Global Pharmacies and Drug Stores
The global drugstore market will be worth around $595 billion by 2015, according to research from Global Industry Analysts.
The retail drug industry is comprised of pharmacies or drugstores, as they are known in Northern America. With an aging global population and greater prevalence of chronic diseases, the need for safe, legal pharmaceutical drugs is constantly rising.
Pharmacies and drug stores dispense prescription medications and over-the-counter drugs directly to patients. However, their role is more than one of simple distribution as they dispense medication in specific doses, adhere to optimal conditions of storage and give valuable advice to patients. They ensure patient safety by providing drugs that have not expired or been damaged by errors in storage.
Pharmacies practice in a wide range of locations and location types such as communities, hospitals, clinics and nursing homes. Other drug retail outlets include supermarkets, and independent and online pharmacies, which offer mail-order drugs to patients, proving especially convenient for those that may be unable to leave their homes. Apart from selling drugs, miscellaneous products also account for a percentage of sales for these retail outlets, such as cosmetics and confectioneries.
The traditional mode of "manufacturer-to-wholesaler-to-drugstore" has been adapted in recent years with the Direct-to-Pharmacy model (DTP). This new supply route has proven particularly successful in the UK. DTP means increased control of supply of drugs for manufacturers and savings for pharmacies.
Regional Drugstore Market Share
The US and the EU are both leaders in the global drugstore market. In the US, health reforms such as President Barack Obama’s Patient Protection and Affordable Care Act passed in 2010 have had an impact on the regional drugstore market. Provisions under this act oblige all citizens to have health insurance coverage and have increased Medicate drug rebates for brand name drugs to over 23%, according to the Kaiser Family Foundation, which informs consumers on health policy issues. The act also extends to the US Food and Drug Administration, a leading authority that approves generic versions of biologic drugs and allows biologic manufacturers a 12-year grace period before generics will be permitted.
The US market is comprised of around 42,000 drugstores, between single and multiple location companies. In total, the US market represents yearly profit of around $220 billion.
The EU market is seeing growth in independent and online drugstores: the UK, Sweden, and Norway are home to the biggest EU share of chain drugstores, while France and Germany lead the EU market for online drugstores.
Asia-Pacific is a global leader in terms of drugstore market growth. India also represents an area of rapid market growth. The Economic Times reports an increase of more than 18% in drug retail sales in India in 2010. The top selling drug in India is Corex, a cough syrup made by Pfizer.
Prescription Dispensing Spending in the US
| Spending *In US$ Bn |
2010 |
2009 |
2008 |
2007 |
2006 |
| Chain Stores |
108,1 |
105,4 |
99,7 |
96 |
91,9 |
| Mail Service |
52,6 |
51,5 |
46,5 |
44,1 |
42,7 |
| Independent |
37,9 |
37,3 |
36,9 |
37,5 |
36,5 |
| Clinics |
36,2 |
34,8 |
33 |
32,7 |
29,8 |
| Non-Federal Hospitals |
28 |
27,6 |
26,8 |
26,4 |
26,1 |
| Food Stores |
21,3 |
21,2 |
20,4 |
21,5 |
21,9 |
| Long-Term Care |
14,8 |
13,8 |
13,7 |
13,3 |
12,8 |
| Federal Facilties |
3,9 |
4,1 |
3,9 |
4 |
3,7 |
| Home Health Care |
2,5 |
2,5 |
2,5 |
2,5 |
2,4 |
| HMO |
1,1 |
1,1 |
1,3 |
1,5 |
1,6 |
| Miscellaneous |
1 |
1 |
1 |
1 |
0,9 |
| Total US Prescription Market |
307,4 |
300,3 |
285,7 |
280,5 |
270,3 |
|
Source: IMS Health, National Sales Perspectives, Dec 2010
Leading Drugstores
The US drugstore industry is concentrated with 70% of profits made by 50 of the largest companies, reports business solution firm Hoovers. Leading drugstore companies include Walgreen, Rite Aid and CVS Caremark.
- According to stock analysis service Trefis, pharmacy drugs account for just over 60% of US-drugstore leader Walgreen’s revenue, with over-the-counter drugs and general merchandise representing the rest. Immunization is fuelling growth for Walgreen as the company has begun an immunization service in its 7,700 stores US nationwide. Its stores also include Duane Reade pharmacies and Take Care clinics. The vaccination market has an estimated worth of $40 billion in the US, and is largely comprised of flu shots.
- US-based CVS Caremark was established through the merger of CVS Corporation and Caremark RX in 2007. The company makes a yearly profit of over $96 billion and is number 21 on the Fortune 500 list in 2011. CVS Caremark is the number-one specialty pharmacy in the US and the leading prescriptions provider. It is also the number-one employer of nurse practitioners and pharmacists. The company spans 44 states and employs 200,000 people. The company’s gross profit margin for prescription drugs is forecast to grow from 34.7% in 2010 to close to 36% by 2017.
- Alliance Boots is a leading global pharmacy-led health and beauty retailer. The company is engaged in the sale of pharmacy-led health and beauty products and the wholesale and distribution of pharmaceuticals. Its 3,280 retail outlets span 11 countries and 3,180 of those stores have a pharmacy. Its wholesale segment involves the supply of medicines and healthcare products and services to more than 160,000 drug retail outlets, such as hospitals and pharmacies, through 370 distribution centers encompassing 21 countries. The company’s revenue for 2011 rose over 15% to more than $31 billion. Alliance Boots employs 115,500 people.
Market Outlook
Challenges facing the drugstore market – such as strict regulations and price pressures – are compensated for, in part, by demand created from an aging population, rising numbers of patients suffering from chronic diseases and consumer-driven demand by a more health-conscience public. ICD Research reports that buyers in the pharmaceutical industry are in agreement that to win and keep their business, suppliers need to develop partnerships that optimize working capital and minimize costs, making acquisitions and mergers an important aspect of the industry’s future.
Leading Associations
