Developing World Healthcare Blog

Developing World Healthcare and the Globalization of Pharmacy

The pharmaceutical industry (both brand and generic) has operated on a global scale for decades. Yet the retail pharmacy industry has been relatively balkanized because of a variety of local regulations; most pharmacies’ inadequate scale; and idiosyncrasies in market structures. As a result, most pharmacy businesses have focused on their home countries. This dynamic is gradually changing as several of the world’s leading pharmacy chains look for new growth markets as their home markets mature. A handful of companies are at the forefront of the globalization trend: Walgreen/Alliance Boots; CVS Health; Wal-Mart; and A.S. Watson Group (subsidiary of Hutchison Whampoa). 

As this trend unfolds, we expect to see more action in the developing world through acquisitions, joint ventures, and accelerated organic expansion.

Alliance Boots: At the Forefront of This Trend

Alliance Boots, which will merge with Walgreen early next year, has been the most aggressive in articulating and executing a global strategy. The company currently has operations in 27 countries, including China, Russia, Thailand, Latin America, Middle East, Turkey and Romania. Management has identified China and Latin America as key priorities for expansion. The company’s rationale for its developing world focus is as follows:

1.     Traditional markets in the UK and Western Europe are mature, and the major growth opportunities are in emerging markets.

2.     Internationalizing their store brands will add scale.

3.     Particularly as more brand drugs go generic, global dispensing scale can leverage global manufacturing and purchasing scale. (Note: Alliance Boots and Walgreen formed a JV with AmerisourceBergen for generic drug purchasing. CVS has formed a similar one with Cardinal Health.)

In the last two years, Alliance Boots has executed this strategy in the developing world through the following actions:

1.     Purchased 12% of Nanjing Pharmaceutical Company (China) after a two-year approval process. The company has had a JV with Guangzhou Pharmaceuticals since 2008.

2.     Purchased Farmacias Ahumada, which operates leading pharmacy chains in both Mexico and Chile.

The pending merger with Walgreen could impact the near-term pace of the company’s expansion plans, but any pause likely will be temporary.

A.S. Watson Group (subsidiary of Hutchison Whampoa): The Big Name in Asia

The company operates 10,500 health & beauty stores under several brand names in Asia and Europe, including 1,800 in China. The company claims to be the largest health & beauty chain in these regions. Parent Hutchison Whampoa conducted a strategic review in late 2013/early 2014 that led to Singapore’s Temasek purchasing a 25% stake for US$5.7 billion, valuing it at $22.8 billion. The investment provided funds for Watson’s future growth; generated a special dividend for Hutchison Whampoa shareholders; and is a prelude to a listing (or sale.)

CVS Health: A Toehold in Brazil and Global Purchasing

The company purchased Brazilian pharmacy chain Drogaria Onofre in 2013 after focusing on the US for decades. In addition, the company formed a generic purchasing JV with Cardinal Health that commenced operations earlier this year. Management notes that Brazil is fragmented: the market leader has a 10% share. CVS is interested in building out both organically and through acquisitions.

Wal-Mart: Looking to Add Pharmacy Where Possible

Wal-Mart is one of the top three pharmacy companies in the US (based on revenue), but has a much smaller presence in pharmacy internationally. Among its developing world markets (Africa, Brazil, China, India, and Chile), Brazil is the only country where it operates pharmacies. Management would like to add pharmacy where feasible.

Developing World Markets and Companies Potentially of Interest to Globalizing Pharmacy Chains


Brasil Pharma operates 1,200+ stores, and has struggled with the integration of eight acquisitions since 2009.

Raia Drogasil operates 1,000+ stores, and has had more success with integrations than Brasil Pharma.


Hospital-based pharmacies dominate the market. China Nepstar Chain Drugstore (US ADR) is one of the country’s largest retail chains. Leading distributors such as Sinopharm and Shanghai Pharmaceuticals (both Hong Kong-listed) run pharmacy chains that are a small percentage of their operations. Most of the remaining pharmacy chains in China are private. US distributor Cardinal Health entered the China distribution market in 2010 through the acquisition of Yong Yu.


The industry is extremely fragmented. Leading hospital chain Apollo Hospitals also owns India’s largest pharmacy chain. Management has disclosed their interest in finding an outside partner subject to the easing of restrictions around FDI.


The five-year phase-in of universal health coverage (certain by no means) could spur growth. Kimia Farma’s pharmacy subsidiary operates 500+ stores, the largest chain in the country.


Caring Pharmacy Group Bhd is one of the leading retail chains. Both Apex Healthcare and Pharmaniaga Bhd are wholesalers and manufacturers.


Corporativo Fragua operates the Superfarmacia chain in western Mexico


Protek Group is an integrated pharmaceutical company that operates the Rigla Pharmacy Chain along with distribution and manufacturing businesses.



Disclosure: The author owns shares of China Nepstar.