In Russia, 2,000 pharmacies closed during the summer
In Russia, from June to September 2021, almost 2,000 pharmacies were closed, according to a report by the analytical company DSM Group, which was reviewed by “Vedomosti”. This is about 3% of all outlets operating in the country at the beginning of the summer. According to the document, the facilities closed to small and medium-sized businesses were closed most often: 44% of the outlets were single pharmacies. Over the three summer months, their number decreased by a total of 8% and amounted to 9521 points in September 2021. Approximately 27% of closed pharmacies are regional (these are networks with more than 15 facilities in at least five settlements), 15% – to small local (3-10 points), 12% – to federal. And only interregional networks (they have at least 40 points in more than five regions) increased their presence by 6% to 8668 points in September. Given this increase, the total number of pharmacies in the country from June to September decreased by 1,500 points, or 2, 4%, to 64,353 pharmacies, according to a report by DSM Group.
Experts attributed the closure of pharmacies by Vedomosti experts to the decline in demand for medicines due to the protection measures imposed on the background of the coronavirus, the entry into the market of online pharmacies, as well as the abolition of the single income tax and drug labeling. The demand, which usually depends on people’s well-being, has also been affected by the coronavirus: it changes the seasonality of sales adopted in the pharmacy business, explains DSM Group CEO Sergei Shulyak. According to him, due to the use of masks, social distancing and the transition to remote work, people almost did not suffer from SARS and did not suffer from exacerbations of chronic diseases, and therefore did not buy drugs. This is confirmed by the general director of “Binopharm Group” Rustem Muratov, who says that due to the “pandemic swing” demand is constantly changing.
Small players eventually shut down due to low profitability, explains Shulyak. The same is said by the director of the SRO “Association of Independent Pharmacies” Victoria Presnyakova. According to her, the business of single pharmacies and small chains has long ceased to be high-margin: according to various estimates, its profitability is only 1-2%. The situation is affected by the emergence of competitors in the form of large federal and regional networks that offer consumers lower prices, adds Shulyak. From this he concludes that they can not withstand such price competition. Among other factors, Presnyakov notes that many of the closed pharmacies were located in remote and inaccessible regions, where it is unprofitable for federal networks. This, in her opinion, could negatively affect the availability of medicines in these areas. In addition, according to Presnyakova, marketplaces have come to the market of remote drug trade, which is also more profitable to cooperate with networks than with small pharmacies. The volume of the market of online pharmacies for the first half of 2021 research agency Data Insight estimated at 89 billion rubles. And during this period it grew by 33 percent compared to the same period last year.
Which pharmacies remained in operation
As of September 2021, more than half of the operating points accounted for federal and regional differences (29 and 23%, respectively). This was followed by single pharmacies – 15% of the total number of outlets in the country, small local players (14%), interregional (13%) and local (6%).
According to the DSM Group, against the background of the closure of physical pharmacies is growing share of players licensed to trade drugs online. As of September 2021, 390 legal entities had such a permit (+ 338% by June 2020 and + 42% by January 2021) and almost 30% of all pharmacies.
According to Presnyakova, the financial condition of small and medium-sized pharmacy retail was affected by the mandatory labeling of medicines introduced in July 2020. This, in turn, led to the abolition of the UTIA regime from 2021, which allowed businesses to save on taxes. According to her, in all regional members of the SRO in the transition to the basic and simplified regimes taxes have increased many times, in some regions – 5-10 times. The labeling, in turn, required additional costs for the purchase of hardware (scanners) and software, as well as an increase in staff for the acceptance of goods. The Ministry of Industry and Trade, in turn, is convinced that the labeling does not affect the financial condition of pharmacies, as it requires minimal investment. The one-time costs of pharmacies are the purchase of a new scanner for the cashier at a cost of about 3,500 rubles, said a representative of the labeling operator – the Center for Advanced Development. According to him, in the vast majority of points they were already before the labeling. It is also not necessary to hire additional staff – the acceptance of goods is standard, according to the interlocutor of “Vedomosti”. A representative of the Federal Tax Service did not respond to the request.
The DSM Group report shows that the growth rate of the pharmacy retail segment in money (an average of 5-6% per year) has slowed. For 10 months of 2021 it was 3.6%. Presnyakova believes that the difference will not return to pre-crisis growth in the coming years. Shulyak is more optimistic, he predicts that seasonal diseases such as SARS will return in early 2022. The average turnover of one pharmacy in Russia, according to DSM Group, is 176 million rubles. And the highest figure is not Moscow, and Dagestan – 3.7 million rubles. Whereas the capital is in second place with an average turnover of one point of 37 million rubles.