By SIMON HENDERY retail writer
Swiss-based drug company Zuellig Pharma is predicting further mergers in the $1 billion-plus drug industry after getting approval to snaffle more than half the New Zealand wholesale market.
The move means Zuellig will also control all but one of the major pharmacy chains in New Zealand.
While the company says it has no plans to merge the two major brands, Unichem and Amcal, it agrees more amalgamations within the local wholesale sector are possible "in certain geographic areas."
Melbourne-based drug company Sigma last week won Commerce Commission clearance to sell its New Zealand wholesaling and retail business to Zuellig.
Sigma is quitting New Zealand after three years, leaving behind a network of chemist shops affiliated under the Amcal, Guardian and PharmacyCare brands.
It will continue supplying drugs to the local wholesale market.
As well as its newly acquired Sigma brands, Zuellig - which has been in New Zealand since 1988 - has a 40 per cent interest in the 130-member Unichem marketing group, and its own 80-member pharmacy grouping, Vantage.
Last year, its local operation turned over $402 million and it now has a 53 per cent share of the wholesale drug market, up from 35 per cent before the Sigma deal.
Zuellig says falling New Zealand drug prices and the resulting squeeze on margins have triggered a string of mergers and acquisitions within the drug industry in recent years.
It says the number of wholesale outlets has dropped as wholesalers have repositioned to achieve greater volumes and diversified into related services.
In its submission to the Commerce Commission in support of the Sigma acquisition, Zuellig said that with Government drug buyer Pharmac setting subsidies and, therefore, effectively the price and margins on pharmaceuticals, wholesalers were forced to operate within a climate of de facto price control, so companies needed to operate on high volumes and tight overheads.
On the retail front, the company said, market dominance was not an issue in regard to the banner groups because only about a third of the country's 980 pharmacies belonged to these groups, and they were not bound to buy exclusively from the wholesaler associated with the group.
In its decision to allow the Sigma sale, the commission said it was satisfied that after the deal there would continue to be sufficient competition in the relevant markets to prevent Zuellig from raising prices above a competitive level or reducing its service or quality.
The president of the Pharmaceutical Society, Gore pharmacist Bernie McKone, said Pharmac's success at driving down drug prices had made mergers in the wholesale drug market inevitable.
"A tube of a particular cream which may have cost $30 or $40 before price reductions and tendering occurred is now around $1.50 [wholesale]," he said.
Unichem chief executive Tim Roper said there were probably too many banner groups in New Zealand.
"The fact that Sigma couldn't make a go of it probably tells a story," he said.
Firm tips further mergers
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