AstraZeneca has signalled an intention to join Pfizer in supplying its products to pharmacies and dispensing doctors through a single distributor, reports The Times today.

Dr Allan Tennant reports

13^{th of} December 2006

The DDA has spoken too an AstraZeneca spokesperson reacting to The Times story "AstraZeneca has undertaken an independent strategic review of the management of the supply chain for its medicines in the UK.  This has highlighted that there are a number of opportunities for AstraZeneca to improve the supply chain for our medicines in the UK. As a result of this initiative, AstraZeneca has approached a number of organizations who we believe are capable of working with AstraZeneca for the supply of our medicines in the UK."

The DDA had heard rumours that AZ may follow Pfizer for sometime and we believe other companies are also considering using one distributor for their products. However nothing in The Times news piece or AZ’s press statement proves that AZ are going down the same route as Pfizer and until the DDA has met with AZ representatives we believe it prudent not to add to speculation on AZ’s plans.

When the pharmacists negotiated their new contract in 2005, purchase profits became part of remuneration for dispensing, I did voice concerns that Pharmaceutical Companies may take a negative view on their discounts paying for the dispensing process. Taking more control of the supply chain may be their way of them paying less for their products to be dispensed.

Pfizer’s main argument for a single supplier is to stop counterfeit products getting onto the market. AZ was unable to specify to DDA Online their reasons for changing their supply arrangements.

Using a single supplier for drugs gives pharmaceutical companies the ability to have more control over drug costs, discounts and level of service in order to increase their profitability. Customers will see lower wholesale discounts as volume with individual suppliers falls. The DDA have successfully encouraged Pfizer to increase their "wholesale discount" for dispensing doctors to 10.5% from the proposed 8.5%. Link

Monopoly
If one wholesaler obtains the contract for single distribution for Pfizer, AZ and another of the big players, a monopoly situation could arise. The alternative is the distribution of manufacturer contracts between the three major wholesalers. How will this impact on the smaller regional wholesalers? Will AZ’s decision affect the view taken by the Office of Fair Trading on Pfizer’s distribution plans? Can AAH have negotiations with pharmaceutical companies on single distributor contracts whilst referring Pfizer’s plans to the OFT?

David Taylor, Labour MP for North-West Leicestershire has written an Early Day Motion  in which he describes Pfizer’s plans as "anti-competitive, anti-community pharmacy, anti-patient and anti-NHS." MPs are concerned that single distributors could result in shortage of supplies and have obtained assurances from ministers that this will not occur.

Current Supply Problems
Members are telling us that they are having some difficulty obtaining Pfizer products from their wholesaler. They are also finding that over the last 3 months there has been an increase in the number of branded products which are difficult to obtain, manufactured by other companies. Wholesalers are telling their customers that they are receiving limited stock or they are receiving quotas from manufacturers. The wholesalers are indicating to their customers that the problems are with supply from manufacturers.

A Pfizer spokesperson told DDA Online "We continue to supply all wholesalers in the UK completely as normal. We are meeting their demands and we are not preferentially supplying Unichem. Pfizer has managed supplies to wholesalers for many years and this has not changed. The Pfizer-Unichem accounts will not go live until March `07." When asked about customer fears about the development of a distribution monopoly they said "We think it is unlikely to happen."

The implication is that wholesalers are stockpiling Pfizer drugs or preferentially supplying important customers to the detriment of others.

DDA Online have spoken to wholesalers who say stockpiling is not taking place and with the rapid movement of stock, would not make sense. They deny preferential treatment to certain customers. They do have problems with the manufacturer quota systems, but these are longstanding. They say that the manufacturers views on customer demand do not match actual demand.

What ever the validity of the arguments, some problems are occurring in the supply chain and The Times news story may cause problems to arise with AZ products.