“With the conditions for business currently the way they are, about 20% of the independent pharmacies will sell their licenses to the major networks. The number of troubled independent pharmacies will increase as of April 2014, once their bills to wholesalers double after the payments made by the Health Insurance House subsidiaries as of 2013,” said Ovidiu Wencz, general manager of SIEPCOFAR, which operates the Dona retail pharmacy chain.
What he means by this is that now that the government reduced payment deadlines for subsidized drugs and is catching up on its payments to pharmacies via the subsidiaries of the National Health Insurance House, pharmacies, too, have to pay their suppliers sooner than they used to, which might be a problem for some.
“The largest chain will probably operate more than 500 or maybe even 600 pharmacies throughout the country.”
Out of the five largest networks, Catena, Sensiblu, Dona, Help Net and Ropharma, only Dona, Help Net and Ropharma have revealed concrete expansion plans for 2014. Catena and Sensiblu only said they would continue expansion without revealing how many new pharmacies they planned to open this year.
The consolidation trend in the pharmaceutical retail sector is due to the mounting pressure on profit margins and has become obvious in Romania and other countries in Europe in the last few years.
Market research firm PMR, for instance, sees pharmacy chains accounting for 50% of the Polish market in the next few years.
Monika Stefanczyk, head pharmaceutical market analyst with PMR estimates there are 25 to 30 chains with at least 10 pharmacies in Romania and the largest five chains operate 17% of the total pharmacies in the country. The data are valid for October 2013, she added.
Based on ZF data, the networks with more than 100 pharmacies also include Belladonna (110).
Romania is one of the 14 countries in Europe allowing pharmacy chains to run, along with Belgium, Bulgaria, Czech Republic, Hungary and others. On the other hand, Austria, France, Germany and Spain do not allow networks, according to the European Association of Pharmaceutical Wholesalers (GIRP – Groupement International de la Repartition Pharmaceutique).
The number of pharmacies in Romania is capped by law depending on the number of inhabitants in a town and expansion is only possible by acquiring an already operational pharmacy.
As profit margins dwindle, many of the independent pharmacies found themselves unable to cope so owners decided to sell to the big chains, which are backed by wholesalers and can achieve economies of scale.
Romania dropped the requirements for the spacing of pharmacies (i.e. how close they may be) years ago and only retained the requirement of one pharmacy per 3,000 inhabitants in Bucharest, one per 3,500 in county seats and one per 4,000 in other cities and towns. Demographic restrictions do not apply in rural areas.
Discussion about Romania dropping this demographic criterion so pharmacies can expand freely has been going on since 2008 but the deadline has been pushed back a number of times. According to the latest information from the Health Ministry it should finally happen in 2015.
“Catena currently has more than 480 pharmacies and national coverage. It will continue to expand, though at a slower pace, focusing on consolidation instead,” said Vlad Tigoiu, chief financial officer of Fildas Group, owner of the pharmacy chain.
Catena has been the most aggressive network in terms of expansion in the last few years beating Sensiblu, the former leader until 2012.
“As in every year since the establishment of the Catena brand, the revenue will increase by a higher rate than the entire market,” Vlad Tigoiu said.
Fildas started developing its own pharmacy chain in 2000, after buying Argesfarm in a privatization process. Argesfarm operated 60 such stores back then.
Farmaciile Dona retail pharmacy chain, too, will expand in 2014, going to 280 pharmacies from the current 230.
“We will continue expansion of the Dona pharmacy chain, which will organically develop by buying individual licenses in targeted areas and/or smaller local chains,” said Ovidiu Wencz, general manager of SIEPCOFAR.
Farmaciile Dona expects more than 800 million lei (EUR177 million) revenue in 2014.
Sales of drugs via pharmacies amount to EUR2.3 billion a year, according to market research company Cegedim Romania.
Pharmacies sell more than drugs, as they also carry various medical supplies and equipment, cosmetics and other products so their total revenue is much higher.
Belladonna network plans to expand both in Bucharest, the only place it has been operating so far, and in the rest of the country.
“We’ll continue to open pharmacies in Bucharest and are now opening pharmacies in the country, which is a new thing for us. We have expanded our chain by 12 Belladonna stores in the biggest counties in the west of the country – Cluj, Bihor, Timis, Arad and Brasov,” said Marius Andone, chief executive of the Belladonna chain.
(English version by Loredana Fratila-Cristescu)