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Miranda Parry
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Every pharmacy in the UK will, at some time, need to purchase a Pfizer
product. Up until now, the company’s products have been available
from a wholesaler of the pharmacist’s choice, but from March next
year the situation will change; some say for the worse. Pfizer’s
announcement a fortnight ago that it was taking
over the sale of its prescription medicines has stunned pharmacists and representative bodies
(PJ, 7 October, p413).
Like GlaxoSmithKline’s agency scheme introduced by the then-Glaxo
some 15 years ago (PJ, 9 November 1991, p644), Pfizer’s plan is
to sell its medicines direct to its customers (hospitals, community pharmacies,
dispensing practices) but with one fundamental difference: it will use
one wholesaler exclusively as a “logistics service provider”.
UniChem has been awarded the contract and will be required to distribute
Pfizer products to every pharmacy in the UK — twice a day.
The impact of Pfizer’s plans remains to be seen. Some contractors
could end up out of pocket. Some fear that pharmaceutical wholesalers,
particularly those with small, regional operations, could go out of business.
A move against counterfeiting?
David Watson, Pfizer’s head of trade, says that the company’s
main reason for the change is to secure the UK supply chain against counterfeiting. “If
you are buying directly from Pfizer,” he maintains, “pharmacists
can be sure they are receiving genuine Pfizer products.”
Mr Watson explains that there are a lot of criminal organisations making
some sophisticated counterfeits, so “it is a situation that Pfizer
is taking very, very seriously”.
A spokeswoman for Pfizer adds: “In the past 12 months there have
been three separate cases of counterfeit Lipitor in the legitimate UK
supply chain, and we believe that even one case is one too many.”
Donald MacArthur, a pharmacist and pricing strategy consultant from PriceSpective
(a team of experts that offers strategic guidance in pricing and reimbursement
to the pharmaceutical industry), says that not too many people believe
the issue of counterfeiting. Counterfeiting has always been with us,
he says, but Viagra — a Pfizer product — brought it to the
forefront: a consequence of it being a successful “lifestyle drug”.
John D’Arcy, chief executive, National Pharmacy Association, says: “We
certainly are opposed to counterfeiting and want to do everything we
can to stamp it out. But I think the best long-term approach to that
is to have industry-wide solutions rather than have individual manufactureres
or individual wholesalers taking their own particular approaches.” But
he adds: “If you are a manufacturer that has a problem with counterfeits,
clearly that’s high on your agenda and needs to be dealt with.”
Richard Freudenberg, secretary general of the British Association of
European Pharmaceutical Distributors, comments: “Pfizer’s
stated reason of trying to stop counterfeiting does not hold up.” He
believes that Pfizer is trying to put an end to parallel trade.
But the issues surrounding counterfeiting and parallel trade are complicated,
and the waters are often muddied.
“Counterfeit has been raised as an issue often in the same breath
as parallel trade,” Mr MacArthur says. The Government has insisted
that there is no link, he points out.
A spokesman for the Medicines and Healthcare products Regulatory Agency
concurs: “It is often cited that parallel importation is a source
for counterfeit medicines. Currently there is no evidence in the UK where
the repackaging process of parallel traded medicines has been the route
for introducing counterfeit medicines into the legitimate UK supply chain.”
And there is also the elusive “grey market” to consider.
Grey market is a term used to encompass trading of a manufacturer’s
own products which occurs through channels other than those intended
by the manufacturer.
Mr D’Arcy says that the NPA has challenged Pfizer on whether its
distribution plans are driven by a desire to suppress the grey market
in Pfizer products. Pfizer has denied that this is the motivation.
The spokeswoman for Pfizer says that grey market activity is independent
of Pfizer “but it does include our products. We anticipate that
a grey market will still exist once our new arrangements come into place.”
However, Mr D’Arcy says that the issues of grey market and parallel
trade cannot be looked at in isolation of what is happening in the wider
market. Certainly Pfizer has attempted to operate quota systems (which
restrict the amount of product sold to wholesalers) for certain parts
of Europe, he adds. “One can’t help feeling that, if you’re
controlling all of your product into the marketplace, that must have
an impact on the grey market. That seems to have been the case with GSK
as there is less of a grey market in its products,” Mr D’Arcy
points out.
