Italy unlocks corporate investments in retail pharmacies

On 29 August 2017, significant regulatory changes allowing corporate entities to own retail pharmacy businesses will enter into force in Italy.  The new measures bring attractive opportunities for corporate investors, opening to new business models for Italian pharmacies that already exist in other EU countries, such as corporate-owned pharmacy retail chains.  To date, Italian law only allowed licensed pharmacists and non-corporate entities composed of licensed pharmacists to own retail pharmacies, among other restrictions applicable to the retail distribution of medicines in Italy (some of which remain in place).

By Law No. 124 of 4 August 2017 – entering into force on 29 August – the Italian parliament introduced measures that liberalise the Italian retail pharmacy sector, with the aim of promoting competition conditions in the distribution of medicinal products, among other fields.  The following measures are worth highlighting:

1. Corporate entities (società di capitale) will now be entitled to own private pharmacies and to hold the necessary regulatory licences to run a pharmacy business.
2. It will be possible for a corporate-owned pharmacy to be run by a (contracted) licensed pharmacists meeting the applicable requirements, no longer being required that the managing director of a pharmacy be one of its owners.
3. Each pharmacy owner (including corporate entities) will be allowed to directly or indirectly control (as defined by Italian law) no more than 20% of the pharmacies in a given region or autonomous province.
4. Pharmacies will be allowed to provide services to the public beyond any hour limitation imposed by law, subject to appropriate notice to the competent authorities and to customers.
5. Importantly, pharmaceutical manufacturers will be prevented from participating in any pharmacy business in Italy, due to an incompatibility provision that will also apply to sales representatives and healthcare professionals.

Law 124/2017 brings a strong wind of liberalisation in the Italian pharmacy market.  However, the retail distribution of medicines remains a highly regulated activity in Italy, as important regulatory restrictions (tender procedures for pharmacy licences, limited number of licences, restricted pharmacy locations, etc.) will remain in place.

In order to attract corporate investors, the Italian Minister for Development, Carlo Calenda, has called for the rapid introduction of the necessary regulatory tools to give full effect to the new Law and stated that he will address the potential adoption of sectorial measures to encourage investment.

It can thus be expected that Law 124/2017 will boost a waive of M&A activity targeting the Italian pharmacy business in the coming years, including by international investors.

This post was originally co-authored by Marco de Morpurgo.