The Latvian Competition Authority (KP) has completed its market monitoring regarding the impact of vertical integration in the pharmaceutical retail sector. The analysis indicates that the market is becoming increasingly concentrated, with a small number of companies dominating the landscape.

KP's findings show that the four largest vertically integrated groups control a significant portion of the market, with their share increasing from approximately 60% in 2020 to 72% in 2024. This concentration raises concerns about reduced competition and market consolidation.

Despite having over 700 pharmacies in Latvia, the authority noted that regulatory barriers severely limit the establishment of new pharmacies, leading to market entry primarily through the acquisition of existing ones. This trend contributes to the growing concentration and decreasing share of independent pharmacies.

Similar trends are observed in neighboring countries, with Lithuania and Estonia experiencing high market shares controlled by a few pharmacy networks. KP highlighted that market concentration and vertical integration can be influenced by various indirect mechanisms, such as franchise agreements.

While vertical integration can enhance supply chain efficiency and reduce costs, KP also identified potential risks related to high market concentration and the competitiveness of independent pharmacies. However, no significant negative impact on competition or consumers has been observed so far, aided by existing regulations that mitigate these risks.

In the over-the-counter segment, competition is more vigorous, particularly due to online pharmacies offering lower prices compared to physical stores. Conversely, the prescription drug segment faces significant price competition limitations due to current price regulations.

To enhance competition, KP recommends reducing market barriers and increasing transparency. The authority supports the requirement for major pharmacy owners to publish drug prices and availability starting July 1, 2026, which could facilitate price comparisons and boost competition.

KP has urged the Ministry of Health to consider the impact of regulatory frameworks on competition while continuing to monitor market developments and structural changes.