Israel’s over-the-counter (OTC) drug market is $130 million a year, and grew by 5% a year in 2000-04. The market is expected to grow by 5-6% this year. Competition in the market is also intensifying. Pharmacists influence purchases more than advertisements, and most non-prescription drug purchases are for pain relievers, states Derby University’s Israel branch in a study published on Monday.
The study was conducted by a Derby University student working for Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA). The growth rate of Israel’s OTC drug market is less than in Europe, where the market is growing by over 15% a year. Pain relievers are the commonest OTC drug purchases in pharmacies in both Israel and worldwide. The study says that this trend will probably continue in the coming years.
The study is based on interviews with the owners of ten large independent pharmacies in central Israel, drug buyers, a sample of 50 customers, and knowledge of the market. The study found, that, despite expectations that buyers would be heavily involved in OTC drug purchases because of their importance, in practice, their involvement was low, compared with purchases of food and other consumer products.
As noted, study found that the main factor influencing purchases was pharmacists’ recommendations, because buyers believe that they are responsible medical authorities with experience and knowledge. The study found that customers were also influenced by advertisements in the media, which was expected to expand in the coming years. Prior personal experience or experience by family members is an important factor in purchases.
The study concluded that opening of the OTC drug market to competition by allowing sales by convenience stores was a new factor that would increase competition and would probably lead to the creation of new distribution lines to hundreds of new sales points. In order to make distribution networks more efficient, limited drug distribution mixes will reportedly be created, with the greatest weight in these mixes given to pain relievers.
The study found that opening the OTC drug market to store that are not pharmacies has spread to Israel’s health funds, which are entering the niche by charging competitive prices. The study concluded that attempts by leading supermarket chains to open store-within-store pharmacies, in order to make drug purchases part of regular shopping, were also likely to increase competition, and pharmacy chains were already lowering prices, which also boosted competition. Economies of scale and the purchasing power of pharmacy chains also make lower prices possible.
Published by Globes [online], Israel business news - www.globes.co.il - on November 2, 2005