Birth of the world’s 5th largest ‘pharmacy company’ by 2027
2009 Pharmaceutical Affairs Act revision eases sales regulations… Rapid growth of ‘chain pharmacies’ selling like supermarkets
Advancement into Southeast Asia and China, where the population is rapidly aging… Capital power – Targeting the ‘blue ocean’ with the best medicine
In Korea, supermarkets cannot be sold due to opposition from pharmacists.
Japan’s largest distribution company ‘AEON’, the parent company of both companies, announced on the 28th of last month that Welshia Holdings, the No. 1 chain pharmacy (drug store) company in Japan, and Tsuruha Holdings, the No. 2 company, have decided to merge. If the integration of the two companies is achieved by December 2027, which is the target, the world’s 5th largest pharmacy chain will be created with total sales of 2.1142 trillion yen (about 18 trillion won) as of last year.
In Japan, where regulations on the sale of over-the-counter drugs were relaxed in 2009, the chain pharmacy industry grew rapidly and became a major axis of the distribution industry. In particular, based on the ‘economies of scale’ achieved in the domestic market, the company is rapidly advancing into Southeast Asia and China, where the aging population is just beginning. A new growth engine has been found through deregulation. This is in contrast to Korea, where related regulations could not be lifted due to resistance from pharmacist groups.
The impetus for the rapid growth of Japanese chain pharmacies was the revision of the Pharmaceutical Affairs Act in 2009. At the time, the existing law allowed only pharmacists to sell even simple general medicines such as digestive medicine, which caused great inconvenience to consumers and reflected the point that effective medication guidance was not provided.
Accordingly, in Japan, in addition to existing pharmacies where pharmacists fill prescriptions, ‘chain pharmacies’, which sell general medicines like regular products from supermarkets, have grown rapidly.
At the time, the authorities broadly divided drugs into four types. First of all, there are ‘specialty drugs’ that require a doctor’s prescription and can only be sold by pharmacists. Next, medicines that require caution due to concerns about side effects, such as hair growth agents and cold sore ointments, were designated as ‘class 1 medicines’ that do not require a prescription but can only be sold by pharmacists.
‘Second-class medicines’ that have certain side effects, such as fever reducers and painkillers, can be sold not only by pharmacists but also by registered sellers who are considered to be one level lower in the profession. The obligation to provide medication guidance was abolished for ‘third-class medicines’ with minimal side effects, such as digestive medicines and vitamins, and virtually anyone could sell them.
After the law was revised, chain pharmacies that sell second and third class drugs like supermarkets grew at a rapid pace. According to the Chain Drug Store Association, Japanese drugstore sales grew 60% from 5.443 trillion yen (about 48.47 trillion won) in 2009 to 8.7134 trillion yen (about 77.6 trillion won) in 2022. It has surpassed department stores and has become one of the three major axes of the distribution industry along with convenience stores and supermarkets.
The Nippon Keizai Shimbun analyzed that after the merger, Wellsia-Tsuruha will target 2 billion consumers in China and Southeast Asia, where aging is rapidly occurring. According to UN population estimates, 11 countries in the Association of Southeast Asian Nations (ASEAN) entered ‘aging’ in 2019, with the proportion of the population aged 65 or older exceeding 7%. In 2043, this ratio is expected to reach 14%, which is twice as high.
At the same time, the number of medical workers per 1,000 people in Thailand is 0.8, less than one-third of Japan (2.6). This means that the company will target the ‘blue ocean’ of the global pharmaceutical market based on its powerful capital developed through deregulation and the world’s best drug quality that has been cultivated over several decades.
Since 2012, Korea has allowed 13 types of over-the-counter medicines to be sold only in convenience stores that are open 24 hours a day and have clerks. However, even after more than 10 years, only 13 items have been covered. In addition, in 2016, the authorities considered expanding sales of over-the-counter medications through vending machines (paint dispensers) and supermarket sales of over-the-counter medications, but this was not realized due to resistance from pharmacists.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.