The Evolution of Pharmacy Distribution in Italy

Understanding the evolution of the pharmaceutical industry post-COVID is crucial for smart distribution projects like MINISAN, specializing in health and hygiene products. By staying informed about these trends, MINISAN can strategically introduce innovative products to the market, meeting the evolving needs of consumers and healthcare providers. As the industry shifts towards digitalization, supply chain resilience, and personalized medicine, MINISAN has the opportunity to leverage these changes to enhance its product offerings and strengthen its market position.

Key Trends Shaping the Industry

Digital Transformation Digitalization has accelerated in the pharmaceutical sector. Companies are investing heavily in digital tools and platforms to enhance research and development, streamline operations, and improve customer engagement. This shift includes the use of artificial intelligence (AI) and machine learning (ML) to accelerate drug discovery and development processes.
Supply Chain Resilience The pandemic highlighted vulnerabilities in global supply chains. Pharmaceutical companies are now focusing on building more resilient and flexible supply chains. This includes diversifying suppliers, increasing inventory levels of critical components, and implementing advanced analytics for better demand forecasting and inventory management.
Remote Healthcare and Telemedicine The adoption of telemedicine has surged, driven by the need for remote healthcare solutions during the pandemic. Pharmaceutical companies are partnering with telehealth providers to ensure patients have access to medications and consultations. This trend is expected to continue as patients and healthcare providers recognize the convenience and efficiency of remote healthcare services.
Personalized Medicine Advancements in genomics and biotechnology are paving the way for personalized medicine. Tailoring treatments to individual patients based on their genetic profiles can improve outcomes and reduce side effects. The pharmaceutical industry is investing in precision medicine research to develop targeted therapies for various diseases.
Sustainability and Environmental Concerns Sustainability has become a crucial consideration for pharmaceutical companies. There is a growing emphasis on reducing the environmental impact of manufacturing processes and promoting eco-friendly practices. Companies are also exploring the use of biodegradable materials and reducing waste in their operations.
Regulatory Changes The pandemic prompted regulatory bodies to expedite the approval processes for vaccines and treatments. Moving forward, the industry anticipates more streamlined and flexible regulatory frameworks. This can help bring new drugs and therapies to market faster while ensuring safety and efficacy.
Collaborations and Partnerships Collaborations between pharmaceutical companies, biotech firms, and academic institutions have increased. These partnerships are crucial for sharing knowledge, resources, and expertise, ultimately accelerating the development of new treatments and vaccines.
Patient-Centric Approaches There is a growing focus on patient-centric approaches in drug development and delivery. This involves engaging patients in clinical trials, improving the patient experience, and ensuring that treatments meet patient needs and preferences.

Observing Pharmacy Chains in Italy

As of now, 5.1% of pharmacies in Italy belong to a capital chain, yet no region approaches the 20% ceiling set by the 2017 Competition Law (law 124/2017). The highest concentration is in Lombardy, where capital pharmacies constitute 12% of the total. Following are the Aosta Valley at 11%, Tuscany at 10%, Emilia Romagna at 9%, and Veneto at 8%. This data is drawn from the first report of the Chain Observatory, a new column launched by Iqvia and Pharmacy Scanner to closely monitor pharmacy aggregation trends. Officially presented on June 27th, during the "number zero" forum of Pharmacy Scanner for the pharmacy community, the Observatory will offer semi-annual analyses of the numerical and economic progress of pharmacy networks and chains, along with insights to understand evolving models and experiences.

To ensure data consistency and comparability, they defined and delineated various types of aggregations under the Observatory’s lens. This classification resulted in five categories: real chains (aggregations with more than ten pharmacies), municipal pharmacy groups (brands with at least three stores managed by municipal companies), strong networks (networks with stringent affiliation rules and centralized purchasing), light networks (requiring less compliance from affiliates), and independent pharmacies (those not belonging to any network or part of chains with fewer than ten stores).

Chains, Municipal Groups, and Networks: Current Numbers

Researchers categorized pharmacies based on their criteria:

Real Chains: 5.1% of active pharmacies, generating 6.6% of the channel's total revenue.
Municipal Groups: 3.4% of pharmacies, accounting for 3.5% of revenue.
Strong Networks: 11.6% of pharmacies, holding an 11.4% market share.
Light Networks: 23.6% of pharmacies, representing 25.2% of the market value.
Independent Pharmacies: 56.3% of the total, generating 53.3% of the overall revenue.

In summary, aggregations with central leadership (capital chains, strong networks, and municipal groups) comprise 20.1% of Italian pharmacies, producing 21.5% of the channel’s revenue.

Aggregation Types and Geographic Distribution

The Observatory mapped the geographic distribution and numbers of key brands within each cluster. Real chains are primarily concentrated in Northern and Central Italy, especially in Lombardy, Tuscany, and Veneto. Municipal groups with more than three pharmacies are most prevalent in Trentino and Umbria, where strong networks also show significant presence.

Comparing Revenues and Growth

Comparing the performance of different aggregation clusters provides insights: in 2022, independent pharmacies saw the highest revenue growth per store at 4.7%, compared to 4.5% for strong network pharmacies and 3.2% for chain pharmacies. However, in the first five months of 2023, chain pharmacies led with a 2.7% revenue increase per store, followed by 1.9% for strong networks and 1.5% for independents. Municipal groups maintained steady growth with 3.9% in 2022 and 3.6% in early 2023.

Revenue Composition and Profitability Focus

Significant differences exist in revenue composition among clusters. Real chains show a lower proportion of ethical drug sales, focusing more on high-margin categories like supplements, personal care, and OTC products. Municipal groups display a similar revenue mix, while independent pharmacies distribute their revenue more evenly across categories.

Upselling and Market Value

Real chains excel in upselling, convincing customers to purchase higher-value versions or brands of products. Iqvia compared market segments (hair products, cosmetics, parapharmaceuticals, and OTC/supplements), showing real chains leading in all but parapharmaceuticals, where independents prevail. This upselling ability highlights the active management capabilities of central-led aggregations in retailing strategies, consumer decision-making, and leveraging supplier negotiations.

The growth of these aggregations will compel the industry to reconsider its margins, market strategies, trade marketing, and supply chains, facing increased costs for customized sell-out activities.

This comprehensive overview of the pharmaceutical industry's evolution and the emergence of pharmacy chains in Italy provides essential insights for businesses like MINISAN. By understanding these trends, MINISAN can strategically navigate the market, introduce innovative products, and meet the evolving demands of healthcare consumers.