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

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Pharmaceutical Supply Chain in Europe - Adoption of Direct to Pharmacy (DTP) Model to Boost Efficiency and Optimize Pricing
Published: July 10, 2012 Content info: 78 Pages
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Summary

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.

Scope

  • Segmentation of pharmaceutical supply industry by its major components such as manufacturers, wholesalers and pharmacies.
  • Key issues and unmet needs of the pharmaceutical supply chain in Europe.
  • Analysis of strategies adopted by pharmaceutical manufacturers and wholesalers to stay competitive in the current scenario
  • Key parameters that are considered for choosing a pharmaceutical supply vendor.
  • Profile of key companies which deal in pharmaceutical supply chain management.
  • Analysis of factors which are considered for outsourcing pharmaceutical supply chains to other companies.

Reasons to buy

  • Decide on the existing market scenario in pharmaceutical supply chain management.
  • Analyze the requirements for regulatory compliance for pharmaceutical supply chain management.
  • Gain knowledge of the key challenges and unmet needs of the pharmaceutical supply chain in Europe.
  • Develop strategies for quality control of pharmaceutical supply materials.
  • Develop risk mitigation strategies to enhance risk management.

Executive Summary

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.

Table of Contents

Table of Contents

1. Table of Contents

  • 1.1. List of Tables
  • 1.2. List of Figures

2. Pharmaceutical Supply Chain in Europe - Introduction

3. Pharmaceutical Supply Chain in Europe - Overview

  • 3.1. Introduction
  • 3.2. Structure of Supply Chain - Channels of Distribution
    • 3.2.1. Manufacturers - Pharmaceutical Companies
    • 3.2.2. Wholesalers
    • 3.2.3. Pharmacies
    • 3.2.4. Parallel Traders
  • 3.3. Evolution of Pharmaceutical Supply Chain in Europe
    • 3.3.1. The Traditional method
    • 3.3.2. Direct-to-Pharmacy (DTP) model

4. Pharmaceutical Supply Chain in Europe - Industry Dynamics

  • 4.1. Introduction
    • 4.1.1. Current Scenario
    • 4.1.2. Breakdown of the Retail Price of a Medicine
  • 4.2. Pharmaceutical Manufacturers
    • 4.2.1. Label Supply Chain
    • 4.2.2. Raw Material Supply Chain
    • 4.2.3. Third Party Logistics (3PL)
    • 4.2.4. Production Supply Chain
    • 4.2.5. Distribution Supply Chain
    • 4.2.6. Reversed Supply Chain
    • 4.2.7. Profit % for Pharmaceutical Manufacturing Company
  • 4.3. Wholesale Distributors
    • 4.3.1. Current Scenario
    • 4.3.2. Split of Turnover of Distribution Channels
    • 4.3.3. Time of Delivery and Total Number of Deliveries per Week
    • 4.3.4. Distribution Margin
    • 4.3.5. Discounts
  • 4.4. Pharmacies
    • 4.4.1. Horizontal and Vertical Integration
  • 4.5. Direct-to-Pharmacy (DTP) Distribution
  • 4.6. The Impact of the Distribution Chain on Prices
  • 4.7. Policies to Encourage Generic Pharmaceuticals

5. Pharmaceutical Supply Chain in Europe - Principles of Pharmaceutical Supply Chain Management

  • 5.1. Management Systems
    • 5.1.1. Commitment and Accountability
    • 5.1.2. Legal and Customer Requirements
    • 5.1.3. Risk Management
    • 5.1.4. Documentation
    • 5.1.5. Training and Competency
    • 5.1.6. Continual Improvement
  • 5.2. Ethics
    • 5.2.1. Business Integrity and Fair Competition
    • 5.2.2. Identification of Concerns
    • 5.2.3. Animal Welfare
    • 5.2.4. Privacy
  • 5.3. Labor
    • 5.3.1. Freely Chosen Employment
    • 5.3.2. Child Labor and Young Workers
    • 5.3.3. Non-Discrimination
    • 5.3.4. Fair Treatment
    • 5.3.5. Wages, Benefits and Working Hours
    • 5.3.6. Freedom of Association
  • 5.4. Health and Safety
    • 5.4.1. Worker Protection
    • 5.4.2. Process Safety
    • 5.4.3. Emergency Preparedness and Response
    • 5.4.4. Hazard Information
  • 5.5. Environmental Protection
    • 5.5.1. Environmental Authorizations
    • 5.5.2. Waste and Emissions
    • 5.5.3. Spills and Releases

