My Chemist corners market amidst ‘intensifying competition’

Chemist Warehouse
Image by Francisco Anzola

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.

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1 Comment

  1. Slim Jim

    And now with a big enough share of the market (at 29.2%) to acquire their own first line pharmaceutical wholesaler, for example, one with 19.9% of the market to give them almost half the market (49.1%) and the added bonus of access to the CSO pie and the CPA negotiating table through membership of the wholesalers association.

    If wholesalers can own and develop pharmacy franchise and management groups of their own, why can’t this happen in reverse? Particularly if the pharmacy group in question is also the largest (and most valuable) customer of the (struggling…) wholesaler who has done this sort of merger/acquisition in the past. Remember the original Arrow company?

    Meanwhile, “the number of independent pharmacies has continued to decline over the past five years”. I wonder how the 7CPA negotiating team will be able to justify to the public and government that “the delivery of pharmacy services by a network of independently owned and operated pharmacies throughout Australia is the backbone and strength… blah blah” when it looks more like an agreement between the government and an oligopoly? How would the public react to this sort of expenditure of public funds in other retail industries?
    And lets face it people… the key word here is retail (not the professionals that pharmacists claim to be – we sell stuff!).

    Any comment from Bruce Annabel on this possibility would make interesting reading!

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