My Chemist Retail Group, which includes Chemist Warehouse, holds nearly a full third of the entire community pharmacy market, according to a new report
Intensifying competition between traditional stores and discount pharmacies has “adversely affected” pharmacy operators’ profitability, particularly as the industry has become increasingly divided into these two business models, according to a report released this week by industry research analysts IBISWorld.
And despite some favourable conditions driving underlying demand for pharmaceutical and medicinal products, many community pharmacy operators have been struggling over the past five years.
“Industry operators have contended with ongoing PBS regulatory reforms, which have reduced prices for prescription medicines, the industry’s largest product segment,” states IBISWorld senior industry analyst Arna Richardson.
“Additionally, rising internal and external competition has put pressure on industry operators.”
“In particular, corporate warehouse-style pharmacies with aggressive pricing strategies and consistently low prices have proliferated over the period, threatening the traditional community pharmacy business model,” reads the report.
According to the latest figures published by IBISWorld, the My Chemist Retail Group holds nearly a third (29.2%) of the pharmacy market share.
Sigma Healthcare holds another 19.9% of the market, while Terry White Group holds 12.5% and Australian Pharmaceutical Industries another 11.6%.
Other threats identified in the report include Ramsay Health Care’s entrance into the industry, as well as the emergence of online pharmacies.
“Intensifying competitive pressures, combined with a changing operating backdrop due to ongoing PBS reforms, have contributed to industry consolidation over the past five years,” writes Mr Richardson.
According to the report both discount pharmacy chains and retail banner groups operated by upstream wholesalers have grown in size, gaining market share in the industry’s non-prescription segment and in the volume of PBS prescriptions dispensed.
“In response, Terry White Chemists merged with Chemmart in 2016 to form a 500-strong pharmacy chain. This merger has allowed the company to compete more effectively against discount pharmacy group Chemist Warehouse, with its 420 big-box pharmacies.”
The report also cites independent pharmacy group SmarterPharm’s merger with Pharmacy Alliance, with the partnership now covering 650-member pharmacies.
Meanwhile, “the number of independent pharmacies has continued to decline over the past five years”.
Pharmacies have had to turn to new sustainable models in response to the increasing competition, according to IBISWorld.
This includes strengthening their focus on providing community health services such as drug information, clinical interventions, preventative care, medication reviews, and vaccinations.