The spokeswoman for Pfizer comments: “Pfizer doesn’t and
can’t stop its products being sold by UK traders into other parts
of Europe. However, we are concerned that this activity leads to shortages
for UK patients, as is the case in other countries where products are
exported. We have a supply policy in the UK that aims to supply enough
product to meet the demand for UK patients.”
MHRA views on counterfeiting — and the scale of the problem
The Medicines and Healthcare products Regulatory
Agency shares Pfizer’s concerns regarding the increase in counterfeit medicines
in the legitimate supply chain and regularly meets with industry
bodies to discuss the issues, a spokesman for the MHRA reveals.
However, the MHRA has confirmed that Pfizer’s decision is
a commercial one.
According to the spokesman, the legitimate supply chain in the
UK is tightly regulated and is judged to be safe from large-scale
contamination from counterfeit medicines. He says that “the
MHRA operates a long-term anti-counterfeiting strategy led by its
Enforcement and Intelligence Group”.
The World Health Organization estimates that up to 10 per cent of medicines
worldwide may be counterfeit and that the cost to the pharmaceutical industry
is $32bn, says the MHRA spokesman.
“Over 700 million prescriptions are written annually in the UK. There have
been five discoveries of counterfeit medicines that have reached patients through
the legitimate UK pharmaceutical supply chain since 2004,” he says. “While
the legitimate pharmaceutical supply chain is tightly regulated and has one of
the best international records for being difficult to breach, it is recognised
that no supply chain is impenetrable, whatever the regulatory and surveillance
safeguards that may be in place,” he adds.
Guidance for pharmacists on counterfeit medicines, published by the MHRA and
the Royal Pharmaceutical Society, is available as a PDF file (160K) |
Impact on contractors
Graham Phillips, member of the Independent Pharmacy Federation’s
steering group, believes that “this is bad news from almost every
perspective. Clearly it will damage relations between pharmacy and Pfizer
at a time when the pharmacist’s role is becoming more clinical
and a strong link to industry is needed.”
Mr D’Arcy says that pharmacists might be required to deal with
additional paperwork to set up UniChem and Pfizer accounts.
“It would be a great travesty,” he says, “if at a time when
we are suppsed to be spending more time on patient care we are having
to divert some of that into administration.”
And Mr Phillips insists that, with the new contract, pharmacists should
be working together to get the best care for patients rather than talking
about funding.
Mr D’Arcy points out that, whether a contractor holds a UniChem
account or another wholesale account, Pfizer products that are currently
included in the basket of products will no longer be available to contribute
to the discount. “So depending on your mix of Pfizer products,
that might have an impact,” he says. “Over time that will
be reflected in the discount clawback, but we will wait to see exactly
how that pans out.”
Sue Sharpe, chief executive of the Pharmaceutical Services Negotiating
Committee, says that it is too early to say what the impact will be until
Pfizer releases details of its discount plan, expected imminently.
She says: “The pharmacy contract structure determines overall the
amount that contractors receive through purchase profit income as a contribution
to total income.” The mechanisms of the contract, she explains,
should adjust for any changes that Pfizer makes to the discounts. “The
issue of course is if any changes affect particular contractors,” Mrs
Sharpe says.
Mr D’Arcy elaborates: “The whole system of remuneration and
reimbursement works on an averaging basis. Any change to the system that
pushes a pharmacy either deeper below the line or from above the line
to below the line is bad news.
“And that’s certainly one of the things that came up with the GSK
distribution scheme — if you were a pharmacist that had a high
density of GSK products and if the discount arrangements changed so you
were worse off under that, then clearly you weren’t happy.”
A “Price strategy bulletin” published this month by PriceSpective
states: “Pfizer emphasises its aim is not to save money. Like all
UK brand manufacturers it currently pays wholesalers a gross margin of
12.5 per cent of the value of stock handled at NHS prices, with wholesalers
giving about 10 per cent of this away as discounts to pharmacy customers.
Some is then clawed back from pharmacy remuneration by the Government
through the discount recovery scheme, along with part of pharmacy purchase
profit from generics and parallel imports.”
The bulletin goes on to say: “As well as paying UniChem an agency
fee for whatever package of services it requires of it, Pfizer will need
to offer pharmacies and dispensing doctors comparable discounts to those
now obtained from wholesalers. Otherwise it will incur the wrath of these
two groups who will lose remuneration until the clawback scales are adjusted.”
