WHILE the debate on dispensing separation (DS) — which will essentially divide the professional responsibilities of doctors and pharmacists — waxes hot and furious, money has been pouring into the community pharmacy industry. This is no surprise as the pharmaceutical market as a whole is estimated at RM8 billion — and growing.
These investors are pinning their hopes on the eventual implementation of DS.
Big names like Boots and Chemist Warehouse are said to be eyeing a slice of the Malaysian pie — one of the few countries in Asia that have yet to implement DS.
Business Monitor Research, an international market research organisation, puts the value of the Malaysian pharmaceutical market (encompassing MNC R&D companies) at
RM6.5 billion in 2013. The channels through which these pharmaceutical products are distributed are: government (40% or RM2.6 billion), community pharmacies (23% or RM1.5 billion), clinics (20% or RM1.3 billion) and private hospitals (17% or RM1.11 billion).
Another 30% or roughly RM1.95 billion is said to encompass local generic manufacturers and generic imports, which brings the total size of the pharmaceutical market size in Malaysia to about RM8.45 billion in 2013.
Malaysia’s community pharmacies, also referred to as retail pharmacies, number a little over 2,000, with major names like
Caring, Guardian, Watsons, Cosway and Vitacare controlling a sizeable number of stores. Others include Tigas, Aeon Wellness, Alpro, Constant, Health Lane Family and Multicare.
It is the market share held by the clinics that the community pharmacies are eyeing. Should DS be implemented, community pharmacies could grab as much as RM1.7 billion from the clinics, bringing their total revenue to RM4 billion, based on 2013 figures.
DS is said to have been generally agreed upon by the professional bodies representing the doctors and pharmacists. Associations representing community pharmacies and pharmacists voiced their hope several weeks ago that the “doctors diagnose, pharmacists dispense” would be implemented as early as April 1 — the same day the Goods and Services Tax (GST) takes effect.
But Health Minister Datuk Seri Dr S Subramaniam has since come out to say that no decision has been made and that the dialogue between the stakeholders is ongoing. Just two weeks ago, on March 12, Subramaniam said what works elsewhere may not be applicable to Malaysia, as far as DS is concerned.
New players, new models
Two new players recently entered the community pharmacy market in anticipation of DS. Pharmaceutical and medical devices distributor Zuellig Pharma Group last month acquired 24-year-old Johor-based My Pharmacy (M) Sdn Bhd, which operates 15 stores.
“With rising health awareness and increasing momentum to separate drug prescribing and dispensing, community pharmacies will play a crucial role in primary healthcare provision in Asia. Zuellig Pharma believes the acquisition of My Pharmacy represents a compelling opportunity to becoming a key player in the community sector in Malaysia,” the company says in a statement to The Edge.
“Zuellig Pharma looks to further increase the number of stores across the country,” the company says, adding that My Pharmacy will form part of Zuellig Pharma’s retail investments business unit, which will be operated separately from the distribution business.
Hong Kong-based Zuellig Pharma, which was founded by a Swiss, did not reveal the price it paid for My Pharmacy. Filings with the Companies Commission of Malaysia shows that My Pharmacy posted a net profit of RM1.21 million in the financial year ended July 31, 2013, on revenue of RM37.4 million. As at the same date, the company had accumulated profits of RM2.13 million and total liabilities of RM7.43 million.
Symbion International LCC — a private investment vehicle of Datuk Dr Jennifer Low, who is co-founder of the Quill Group of Companies — has put into motion plans for two unique business models that are new to Malaysia. These are a warehouse concept pharmacy called Super Pharmacy Megastore and MEDICO clinic and pharmacy. Both concepts aim to provide consumers and patients with the convenience of obtaining their prescriptions.
Super Pharmacy Megastore, set up by Super Pharmacy Sdn Bhd, is a one-stop shopping solution for all health-related needs, including prescription drugs.
Super Pharmacy CEO David Mah, in an interview with The Edge, says not only will the warehouse offer a wide range of pharmaceutical products that is usually available at shoplot-sized retail pharmacy outlets, it also plans to reach out to customers through home delivery and sales via its e-commerce portal.
In the second quarter, Symbion, via Medico Healthcare Sdn Bhd, will launch a clinic and pharmacy store concept. “Other than Super, our next retail pharmacy concept will be combined with a clinic next door, and we have named this MEDICO. MEDICO Clinic and Pharmacy is not a new concept abroad. We want to be the pioneer [in Malaysia] and set the benchmark for the [community] pharmacy industry once DS is implemented,” Mah says.
Meanwhile, two other established brands are said to be keen to set up shop here — Boots and Chemist Warehouse.
