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After years of debate, the drug market in Israel is about to undergo a fundamental change. As of May 10 it will be legal to sell non-prescription drugs not only at pharmacies, but also at supermarkets and convenience stores. This development is expected to boost the OTC (over-the-counter) drug market - estimated at $100 million and accounting for 14 percent of the entire drug market - by some 30 percent over the next few years.

Still, consumers will have to wait a while before actually being able to buy medications at supermarkets, gas stations and even specialty stores, such as book stores or camping gear outlets. Opening of this market to competition, though expected to eventually lead to lower prices, is not necessarily in the interest of the major players in the sector. Drug manufacturers, distributors and supermarket chains - each for their own reasons - are downplaying the importance of the reform and are asking consumers to be patient.

"In general," says Omri Ofer, marketing vice president for sales and trade at Chemipal, the marketing, sales and distribution company that represents Dexxon, Novartis, Rafa, Trima, Dr. Fischer and others, "the media coverage is overstated. The activity in the field and the facts indicate a very limited number of approved drugs and a small number of approved sales points."

CEO of the New-Pharm drugstore chain, Yaron Dor, thinks there is more talk than action. "We will be ready toward the end of May," says Dor. "Our stores do not need any change that requires Health Ministry approval. We are ready with new display shelves."

Dor says that at Clubmarket, New-Pharm's sister supermarket chain, the preparations for selling drugs are a bit slower because, "they need Health Ministry permits and the distribution networks currently serve only the pharmacies and drugstores, and not the new players entering the market."

This means that in practice, the only change next week will be the display of non-prescription drugs on drugstores shelves rather than behind the pharmacy department's counter.

Eyal Donsky, head of the OTC drug and consumer products division at Teva Pharmaceuticals says that even the stores that have set aside shelf space may not have stock to put on them. This, he explains, is because the drugs will be packaged in small quantities and the drug companies need Health Ministry approval for each and every redesigned product package.

It's all propaganda

Amir Bibi, head of the pharmacy at Supersol, says that the changes announced for May 10 are propaganda, and that Supersol is in no hurry to make the alterations required to compete in the OTC drug category.

"We still don't know how the market will respond," says Bibi. "We will not allocate shelf space just because reforms have been declared. In the meantime we are being cautious and will proceed slowly. At first [OTC drugs] will be available only at stores in which we have pharmacies and we will proceed in keeping with the market's reactions."

Bibi also rejects the notion of price drops due to wild competition between the pharmacies and the new players in the market.

"There are price ceilings that we won't exceed and we will follow the dictates of the market," he says.

The retailers are not the only ones holding back. Some of the manufacturers are also not hastening to adapt their products for marketing outside of pharmacies. The Health Ministry's directives require small packages and costly changes to production lines. Some manufacturers have decided that the investment is not worthwhile, and cite their experience from European countries, which shows no significant increase in sales.

Still, most manufacturers are not forgoing the open shelves altogether, but are simply delaying the release of suitably packaged products until late 2005 or early 2006.

The manufacturers also have to consider their biggest clients - Superpharm and the health maintenance organizations - which are reason enough to refrain from selling directly to consumers.

"We have been working with these clients for many years," says one manufacturer, "and they provide us with good service. If we create competition against them in other places, this could endanger our status with them."

Ofer does not anticipate a significant increase in OTC sales in the short term, but rather only after four or five years, with the growth rate of sales dependent on the activity of the new sales points. Others believe the market will change sooner, toward the end of this year, as drug companies aim their marketing directly at consumers, rather than at pharmacists.

Gadi Klarsfeld, the OTC drug marketing consultant for Paz Oil and Yellow convenience stores, says the big players have not entered the market yet and that it will take time, although some Yellow outlets have already obtained the necessary permits. He estimates that it will be two or three years before mini-markets and convenience stores become a significant market force.