German Pharmacists Battle One-Stop Internet Shopping

Walk into a German pharmacy these days and you’re sure to find a petition on the counter and a friendly sales person asking you to sign it. Even if you just want throat lozenges and a pack of tissues, the counter personnel will give you a short speech on why your signature matters.

The German Association of Pharmacists is collecting signatures for a nation-wide petition to stop the sale of medicine over the Internet. More specifically, their aim is to prevent a particular Dutch company from competing in the German market via its online prescription drug service.

DocMorris, as the Internet pharmacy is called, operates directly across the German border in a small Dutch town called Landgraaf. The village, hardly more than a strip of warehouses, is just near enough to the state of North Rhine-Westphalia in Germany to allow German courier services to pick up parcels and deliver them cheaply across the border, and just far enough to be out of the scope of the German law banning online drug services.

And it’s this combination that makes Landgraaf the ideal location for DocMorris’s cross-border pharmaceutical business.

Cross-border drug trade

The company’s concept is simple and clear-cut. Internet users in Germany and the Netherlands log onto the docmorris.de website and submit their prescription drug request. If the medication is in stock, the user can fill out an order form and a packaging label with address information. Within a week a courier service delivers the medication directly to the customer.

DocMorris has flourished in its first two years of existence. Starting out in June 2000, with only four employees and an average of five prescription requests a day, the company has blossomed into a major enterprise with 75 employees and thousands of customer orders a day. Last year it grossed five million euro ($4.78 million) in sales, and in the first quarter of this year the company cleared 3.5 million euro ($3.35 million). Three-quarters of the company’s customers are from Germany.

The Dutch-German connection is the key to DocMorris’ success. Not only is parcel delivery made cheaper by the close proximity to the German customers, but the price for drugs at the Dutch company is considerably lower than across the border in Germany. The Netherlands have no set prices for medication, no anti-competition laws for pharmacists, no prescription fees and no distribution monopoly. Prescription drugs are on average10 to 15 percent cheaper in the Netherlands. Viagra, one of DocMorris’ more popular prescription requests, is a full 18 euro cheaper than at a German pharmacy.

Ralf Däinghaus, founding father of DocMorris, recently told the Financial Times Germany newspaper online pharmacy is growing in popularity among Germans because it offers something their local pharmacies do not: prescription filling in the comfort and privacy of one’s own home. An Internet user is neither restricted by the opening hours of a pharmacy nor hindered by distance to it. Ordering a prescription online also saves the customer a potentially embarrassing trip to the pharmacy, where he or she might run into a person they know. The anonymity of ordering prescriptions online is a clear benefit for the customer, says Däinghaus.

Online drug trade

But what many see as an improvement in terms of ease of access, anonymity and cheaper prices, is being criticized by German pharmacists as a risk to patient’s heath and a violation of consumer protection laws.

In Germany, there is a ban on mail order pharmaceutical services including the filling of prescription drug orders over the Internet. The law was established in 1998 to protect the consumer from unreliable pharmaceutical operations. The primary concern was that online drug did not fall under the auspices of federal German regulations which monitor the production, storage and distribution of medicine. According to the law, prescription medication can only be handed out in the sales rooms of pharmacies. Hence, an Internet drug company, especially a foreign one, is illegal.

In this regard Germany is going against the tide of technology. Since the 1998 law was passed, Internet pharmacies have popped up throughout the World Wide Web. A simple search in google.com produces 500,000 entries for online drug companies. Although some of the Internet companies are dubious, the majority of the online pharmacies have improved their reputation as more and more patients order prescription drugs from them.

Over the last few months, Federal Health Minister Ulla Schmidt has criticized the ban on online pharmacies as outdated and no longer feasible. "We cannot build a wall around Germany" to keep out the Internet drug providers, she said when the subject first came up for discussion in her ministry.

The German pharmacists, however, want to make sure that the law stays on the books. Thomas Preis, head of the North-Rhine Westphalia Association of Pharmacists urged the government to maintain the ban on Internet pharmacies "in the interest of patients and consumer protection." Preis criticized Internet pharmacies for delivering medication too late and without the necessary prescription counseling. These unreliable practices "endanger the successful healing therapy of the patient," he said.

Last year, the German Association of Pharmacists took DocMorris to court and won a temporary injunction against the Dutch Internet company. Their case was based on the violation of German pharmaceutical trade law. But DocMorris still exists and is protected against such legal actions by Dutch and European Union laws which permit online drug companies as long as the provider is a recognized pharmacist.

Money for medication

The underlying issue at stake in the dispute is more about money than safe distribution of drugs. Last year the German health insurance companies spent 22.4 billion euro ($21.4 billion) on prescription drugs. One third of that money flowed back into the hands of large pharmaceutical distributors and the individual pharmacies.

The pharmaceutical trade law of 1998 virtually guarantees pharmacists a hefty profit margin on all medication handed out to patients. The law allows pharmacist to place a 27 percent handling fee on top of the wholesale price for a prescription drug. For more expensive medication, the profit margin can go up to as much as 40 percent. That’s a lot of money for the pharmacists, and it’s no wonder they’re concerned about the Dutch Internet competition. The online pharmacies are cutting into their profits.

Studies by the Bavarian Ministry for Social Welfare show that if the online pharmacies were to gain just five percent of the German market, 20 to 30 percent of pharmacies in Germany would have to shut down over loss of sales. Bavaria is the only state in Germany to have come out in favor of banning online drug providers. The rest of the country, including the federal health ministry, has considered lifting the ban as a way to save money and provide patients with an alternative to traditional pharmacies.

Affordable medication or consumer protection?

German health insurance companies are behind the online drug providers. They’ve calculated that approximately three billion euro ($2.87 billion) could be saved annually by allowing their insurance holders to order drugs online. Reimbursing patients for the money they spend filling prescriptions online is considerably cheaper than paying the higher price at German pharmacies.

German pharmacists criticize such market-based thinking. The North-Rhine Westphalia Association of Pharmacists is concerned that the needs of the patient will be overlooked if the German government and health care providers focus on the issue from a "purely financially-motivated standpoint and not from the perspective of providing quality individual patient care".

Pro Pharmacy

The Federal Association of Pharmacists recently launched a nation-wide petition called "Pro Apotheke" (Pro Pharmacy). Through the collection of signatures, the pharmacists hope to show the government that the German consumer is on the pharmacies’ side in banning Internet drug providers. The pharmacists stress that permitting online pharmacies would lead to a decline in available service, a closing of local pharmacies, an elimination of individual counseling, and an increase of risk to the patient.

So far their petition has only managed to increase awareness of the online pharmacies. While many customers have willingly signed the petition, others have learned for the first time about the possibility of filling prescription orders online. And even the government has begun to consider a compromise solution.

Pro Internet

For DocMorris and other online pharmacies, the debate in Germany is money to their ears. The more the subject comes up in the news, the more German customers find their way to the company’s website to order medication.

"Thanks to the court cases, we don’t have to pay a single penny for advertisement. We couldn’t have bought a better marketing campaign," Ralf Däinghaus told Financial Times Germany. "If we were sitting in Germany, we wouldn’t have been nearly so successful. DocMorris profits from the inflexibility of the German market."

Just a kilometer a way from DocMorris, a second Dutch Internet pharmacy is getting ready to open for business with an eye for the growing German market. And in the last month, the German Association of Pharmacists launched its own website, aponet.de. Currently, the site only allows customers to pre-order a prescription, not to have it filled and mailed. But if the government decides to liberalize the law, the German pharmacists will certainly have no qualms about extending the type of online service they offer.