According to industry sources, Boots has been scouting around for business opportunities in Malaysia.
When contacted by The Edge, a Walgreens Boots Alliance spokesperson says, “Our strategy has always been to build a presence in current or complementary business areas, within countries we already operate in or new markets with a strong growth potential. We have a team focused on evaluating opportunities but, as you might expect, we would only do a deal if it was right for the company.”
Boots UK Ltd, which was formerly known as Boots the Chemist, became part of Walgreens Boots Alliance on Dec 31, 2014. Boots already has a retail presence in Thailand, Singapore and Hong Kong.
There is also talk in pharmaceutical circles that another foreign name is looking to enter the local market — Australia’s Chemist Warehouse. As at May 2014, Chemist Warehouse was Australia’s 13th largest retailer in terms of sales, churning A$2.7 billion and operating 260 stores.
Chemist Warehouse operates high-volume, low-margin pharmacies offering deep price discounts as well as an online health and pharmacy website. The company did not respond to The Edge’s queries. Nonetheless, sources say this player has been talking to established chains in Malaysia.
Local clinics will understandably be concerned over these developments.
In what appears to be a bid to defend its turf, a chain of clinics has set up community pharmacies to safeguard its revenue from dispensing medicine.
Established healthcare chain Klinik Mediviron Sdn Bhd has set up a wholly owned subsidiary, Green Care Health Management Sdn Bhd, to operate community pharmacies. The first store is in Sea Park, Petaling Jaya, just across the street from a Klinik Mediviron. According to Mediviron’s Group of Clinics website, it has over 110 clinic branches, many of which are open 24 hours.
Apart from these players, Angkatan Koperasi Kebangsaan Malaysia Bhd (Angkasa) in late-2013 signed a memorandum of understanding to establish a joint venture with Bioalpha Holdings Bhd to manage the MyAngkasa Pharmacy network. Bioalpha is a company controlled by the Ministry of Finance (MoF).
The JV had planned to open 15 mega stores and 1,000 pharmacies over a five-year period via a franchise scheme. It is understood that the first store opened in June last year. Industry players say the involvement of the MoF firm is an indication that DS is on the horizon.
Are we ready?
Last month, Malaysian Medical Association (MMA) president Dr H Krishna Kumar said the Ministry of Health (MOH) had decided that DS would not be implemented in the near term simply because the suburban areas were not ready.
He was quoted as saying that they were in agreement there was an insufficient number of pharmacists and that community pharmacies were predominantly in the urban areas, which could pose a burden to patients in smaller towns. He pointed out that while there were many 24-hour private clinics, not many community pharmacies were open all day.
The ideal ratio of pharmacists to population, according to the World Health Organisation, is one pharmacist for every 2,000 people. Data from the Pharmaceutical Services Division (PSD) shows that in 2014, Malaysia had a total of 13,173 registered pharmacists, and this number is expected to reach 14,563 this year. By 2020, the forecast number of pharmacists is 22,103 (see chart).
Based on the Department of Statistics’ population projection of 30.5 million in 2015, Malaysia is not too far off from the ideal ratio at 1:2,094. By 2020, when the population hits 32.4 million, the ratio would be one pharmacist for every 1,465 persons.
Community pharmacy players say that the lack of outlets should not be a reason to delay the implementation of DS. This is because once it is announced, the number of outlets will start to mushroom.
”We believe the normal demand-and-supply economy rule will prevail in this situation. There will certainly be more pharmacists opening their own community pharmacies when there is a major change in the market, such as the launching of DS.
“The existing number of community pharmacies may even double within a short period of time because there are a few thousand registered pharmacists working in government hospitals who are keen to start their own practice for whatever reason”, the president of the Malaysian Community Pharmacy Guild (MCPG), Wong Sie Sing, says.
Malaysian Pharmaceutical Society (MPS) president Datuk Nancy Ho foresees not only more outlets being opened but also relocation of some of these pharmacies. “There is a lot of talk about there being not enough pharmacies to serve the clinics, or no 24-hour pharmacies. Of course there is none now, but we are not far behind. Already, we can find several pharmacies within the same locale, such as in a shopping centre. If this is the case now, what more with DS? Who would want to open 24 hours when the doctors are not writing out any prescriptions?” she asks.
MPS’ ideal community pharmacy scenario is “one pharmacy on each street” so that patients don’t have to walk more than five minutes to get their prescriptions filled.
Given the number of new players jumping onto the bandwagon, Malaysia may not be too far off from the ideal scenario now. Does that mean we are ready for DS?
This article first appeared in The Edge Malaysia Weekly, on March 23 - 29, 2015.
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