Merger of Chemist Warehouse and Sigma Approved, Valued at $8.8 Billion

The Australian Competition and Consumer Commission (ACCC) has approved Chemist Warehouse and Sigma Healthcare’s $8.8 billion merger, determining that it will not diminish competition in the pharmacy sector.

Chemist Warehouse operates a pharmacy franchise model, while Sigma runs similar franchises such as Amcal+ and Discount Drug Store.

“The ACCC’s analysis found that the proposed merger is not likely to significantly reduce competition nationally or locally because other pharmacies and non-pharmacy retailers will continue to compete as they do now,” said ACCC Chair Gina Cass-Gottlieb.

During the approval process, Sigma’s legal team, led by Elizabeth Avery and Liana Witt, worked closely to secure ACCC clearance.

Avery expressed pride in the outcome, calling it “a significant step towards such an important and transformational merger for Sigma.”

The ACCC determined that consumers will still have a wide range of options, given the distinct differences between Chemist Warehouse’s large discount stores and Sigma’s smaller, service-oriented pharmacies.

“Importantly, consumers will continue to have a choice between smaller format stores offering personalized services and the Chemist Warehouse offering, focused on larger format discount stores and front-of-store offerings,” Cass-Gottlieb explained.

To address concerns about the supply of pharmacy products, the ACCC highlighted that suppliers and manufacturers have multiple channels to distribute their products, even outside of the newly merged entity.

Concerns Over Reduced Competition

The Pharmacy Guild of Australia has raised concerns about the merger, stating that it could reduce wholesaling options, potentially leading to higher costs for patients.

“Reduced competition ultimately results in higher prices for patients and lower service standards,” a Guild spokesperson remarked.

The Guild argued that market consolidation in healthcare sectors, including pharmacy, may negatively impact small businesses and diminish personalized services for communities.

“It is disappointing that the ACCC accepted limited behavioral undertakings and did not explore structural undertakings,” the spokesperson added, citing worries that healthcare market consolidation often results in non-competitive duopolies.

Assurances from Sigma

To address competition concerns, Sigma has provided enforceable commitments to the ACCC.

This includes a promise to protect and delete data of pharmacies that choose to switch providers and a commitment to remain a pharmaceutical wholesaler under the Commonwealth Government’s Community Service Obligation for the next five years.

“The evidence collected, along with the commitment made by Sigma, led us to conclude that a substantial reduction in competition is unlikely,” Cass-Gottlieb concluded.