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Retail Chemists and Drugstores Market Report 2003
Key Note Publications Ltd, Jan 2003
Overall growth in the market for retail chemists remains restricted by government legislation, controlling the location and number of dispensing pharmacy outlets. A system of registration - in the form of the National Health Service (NHS) Contract for Pharmacies - has kept the number of retail chemists constant since its introduction in 1987. In 2002, the total market for retail chemists was valued at £7.99bn. (This figure includes the value of in-store pharmacies but not drugstores.)
Both retail chemists and drugstores supply over-the-counter (OTC) pharmaceuticals, other healthcare and personal care products. Larger outlets also sell gifts and household goods. Operators of retail chemists also generate income from dispensing prescription-only medicines (Poms) and from retail sales of a wider range of OTC products.
Due to the limited availability of NHS dispensing licences, retail chemist chains are generally only able to expand their presence in the market through the acquisition of existing outlets. The market is led by a few key players - the largest being Boots The Chemists - which has increased its presence in the market at the expense of the independent sector. Both retail chemists and drugstores have felt the impact of the overall increase in competition in the UK retail market, particularly from multiple grocers and out-of-town retail parks. Following the abolition of the resale price maintenance (RPM) on OTC pharmaceuticals in 2001, supermarkets have been able to offer increasingly competitive prices on these products.
As part of its NHS Plan, the Government has introduced a number of initiatives to encourage the role of pharmacists and the use of OTC pharmaceuticals in order to curb spending on its NHS drugs bill and reducing time spent at general practitioners (GPS).
At present, there is a great deal of uncertainty in the retail chemists market following an Office of Fair Trading (OFT) report, which recommended relaxing the current licensing restrictions in a bid to increase competition, reduce prices and offer longer opening times. Any such move would serve to significantly increase the number of in-store pharmacies in multiple grocers. The Government has already indicated that it wishes to find a 'middle way' which opens up the market, whilst still protecting community pharmacies. At the time of publication, the Government announced that it was to reject, in part, the OFT recommendations. However, as we anticipated, it still plans to partly deregulate the market.
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