James Dudley Management

James Dudley Management

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.

So says a major new 20 Country study of Europe’s consumer healthcare market from James Dudley which is due to be published next month.

The report, ‘OTC Distribution in Europe - the 2016 edition – Facing the Challenges 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. affiliated entities which allow pharmacists to be a member of a group of pharmacies in order to gain procurement and marketing advantages and provide 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 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 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 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 pharmaceutical pharmacies that one owner can have to 1% of total pharmacies in a province (‘voivodeship’). This is based Article 99 paragraph 3 of the Act - Pharmaceutical Law passed into Law 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.

Figure 1: Pharmacies in 20 European Countries Split by Grouping Type - 20 Country European Study

Pharmacies in 20 European Countries Split by Grouping Type

Source: James Dudley Management 2015 – OTC Distribution in Europe 2016 edition

Figure 2: % of Pharmacies in Wholly Owned Retail Chains - 20 Country European Study

% of Pharmacies in Wholly Owned Retail Chains

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

“There is a growing determination among progressive companies to develop large groupings of pharmacies as multi-channel brands. A few innovators go further by creating mixed ownership entities made up of wholly owned pharmacies, affiliated independent pharmacies and increasingly franchise concept outlets. While these groups can exploit economies of scale to strengthen their competiveness in terms of procurement, pharmacy management efficiencies and marketing, there are tremendous advantages from positioning a strong retail brand ”, says James Dudley author of OTC Distribution 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. (figure 3)

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.

Figure 3: % 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


Information for Editors

Contact James Dudley author of the Report

OTC Distribution in Europe – the 2016 edition - The New Global Agenda is a long running in-depth multi-country study that explores and tracks change. It identifies the driving factors coming into play which will influence the distribution channel environment for the consumer healthcare industry now and in the future. It provides knowledge, comprehensive statistics and analysis covering 20 European countries, together with insights into an increasingly complex market sector from a highly respected strategy consultant, James W Dudley.

The 2016 edition of OTC Distribution in Europe is the tenth edition of a project which first began 25 years ago.

Markets covered are: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Netherlands, Norway, Poland, Romania, Slovak Republic, Slovenia, Spain, Sweden, Switzerland and the United Kingdom


OTC distribution in Europe - 20 country consultancy report - with over 590 pages and over 300 graphs, tables & figures

More information and Table of Contents can be found at www.james-dudley.co.uk

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