Sweden - How will the deregulation of the pharmacy monopoly affect the market environment?

The deregulation will increase the number of pharmacies and ensure longer opening hours, as well as creating downward pressure on prices as more providers enter the market.

The pharmacy monopoly was deregulated in July 2009 in order to create greater competition in the Swedish market, and lead to more pharmacies with longer opening hours. As a result, Apoteket is no longer the exclusive pharmaceutical retailer, but remains a key competitor in the market. A total of 465 pharmacies were sold in November 2009, and a further 150 pharmacies will be sold to small companies to create more choice for consumers. The largest cluster of 208 stores was bought by Altor Equity Partners, while Kronans Droghandel Retail purchased 171 shops, Segulah bought 62 and Vaardapoteket i Norden purchased 24. Celesio has also announced that it is planning to open a chain of around 100 pharmacies in Sweden, although it did not join the bidding for premises previously occupied by the state-run Apoteket pharmacies.

The deregulation of the pharmacy monopoly is expected to drive down prices of pharmaceuticals due to increased competition. The number of pharmacies is likely to rise rapidly in 2010 and 2011, and slow down and stabilise from 2012 onwards. In addition, wholesalers have been negotiating an increase in distribution margins with pharmaceutical manufacturers, as a result of a rise in costs due to an increasing number of distribution locations.

As part of the liberalising of the Swedish pharmacy market, OTC products have also been available to buy from shops as well as pharmacies since November 2009. This provides an opportunity for OTC medicines to reach a wider market. Freedom of pricing for OTC medicines will be maintained, and it is likely that prices will continue to increase in the short term.

Further reading - A detailed analysis of the Swedish pharmaceutical market is available from Espicom: The Pharmaceutical Market: Sweden (published April 2010)

Brazil - The consolidation of the Brazilian pharmaceutical distribution sector continues

Celesio invests in Brazil …

The German Celesio, the largest European wholesaler, acquired a majority stake in the leading Brazilian pharmaceutical wholesaling group Panpharma in July 2009. This is Celesio’s first acquisition outside of Europe, triggered by the company’s lost bid to overturn pharmacy ownership laws in Germany and Italy. The move will also help Celesio to diminish its reliance on the British pharmaceutical market which has been affected by price cuts in generic medicines and the weakness of the British pound against the euro. Founded in 1976, the Panpharma group comprises the Panarello, Sudestefarma and American Farma companies. The group has about 17.0% of the Brazilian retail pharmacy sector and is expected to increase its market share following Celesio’s investments.

Growth opportunities …

Brazil is the largest pharmaceutical market in Latin America and one of the most attractive BRIC markets. Espicom Business Intelligence projects a CAGR of 7.9% over the next few years. Between 1997 and March 2009, annual cumulative pharmaceutical sales more than trebled in local terms, whilst they nearly doubled in dollar terms. Consumption levels by volume have increased particularly since 2004, as the market is becoming more generic-lead. In fact, Brazil has the largest generic market in Latin America. The industry expects to do well in the current economic downturn and generics are expected to represent 20.0% of the retail pharmacy sector by volume in 2010. sanofi-aventis’ acquisition of Medley, announced in April 2009, is going to change the generic market, with increasing foreign participation.

Further reading - An in-depth analysis of the Brazilian pharmaceutical market is available from Espicom: The Pharmaceutical Market: Brazil

Sweden - Pharmacy Market Reform Bill Will Come into Force in July 2009

From July 1st 2009, there will be both state-owned and private outpatient pharmacies in Sweden. The pharmacy market reform is expected to result in more pharmacies with longer opening hours, increasing access for patients. Sweden is one of few countries in the world to have a state monopoly in the pharmacy market, with the Apoteket chain, which has been in place for 35 years.

One important issue is that pharmacies will be allowed to negotiate with branded and generic drugmakers on purchase prices for medicinal products. The new model will maintain price pressure while providing the conditions for a greater number of pharmacies to establish themselves on the market. The model approved by the government means that:

• Freedom of pricing will be maintained for over-the-counter (OTC) medicines
• Price competition via a national marketplace will be maintained for generic medicines
• Pharmacies will be given the chance to negotiate on the price of original pharmaceutical products

Apoteket will remain a key competitor in the market, with 330 of the 946 pharmacies currently owned by Apoteket remaining under state ownership. The remainder will be sold to other competitors, and a proportion of those remaining will be transferred to a newly formed company that will have individual entrepreneurs as partners. This will allow small-scale enterprise within the framework of a functioning support structure, with the intention that the partners will eventually be able to buy out their pharmacies. The only restriction is that neither physicians nor drugmakers will be allowed to own a pharmacy.

There are several potential bidders for the pharmacies, including Celesio, Tamro, Oriola and Alliance Boots. The pharmacies will be sold in two nationwide clusters, of 200 pharmacies and 170 pharmacies, alongside a number of regional clusters with 20 pharmacies in each.

The government has also proposed selling OTC medicines in shops, in addition to pharmacies. The Medical Products Agency will be instructed to decide which products are allowed to be sold in this way, and there will be an age limit of 18 for purchasing OTC products in shops. This will come into force in November 2009.

Further reading - An in-depth review of the Swedish pharmaceutical market, including information on the deregulation of the pharmacy state monopoly, is available from Espicom: The Pharmaceutical Market: Sweden (published April 2009)