Horizontal integration
Horizontal integration refers to a situation in which a single person (or company) owns more than one out-of-hospital pharmacy, i.e. creates a pharmacy network.
This approach is attractive because it can provide economies of scale. However, it can also lead to limited competition and even monopolies when a single individual or entity controls a significant market share through one or more out-of-hospital pharmacy networks.
Many countries such as Albania, Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Republic of Moldova, Russian Federation, Tajikistan, Turkmenistan, Uzbekistan and Ukraine do not provide for horizontal restrictions in their legislation, while others have adopted them. Sometimes they only refer to a specific geographical area (city, province or region) and/or minority stakes in pharmacies (not including the first pharmacy in the person’s ownership). Sometimes there are no formal restrictions, but state competition authorities have the right to intervene in cases of concentration of a high market share in one hands.
For example, restrictions on horizontal integration in Norway were introduced after the Competition Authority intervened in a situation where, after liberalization, more than 80% of pharmacies ended up in the ownership of one group. A new Polish law from 2017 also preempts further horizontal integration, as according to it, a legal entity cannot hold an additional license for a new pharmacy if it controls more than 1% of out-of-hospital pharmacies in a given region.
Examples of norms restricting horizontal integration
| Country | Limitations |
| Bulgaria, Poland, Hungary, Portugal | No more than four pharmacies in the ownership of one person |
| Germany, Denmark, Spain, Monaco, Turkey, Finland | Ownership of more than one pharmacy is prohibited |
| Italy | Each pharmacy owner (including corporate entities) is allowed to directly or indirectly control no more than 20% of pharmacies located in one region or autonomous province |
| Malta | An individual or company may own only one pharmacy in the same town or village |
| Norway | No pharmacy chain is allowed to own more than 40% of all pharmacies in the country |
| France | Ownership of multiple pharmacies is not permitted, but minority stakes in a maximum of four out-of-hospital pharmacies are possible |
| Estonia | No more than four pharmacies (or minority stakes in a maximum of four community pharmacies) owned by one individual or legal entity |
Vertical integration
In the context of out-of-hospital pharmacies, vertical integration mainly characterizes the ability of a wholesaler or pharmaceutical company to own out-of-hospital pharmacies. From an economic point of view, this is only relevant if it is accompanied by horizontal integration (in other words, a wholesaler is unlikely to be interested in just one own out-of-hospital pharmacy in a country).
In the WHO European Region, the largest wholesalers (Walgreens Alliance Boots, McKesson-Celesio and Phoenix) own one or more pharmacy chains in countries where vertical and horizontal integration is allowed. In Poland, a 2017 law in 2017 no longer grants new licenses to non-pharmacists and sets a limit on the number of pharmacies – only four can be owned by a single private individual. These provisions limit further vertical integration by making it impossible to transfer licenses to other companies, even in the case of a merger.
In addition to regulations restricting vertical integration, there is often a prohibition on the ownership of an out-of-hospital pharmacy by a physician or other specialist with prescribing authority to avoid potential conflicts of interest. Such provisions exist in Denmark, Estonia, Denmark, Iceland, Ireland, Malta, Norway, Sweden and Estonia. In Spain and France, such a prohibitive measure applies even if the health worker also has a higher education in pharmacy.
Drug manufacturers, (private) hospitals and health insurance funds may also be prevented from owning out-of-hospital pharmacies in order to prevent potential conflicts of interest, including in Iceland, Norway and Sweden.
In Armenia, approximately 25% of pharmacies belong to pharmacy chains that are owned by wholesale companies. According to the Ministry of Health, due to high risks of monopolization and unfair competition, a draft law restricting vertical integration has been proposed and its introduction is planned in 2025 year.
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