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OFT investigates UK drug distribution

The OFT has launched a market study today into the distribution of medicines in the UK following Pfizerís exclusive deal with Unichem at the beginning of March 2007

The Office of Fair Trading (OFT) has launched a market study today into the distribution of medicines in the UK following Pfizerís exclusive deal with Unichem at the beginning of March 2007.

The OFT is carrying out the study to determine how recent and proposed changes to drug distribution affect competition, the NHS and patients. The final report is due by the end of 2007.

"This is an important market study in one of the OFT's priority sectors. Recent changes in the distribution arrangements for some medicines have caused great concern to many in the market. It is important for us to understand the likely impact of these changes on patients and costs to the NHS," said Ann Pope, OFT Director in Markets and Projects. The NHS currently spends over GBP 10bn (EUR 14.8bn) a year, with Pfizer its single largest supplier.

The market study will consider all competition issues in the market and will focus on Pfizerís new distribution arrangements as well as other companiesí proposed changes.

"Pfizer is pleased to note that the OFT has not launched a formal investigation into Pfizer's medicine supply and distribution arrangement at this time and we will continue to sell our medicines directly to pharmacy customers using UniChem as our logistics service provider," said a Pfizer spokesperson.

The OFT intends to examine the following:

  • Motivation for the direct to pharmacy model and its impact on competition and choice in wholesaling
  • Motivation for exclusive arrangements and their long term impact on competition
  • Incentives created by sector specific regulations
  • Potential impact of the different distribution models on the following: the appropriation of the discounts secured by pharmacies and the NHS; and service levels provided to patients

"We will consider how the changes in this market are influenced by sector specific regulations, parallel trade and counterfeit products," said the OFT.

The OFT said it had received complaints regarding supply changes from pharmacists, dispensing doctors and competing wholesalers. When Pfizer announced its deal with Unichem, wholesalers and doctors took Pfizer to the UK High Court, in a bid to thwart the deal, but were unsuccessful.

Pfizer changed its distribution model to halt counterfeits and secure its supply chain and is so far pleased with the success of the system. A Pfizer spokesperson said: "Three weeks into the new model, over 97 per cent of pharmacy customers have opened a trading account with Pfizer and over 85 per cent of these customers have placed orders and received deliveries of our prescription medicines. Pharmacy customers are receiving a very high level of service trading directly with us, with over 99 per cent of deliveries being made on time and in full."

Novartis is also considering changes to its supply chain and says it should reach a decision by the summer whether it should change its current supply chain arrangements in the UK to a direct-to-pharmacy model.

The company has sent out letters to several wholesalers and logistics companies, saying it is considering a direct-to-pharmacy arrangement, using the wholesalers only as a logistics provider and paying them a fee for their services. This would mean Novartis would deal directly with pharmacies, hospitals and doctors.

"We are considering a new system as the role of the pharmacist is increasing in healthcare because of the Governmentís pharmacy plans ñ we want to get closer to that customer group," a Novartis spokesperson told Pharmaceutical Marketing.

No decisions have been made, however, and Novartis plans to consult with a wide range of stakeholders, including community pharmacists, before deciding whether to change to a new system.

4th April 2007

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