James Dudley Management

James Dudley Management

First Major Study of the Impact of Mail order and Internet Pharmacy on the European Healthcare Supply Chain compared to the USA

Results of the first major 17 European country study into mail order and Internet pharmacy markets show that five key factors are responsible for driving the success of the channel. In the markets where these are present mail order and Internet pharmacies are beginning to make an impact but where they are absent legal channels are replaced by the massive growth of unregulated, illegal and fraudulent organizations which use the Internet to access customers.

The new study “Mail order and Internet Pharmacy in Europe – Embracing the New Challenge”, written by the healthcare strategy consultant James W. Dudley, compares the European growth drivers with the success already achieved in the USA and shows a new and challenging retail channel breaking through in Germany, the United Kingdom, Switzerland, the Netherlands and Poland.

Unlike the USA, the European mail order and Internet pharmacy market is predominantly based around consumer demand for non-prescription medicines, vitamins and supplements, home care and personal healthcare. Yet, the online healthcare market is diverse and presents opportunities for prescription medicines whether branded or generic, medical devices and also healthcare services. In a number of European States patients can access medical consultation and obtain prescriptions which in turn can be used to obtain medication from any online pharmacy.

“When we add together the different Internet services available to Europeans we find a virtual healthcare community which not only provides legal access to prescription and non-prescription medicines and other associated products but includes online medical consultants where patients can get advice and obtain prescriptions for drugs for embarrassing conditions, contraception and lifestyle as well as other personal concerns such as STD – most of this barely existed before 2004”, says James W Dudley author of the report

Of 17 European countries covered in the Dudley study 13 allow mail order trade in non-prescription medicines but only 9 permit mail order and Internet access to prescription medicines. Even so, both Switzerland and Poland have restrictions on home delivery. Austria permits mail order in non-prescription medicines from other EU States on a very restricted basis but not from internal companies. (see notes for editors 1)

Five factors have been identified in the Dudley study which contributed to the success of Mail order and Internet Pharmacies in some European States.

These are: -

    • The entrepreneurial drive from a core group of companies with expertise and who are prepared to take on the pharmaceutical establishment, the law and take financial risks to provide the stimulus of early market entry

 

    • A legal framework and code of practice supporting the development of mail order and Internet pharmacies

 

    • A set of web savvy user segments with identifiable needs for which the mail order and Internet pharmacy offer is both relevant and an economic channel option especially for patients requiring, convenience, keen pricing and above all privacy.

 

    • Major wholesale and retail companies which as early adopters have identified the advantages of investing in new direct to consumer channels with national and international brands either to strengthen and renew their own brands or to break into new channels

 

  • A business environment which institutionally helps consumers distinguish between reliable and unreliable outlets and protects them from counterfeit medicines and fake pharmacy websites thus opening the way for more risk adverse adopter segments.

The question, however, for manufacturers is whether to resist the development of the mail order channel in order to preserve prices and maintain the confidence of their traditional pharmacy customers or to identify areas of opportunity to reach specific target audiences that find procurement through mail order preferable to traditional pharmacies for whatever reason.

While manufacturers bemoan the price cutting culture that Internet pharmacies have introduced to a once price conservative retail sector, most appear to have ignored the clear opportunities to reach specific target audiences. So far the study reveals that few healthcare manufacturers and associated suppliers have designed communications packages of products and services that exploit Internet technology and the privacy and convenience that online pharmacies offer as a competitive advantage over other channels

As a general conclusion the mail order and Internet pharmacy channel was not created by the long standing and traditional distributors. However, an indication of the importance of mail order and Internet pharmacy has been the entry of the major distributors, Celesio, Alliance Boots and Phoenix into the sector. To these can be added Galenica and Zur Rose in Switzerland, Polska Grupa Farmaceutyczna (PGF) in Poland, Penta in Czech Republic and Apoteket in Sweden to name but a few.

“While mail order and Internet pharmacies represent a small fraction of consumer purchases of pharmaceutical preparations and related healthcare and personal care products in Europe, the channel should not be underestimated”, Says Dudley.

For example almost a third of consumer purchases of the weight reducing brand Alli (GSK) in 2009 in Germany were through mail order and Internet pharmacy. Other expensive and segment focused non-prescription and OTC medicines are promoted by mail order and Internet pharmacies with high discounts.

The growth of the legitimate sector has been held back by regulatory hurdles. However well intentioned the contradiction in the attitudes of regulators attempting to ban or restrict direct delivery marketing of pharmaceutical products has led to the massive growth of unregulated, illegal and fraudulent organizations which use the Internet to access customers. The main objectors however appear to be pharmacist trade associations.

“If consumers are to have trust in mail order and Internet pharmacies and governments are seen to be protecting the public then legitimate online retailers need to stand out with some sort of safety mark with a system similar to the seal introduced in Germany by the German Institute of Medical Documentation and Information (DIMDI),” says James W Dudley author of the report. “The Federal Ministry of Health in Germany has been campaigning for this for some time at an EU level”, Says Dudley.

