Direct-to-pharmacy Supply Chain Model Could Optimize Efficiency, 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.