Growing regulatory and competitive pressures from new internal and external forces, such as big box pharmacies and supermarkets, are changing the industry’s operating landscape, a report by IbisWorld has found.
According to IbisWorld, no significant growth has been recorded over the past five years. Industry revenue is estimated to grow at an annualised 0.1 per cent over the five years through 2014-15, to total $11.9 billion.
Revenue is down two per cent from the previous year as the changing operating environment continues to take its toll.
Over the next five years, a rising number of converging variables will combine to create a perfect storm for the pharmacy sector.
These include intensifying competitive pressures, the continued loss of market share to external forces, falling prices due to price disclosure and discounting, the passing patent cliff, tighter trading terms implemented by upstream wholesalers and rising rents and occupancy costs.
“The industry’s competitive landscape will become increasingly polarised between pharmacies offering full services and health advice and discount pharmacies competing on the basis of price,” says IbisWorld industry analyst, Arna Richardson.
The Pharmacies industry is highly fragmented, primarily because of state and territory legislation that restricts pharmacy ownership.
Ongoing Pharmaceutical Benefits Scheme (PBS) reforms are also affecting the industry’s operating conditions, as the move towards price disclosure progressively cuts the cost of PBS medicines.
Only qualified pharmacists (and not incorporated entities) can own pharmacies. In addition, the number of pharmacies that a pharmacist can own is generally limited. Therefore, individual operators dominate the industry.
However, the existence of branded groups means that in the eye of the consumer, the industry appears to be dominated by the likes of Amcal and Chemist Warehouse.
The major players in the industry are My Chemist Retail Group, Sigma Pharmaceuticals Limited, Australian Pharmaceutical Industries Limited, TWC Group Investments Limited, and Ebos Group Limited.