Pharmacies divide the territory

Faced with pressure from federal pharmacy chains, small players are trying to limit their expansion opportunities. The Association of Independent Pharmacies asks the Ministry of Economy and the Federal Antimonopoly Service (FAS) to establish a distance norm between pharmacies in order to encourage market participants to look for unoccupied locations. Federal chains see signs of an oversupply of pharmacies in some regions, but are predictably in favor of “soft regulation.”

At the disposal of Kommersant was a letter dated February 6, in which the director of the Association of Independent Pharmacies, Victoria Presnyakova, asks the Ministry of Economy and the Federal Antimonopoly Service to consider the issue of limiting the distance between pharmaceutical retail outlets. The document says that federal pharmacy chains are “unfair competition” in relation to small and medium-sized businesses, opening outlets too close to existing facilities, using established traffic and logistics. In addition, large players can poach employees from small networks and use price dumping, which leads to the closure of neighboring outlets, the appeal says. Limiting the distance, Victoria Presnyakova believes, will allow the development of small networks and “evenly provide the population with medicines.”

The Ministry of Economy and the Federal Antimonopoly Service told Kommersant that the appeal was being considered. However, the ministry clarified that, according to its estimates, there is “no unfair competition” regarding the location of pharmacies, and decisions to open outlets “are made by market participants based on expediency and marketing indicators.”

Federal players are in a deliberately advantageous position, confirms Elena Gladkova, general director of the Samara network “Duty Apteka 245”. According to her, large pharmaceutical retailers get the best prices and deferred payment from distributors due to volume, have income from marketing promotion from manufacturers, which allows them to keep relatively low prices. Small players in such conditions are forced to include more marginal products like biologically active additives (BAA) in the assortment to the detriment of medicines, adds Anton Foteev, general director of the Ulyanovsk network of Sova pharmacies.

The competition in the pharmacy market is extremely high, and the number of outlets in one location may exceed the needs of consumers, admits Alexander Kuzin, CEO of the 36.6 federal pharmacy chain. According to him, as a result, small chains and individual pharmacies may close and leave the market, or “the balance can be achieved through legislative restrictions.”

The general director of another large Rigla chain, Alexander Filippov, confirms that today Russian cities are oversaturated with pharmacies, and in small towns there is a shortage of them. However, he considers it necessary “soft regulation on the principle of one address – one pharmacy license.” The executive director of the Russian Association of Pharmacies Nelli Ignatieva agrees with this, adding that the norm should only apply to new points.

RNC Pharma Development Director Nikolay Bespalov is confident that the closure of existing pharmacies as a result of tightened regulation will not lead to the development of pharmaceutical retail in hard-to-reach and small towns. According to him, such measures are generally unnecessary and limit competition. Regions with an insufficient number of pharmacies would benefit from tax incentives, rent and the development of online sales of prescription drugs, but steps in this direction “for some reason are not discussed,” the top manager notes. According to his forecasts, the number of individual pharmacies and small chains will decrease in the long term, but there is no need to talk about total market consolidation.

Olga August