Dispensing Pharmacy Market in Japan: Key Research Findings 2020

Despite Sagging Profits due to Revision of Dispensing Fees, Dispensing Pharmacy Businesses Pulled Through in FY2019

Yano Research Institute (the President, Takashi Mizukoshi) has carried out a survey on the domestic market of dispensing pharmacies, and found out the current status, the trends at market players, and the future perspective.

Market Overview

While the influence of COVID-19 was still minimal, many dispensing pharmacy chains sustained their business growth in FY2019. Nonetheless, slowdown was seen even at those companies that increased both revenue and profits, while much of the profit expanded by efforts to raise insurance dispensing revenue and by improving operational efficiency. On the other hand, there were quite a few companies that suffered profit decline. Since FY2016, revision of the dispensing fees and revision of the drug prices have had striking impact on the dispensing pharmacy market. On the whole, a trend of dispensing pharmacy businesses is sluggish and apparently failing.
Except for major companies that keep on expanding the number of stores by M&A to make up for a downturn in the number of self-developed stores, new store opening, a key factor for increasing revenue, is generally diminishing. As revision of dispensing fees as well as drug prices are anticipated in forthcoming years, polarization by achievement is likely to continue among dispensing pharmacy chains. 

Noteworthy Topics

Importance of Reinforcing “Family Pharmacy” Role to Increase Sales at Existing Stores and Establish Regional Superiority

Since the deregulation of on-site pharmacies (dispensing pharmacies on the premise of hospitals) in October 2016, on-site pharmacies are on the rise at public and private hospitals, including national and private university hospitals, national public hospitals, and Red Cross hospitals. Nonetheless, considering the current requirements of public offering, it seems that only major dispensing pharmacy chains are capable of opening on-site pharmacies. 
For this reason, it is unlikely to expect a drastic change in industry structure, where community pharmacies including so-called “monzen pharmacies” near large hospitals (“monzen” means “at the gate”; i.e. pharmacy not on premise but located very close to large hospital) and “one-to-one pharmacies” (a kind of monzen pharmacy which fills prescriptions exclusively from a single general practitioner) are the mainstream. Furthermore, it is assumed that the monzen pharmacies and one-to-one pharmacies may become family pharmacy/pharmacist, while enhancing services by accepting more prescriptions from various hospitals in the region (the situation is called “men-bungyo”*). Concurrently, due to progress of men-bungyo and increase in the number of drugstores with dispensing pharmacy function, in a medium to long term perspective, the number of pharmacies capable of men-bungyo and the ratio of dispensed drugs by men-bungyo pharmacies to total dispensed drugs are expected to continue expanding.
Nevertheless, as separation of prescribing and dispensing is proceeding and the number of dispensing pharmacies is on the rise, new store opening is becoming more challenging. It is no longer a choice for enterprises to grow business simply with constant store openings. Therefore, dispensing pharmacy chains are thriving more than ever to reinforce “family pharmacy” function. Enhancing revenue at existing stores and establishing regional superiority is gaining importance. 

*Note from translator: The term “men-bungyo” is a jargon used in Japanese medical/pharmaceutical market as a comparison to “ten-bungyo”, both referring to types of separation of prescribing and dispensing (“bungyo”). While “ten-bungyo” is a customary way that involves “monzen pharmacies” and “one-to-one pharmacies” dispensing ethical drugs based on prescriptions issued by a near-by general practitioner/hospital only, “men-bungyo” refers to relatively new practice with pharmacies and retail stores/drugstores with pharmacy function dispensing medication based on prescriptions from various hospitals in wider geographic area. 

Future Outlook

In the maturation of the dispensing pharmacy market, the number of pharmacies is multiplying and competition is intensifying. To continue opening of new stores, secure staffs, and enhance educational training, it is assumed that expansion of company size is critical.
From this point of view, restructuring of the dispensing pharmacy industry is expected to gather momentum and accelerate hereafter. Up till this point, M&A in the industry were mostly assignment of business, where major pharmacy chains buying out small and medium-sized pharmacies. From now on, there will be higher possibilities of M&A to be led by midsize pharmacy chains and merger among those midsize pharmacy chains. In particular, midsize pharmacy chains that have rolled out their business within a confined geographical area are envisaged to play a key role in industry restructuring. 

Research Outline

1.Research Period: October 2020 to January 2021
2.Research Object: Dispensing pharmacy business management companies, pharmaceutical companies, pharmaceutical wholesalers
3.Research Methogology: Face-to-face interviews by our expert researchers, surveys by telephone/email, and literature research

Dispensing Pharmacy Market

Dispensing pharmacy market in this research indicates insurance dispensing pharmacies certified by local authority governing healthcare and public welfare (pharmacies authorized for insurance dispensing), which fill prescriptions issued by medical institutions. In addition to those pharmacies that mainly dispense prescribed ethical drugs, the market includes retail pharmacies that sell miscellaneous items and drugstores that dispense prescribed medicine. 

<Products and Services in the Market>

Dispensing pharmacy business management companies, dispensing pharmacy chains

Published Report

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