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Team players

Pharma and wholesalers need to work together to develop patient-centred initiatives

A drawing of a motorcycle display team creating a pyramidOver the last five years, the pharmaceutical supply chain in Europe has been through some of the most significant market changes in more than 40 years. These changes, in addition to other market forces, have driven manufacturers and wholesalers to develop and implement new business models. For example, sector players are increasingly tailoring their activities more directly to meet the growing needs of stakeholders – particularly payers and patients.

The changes Pfizer made to its UK distribution model in early 2007 represented a landmark stage in this process. The implementation of its direct-to-pharmacy (DTP) supply model was aimed at gaining greater visibility and assurance of the supply route for its products. Initially, it was met by considerable resistance in the pharmacy market. However, the trend of introducing new distribution models has carried on and almost three years later, the number of manufacturers that has changed their supply chain in the UK continues to rise.

By changing their models, manufacturers are trying to protect the authenticity of product supply, while at the same time developing closer working relationships with stakeholders further along the supply chain.

The global economic downturn is likely to accelerate the process of supply chain change even further, by intensifying pressure on healthcare payers to provide patients with systems that offer improved value for money.

Consolidation of the market, particularly in the last 18 months, has also had a significant impact on the sector, as has increased competition due to medicines coming off patent and the subsequent growth of the generics market. In essence, manufacturers and wholesalers are now meeting the challenge of how to preserve revenue in the face of a diminishing stream of high-margin blockbuster products in the ethical market.

All of this has come in the face of an ageing demographic and increasing patient demand on a global scale.

In parallel, as costs increase and  healthcare markets evolve, the pharmacy sector across Europe has faced its own unique set of challenges – particularly in terms of the impact of significant and continued reductions to government reimbursement on prescription medicines. As a frontline provider of patient medicines and related services, pharmacy is now increasingly reliant on support and engagement from private sources, such as manufacturers, to counteract the pressures they face.

Shifting sands
The experiences of the European pharmaceutical market in the last five years have driven, and continue to drive, the pace of change – encouraging businesses that operate within this market to face up to the challenges and re-shape the ways in which they do business. Consequently, the UK supply chain continues to evolve and other European markets are now moving towards a new model, which benefits from supply chain stakeholders working closely together, to adapt to changing market forces and develop a more integrated supply chain that has a 'pallet to patient' approach.

Like manufacturers, wholesalers have been required to respond to these market changes and evolving customer needs. One of the biggest challenges over the last few years has been successfully anticipating the pace and direction of change across the pharmaceutical sector as it takes place in each of the markets in which they operate.

As a wholesaler, Alliance Healthcare took steps to anticipate change some years ago to ensure that wholesaling and its different manifestations could have an even greater role within the pharmaceutical supply chain. Our approach has been that building closer links with stakeholders will enable stronger, more successful supply chain partnerships.

New business model
Alliance Healthcare has been acutely aware of the profound changes in the healthcare sector and has conceived, developed and implemented a modern business model which is designed to strengthen our working partnership with manufacturers and our other numerous stakeholders within the supply chain. The UK was the first country to adopt this model, but as the markets evolve in other European countries, we are also making changes to our business in these markets.

The new business model was designed to take into account the European and global forces faced by all, while at the same time ensuring that any new model can be tailored to meet the needs of the specific domestic market.

One constant is, and will always be, the patient. The focus on patients is a must for all supply chain stakeholders and emerging new healthcare models must be patient-centred.

This is why primary care is becoming more important compared to secondary care in terms of pharmaceutical wholesale. In the traditional distribution model, pharmaceutical wholesaling was simply the intermediary between the manufacturers and the pharmacy in the supply chain, in a mainly transactional logistic role. A transformation process had to be initiated in order to see how manufacturers and wholesalers could implement a service that would address cost challenges while satisfying patients who are ever more attentive, informed, knowledgeable and, therefore, harder to satisfy.

Wholesalers, as a result, are moving away from being mere logistics players. In the case of Alliance Healthcare, we have developed to become a business that has invested in commercial and marketing activities focusing on the patient, and also in specialist areas such as Homecare.

As the middlemen in the supply chain, wholesalers have had to develop proactive and flexible ways of working to satisfy the needs of manufacturers while better managing the continued changes that governments challenge us with daily, for example through the reduction of ethical and/or generic prices and, subsequently, supply chain margins.

What of the future?
As an industry we will continue to be affected by significant challenges in the years to come. In particular, the level of public debt that is increasing drastically in countries such as France and Germany (which were solid up to a few years ago) will add further pressures which we must address sooner rather than later.

Less dependence
New business models continue to grow, and we need to work together to develop initiatives that are not so dependent on public sector money. For example, the increase in the number of prescription medicines available for sale in pharmacies represents a fantastic opportunity for stakeholders across the sector to work in partnership and, ultimately, to help improve the quality of healthcare in the communities they serve.

Wholesalers can play an important role by working with manufacturers to ensure that when a new product is launched in Europe, it can be delivered in, and supported by, a compliant model in the region, which can adapt to the needs of the individual local markets.

A good example of how this can be achieved is evident in the work of Alphega Pharmacy, Alliance Healthcare's pan-European network of independent pharmacists, which offers manufacturers opportunities to improve the profile and distribution of their products to a wider network of independent pharmacists.

While it is recognised that manufacturers and wholesalers will continue to perform very different roles, it is clear that there will be many more opportunities for the two stakeholders to work more closley together. As our world continues to change and as the focus shifts further towards the needs of the patient, we must be ready to tackle this together. By working proactively and innovatively with each other to assess the opportunities we find in the market and make the correct choices, we will help each other to rise to the challenges of the future.

The Author
Ornella Barra is chief executive, Pharmaceutical Wholesale Division, Alliance Boots

To comment on this article, email

20th January 2010


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