MercadoLibre’s Brazil Drug Marketplace Faces Regulator Review

MercadoLibre Inc.’s push to expand its sale of prescription drugs in Brazil is facing a setback after the nation’s health regulator said it’s reviewing the e-commerce company’s plan to create an online marketplace for pharmacies.

Brazil’s health regulator, known as Anvisa, said that there’s currently no legal basis for the sale of medicine through intermediaries, according to a statement. MercadoLibre announced the plan last week and said it aims to launch the third-party marketplaces for drugs in the second half of October, which would offer treatments including antibiotics and weight-loss drugs through partner pharmacies.

Anvisa said it has requested information from MercadoLibre about its prescription-drug plans.

MercadoLibre said it hasn’t received any notification related to Anvisa’s request and reiterated that it complies with applicable rules.

“We are taking a step that has always been our goal: evolving toward a marketplace model, connecting partner pharmacies directly with consumers,” Fernando Yunes, MercadoLibre’s head in Brazil, said in a statement last week.

MercadoLibre also has its own online drugstore for Sao Paulo state, launched in March, which sells medicine directly. However, the creation of a marketplace to connect established pharmacy chains with MercadoLibre’s customers — without building a large physical network — is seen as a bigger opportunity.

Under MercadoLibre’s planned model, medicine would be shipped directly by partner pharmacies rather than through the company’s own fulfillment centers. MercadoLibre has said it aims to reach major metropolitan areas by year-end through about 20 partner chains, with deliveries in as little as an hour.

Itaú BBA estimates medicine sales could account for about 5% of MercadoLibre’s incremental gross merchandise value growth in Brazil through 2030. Sao Paulo state, where the company plans to begin its third-party pharmacy operation, represents about 40% of its Brazilian gross merchandise value, according to the bank.

Shares of Brazilian pharmacy chains fell after MercadoLibre announced its plans last week. MercadoLibre could gain market share in a Brazilian pharmacy market worth more than 200 billion reais ($38.7 billion), XP said in a report. But investments in delivery, pharmaceutical operations and inventory could add pressure to profitability, the brokerage said.