Distribution change affects supply chain balance of power

A new type of drug distributor is emerging in the U.K. and attempting to make its way into Europe. Its emergence, ironically, is the consequence of manufacturers adopting a direct-to-pharmacy model, in which they cut out distributors by selling to pharmacies using just a few logistics service providers for delivery.

But some manufacturers, unwilling to move all the way to the direct-to-pharmacy model, are finding a middle ground by reducing the number of their wholesalers and using the direct-to-pharmacy approach for certain products.

Pfizer uses a direct-to-pharmacy system in the U.K., says Pharmaceutical Technology Europe. It increases the drugmaker's supply chain control at the expense of drug wholesalers. Several other manufacturers have set up such systems in the U.K., and the concept is headed for Poland. AstraZeneca has been trying to implement the model there since 2009, but is meeting with some legal resistance.

Bayer Schering and Bristol-Myers Squibb are flying the fewer-wholesalers banner. European wholesalers have been ineffective at thwarting the model, the magazine says, largely because the few large distributors that become preferred partners of the drugmakers enjoy the guaranteed business it provides them. They are disinclined to oppose the change, leaving only the poorly organized, smaller distributors to fight for their business.

The distributor that emerges in this model comes from the consolidation of these large wholesalers executing their direct-to-pharmacy deals with manufacturers. As they become established through additional relationships and into new regions, they will assume greater control of the supply chain at the expense of pharma companies.

- here's the article

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