Impact of Japan drug sales rules seen limited for now

TOKYO, June 1 (Reuters) - Deregulation of over-the-counter drug sales in Japan took effect on Monday, opening the $12 billion market to convenience stores and supermarkets in a move that could spur fierce price competition.

But analysts and industry players said most consumers were unlikely to find cold medicine or aspirin at their neighbourhood convenience stores anytime soon, citing the high economic hurdles of selling nonprescription drugs at such smaller shops.

“I don’t see an immediate impact from deregulation,” said Akihiro Hayashi, a retail analyst at Ichiyoshi Research Institute.

In what was billed as the first major change in Japan’s regulation of drug sales in half a century, the government has introduced less rigorous qualifications to sell most OTC drugs, which only licensed pharmacists had been previously allowed to sell.

Japan’s OTC drug market is estimated around 1.17 trillion yen ($12.4 billion) for the year that ended in March, data by market research firm Intage shows.

Deregulation is expected to help new entrants as they can now hire lower-paid staff to do most of the sales work done previously by pharmacists.

Given their sheer number - over 40,000 nationwide - and their 24-hour operations, convenience stores have been seen as one of the biggest threats to drug stores. Convenience store chains also see drugs as one of the few promising untapped sales categories.

But analysts said it would be hard for convenience stores, whose workforce is made up primarily of part-time workers, to secure shop clerks who have the appropriate sales licence and to generate enough sales to pay for the extra fees for licence holders.

“Convenience stores lost in this round of deregulation in that drug sales still require a license,” said Kazunori Tsuda, retail analyst at Daiwa Institute of Research.

Convenience store chains also said drug sales were unlikely to spread quickly among their stores, though they said potential demand is strong for cold medicine and other drugs during odd hours.

Industry leader Seven-Eleven started selling OTC drugs at one of its stores in Tokyo on Monday, stocking a shelf with nearly 100 items.

"We are expecting further deregulation in the future, and we are preparing for that," said Nobuyuki Miyaji, a spokesman for Seven & I 3382.T, which operates Seven-Eleven. ($1=94.61 Yen) (Reporting by Taiga Uranaka; Editing by Chris Gallagher)