The two largest pharmacy chains in our country – Lilly Drogerie and Benu – together generated a revenue of 46 billion dinars in 2022, which is slightly over 390 million euros.
The overall result for all companies in the sector is even more impressive – data from the credit rating agency CompanyWall indicates that in 2022, 1,180 registered pharmacy establishments achieved a total revenue of 168.2 billion dinars, or almost one and a half billion euros. However, is there enough space for all players in such a valuable market?
It is estimated that there are about 4,000 pharmacies in our country, with large chains comprising hundreds of establishments. Lilly Drogerie, which leads in terms of total revenue in the retail of pharmaceutical products in pharmacies, according to its own data, has more than 200 pharmacies, while Benu has 430 pharmacies across Serbia.
The third member of the “big three” in terms of revenue is Dr.Max, whose “family of pharmacies” includes Nova Pharm, Medis lek, Cvejić, Melem, Ristić, and Emily pharm, with nearly 300 pharmacies throughout Serbia.
Pharmacy establishments with the highest total revenues can be easily divided into those under foreign and domestic ownership. Among the top 10, those in domestic ownership include Lilly, as well as pharmacy establishments Janković, Filly, Galen Pharm, Vegafarma, and Kršenković. AU Cvejić is part of the Dr.Max “family,” and the owner of Pet Network SRB is a company based in Zagreb.
It’s worth noting that Benu is owned by Phoenix Pharma, the Serbian member of the German Phoenix Group operating in 27 countries, while Dr.Max is a Czech group with the largest pharmacy chain in Central and Eastern Europe.
Another division in the domestic pharmacy market can be made based on the size of the pharmacy establishment, specifically the number of pharmacies that constitute a chain. Every stroll through larger streets in Belgrade, as well as shopping centers, often involves passing by at least two or three pharmacies in close proximity.
“You can witness pharmacies opening up, just like bakeries and betting shops, on every corner. This phenomenon has long been jeopardizing the operations of already existing pharmacies and reduces the work of pharmacists to trivialized trade,” warns Mirjana Marković, a pharmacist and the president of the section for pharmacy activities of the Union of Pharmaceutical Associations of Serbia, in an interview for Biznis.rs.
The reason for this lies in the fact that in our country, there are no demographic or geographic restrictions for opening new pharmacies, unlike in some EU countries. Therefore, the number of pharmacies in European countries varies from nine in Denmark to 88 in Greece, while in Germany, there are 25 pharmacies per 100,000 inhabitants.
In Serbia, according to estimates from the Statista portal, there are 18 pharmacies per 100,000 inhabitants.
The debate on whether to limit the number of pharmacies based on the population or geographic location is ongoing worldwide, including in the EU and Serbia. Our interviewee warns that countries recognizing the importance of pharmacies in primary healthcare have clear and strict criteria for their establishment.
In Serbia, the law stipulates that pharmaceutical activities can be carried out by a pharmacist or a pharmacist with relevant specialization, as well as a pharmaceutical technician with appropriate education in the healthcare field.
“Pharmacists are the most accessible healthcare professionals and provide a whole range of health services, from supplying medications and compounding compounded and galenic drugs to counseling on proper use and side effects. Therefore, the operation of pharmacies should by no means be left, to this extent, to ruthless market competition,” emphasizes Mirjana Marković.
The market entered pharmacies “through the back door” seven years ago when the Regulation on the list of products that can be sold in pharmacies stipulated that, among prescription and non-prescription drugs, auxiliary medicinal products, and medical cosmetics, items such as “products for the care, protection, and coloring of the lips and the area around the eyes” or “items for maintaining the cleanliness of things,” umbrellas, socks, and “other textile clothing items that come into contact with the skin” can be found.
However, economist Mihailo Gajić, speaking to Biznis.rs, states that he doesn’t see why our pharmacy market would need additional regulation through demographic-geographic restrictions.
“It would have negative consequences for consumers through a reduction in competition. Many would have to struggle to find the medicine or medical product they need and waste time on it because not all pharmacies have the same assortment. This would be an artificial increase in entry barriers to the industry and would result in higher prices. Pharmacy profits would be higher, existing market players would be rewarded, and the opening of new small pharmacies would be made more difficult, to the detriment of consumers,” pointed out Gajić.
In the domestic market, all pharmacies, whether part of large chains or independent neighborhood pharmacies, procure medications through tenders from manufacturers and wholesalers. In our country, there are no restrictions when it comes to so-called vertical integration of ownership. This means that in Serbia, as well as in some other European countries, pharmacy owners and pharmacy chains can be wholesalers as well as pharmaceutical manufacturers. For example, Benu pharmacies are owned by Phoenix Pharma, a company registered for wholesale trade in pharmaceutical products.
For years, there has been a debate throughout the EU about whether to allow or break the practice of wholesalers and pharmaceutical manufacturers being owners of pharmacies. A recent contribution to this debate comes from neighboring Bulgaria.
The Bulgarian Association of Pharmaceutical Wholesalers (BAPW) highlighted in September of last year that vertical integration between wholesalers and pharmacies opens significant possibilities for Bulgarian patients. This includes regular and reliable supply from distributors and the ability to comprehensively analyze the needs throughout the chain and ensure stocks of medications with constant demand.
On the other hand, the Bulgarian Pharmaceutical Union (BPhU) recognized vertical integration in the drug supply chain as a problem for the sector when pharmacy chains, warehouses, and even manufacturers have the same owners.
“These vertically connected structures can operate to mutual benefit, gaining a monopoly position,” said BPhU President Dimitar Marinov to reporters at the National Press Club BTA. According to him, such connections also carry the risk of limiting patients’ access to certain medications delivered only to “connected” pharmacies.
Should the Serbian pharmacy market be restructured, and if so, how?
In an interview with Biznis.rs, Mirjana Marković from the Union of Pharmaceutical Associations of Serbia points out that, as part of the Second Health Development Project in Serbia, the Ministry of Health in the Draft Strategy for optimizing the network of healthcare institutions has proposed establishing geographical and demographic criteria for opening new pharmacies as one of the solutions to the problems identified in this field.
This measure, as stated in the document, is expected to, in the medium term, limit the number of pharmacies, make their operations more profitable, and provide higher-quality pharmaceutical healthcare.
As part of the efforts to regulate the market, they suggest strengthening inspection services to ensure compliance with enacted laws and sub-laws, especially regarding the presence of pharmacists in pharmacies and the responsibility of pharmacists in the process of dispensing medications.
It is also necessary to expand the range of services that pharmacists can provide, with direct payment for these services by the Health Insurance Fund, and consider increasing the margin on prescription drugs, which currently stands at 12 percent, according to the guidelines for developing the Health Care Development Plan until 2035.
“We hope that the Health Development Strategy, and consequently, the pharmacy sector in Serbia, will align with the modern world, where the pharmacy is a place of safe and efficient healthcare, rather than a place of trade in consumer goods,” concludes Marković.
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