The Clicks Group is killing small pharmacies and harming consumers, say independent pharmacies.
The group has just more than 300 retail pharmacies, but the Independent Community Pharmacy Association, which represents a group of about 2 000 retail pharmacies countrywide, said in a complaint to the Competition Commission that the playing field was far from level.
The association is complaining that Clicks’ alleged countercompetitive behaviour has been doing harm to the highly regulated pharmacists’ profession.
Mark Payne, CEO of the association, argued that Clicks had overwhelmed the medicine market with its range of medicines under the Clicks brand, and the chain store group was violating the Pharmacy Act, which stipulates that a medicine manufacturer may not have an interest in retail pharmacies.
The Clicks Group strongly denies the allegations.
“The Independent Community Pharmacy Association has repeatedly made these allegations that Clicks is keeping itself busy with countercompetitive practices,” David Kneale, the CEO of the Clicks Group, told Rapport, City Press’ sister newspaper.
“We have rejected the allegations. Clicks is a JSE-listed company. We obey the law and observe the highest professional standards.”
Clicks established Unicorn Pharmaceuticals in 2011, a business unit that tasks medicine manufacturers with making pharmaceutical products for the group, which it then sells to the public under its own brand name.
The department of health approved Unicorn Pharmaceuticals’ application to import, export and distribute medicine in 2012.
Payne argues that although Clicks is not currently manufacturing pharmaceutical products through Unicorn, the group should still be regarded as a medicine manufacturer because it repackages products.
“That in itself means the group is involved in the manufacturing process,” said Payne.
According to Payne, Clicks found a loophole thanks to Unicorn Pharmaceuticals that in the end enables it to sell its own products to consumers at cheaper prices.
“Clicks is now a manufacturer, wholesaler, distributor and retailer,” said Payne.
But Kneale disagreed.
“We are acting within the law. Vertical integration [when a company expands its business interests for the supplier and distributor to also be owned by the controlling company] is not against the Competition Act,” he said.
Kneale said that the licence Unicorn obtained from the health department did not give the group permission to manufacture medicines, but it could import, export and distribute its own products.
According to Payne, however, Clicks’ ownership of Unicorn has afforded the company a legion of benefits: “Clicks makes a profit from manufacturing and can therefore apply to government for the so-called exit price – the lowest unit price of medicines. This enables Clicks to sell medicines at considerably lower prices to the public.”
Payne said that small, independent pharmacies were struggling to keep their heads above water due to price regulations related to medicines, as well as the maximum price they were allowed to charge for services.
Payne also contends that the medicines Clicks sells under its own brand are not necessarily cheaper than other generic products.
“They don’t necessarily have these medicines in stock and clients then do not necessarily get the best product.”
Kneale denied this: “Our starting point has always been to give our customers a wide range of affordable medicines. We have medicines under our own brand, as well as generic medicines in stock, and our pharmacists don’t promote Clicks products over others.”
Payne further argues that Clicks pharmacies are given preference over independent pharmacies in big shopping malls.
“We have a lease agreement in our possession in which the independent pharmacy in a certain mall was told it may be given 60 days’ notice to vacate the mall should Clicks want to open a pharmacy.”
The bosses of shopping malls are seemingly also using the tactic of suggesting that the number of customers justifies the opening of an “anchor store” such as Clicks.
The association filed various other complaints with the Competition Commission.
In a wide-ranging document submitted to the commission in 2014, the association outlines how some medical aid funds force their members to buy medicines from preferred service providers.
Those who prefer to buy their medicines from independent pharmacists pay up to 40% more for their medicines, said Payne, “even if independent pharmacies charge the same dispensing fees”.
Clicks and Dis-Chem pharmacies are often listed as preferred service providers and they can easily lower their dispensing fees because other business units in the group can absorb these “losses”.
“This is, however, not the case with independent pharmacies,” said Payne. “We can’t buy medicines wholesale.”