Story of the month by ODDO BHF Asset Management.
E-scripts democratization is currently booming in Germany with a dramatic +182% increase in redeemed eRx, testifying to a favorable environment regarding the political framework, customer behaviors and the ongoing digitalization trend in pharmaceuticals.
A SUPPORTIVE REGULATORY FRAMEWORK
Since January 1st, 2024, eRx are now mandatory in Germany, the guided and awaited necessary game-changer step in Germany’s healthcare ecosystem. While previous legal implementations have been delayed multiple times, all doctors, pharmacies, and patients are now “digitalized” in Germany. Digitalization is to be completed with the expected Bundesrat’s enactment on the 2nd of February 2024 regarding NFC (Near-Field Communication) technology implementation in the digital redemption method. Thanks to their e-health-card, patients will be able to put prescriptions on their smartphone via NFC and then send them to pharmacies, be they traditional offline or online players.
JANUARY 2024 MOMENTUM
German eRx momentum turns out being quicker and stronger than expected. Be it the growing number of traditional pharmacies accepting to redeem eRx (c17.5k as of end of January 2024 vs. c10k as of beginning of August 2023), the increasingly growing proportion of medical facilities issuing e-prescriptions (+242% in January 2024, from c23k to c79k), or even the number of downloaded apps supporting eRx (+142% in January 2024, from c650k to c1.6M), all the GEMATIK’s (German national agency for medicine digitalization) indicators are green for this dematerialization trend in pharmaceuticals. E-receipts redemptions increase in Germany as a striking example of this dynamic with a 182% YTD increase (from 18.72Mto 59.32Mas of 05/02/2024).
A PURE GERMAN DYNAMIC? THE SWEDISH CASE
German is no pioneer regarding e-scripts, in Sweden e-scripts are transmitted since 2004 to a “national mailbox” from which patients can get their medication dispensed at any pharmacy and access their prescriptions via an online portal. The Swedish effective online penetration reaching 15% after 20 years, even a cautious 10% eRx online penetration scenario in Germany is to present tremendous growth potential. The exact mechanism of how eRx actually work vary by country, but overall, a clear relationship stands between the adoption of eRx and the online penetration. Germany turns out being in line with a broader European landscape, gradually moving toward digitalization.
AN INVESTMENT CASE FOR ONLINE PHARMACIES?
The German Rx market is currently worth 55bn€ and to be stably growing at a 3.5% CAGR over the last 10 years. While until recently online market share was insignificant (c1%), the latest German legislation is weighing heavily on current market dynamic. The German online pharmacy market turns out to be a duopoly structured around two publicly traded players: DOCMORRIS (ex ZUR ROSE) and REDCARE (ex SHOP-APOTHEKE), with REDCARE currently gaining market shares over DOCMORRIS (10.7M active customers vs. 9.1M as of end of Jan24). Online players are especially expected to materially disrupt offline pharmacies regarding chronicle disease (diabetes, heart issues, blood pressure, etc.) applications with repetitive and renewable prescriptions where online pharmacies are proving to be way more user-friendly. Chronicle disease sub-market is estimated at 80% of the whole market, considering German rural areas with decreasing number of traditional pharmacies, significant market shares are to be gained! Moreover, online pharmacies’ non-drug offer (beauty and personal care, functional food, nutrition, etc.) and OTC drugs are indirectly expected to drive further revenues through cross-selling with eRx online redemption. These products trading at a c20% discount compared to offline pharmacies, online players are expecting patients to take this opportunity to add these products to their basket while ordering drugs.
