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Pharmaceutical Supply chain strategies - Reassessing product distribution to cut costs and improve supply chain management

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Report Summary

Introduction

Ideally drug supply should be a simple and transparent chain that connects the manufacturer and patient in as few steps as possible, however in practice it can be a highly circuitous one that includes several intermediaries before reaching a pharmacy. This increases the risk of counterfeit drugs and facilitates parallel trade, both leading to lost sales for the manufacturer.

Scope

  • An overview of the drug supply chain in Europe and the US.
  • Identification of the key players in the drug supply chain.
  • Coverage of recent trends and key events in the distribution industry.
  • Analysis of the impact of new events on the key stakeholders.


    • Highlights

    With the trend towards market expansion, higher drug volumes must be transported further, necessitating the use of logistics coordination on a global scale. As distribution needs increase, the knock-on effect of state-enforced cost-containment strategies are reducing already tight margins, forcing many stakeholders to change their strategy.

    Manufacturers are looking to gain greater control over the drug supply chain, to safeguard it against counterfeit entry, but also to regulate drug supply and therefore limit diversion. The most progressive events have occurred in the UK, where Pfizer has implemented direct to pharmacy distribution, with other companies likely to follow suit.

    Competitive pressures have and will continue to drive consolidation along the supply chain, with vertical integration providing a means of extending control and limiting margin loss. A relaxation in pharmacy laws in Europe will lead to an increase of chains, while wholesaler-pharmacy and manufacturer-pharmacy combinations are becoming common.

    Reasons to Purchase

  • Gain an understanding of the pharmaceutical supply chain in the US and Europe, and who the key players are.
  • Become aware of new issues in the distribution industry, and how they influence the major stakeholders.
  • Gain an insight into current trends in distribution, and how they are likely to change going forward.

    • Table of Contents

    CHAPTER 1 EXECUTIVE SUMMARY 4
    Scope of the report 4
    Key findings 4
    CHAPTER 2 SUPPLY CHAIN OVERVIEW 9
    Why worry about the drug supply chain? 9
    The US Supply Chain 10
    Manufacturers wield most power in setting drug price in the US 10
    Wholesalers are the primary buyers for manufacturers 11
    Pharmacies are at the interface of the supply chain and patient 12
    Pharmacy Benefits Managers - a crucial link in the US supply chain 13
    The UK Supply Chain 14
    Drug list price is regulated by the PPRS 15
    Wholesalers compete to acquire pharmacist contracts 15
    The government reimburses pharmacists at list price 16
    Differences in drug distribution between the US and EU 17
    CHAPTER 3 DRUG DIVERSION 18
    The grey market in the US 19
    The illegal importation of drugs into the US 20
    Parallel trade in Europe 21
    Counterfeits enter UK via parallel trade channels 21
    EU focus on parallel trade and counterfeit drug link 22
    Strategies to tackle diversion 23
    Greater regulation of the pharmaceutical supply chain 23
    e-pedigree roll out in 2009 in California 24
    Drug supply restrictions are effective but can lead to domestic shortfalls 25
    Dual pricing initiatives 26
    Tighter supply chains - direct to pharmacy distribution is gaining traction 28
    GSK sets the ball rolling in the UK 29
    Pfizer goes further by introducing exclusive distribution 29
    Sanofi-Aventis and AstraZeneca introduce DTP in the UK 32
    Implications of the DTP scheme for the UK 32
    CHAPTER 4 THE SUPPLY CHAIN GOING FORWARD 38
    Market expansion 39
    Intellectual property and European Union expansion 39
    Drug registration 40
    Parallel trade in the European Union 41
    Parallel trade implications beyond the EU 41
    Manufacture outsourcing 42
    More complex drugs with more complex distribution needs 43
    The trend towards consolidation 45
    Wholesale industry under increasing pressure 46
    Infiltration of the PBM business 47
    Innovators fail to make PBM acquisitions a success 47
    CVS and Caremark merger 48
    Wal-Mart's foray into pharmacy benefit management 48
    Growth in private label brands 49
    Relaxation in pharmacy outlet laws 49
    Differences between US versus EU distribution 50
    US retailers leave wholesalers with little net margin 51
    US manufacturers subsidize distribution 51
    European retailers have less power 52
    CHAPTER 5 BIBLIOGRAPHY 53
    Publications and online articles 53
    Datamonitor resources 60
    APPENDIX 61
    Abbreviations 61
    Exchange rates 62
    List of Tables
    Table 1: Exchange rates, 2007 62
    List of Figures
    Figure 1: Drug and monetary flow in the US supply chain 10
    Figure 2: The UK pharmaceutical supply chain 14
    Figure 3: UK retail pharmacies, 2006 16
    Figure 4: US pharmaceutical grey market 19
    Figure 5: Drivers and strategies to tackle, drug diversion 23
    Figure 6: UK pharmaceutical distribution channels 28
    Figure 7: Expansion of wholesaler services 34
    Figure 8: Factors impacting on the future drug supply chain 38
    Figure 9: Consolidation within the supply chain 45