Will 2010 bring further changes in pharmaceutical distribution in Central Europe?

Last year brought a reduction in the number of pharmacies in some Central European countries. In Poland the number has been falling since mid-2009. The weak economy is not the only cause of this development. The main reason for the reduction in pharmacy numbers is market saturation, which has caused many outlets to operate at a loss. The Polish Pharmaceutical Chamber estimates that as many as 35-40% of pharmacies in the country may be in serious debt and that many of the rest are operating at the limits of financial viability.

Similar problems are being faced by other countries in the region. About 400 pharmacies may soon go bankrupt in Hungary, according to estimates by the Hungarian Chamber of Pharmacists (MGYK), because the government has removed non-repayable subsidies for pharmacies from this year’s budget. In the Czech Republic yet in 2008 the number of pharmacies began to fall for the first time since 1990. After 1990 the number in the country began to rise rapidly and had more than doubled by 2008, when the Czech Republic had twice the number of pharmacies as Austria, a country of comparable size. Several hundred pharmacies also went bankrupt in Bulgaria in 2009, and several hundred more are on the verge of bankruptcy because of the effects on performance of the economic crisis, lower mark-ups and recent changes in the law.

The highest level of congestion of pharmacies is found in Bulgaria, where there are 1,950 inhabitants per one pharmacy outlet (not taking into account around 900 drugstores, which can sell only OTC medicines). The Czech Republic has the lowest density of pharmacies – around 3,800 inhabitants per one pharmacy outlet.

 

The regulations pertaining to online and mail order sales are not unified among the countries in the region. The most liberal laws governing the online sale of pharmaceuticals are those of Poland, the Czech Republic and Slovakia, where all OTC products are available for sale online. In Hungary only a limited number of OTC drugs can be sold online. Such sales take place in these countries as they are not explicitly banned.

Slovakia has been the latest country in the Central European region to decide to liberalise the law in this area. Online sales were authorised in the country in December 2009, and from mid-March, when the ordinance stipulating the conditions pertaining to mail-order sales came into force, pharmacies can apply for permission to sell medicines online.

Mail order is limited to drugs and medical devices available over the counter and not covered by obligatory health insurance. The Slovak Chamber of Pharmacies welcomed the change, saying that it would improve patient safety, as medicines ordered over the internet in the past were often delivered without the observance of basic logistics standards and were sometimes not even registered in Slovakia.

 

The acquisition, in April 2009, of a drug distributor Prosper by Torfarm, other leading Polish pharmaceutical wholesaler, was one of the most important events in the pharmaceutical distribution arena in the region last year. In the wake of the acquisition, the Torfarm group controls more than 30% of the pharmaceutical distribution business (sales to pharmacies) in the country. In July 2009 Farmacol, another leading Polish distributor, acquired 85% of the equity of another wholesaler – Cefarm Bialystok – for PLN 71.5m (€20.4m). Cefarm, which is active in the north-eastern region of Poland, has a chain of almost 50 pharmacies.

In other countries of the region the consolidation processes were not as intensive and there were no major mergers and acquisitions among leading wholesalers in 2009. In March 2010, however, Actavis, the Icelandic drug manufacturer, announced that it had sold Higia, a Bulgarian pharmaceutical distributor, to a private investor. The new owner is Rosica Veselinova Velikova, a person not known in the Bulgarian pharmaceutical industry. Further consolidation can be expected on the Bulgarian pharmaceutical distribution market in the short-to-medium term, with a large number of small players failing to remain competitive in terms of price and quality of service. Large players are also hoping to streamline and solidify their operations, as demonstrated by the merger between Sopharma Trading and Sopharma Logistics, announced in January 2010.

 

Distribution, particularly at the pharmacy level, is strongly influenced by legal regulations which may accelerate or hamper its development. For example in Hungary, in January 2007, geographical and demographical restrictions on pharmaceutical establishments were lifted, and this led to a rapid rise in the number of pharmacies – from around 400 to over 2,400 during the last three years. Such regulations are currently in force in Romania, but, as they are to be lifted in 2011, an increase in the number of pharmacies in this country can be expected.

In Poland there are no geographical or demographical restrictions on the establishment of pharmacies, but the development of pharmacy chains is hampered by anti-concentration rules introduced in 2004 which state that one entity may not possess more than 1% of the pharmacies in a given voivodship. For several years, successive proposals for amendments to the Pharmaceutical Act have included regulations designed to tighten these rules. It is possible, however, that Polish legislation in this area will move in the opposite direction. Toward the end of November 2009 the Ministry of Economic Affairs published a bill which would alleviate administrative obstacles to citizens and entrepreneurs and, if it becomes law, will lift restrictions on obtaining permits to run pharmacies for entities with more than 1% of the pharmacies in a given voivodship.