Is it permissible to allocate a portion of zakat funds to purchase medicines for the poor and needy, while the brother who owns the pharmacy benefits from this to improve his meager income?

The basic principle is that zakat should be handed over to the poor person for them to own and dispose of it. Therefore, allocating a portion of zakat to purchase medicines for the poor and needy in that manner is impermissible, due to certain concerns. These include: the zakat payer disposing of the zakat after its disbursement, which violates the condition of the poor person owning the zakat. Furthermore, this allocation might not be free from favoritism towards the zakat payer's brother, and it might relieve the zakat payer of some charitable contributions they would have otherwise given to their brother. If you wish to help your brother, give him from your private wealth, or give him from zakat if he is eligible for it.