Healthy Skepticism Library item: 6208

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Publication type: report

Dubé G
Competing for the Retail Drug Market
Ottawa: Statistics Canada: Distributive Trades Division 2006 Sep 1
http://www.statcan.ca/english/research/11-621-MIE/11-621-MIE2006048.pdf

Abstract:

Competing for the Retail Drug Market
Guillaume Dubé,
Distributive Trades Division

Summary
Sales of prescription and over-the-counter drugs have exploded in
Canada
during the past decade or so, with the millions of prescriptions now
being
written each year by physicians.
In 2005, retail sales of drugs (a category that also includes vitamins
and
other health supplements) surpassed the $20-billion mark for the first
time.
This boom in drug sales has been accompanied by an emerging phenomenon
in
the retail market-the appearance of more and more pharmacy outlets in
food
and general merchandise stores.
This study looked at this phenomenon, focusing on the competition
between
pharmacies (a category that also includes other health and personal
care
stores) and food and general merchandise stores between 1998 and 2005
using
data from the Quarterly Retail Commodity Survey. It also compared the
situations in Canada and the United States.
Pharmacies still dominate the retail drug market. However, between 1998
and
2005, they lost market share to food and general merchandise stores.
At the outset of the period, pharmacies accounted for 84.0% of drug
sales.
By 2005, this share had tumbled to 76.9%, a loss of 7.1 percentage
points.
At the same time, the proportion of drug sales in both food stores and
general merchandise stores edged up.
During this period, drug sales increased at an average annual rate of
6.5%
in pharmacies. However, this was only half the growth rate of 13.8% for
drug
sales in food and general merchandise stores.
The growth of drug sales outpaced that of all retail commodities
combined.
Drug sales grew at an annual average rate of 7.9% between 1998 and
2005,
compared with growth of 5.3% for all retail commodities combined.
In the United States, the demand for prescription and over-the-counter
drugs
grew at about the same pace as in Canada. In contrast to the situation
in
Canada, however, American pharmacies captured an increasing share of
the
market for health and personal care products. Food and general
merchandise
stores lost market share.
The increase in drug sales is probably not entirely the result of
rising
drug costs. Demand appears to be responsible for most of the observed
growth. The number of prescriptions filled by Canadian pharmacies,
including
new prescriptions and renewals, has risen sharply during the past
decade.
Relative to other products, drugs accounted for a rising share of sales
for
retailers that sell them.