Drug sale shot in arm for wholesaler

By KARYN SCHERER

Australia's largest pharmaceutical wholesaler says it is hoping to sell its New Zealand business to its main rival, in a proposal which could mean another shakeup for the pharmaceutical industry.

Sigma, which dominates the wholesale drug market in Wellington and is a major player in Auckland, has revealed that it wants to pull out of New Zealand and hand over its business to Swiss-based rival Zuellig Pharma.

While a price has not yet been agreed, if the move goes ahead it is expected to give Zuellig more than half of the wholesale market for drugs in New Zealand.

It would also give it a shareholding in the two main pharmacy marketing groups, involving more than 300 New Zealand pharmacies.

Zuellig already owns 40 per cent of the Unichem group, which includes the Unichem and Unichem Life brands.

The deal with Sigma would also give it licensing rights over the Amcal, Pharmacycare and Guardian brands.

In an announcement to the Australian Stock Exchange, Sigma claimed Zuellig was "keen to build on the dominant market positioning" of its wholesale businesses - Russells Pharmaceuticals and Pharmacy Wholesalers - in Auckland and Wellington.

It blamed fierce competition for driving down its profits.

Sigma spokesman Gerry Bullon told the Business Herald the company also hoped that both Amcal and Unichem would sell more of its private label products in their pharmacies.

However, Zuellig's New Zealand chief executive, Peter Merton, played down that possibility.

"[Private label] brands have been around in New Zealand pharmacies since they've been around in supermarkets and it's just never taken off."

Mr Merton said he did not expect the deal to affect the retail prices of drugs, as it was up to Pharmac and individual pharmacies what prices they charged.

He refused to comment further, saying he wanted to wait until the Commerce Commission had considered the deal, which he hoped would be by the end of next month.

The proposal follows successful lobbying by pharmacists to persuade the Government not to allow supermarkets to begin selling prescription drugs.

National put the issue in its too-hard basket before the last election and Labour has made it clear it is not yet convinced that deregulation of the industry would be a wise move.

At least one major retailer has cited the policy vacillation as its reason for changing its mind about offering cheaper drugs to consumers.

The Warehouse confirmed yesterday that it had gone cold on the idea of opening pharmacies beside its outlets.

It struck a deal with the Care Chemists chain last year under which dozens of pharmacies would have opened alongside its stores.

Just six stores were opened.

A Porirua store closed last month, and a New Plymouth store will close next month.

Warehouse chief operating officer Greg Muir said the fate of four other joint outlets - which he claimed were performing well - had not yet been decided.

Other retailers said yesterday that they were still keen to go ahead with their own plans to develop pharmacies alongside their stores.

In September, Woolworths struck a deal with Unichem to open three pharmacies alongside its supermarkets.

The first pilot store will open in the Auckland suburb of Grey Lynn this week. Another store will open in Johnsonville in Wellington next week, and a third is to follow within the next six months.

Progressive Enterprises, which runs the Foodtown, Countdown and 3Guys supermarkets, also plans to open pharmacies alongside two of its Auckland supermarkets in the next year, in Takapuna and Lynfield.