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DPT distribution model limited in uptake

Barr for Poland, recent moves by UK pharmacompanies to distribute products direct to the pharmacy have not been copied in other European markets, finds a new report

Barr for Poland, the recent moves by major UK pharmaceutical companies to distribute their products direct to the pharmacy (DPT) have not been copied in other European markets, finds a new market report.

The report The Future of European Pharmaceutical Distribution: The Impact of DTP on Manufacturers and Wholesalers says that moves in the UK by major pharma companies to bypass wholesalers and supply to pharmacies through exclusive distribution partners have largely been successful and have not met with legal opposition from the authorities. 

The model, which was initiated by Pfizer in 2007, was expected to be rolled out in other major European markets, threatening the existence of many wholesalers.

"As the largest two pharmaceutical wholesale markets in the EU, France and Germany appeared to be likely targets," said Faiz Kermani, author of the report. "But, even by 2010 there were no signs that DTP was being explored in these countries." 

The report notes that while some pharmaceutical companies have adopted the DTP model, others have decided simply to reduce the numbers of wholesalers with whom they do business. Some observers believe that this type of arrangement is much quicker to implement than the DTP model.

"Reducing the number of wholesalers helps to reduce internal costs for manufacturers, and by dealing only with a few wholesalers may create more manageable business relationships," said Edwin Bailey, managing director of URCH Publishing, commenting on the report's findings. 

The power of distributors to resist change has proved limited, since these new models offer some wholesalers opportunities to quickly dominate the market. Essentially, for those wholesalers that become preferred partners for pharmaceutical companies, the new models guarantee business. Therefore, as these companies become enticed by deals their willingness to oppose changes in the supply chain will diminish and only companies that have lost out will be left to put up any resistance to manufacturers.

Surprisingly, Poland has adopted the DTP model, with AstraZeneca (AZ) being the pioneer for a new distribution system. AZ has selected Polska Grupa Farmaceutyczna, Torfarm and Farmacol to be its exclusive distribution partners. 

Up to seven other companies are believed to be selecting distribution partners in Poland as part of DTP agreements. This is predicted to re-shape the Polish wholesale market, which has already experienced a wave of consolidation, and put further pressure on smaller wholesalers. As initially happened in the UK, the DTP agreements in Poland face legal obstacles.

Poland's Main Pharmaceutical Inspectorate is of the opinion that such agreements violate provisions of the Pharmaceutical Law and the Law on Health Benefits, which requires wholesalers and manufacturers to ensure delivery on equal terms to all parties in the distribution chain. 

More information about this reportis available from URCH publishing

2nd August 2010

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