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by Ulrich Adam, Hill & Knowlton Brussels
For those wanting to secure their share in Europe’s lucrative pharmacy markets, further liberalisation presents both a regulatory and marketing challenge. Hill & Knowlton's Ulrich Adam looks at the actors involved and the changes ahead.
Europe's pharmacy market is at the crossroads: the upcoming ruling of the European Court of Justice (ECJ) on restrictions of pharmacy ownership in Germany in the so-called 'second DocMorris case' is widely expected to send shockwaves across the sector in 2008, heralding a fresh round of change in the long-raging battle for liberalisation. The pharmacy landscape has already changed substantially during the course of the past decade: whereas ten years ago, in most European countries virtually all pharmacies were owned by a pharmacist, today already more than 10% of the estimated 150,000 pharmacies in Europe belong to a chain that owns at least 10 different pharmacy stores. In liberalised countries such as the Baltic states, nearly 80% of all pharmacies are estimated to belong to a chain. Similarly, pharmacy chains hold the biggest market share in the UK: Alliance Boots, and Lloydspharmacy (owned by the German wholesaler Celesio) together own around 50% of British pharmacies.
On the other hand, more than half of the EU's 27 Member States – among them, key markets such as Germany, France, Italy, and Spain – still have laws in place restricting pharmacy ownership to qualified pharmacists or the number of pharmacies which any company or individual can own. This makes it difficult, or often impossible, for pharmacy chains to be established. Many of these restrictions present an infringement of fundamental tenets of the European Union’s single market, such as the right of establishment (Art. 43 EC Treaty).
The European Commission views the overly restrictive national regulations and the resulting discrepancies between Member States’ pharmacy markets as obstacles to the completion of the EU’s internal market. As a result of the so-called first 'Doc Morris case (C-322/01) in 2003, the ECJ established that the sale of medicines classified as 'non-prescription drugs' into another Member State cannot be prohibited. The European Commission then urged Member States in 2005 to 'bring about systematic pro-competitive reform' in the pharmacy sector in order to generate 'significant economic and consumer benefits'. The Commission further warned that change would be enforced should Member States fail to act on this recommendation. The slow response by Member States prompted the Commission to launch an infringement procedure against Italy. In addition, it sent reasoned opinions to Austria and Spain in June 2006, mainly on the grounds of incompatibility with freedom of establishment and the free movement of capital. Negotiations between the Commission and Austria and Spain to resolve these issues are ongoing.