The Pharmaceutical Journal
Vol 270 No 7242 p432
29 March 2003

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Full-line wholesalers look to meet new challenges in the pharmacy market

Full-line pharmaceutical wholesalers are being affected by the same technological changes as their community pharmacy customers. Jonathan Buisson (on the staff of The Journal) gathers opinions from wholesaling executives as to what the future holds for them

Full-line wholesalers need to promote themselves to their community pharmacy customers and re-earn the respect they once had from pharmacists, Steve Dunn, chairman of the British Association of Pharmaceutical Wholesalers, told the association's annual dinner this week.

"The contribution full-liners make to pharmacy is often taken for granted," he said. BAPW members deliver 87 per cent by value of the stock in pharmacies, picking 8.7 million items a day and making around 300,000 deliveries each week.

The infrastructure needed to support these deliveries is one of the main costs for wholesalers. It is an area that is constantly being examined and one where a large degree of automation has been introduced over the past 10 years or so. Most wholesalers make two deliveries a day to most of their customers during the week, a much higher level of service than other retail businesses receive. Is this a level that can be maintained?

David Cole is managing director of Phoenix Medical Supplies, the third national wholesaling chain, which was assembled by the acquisition and integration by Phoenix of a number of regional wholesaling businesses.

"Twice daily delivery is probably maintainable in the current circumstances," he says, "as long as there are no major changes to the wholesaler margin in the Pharmaceutical Price Regulation Scheme or the discount clawback applied to community pharmacists. But if margins come under pressure then wholesalers would need to reduce costs and there are not many other areas where one can cut costs substantially."

Jeff Harris, executive chairman of Alliance UniChem, the second national wholesaler, says that the issue has been discussed by the BAPW. "We will need to see an improvement in electronic communications within the National Health Service before there is any move to end twice daily deliveries," he says. Better information technology might allow pharmacies and wholesalers to move to a "dispense one, supply one" basis with a lower frequency of deliveries, but this is still some way off, Mr Harris believes.

"It will need closer co-operation between pharmacies and wholesalers and when electronic transfer of prescriptions is introduced that might move things ahead, but ETP has been established in the Netherlands and we are still doing twice daily deliveries there."

Mr Cole says that moving to once daily delivery would bring its own problems. For example, if pharmacy customers were split into morning or afternoon deliveries then most would want to be in the morning group. "We use 282 vans for our twice daily deliveries. We would need more than 141 to do once daily and you still have to find something for the staff to do," he says. One way of moving to a once-daily pattern would be if pharmacies had secure delivery boxes or lock ups in which wholesalers could leave deliveries during the night, as some European pharmacies have. "However, pharmacies here do not have them and there are still problems with bulky front-of-shop items and a need to sign for Controlled Drugs."

Bringing automation to pharmacy

ETP and automated dispensing may have a considerable impact on the way in which community pharmacy works in the future and, by implication, the way in which wholesalers respond.

Michael Ward is chief executive of AAH Pharmaceuticals, owned by Celesio AG (formerly GEHE) of Germany, and the largest wholesale chain in the United Kingdom. "ETP will have quite an impact," he says, "as pharmacies will know what is coming and when. However, there will still be acute prescriptions to dispense and it is these peaks and troughs that drive the need for twice daily deliveries."

Mr Cole believes that ETP and automation may lead to a greater concentration of dispensing. "Wholesalers are already picking orders in patient packs. With ETP you have to wonder why it cannot just be automated straight from the wholesaler."

Since successful automation is dependent to some extent on securing sufficient prescription volume to justify the investment, a polarisation may occur with dispensing factories for nursing homes and patients needing monitored dosing systems.

John Nuttall is general manager of United Co-op's health care division which includes its pharmacy chain and wholesaler Sants. He says that automation in an increasing number of pharmacies may lead to bulk deliveries of products rather than a just-in-time delivery strategy.

Moss Pharmacy, part of Alliance UniChem, has been using automated dispensing as part of its contract to supply pharmacy services to Scottish prisons. Mr Harris says that this has been successful (as has similar work in Norway) but he maintains that there still needs to be interaction between the pharmacist and the patient when the medicine is handed over.

More benefits from ETP

Mr Ward is less convinced about the potential for automation, although it is to be tried in a Lloydspharmacy branch, he says. "We are not expecting great things from it. It is more about the lessons we can learn from it to apply to other circumstances." He believes that ETP will be the main development that will allow for more efficiencies in pharmacies and, as a result, in wholesaling. "Everything is pushing towards ETP — more 28-day prescriptions and repeat dispensing. The Government must put the infrastructure in place to support this," he says.

One problem that has faced full-line wholesalers in the past is parallel imports, an area in which short-line wholesalers are particularly active. With 10 countries due to join the European Union next year there had been some concern that this might have led to an increase in PIs. However, full-liners now seem more sanguine about this prospect, particularly as the euro has gained in strength against sterling.

"The volume of product available in these new countries will be small," Jeff Harris believes. "The PI market is beginning to slow down in a number of EU countries and we may have seen the most of it now."

Michael Ward agrees: "Pharmaceutical companies are rationing stock to restrict PIs. There will be some opportunities for PIs from the new EU, but not a bonanza."

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