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