Pills + Politics

When Erika Reinhardt, a 55-year-old saleswoman, rode into Saarbrücken one morning last month, she didn't think she was taking part in a revolution; she simply wanted to save a few euros on her medication. When she saw the long line snaking out of the DocMorris pharmacy, however, she knew something new was happening. She had arrived at the first cut-price drug retailer to open in Germany. "It's about time they changed their old ways," she says of Germany's pharmacists as she leaves the store, clutching a tube of Voltaren, an ointment for sore joints and muscles. "I just saved €4. I'll be back often. More pharmacies like this should open."

Even as European countries over the past two decades have deregulated everything from telephone calls to car dealerships, lawmakers in most countries dared not attack the regulatory fortress that keeps drug prices high and protects pharmacies against unwelcome competition. On the grounds that public safety requires it, the sale of everything from common-cold tablets to the most powerful prescription medication has been reserved in most countries for a registered pharmacist in his or her own pharmacy. The concept of chain drugstores, familiar to anyone who has been in the U.S., offering cheap over-the-counter medications as well as prescription medicines dispensed by a pharmacist, is largely unknown outside the U.K. — and the lack of robust competition has meant prices stay high.

But recently, the formidable walls around Europe's $169.5 billion retail pharmacy business have begun to crack. Lawmakers eager to rein in health-care costs are eyeing the industry as an untapped reservoir for savings. The purchase of the pharmacy Reinhardt visited in Saarbrücken by DocMorris, a mail-order medicine business based in the Netherlands and run by former software engineer Ralf Däinghaus, has plunged Germany into a fierce debate over whether to allow retail drug chains. (This controversy is one reason why the coalition government talks on major health-care reforms have hit a snag.)