungary have built large affiliate memberships for their virtual chains in their domestic markets.

% of Pharmacies in Virtual Retail Pharmacy Chains - Europe 20 Country Study 2015

Country

% of Pharmacies in Virtual Chains

Denmark

95.0

Germany

85.0

Netherlands

78.3

Slovakia

71.0

France

68.0

Finland

59.4

Switzerland

47.0

Bulgaria

40.0

Czech

36.0

Average 20 European countries

35.7

UK

35.0

Hungary

30.0

Poland

23.0

Italy

20.0

Sweden

12.3

Belgium

12.0

Norway

10.2

Spain

3.3

Source: James Dudley Management OTC Distribution in Europe - the 2016 edition

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SOURCE James Dudley Management