Warehouse-style pharmacies pressure neighborhood drugstores

A “pharmacist’s recommendation” sign is displayed among various medicines on shelves at MediKingdom, a warehouse-style pharmacy in Yongsan District, Seoul, Monday. Photo by Park Gyeong-dam

At the first-floor entrance of the new wing of Yongsan Etland, one of Korea’s largest electronics marketplaces, stands Medikingdom Pharmacy, a warehouse-style pharmacy that opened in February. Occupying one of the building’s prime retail spots, the store spans 1,178 square meters — roughly 24 times the size of a typical neighborhood pharmacy, which average about 50 square meters.

More striking than its size is the way the pharmacy sells medicine. Dozens of display shelves, each measuring 2.5 meters wide and 2 meters tall, were lined with over-the-counter drugs organized by category, including vitamins, pain relief, cold medicine, ointments and fever reducers.

Inside, about 50 customers roamed the aisles, pushing small shopping carts and picking up medicines like they might grab instant noodles or fresh vegetables at a big box store. The products themselves looked more like items at a supermarket than medicines at a neighborhood pharmacy.

Jang, 27, said he visited MediKingdom Pharmacy after seeing a post about it on social media. “I bought antiseptic mouthwash, which I usually feel uncomfortable buying at neighborhood pharmacies. This place is convenient for customers like me who don’t want to talk to pharmacists,” he said.

The store is one example of warehouse pharmacies, which have increased in number across the capital region and in other parts of the country. Backed by outside capital, this new kind of pharmacy draws customers with wider product selections, lower prices and supermarket-style displays.

But as they use more aggressive sales tactics to recoup investments, concerns are growing that they could encourage bulk purchases and worsen the problem of drug misuse and overuse.

Medicines are displayed for customers to browse and choose on their own, much like in a large supermarket, at MediKingdom, a warehouse-style pharmacy in Yongsan District, Seoul, Monday. Photo by Park Gyeong-dam

Warehouse-style pharmacies spread in Korea after first-mover success

Industry insiders say Korea’s first warehouse-style pharmacy was Megaphactory in Seongnam, Gyeonggi Province, which opened last June with a floor area of 552 square meters.

A review of pharmacy licensing data from the Public Data Portal showed that eight more pharmacies larger than 500 square meters opened in the country later that year. In January and February this year, 10 additional pharmacies of that size opened. The pace marks a sharp break from previous years, when only one pharmacy larger than 500 square meters opened in 2022 and another in 2024, with none recorded in 2023 — a sign that pharmacies are rapidly growing in scale.

The newly emerging large pharmacies share several traits. For one, they all promote themselves as warehouse-style pharmacies. Their names — Megaphactory, Megatown, Megastore and Megamax — also suggest a shared branding strategy, with the word “mega” used to signal their large store formats. They also focus on selling nonprescription drugs, unlike neighborhood pharmacies that rely more heavily on prescription drug sales.

Industry observers say the emergence of these pharmacies signals the beginning of capital flowing into and reshaping Korea’s pharmacy industry.

Until now, most pharmacies have operated as small businesses, as the Pharmaceutical Affairs Act restricts pharmacists from owning more than one pharmacy. But the recent push toward large-scale pharmacies is being led by pharmacists who have accumulated enough wealth to expand on their own or secure outside investment, according to people familiar with the industry.

Megaphactory, for example, traces its roots to Onyou Pharmacy, a drugstore in Seoul’s Jongno pharmacy district that gained a reputation as a go-to destination for hair-loss medication. The founder of Megaphactory is the pharmacist who operated Onyou Pharmacy.

Megaphactory has since expanded its footprint, opening a 2,210-square-meter Seoul branch in February, the largest pharmacy currently in operation in the country.

The main reason warehouse-style pharmacies appeal to consumers is price. By purchasing large volumes of drugs directly from pharmaceutical companies, they can lower procurement costs and offer retail prices up to 30 percent cheaper than conventional pharmacies.

“In an era when consumers can look up information on medicines themselves with the help of artificial intelligence, pharmacies also need to change,” said the operator of one warehouse pharmacy. “Under market logic, bulk purchases allow us to offer lower prices, but we also bear the burden of holding inventory.”

Shopping carts of the type commonly seen in supermarkets are placed at MediKingdom, a warehouse-style pharmacy in Yongsan District, Seoul. Photo by Park Gyeong-dam

Calls for tighter regulation grow

Concerns are growing over the possible side effects of pharmacies putting market logic at the forefront. Some pharmacists worry that as warehouse-style pharmacies become more profit-driven, less attention may be paid to the core role of pharmacists: providing proper guidance on medication use. Such concerns are already beginning to surface, with some large-scale pharmacies reportedly becoming a source of drugs for teenagers at risk of abusing over-the-counter medicines.

Another concern is that local residents’ access to pharmacies could worsen if smaller neighborhood drugstores are pushed out by large-scale chains. The Korean Pharmaceutical Association said on April 13 that 65.6 percent of 535 pharmacies located near warehouse-style pharmacies reported a decline in customers, according to its survey.

“Medicine should be taken only when needed and in appropriate amounts, but warehouse-style pharmacies are encouraging the sale of unnecessary drugs,” an association official said.

Legislature and administrative bodies are just beginning to discuss regulations for the newly emerging gigantic stores. The National Assembly’s first subcommittee of the Health and Welfare Committee on Bill Review passed a revision to the Pharmaceutical Affairs Act, proposed by Rep. Nam In-soon of the ruling Democratic Party of Korea, aimed at regulating how warehouse-style pharmacies label and advertise themselves.

At the core of the bill is a ban on using terms such as “warehouse-style,” “mart-style” or “factory” in pharmacy names, on the grounds that such expressions could encourage drug misuse and overuse.

Some are calling for even tougher regulations. One proposal would apply rules such as limits on operating hours and mandatory closing days, similar to the restrictions currently imposed on large discount stores to protect traditional markets and smaller neighborhood businesses.

But applying the same rules to warehouse-style pharmacies may not be straightforward, as they are still operated by individual business owners, unlike major discount chains such as E-Mart and Lotte Mart, which are run by large corporations.

This article from the Hankookilbo, the sister publication of The Korea Times, is translated by a generative AI system and edited by The Korea Times.