The Pressing Plight of Pharmacies across Germany
Pharmacy sales experienced an upward trend throughout the previous year - Pharmacies witnessed a surge in sales during the previous year.
Let's dive into the current state of Germany's pharmacies, where the average pharmacy rakes in approximately 3.7 million euros yearly — with 80% of that figure allocated towards the cost of goods alone. After accounting for other expenses, an average pre-tax operating profit of around 162,073 euros remains. However, a staggering 26% ended the year with earnings below 75,000 euros, and a grim 7% fell into the red.
Despite a hardly transformative landscape in the last two decades (even after considering inflation), the federal government has held off on adjusting the pharmacy fee for a continuous 12 years. This prolonged inaction is one of the reasons suspected for the persistently dwindling pharmacy count in the country. As of Q1 this year, there were 16,908 pharmacies in Germany, marking a minute increase of 133 pharmacies from the end of 2024.
The situation seems adversely challenging, yet the number of pharmacies persists in its gradual descent. This decline can be attributed to several influencers:
A Tangle of Regulations
- Strict Ownership and Operation Rules: In Germany, pharmacies operate under stringent ownership laws, limiting the number of possible pharmacies. For instance, only pharmacists may own pharmacies, and there's a cap on the number of pharmacies one pharmacist can own — stifling new entrants and limiting the expansion of existing establishments.
- Costly Licensing Procedures: The process of acquiring a pharmacy license is complex and costly, which might deter potential pharmacies from opening their doors.
Economic Gauntlet
- Tough Competing Fields: The pharmaceutical market is progressively competitive, fostering consolidation. Larger chains or organizations often boast greater efficiency and cost-effectiveness, leaving independent pharmacies struggling to keep up.
- Mounting Operational Expenses: Despite steady sales, pharmacies face escalating operational costs, such as rent, salaries, and regulatory compliance. These costs can strain the financial health of smaller pharmacies, making long-term survival a challenge.
The Digital Disruption
- Online Pharmacies and Platforms: The growth of online pharmacies and digital platforms knocks physical stores toward the ropes, further stressing traditional pharmacies.
- Integration with Other Health Services: There's a trend toward integrating pharmacies with other healthcare services, such as physician offices or clinics, which could potentially reduce the number of standalone pharmacies.
Governmental Policies
- Reimbursement Policies: The reimbursement policies for medicines can significantly impact a pharmacy's profitability, even though they do not directly affect fees.
- Healthcare Reform: Changes in healthcare policies and regulations can influence the pharmacy landscape by affecting service demand or operational costs.
In conclusion, the downward trend in pharmacies is likely the result of an intricate combination of regulatory, economic, and market factors and not merely the lack of adjustment in pharmacy fees.
- In light of the mounting challenges facing pharmacies in Germany, such as vocational training expenses and the complex licensing process for new entrants, exploring vocational training programs in the health-and-wellness sector or partnering with finance and business entities for financial advice could potentially alleviate some of these issues.
- To revitalize Germany's pharmacy sector, it might be beneficial to consider implementing looser ownership and operation regulations, streamlining the licensing process, fostering collaboration with technology companies for digital innovation, and advocating for science-based reimbursement policies and progressive healthcare reform to stimulate demand and improve overall profitability for pharmacies.