Mr MacArthur says that manufacturers probably think a 12.5 per cent margin
is too generous and, with the increasing price of products, that the
returns are disproportionate.
AAH speaks out against scheme
Steve Dunn, group managing director of AAH
Pharmaceuticals, gave his view of Pfizer’s distribution plans at the Pharmacy Show,
which took place at the NEC, Birmingham, this week (15–16
October).
“Now is not the time to drive out choice and competition in pharmacy
at the very time the NHS is seeking to increase choice and competition
in health care provision,” he stressed.
He added: “We believe that Pfizer’s new scheme will
inevitably lead to a reduction in discounts in an attempt to boost
Pfizer’s profits … costing the NHS several millions of
pounds. Discounts in general will have to fall costing pharmacy
and the NHS dearly.”
“It will bring about a complete loss of wholesale competition,” he
said, “competition that has served pharmacy contractors so
well in the past. It removes a pharmacy contractor’s choice
in who they choose to partner with. It disrupts and potentially
destroys the stable and essential pharmacy supply chain model based
on twice a day delivery and wholesalers carrying a full range of
pharmaceutical goods.”
Mr Dunn went on to say: “Pfizer have the right to run their
business as they see fit but they should consult widely with all
interested stakeholders to achieve a model which fulfils some or
all of their objectives while at the same time maintaining the
essential, stable and time-proven supply chain model which has
served pharmacy, pharmacists and patients so well in the past and
will continue to do so in the future.” |
Wholesale market
Mr D’Arcy says that, if the other wholesalers lose out on 15 per
cent of their product portfolio because of the Pfizer/UniChem deal, they
are going to have to make adjustments to their discount threshold or
their provision of added value services. He points out that the current
system of multiple wholesalers ensures competition and guarantees that
pharmacists benefit from a key service — twice daily delivery. “We
sincerely hope that [Pfizer’s plan] doesn’t throw those arrangements
out of kilter and prejudice services to patients,” he says.
Mr MacArthur says: “In the UK, pharmacies choose their main and
back-up wholesalers knowing they will stock the full range of products.
The nature of the whole business changes when you go from a multiple
to a single channel system.”
He explains that with the multi-channel system, like that found in the
UK, pharmacists have some control — they can choose which wholesaler
to use and the wholesalers compete for pharmacy business by offering
high quality service; manufacturers have no choice but to supply the
wholesalers in order to sell their products.
However, he says that in the single channel system the manufacturer is
in control — it chooses an exclusive wholesaler (or distributor)
which has fought with other wholesalers for that contract and the pharmacist
has no choice but to use that wholesaler to purchase that manufacturer’s
products.
Allan Karr, chairman of the Guild of Healthcare Pharmacists procurement
and distribution interest group and pharmacy business services manager,
University College London Hospitals NHS Trust, comments: “This
is a major strategic initiative on behalf of Pfizer, with complicated
ramifications for the marketplace which need to be worked through over
time. The pharmaceutical
industry has the natural desire to manage
the supply chain more closely and also to have a closer and direct relationship
with
customers.”
Mr Karr explains that normally the wholesaler purchases and legally owns
the stock to sell under its own terms, whereas distributors get paid
a fee for moving the stock from point A to point B. “UniChem will
not own any Pfizer stock under the new scheme and will therefore have
an unusual role as being a wholesaler performing a distribution role
in a similar manner to the Glaxo agency scheme,” he adds.
“Over the past few years, manufacturers appear to be using more distributors
in the hospital sector,” he says. “From an NHS hospital perspective,
there doesn’t appear to be a significant impact.” He explains
that, in the past, hospitals have had contracts for products requiring
a single wholesaler distribution arrangement.
He adds: “I would imagine that UniChem’s service will be
excellent and that Pfizer will also closely monitor UniChem’s supply
performance to ensure that no shortages arise.”
However, Mr Phillips says the deal feels anti-competitive: “Small
independent wholesalers are far more vulnerable. How much damage is done
to these businesses when some 15 per cent of turnover is lost?” He
says that “anything that undermines the distribution network is
bad news for pharmacy”.
Mr D’Arcy says: “We are seeing a fundamental change within
the supply chain system and there will inevitably be adjustments to that.” Of
broad concern, he says, is: “Will there be unintended consequences
of this? And what will they be?” |
The
Pharmaceutical Journal