The pharmacy retail sector is pivotal in the creation of an affordable and accessible health-care sector for consumer welfare and protection.
For this reason, efforts to create a more efficient and deconcentrated pharmacy retail sector do not only guarantee competitive market prices but also address the fundamental issue of the cost of living.
South Africans would have witnessed the Competition Commission’s agility in addressing price gouging of essential health products when society was seized with the unprecedented Covid-19 pandemic.
In our inaugural concentration tracker report, the commission had flagged the retail pharmacy as one of the highly concentrated sectors.
We have also reported “a concerning trend for competition in the retail pharmacy sector is the rapid increase in concentration in just the past seven years (2015-2021) and the emerging duopoly of Clicks and Dis-Chem.”
Our research teams found “both pharmacy groups have increased their share of dispensing to 21-24% each, or 45.2% collectively in 2021”.
These statistics largely explain why the Competition Commission would have an interest in unearthing competition issues within a particular sector or an aspect of competition regulation that requires further intervention.
Our intervention could be through enforcement, market enquiries and/or awareness campaigns, information sessions and set guidelines that seek to inform a particular sector about potential competition issues.
The growing market share of corporate pharmacies and the disadvantages faced by independents suggest that the pharmacy retail market may be rapidly moving towards a less competitive market structure.
The inability of independent community pharmacies to secure or retain tenancy in shopping malls has a negative impact on competitive rivalry with the corporate pharmacy groups, especially in urban and underserved communities, and ultimately affects the promotion of consumer choice.
The commission therefore hosted an online workshop with the SA Property Owners Association (SAPOA) for shopping centre owners, property funds and property developers to discuss the concentration issues and barriers to entry facing small and independent community pharmacies.
We also promoted competition principles for the entry and retention of independent community pharmacies in shopping centres.
We hope that raising awareness of applying fair, transparent and commercially justifiable criteria in rental terms will foster a growing, inclusive and deconcentrated economy for the participation of independent community pharmacies that are mostly small and medium enterprises (SMEs) and businesses owned and operated by historically disadvantaged persons (HDPs).
We highlighted how competition concerns such as the early termination or non-renewal of the independent community pharmacies’ lease agreements in shopping centres may lead to their exit and the subsequent entry of corporate pharmacies; high rental costs, additional costs, and unfavourable trading terms that independent pharmacies face, and which are not imposed on corporate pharmacies; and corporate influence on tenant mix in shopping centres that may lead to exclusion or limited participation of SMEs and HDPs.
Shopping centre owners, property funds and developers may access more information about fair lease agreements on our website at https://www.compcom.co.za/wp-content/uploads/2019/12/GRMI-Non-Confidential-Report.pdf
Makunga is spokesperson for the Competition Commission of SA.
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