German Pharmacies Face Online Headache

There are no soda fountains or cellophane-wrapped chocolate samplers, but Germany’s corner drugstores still evoke memories of a more innocent era, with customers bringing in their coughs and colds and skin conditions to consult with the white-clad experts they’ve known for decades.

But for those who already know what ails them, the medicine monopoly that requires face-to-face consultation between pharmacist and consumer before sale of a single aspirin has become a costly and inconvenient anachronism.

One of the last surviving cartels in a country trying to shed its reputation for protectionism, German pharmacies are facing competition from online providers challenging laws meant to ensure that those buying pharmaceuticals get what they pay for.

The battle between 0800.DocMorris.com, a Netherlands-registered Internet pharmacy with 25 employees, and the powerful ABDA, the federal Union of German Pharmacists, which represents this country’s 50,000 druggists, is a David-and-Goliath clash that the giant is still winning.

But in the 11 months since German software developer Ralf Daeinghaus founded DocMorris, the company has made significant inroads--not to mention waves--in a market so heavily regulated that aspirin costs 10 times as much in the country where it was developed as it does in the United States.

German pharmaceutical production, marketing, pricing and sales are strictly controlled, with a state commission setting prices for every product with even a trace of medicinal substance, be it for indigestion or cancer. Over-the-counter preparations are prohibited, and German medicines tend to be among the European Union’s most expensive.

That discrepancy within a trading bloc striving to erase economic borders gave rise to DocMorris and a handful of other offshore prescription drug services hoping to offer German consumers a cheaper alternative.

DocMorris is now mired in legal challenges, however, because a law remains on the books prohibiting delivery of medicines, ostensibly to prevent abuse and preserve the pharmacist-patient relationship. But the Internet upstarts contend it’s really about money.

“Pharmaceutical sales are 50 billion marks a year in Germany,” notes DocMorris marketing director Jens Apermann, citing a sum worth $23 billion. “There are far too many pharmacies in the country, and many would go bankrupt without this closed system that prevents competition.”

DocMorris, the only Internet pharmacy to challenge the delivery ban and therefore the ABDA’s only adversary, has gotten around the obstacle by invoking its status as a Dutch company to allow customers to send a courier to collect their prescriptions--a service DocMorris pays for.

A Berlin court earlier this year confirmed Germans’ right to have prescriptions filled across borders, but the delivery issue has yet to be resolved to either side’s satisfaction, which means DocMorris must operate in a legal nether world that makes many potential customers uncomfortable.

“Economically, we are a dwarf, but what we are doing is important in that we are driving the discussion on consumer rights to better service and lower prices,” says Apermann, whose company’s wares sell on average 25% lower than at established pharmacies.

Health-Care Insurers Not Pushing for Change

DocMorris currently operates at a loss as it defends itself from the ABDA legal onslaught and strives to build a customer base in a country little troubled by the pricey status quo. Almost every German is covered by health insurance, which picks up the bills for most medications.

Even the insurers have been slow to push for change, because many are state-financed and the government gets a hefty 16% cut of medicine sales in taxes that would be lost for every sale made by offshore providers.

The pharmacists argue that the German system isn’t broken and therefore needs no fixing, and they consider it a matter of pride, not inflation, that this country has three times the ratio of pharmacies to population as its neighbors.

“We have a good, functional, socially responsible health-care system in this country that is expensive, but everyone is well served. What’s wrong with that?” demands Lutz von Lehmann, whose Behring Apotheke has been in business in Berlin for 30 years. “It’s true we have fixed prices, and they are high because the cost of living in Germany is high. But this is in the global interests of all involved, not just the pharmacists.”

Some health-care insurers have expressed interest in cooperating with online pharmacies to hold down costs. But officials from both the federal Health Ministry and the Consumer Protection Assn. are urging a thorough review of the Internet providers and their adherence to professional standards adopted across the European Union.

Concerns Over Validity of Online Businesses

“At the moment, there is a lot of garbage on the Internet, and it’s not always clear what businesses are legitimate and which are not,” says Thomas Isenberg, head of the consumer protection group’s health and nutrition department. “There are a lot of economic advantages for the consumer [from Internet drug sales], especially in Germany, where the costs are so much higher, but the federal Health Ministry needs to develop a rating system that would give consumers confidence about wading into this new market.”

Health Minister Ulla Schmidt has so far sided with the ABDA in resisting change to a health-care network that is the envy of its European neighbors. But she acknowledges that Germany cannot wall itself off from the conveniences offered by online services and should instead emphasize the value of qualified consultation even if the delivery ban is lifted.

While DocMorris emphasizes convenience with its offer of delivery to the consumer’s door, the established pharmacists warn that undermining their system could spell the end of their own after-hours service.

The ABDA requires each pharmacist to participate in an emergency duty rotation that keeps at least one pharmacy in each city precinct open nights and on weekends to serve customers who fall ill or have forgotten to fill vital prescriptions during normal business hours--which, like those at all German shops, are restrictive. In general, Sunday sales are forbidden and shops must close by 4 p.m. Saturdays, with many small businesses not bothering to open at all on weekends.

Pharmacists can deliver drugs themselves under extremely limited conditions, such as when a woman is alone with sick children at night, says ABDA spokesman Elmar Esser. But they don’t want to have to offer that service on a regular basis.

“Pharmacists would lose money if they had to deliver, and they would also question the need for providing after-hours service if this was available elsewhere,” says the pharmacist lobby representative. “If this happens, that deliveries are allowed, there would be no ethical grounds for requiring pharmacists to provide emergency service.”

Internet Sales May Bring End to Pharmacies

The profit margins for most of Germany’s 21,500 pharmacies are too thin to withstand the onset of chain-store or online competition, warn the pharmacists, predicting numerous bankruptcies if the cartel is broken--and an eventual end to one of the last vestiges of neighborhood commerce.

“The only way to cut the price of pharmaceuticals appreciably is to allow this mail order and delivery,” Lehmann says. “But when that happens, it’s all over for us.”