Germany is the largest mail order and Internet pharmacy market in Europe having grown from virtually nothing at the beginning of 2004. Yet it had taken the entrepreneurial vision and sheer determination of the Dutch mail order company DocMorris to win a three year legal battle and break open the German online pharmacy market with a land mark ruling in the European Court of Justice in 2003. (see notes for editors 2)

This changed the law banning distance marketing of pharmaceutical products in 2004 and opened the way for new online driven channels in Germany.

Online “pureplay” pharmacies have driven the sector especially in Germany but also in the United Kingdom and Switzerland. By 2010 the leading firms have an estimated combined turnover of €1.3 billion and represent 62% of the European mail order and Internet pharmacy sector. (see notes for editors 3)

Developing markets in CEE should not be ignored. Around 136 mail order and Internet pharmacies have emerged in Czech Republic and since a change in the law in 2007 about 150 Poland. Following a change in the law at the end of 2009 mail order and Internet pharmacies have also begun to sprout up in Slovakia.

Notes for Editors

1) Figure 1: Online Commerce in Pharmaceuticals - Regulatory Status in European States Permitting Online Commerce – Revised 2010

Country

Online Commerce
OTC Medicines

Online Commerce
Prescription Medicines

Pharmacy
Home Pages

Austria

Restricted access to Mail order  from EU member states but banned internally

No

Yes

Belgium

Yes Revised 2009

Reserve on line – pick up in pharmacy

Yes

Czech Republic

Yes

Yes

Yes

Denmark

Yes

Yes

Yes

Finland

No

Pharmacy only as a means of delivery to remote rural areas (not exploited commercially)

Yes

France*

No

No

Yes

Germany

Yes

Yes

Yes

Hungary

Yes Revised 2005

No

Yes

Italy

No

No

Yes

Netherlands

Yes

Yes

Yes

Norway

Yes

Yes

Yes

Poland

Yes Revised 2005

Yes
but home delivery restrictions exist

Yes

Slovakia

Yes Revised 2009

No

Yes

Spain

Yes Revised 2006

No

Yes

Sweden

Yes

Yes

Yes

Switzerland***

Yes (prescription required)

Yes
but with strict conditions covering medical support and supervision for home delivery

Yes

UK

Yes

Yes

Yes

USA

Yes

Yes

Yes

Canada (most provinces)

Yes

Yes

Yes

*Belgian pharmacies can be found that offer e-commerce in France.
*** Swiss distance selling law allows for pharmacies to post to known customers or provide services supported by a medical advisor and pharmacy supervision
Source: Mail Order and Internet Pharmacy in Europe – Embracing the New Challenge by James Dudley Management 2010

2) The 2003 European Court ruling in favor of DocMorris had a profound change in the government attitudes towards distance selling of pharmaceuticals across the region. In effect the Court has ruled that distance selling of prescription only medicines can only be prohibited on the grounds of public health safety and not for the protection of the local pharmacy monopoly. The court found no reasons for prohibiting sales of OTC medicines through the Internet.

3) Europe’s top ‘pureplay’ Internet pharmacies represent some €1.3 billion of European mail order and Internet pharmacy sales in 2010 of which just over 90% is generated in the German market.

Graph1: Europe’s Leading ‘Pureplay’ Mail Order and Internet Pharmacies – based on estimated euro Turnover for 2009

Source: Mail Order and Internet Pharmacy in Europe – Embracing the New Challenge by James Dudley Management 2010

The largest ‘pureplay’ pharmacy is Docmorris which serves the German market from the Netherlands with estimated sales of €254 million in 2009 and was acquired by Celesio in 2007. The second largest is Sanicare with an estimated €197 million. Europa-Apotheeke is another Dutch based business serving the German market with estimated sales of €155 million. The company is owned by the US healthcare company Medco.

Mediservice and Zur Rose are both Swiss based ‘dispatch pharmacies’ and while the former is very much focused on the Swiss Market, Zur Rose has set up operations in Germany and the Czech Republic. At the lower end of the scale are two British companies. Pharmacy2u, which in 1999 was the first ‘pureplay’ online pharmacy in the UK and ChemistDirect, a relative new comer in 2007. Both businesses focus on the UK and target niche customer segments.

Details

The report title: Mail Order and Internet Pharmacy in Europe – Embracing the New Challenge by James W Dudley 2010.

The report compares success drivers in the USA to that of Europe’s leading online pharmacy markets Germany, Poland, Switzerland and the United Kingdom and has analysis of activities in Austria, Belgium, Czech Republic, Denmark, Finland, France, Hungary, Italy, the Netherlands, Norway, Slovak Republic, Spain and Sweden. For enquiries contact James Dudley ++44(0)1562 747705 email information@james-dudley.co.uk or visit www.jamesdudley.info

End

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