Pharmaceutical Supply Chain in Europe - Adoption of Direct to Pharmacy (DTP) Model to Boost Efficiency and Optimize Pricing

GBI Research, leading business intelligence provider, has released its latest research report, entitled “Pharmaceutical Supply Chain in Europe - Adoption of Direct to Pharmacy (DTP) Model to Boost Efficiency and Optimize Pricing”. The report focuses on the current scenario of supply chain management. Key participants in the pharmaceutical supply chain in Europe are covered in the report as well as issues such as pricing, labeling, packaging, warehousing, logistics, and distribution.

The number of full-line wholesaler in the UK is decreasing due to an increase in the adoption of alternate distribution systems such as DTP and RWA. A study conducted by the Institute for Pharmaeconomic Research (IPF) in 2010 revealed that Spain had the highest involvement of full-line wholesalers in the pharmaceuticals supply chain process, with 96% of total turnover in the country, while direct sales from manufacturers accounted for only 4%. France had the highest share of direct sales from manufacturers. In 2010, the DTP and RWA models had a high market share of 25% in the UK.

European member states have a lot of differentiation in the pricing of pharmaceuticals. As a result of national price controls and regulations, parallel traders get the opportunity to import pharmaceutical products between EU member states. This provides an opportunity to traders to buy pharmaceutical products in low-price member states and re-sell them in high-price areas, resulting in huge profits.

According to the European Federation of Pharmaceutical Industries and Associations (EFPIA) the nature of parallel trade is such that it greatly complicates the traditional route of supply where quality control is effectively checked at all stages. Examples reported by research-based pharmaceutical companies highlight a series of safety and quality problems arising from the handling of pharmaceutical products by parallel traders, in addition to logistic problems and regular product shortages in some countries where medicines simply do not find their way to patients in need. This raises not only serious safety issues in terms of patient consumption, but also acts as an obstacle in case of product recalls.

The total profit made by manufacturing companies, wholesalers and pharmacies has decreased due to several factors related to the respective level of supply chain processes. For manufacturing companies, the primary reasons for low returns are patent expiries, stringent regulations for new product approvals, economic turmoil, changes in demand patterns, and government pressure to reduce drug prices, among others.

Manufacturing companies are increasingly adopting new models of distribution, such as DTP and RWA, to cut out intermediaries and allow wholesalers to strategically becoming a part of new supply chain models. The government is increasingly keeping check on profit percentage margins leading to low profits for wholesalers over the past decade.

As a result, companies are now focusing on international levels with a primary focus on emerging markets to explore new market segments with segment-specific strategies.

Report Highlights
The European Pharmaceutical Supply Chain Branches Out.

Pharmaceutical companies are hiring a little help, and joining with Third Party Logistics (3PL), but are they abandoning too much control over their business, asks a new report by healthcare experts GBI Research.

The new report states that use of 3PL companies is a growing trend in the global pharmaceutical supply chain, as cost cutting measures encourage businesses to use outside companies, who can offer services at competitive prices. However, while Direct to Pharmacy (DTP) and Reduced Wholesaler Agreements (RWA) models play a vital role in the UK, other EU countries are boosting their direct sales, and only time will tell which approach will succeed.

Around 772 full-line wholesalers in Europe supplied pharmaceutical products to pharmacies, hospitals and doctors in 2010, according to the European Association of Pharmaceutical Wholesalers (GIRP). During this year, the overall sales turnover generated within EU-27 countries was valued at $180 billion. The Institute for Pharmaeconomic Research (IPF) concluded that over 703 million transactions took place between pharmaceutical full­line wholesalers, pharmacies and manufacturers every year within France, Germany, Italy, Spain, the Netherlands and the United Kingdom collectively.

However, the number of full-line wholesalers in the UK is decreasing due to a rise in the adoption of alternate distribution systems such as DTP and RWA. The impending absence of full-line wholesalers is expected to increase the number of transactions to 97.9 billion per year, and result in unnecessary transportation and delays for doctors who desperately need medicines.

Logistical help has been prevalent in the pharma industry for several years, as Merck’s partnership with United Parcel Service (UPS) in 2003 set the scene for business collaborations. UPS agreed to provide distribution and logistics services in the US, and this was later extended internationally. UPS Inc. now manages the distribution, warehousing and transportation of medicines and vaccines manufactured by Merck in North America, and according to the new deal, the company is set to additionally provide distribution, warehousing and transportation services for Merck in some Asian countries and Latin America, and transportation in Europe. While Merck benefit from a comprehensive delivery service, UPS have secured an enormous contact, and work in the upcoming pharma powerhouses of China and Brazil. However, does this deal signify a loss of control for Merck, as aspects of their business are run by another company?

A study conducted by IPF in 2010 revealed that Spain had the highest involvement of full-line wholesalers in the pharmaceuticals supply chain process, with 96% of total turnover in the country, while the DTP and RWA models had a high market share of 25% in the UK. Whether these two differing approaches lead to disparity between the Europe’s quality of healthcare remains to be seen.

*Pharmaceutical Supply Chain in Europe - Adoption of Direct to Pharmacy (DTP) Model to Boost Efficiency and Optimize Pricing

This report provides an in-depth analysis on the current scenario of supply chain management. Key participants in the pharmaceutical supply chain in Europe are covered in the report as well as issues such as pricing, labeling, packaging, warehousing, logistics, and distribution.

This report is built using data and information sourced from proprietary databases, primary and secondary research and in-house analysis by GBI Research’s team of industry experts.