German pharmaceutical wholesalers fear a ruinous price war

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Frankfurt The pharmaceutical wholesaling in Germany is alarmed: The planned law to strengthen the on-site pharmacies threaten the German pharmaceutical wholesalers a “ruinous price and discount competition” of foreign competitors. This is how the chairman of the industry association Phagro, Thomas Trümper, formulates it in an interview with Handelsblatt.

Because the law, which was passed by the Federal Cabinet in July, leads to foreign wholesalers who deliver to German pharmacies, are no longer bound by local price regulations. “This creates unequal competitive conditions and discriminates against pharmaceutical wholesalers based in Germany,” says Trümper.

With the Pharmacy Strengthening Act, Federal Health Minister Jens Spahn wants to achieve, among other things, that EU mail-order pharmacies such as Doc Morris and Shop-Apotheke may in the future no longer give discounts on prescriptions. This should be equated with the German pharmacies, which must not give discounts on prescription drugs and must comply with the German pharmaceutical price regulation.

Years ago, Germany had regulated by law that foreign mail order pharmacies must also comply with German price legislation. However, a ruling by the European Court of Justice tipped this regulation in 2016 with reference to the EU goods free movement.

Since then, the EU mail-order pharmacies are again offering discounts and the EU Commission is urging Germany to amend the Medicines Act. Specifically, this concerns paragraph 78 (1) sentence 4 of the Medicines Act. This sentence – so to speak the requirement that the same prices apply to all, should be deleted with the Apothekenstärkungsgesetz.

In order to ensure that foreign mail-order pharmacies remain bound by German price rules, Spahn wants to shift the price-fixing into the rules of social law, in the hope that the EU will grant more room for maneuver here. The social framework agreements are concluded between statutory health insurance funds and pharmacies. Manufacturers and pharmaceutical trade are not affected.

Therefore, the industry association Phargro argues that with the deletion of the passage from the drug law and the Gleichzwichtsgebot falls on the wholesale level. According to Trümper, domestic providers fear that foreign competitors will especially secure their lucrative drug business and want to attract German pharmacies as customers at low prices. This would be to the detriment of the German pharmaceutical trade, which is still bound by the regulations of the pharmaceutical price regulation.

Low net margins at the German pharmaceutical wholesaler

The Phagro chairman even fears that the need-based supply is threatened by the wholesale. So far, the business has worked thanks to a mixed calculation: The wholesaler receives a fixed range, no matter which drug is concerned.

This remuneration is sufficient for the distribution of many drugs. For other medicines, which must be transported refrigerated, or narcotics, which are subject to special safety regulations, they are far from cost-covering, so Trümper.

The German pharmaceutical wholesaler, which supplies the more than 19,500 pharmacies, has been working for years with very low profit margins. On the one hand, the rates have fallen in the past two decades.

On the other hand, the providers always deliver a tough discount competition for customers. According to industry insiders, net margins in Germany are below 0.5 percent. The total turnover of the industry in 2018 was 31.5 billion euros. Five big players dominate the market.

Phoenix Pharmahandel leads the market with a market share of around 28 percent, followed by Noweda Pharmacy Cooperative, which is valued at more than a fifth of the market share. Of the three other major providers with billions in sales, two are in the hands of US corporations: McKesson-owned Gohe and Alliance Healthcare (formerly Anzag), part of Walgreens Boots Alliance. The fifth company in the oligopoly is the cooperative Sanacorp. There are also a few independent wholesalers such as the pharmaceutical wholesaler Kehr.

Co-owner and managing director Hanns-Heinrich Kehr also sees the cancellation of the principle of non-compliance with concern: “If the law comes into force, we would actually have to set up a location abroad from where we can buy and deliver on the same terms as the other foreign wholesalers” , he says.

According to Phagro, it should be explicitly stated that foreign pharmaceutical wholesalers and directly supplying pharmaceutical companies remain bound to the pharmaceutical price regulation when supplying German pharmacies. The Federal Ministry of Health, at the request of the Handelsblatt, does not comment on the specific demands of the Phagro, but points out that the result of the parliamentary procedure remains to be seen.

Bundestag and Bundesrat must agree to the law yet. In addition, there is still a statement from the European Commission.

More: The pharmaceutical dealer Phoenix is ​​growing vigorously – achieving record sales of 25 billion euros. The competition is weakening.

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