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Driving collaboration

Mark Stephenson believes that only through partnership can industry tackle the shortfalls in drug supply

Hand adding the 'h' into 'partnership'This year the UK pharmaceutical industry has been hit by one of the worst shortages of medicines in many years. The issue has generated widespread debate among those working within the pharmaceutical supply chain and the argument, which has even generated headlines in the national press, has driven strong opinion from both manufacturers and pharmacists as to exactly who's to blame.

Wholesalers such as Alliance Healthcare have been positioned right in the middle of this debate, looking to balance the opposing opinions between customers at either end of the supply chain. Manufacturers and trade bodies strongly believe that the problems lie in the practice of pharmacists exporting UK medicines to Europe, something widely practiced in other EU countries when the exchange rate was in favour of the Sterling Pound. Then there are the views of some pharmacists, who believe that parallel trade is a perfectly legal practice and that manufacturer quotas are largely to blame for the shortages. They argue that a simple solution can be found by manufacturers increasing the level of stock being put into the UK supply chain to meet the current demand. But with manufacturers already putting more product into the market than ever before, is this too simplistic a solution?

Parallel trade issues
Parallel trading is certainly not a new phenomenon to the UK market. Many would argue that for years we benefited from parallel importing and that the NHS even encouraged it as a cost-effective way of managing the ever-increasing medicines bill. With the tables now turned, it is clear that the stock we do have in the UK needs to be managed responsibly and, understandably, manufacturers, among others, are asking whether high volume exporting can really be justified if it is to the detriment of the UK patient.

It is, in fact, only a small minority of pharmacists (between 5 per cent and 10 per cent depending on your source) that is exporting a relatively small number of products (approximately 200 lines). Nevertheless, the quantities of product being traded seem to be creating significant disruption to the UK market.

Here wholesalers and manufacturers have an important role to play to ensure that, where there is evidence of stock exporting, the hot spots are targeted and the leakages properly managed. However, it will be a tricky balancing act to ensure the practices of a few are not to the detriment of the majority.

Manufacturer quotas
Given this, it could be argued that the approaches taken by some manufacturers on quotas is not really solving the problem and that blanket quotas on stock can, in fact, exacerbate problems on products that, for whatever reason, are already in short supply. One concern is that some quotas are encouraging panic buying from the silent majority of pharmacists who aren't parallel trading, but who are under pressure from their own patients to ensure continuity of supply on what could be a lifesaving medicine. Therefore, in order to retain customers, pharmacists will look to obtain any stock they can. This has also been demonstrated by the increased number of emergency orders being placed by pharmacists, which is a costly and inefficient solution to a widespread problem.

There are also those who have argued that new supply chain models, such as Direct to Pharmacy, are in fact to blame for some of the problems we face, and that reduced choice is making it harder for pharmacists to source medicines for their patients.
From our perspective, we do not believe this to be the case. Our service level data demonstrate that, where Alliance Healthcare is involved in new supply chain models such as these, service levels are significantly better. This is for three reasons:

1. The manufacturers themselves have more visibility of stock
2. The supply chain works more smoothly as better data enable better forecasting
3. Where there are supply problems, it is easier for two or three wholesalers (rather than 10 or 20) to work with a manufacturer to pinpoint any issues and find ways of resolving them quickly and effectively.

Working in partnership
The recent news that various industry trade bodies are in talks to find a solution is encouraging. However, our concern is that, up until now, much of the focus has been on placing blame rather than looking for a solution. Simply attributing responsibility to one source or another does not tackle the problem and if the debate continues as it has done so far, we are unlikely to find a resolution any time soon. So instead of pointing the finger, we should be following the example of our trade bodies and working together to find a mutually acceptable resolution that has, first and foremost, the needs of the UK patient at its heart.

When Pfizer first launched its Direct to Pharmacy model in 2007, Alliance Healthcare (or UniChem as it then was) took the decision to adapt its business model and view manufacturers as customers in the same way that it had  done historically with its pharmacy customers.

There were many reasons for adopting this new business model, one of the most important of which was to strengthen the links between the two ends of the supply chain. This would ensure that when we were faced with problems, challenges, or opportunities, we could work together in close partnership to find a solution that was in the interests of the UK patient. At the same time, this ensured continued viability for each of the stakeholders across the supply chain. In terms of the current issues faced through medicine shortages, we believe that now, more than ever, these links provide us with a good basis to work together and find a practical solution.

Looking to Europe
We can't control the exchange rate, but looking more closely at the examples of other European countries affected by parallel exporting when the Sterling Pound was stronger could provide some answers. When the practice caused similar problems in these countries, manufacturers and wholesalers worked together and put detailed systems in place to manage parallel trade better. While small levels of parallel trade were inevitable, having more transparency, in terms of sharing of data, helped manufacturers and wholesalers to identify and target areas where significant problems were occurring. Once certain that an appropriate system was in place, manufacturers were comfortable putting more product into the supply chain, ensuring that the level of medicines available met the needs of the local patient better.

Government involvement
There are those who believe that only the government can find a solution for the industry and there are others who believe that the Office of Fair Trading (OFT) should reinvestigate whether the supply chain is working in the interests of the wider health sector. On these points, we need to be very careful. First, the OFT is here to investigate commercial issues and we do not believe this is the root cause of the stock availability problem. Furthermore, if the Department of Health were to become involved, then this should not be to the detriment of its current focus on managing the H1N1 epidemic. This is why we think it is up to the industry to find a solution.

So, at the current time, we find ourselves in a continued stalemate situation and, while our respective trade bodies are in talks to find a solution, there are still some who need to be convinced that we can, in fact, find a way forward.

At Alliance Healthcare, we believe that constructive and collaborative discussion between the industry stakeholders themselves is the best way to ensure that patient safety is not compromised. We will continue to work closely with manufacturers and pharmacists, as well as the British Association of Pharmaceutical Wholesalers (BAPW) and other industry trade bodies, in the belief that we have solutions to help manufacturers alleviate most of the current problems. We are confident that by building trust we can work together to find a way forward.

Mark Stephenson - commerical healthcare director with Alliance Healthcare


The Author
Mark Stephenson joined Alliance Healthcare in 2003 as head of strategy and marketing and was promoted to the role of marketing director in January 2005. He took up the post of commercial and supplier relations director in 2007, and in 2009 was appointed to the role of commercial healthcare director. Today Mark heads a team that is dedicated to all key areas of new business development within Alliance Healthcare. This includes manufacturer supply chain changes, homecare services and the UK arm of Alphega Pharmacy, Alliance Healthcare's pan-European network of independent pharmacists.

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2nd December 2009


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