6. Pharmaceutical Supply Chain Industry - Key Issues

  • 6.1. Introduction
  • 6.2. Parallel Trade
    • 6.2.1. Percentage Share of Parallel Imports among EU Countries in Pharmacy Market Sales
    • 6.2.2. Supply Quota Systems (SQS)
    • 6.2.3. Dual pricing systems
  • 6.3. Counterfeits
    • 6.3.1. New Directive by EU Commission for Falsified Medicines
  • 6.4. Difference in Price Regulation
  • 6.5. Packaging Variations
  • 6.6. Variation in Applicable VAT Rates
  • 6.7. Difference in Registration Procedure
    • 6.7.1. GSK- Case Study
  • 6.8. Difference in Marketing Authorization
    • 6.8.1. GSK- Case Study
  • 6.9. Lag in Technological Adoption
    • 6.9.1. GSK- Case Study
  • 6.10. Specific Market Labeling
    • 6.10.1. Repackaging and Relabeling of Products
  • 6.11. EU Draft Guidelines on GDP in Europe
    • 6.11.1. Introduction
    • 6.11.2. Problem
  • 6.12. Tendering
  • 6.13. Disruption in Supply Chain- Case Study
    • 6.13.1. Drug Shortages in Europe - The UK

7. Pharmaceutical Supply Chain in Europe - Strategies Shift in the Business Model

  • 7.1. Introduction
  • 7.2. Factors Leading to Changes in the Business Models of Pharmaceutical Companies in Mature Markets
    • 7.2.1. Diminishing Revenues in Mature Markets Due to Patent Expiries of Blockbuster Drugs
    • 7.2.2. Rising Competition in Mature Markets and Rapid Growth of Pharmaceutical Sales in Emerging Countries
    • 7.2.3. Rising imports
    • 7.2.4. Point of Delivery
    • 7.2.5. Requirement of New Packaging Practices
    • 7.2.6. Pricing Pressures
    • 7.2.7. Patient Centric- B2C Supply Chain
  • 7.3. Strategies to Evolve Supply Chains
    • 7.3.1. Introduction
    • 7.3.2. Entering Emerging Markets
    • 7.3.3. Free Trade Agreements to Generate Cost Savings
    • 7.3.4. Raw Material Procurement Strategies
    • 7.3.5. Distribution Cost Reduction
    • 7.3.6. Strategic Sourcing Models
    • 7.3.7. Supply Chain Agility
    • 7.3.8. Centralized Supply Chain and Local Logistics Presence
  • 7.4. Examples of Change in Supply Chain Arrangements in the UK

8. Pharmaceutical Supply Chain In Europe - Risk Management

  • 8.1. Market Risks
    • 8.1.1. Economic Risks
    • 8.1.2. Regulatory Risks
    • 8.1.3. Specific Market Risks
  • 8.2. Corporate Strategy Risks
  • 8.3. Operating Business Risks
    • 8.3.1. Interruption of Operating Business
    • 8.3.2. Counterfeit Pharmaceuticals
    • 8.3.3. Dispensing Errors
    • 8.3.4. Incorrect Handling of Medicines in the Logistics Chain
  • 8.4. Financial Risks
    • 8.4.1. Currency Risks
    • 8.4.2. Risk of Default on Receivables
    • 8.4.3. Liquidity and Financing Risks
    • 8.4.4. Interest Rate Risks
    • 8.4.5. Counterparty Risks from Derivatives
    • 8.4.6. Measurement Risks
  • 8.5. Information Technology (IT) Risks
  • 8.6. Personnel Risks
  • 8.7. Legal Risks

9. Pharmaceutical Supply Chain In Europe - Drivers and Restraints

  • 9.1. Drivers
    • 9.1.1. Free Trade Policy
    • 9.1.2. DTP Model
    • 9.1.3. Universal Health Care
    • 9.1.4. New Directive on Counterfeit Medicines
  • 9.2. Restraints
    • 9.2.1. Parallel Imports
    • 9.2.2. Differences in Price Regulation
    • 9.2.3. Differences in Packaging Variations
    • 9.2.4. Differences in VAT rates

10. Pharmaceutical Supply Chain In Europe - Company Profiles of Leading Wholesalers

  • 10.1. Celesio Group
    • 10.1.1. Pharmacy Solutions
    • 10.1.2. Patient and Consumer Solutions
    • 10.1.3. Manufacturer Solutions
  • 10.2. Alliance UniChem in Europe
    • 10.2.1. Pharmaceutical Wholesaling and Distribution
  • 10.3. PHOENIX Pharmaceutical Activities in Europe
    • 10.3.1. Wholesale Business
    • 10.3.2. Retailing
    • 10.3.3. Supplier Services
    • 10.3.4. Subsidiaries

11. Pharmaceutical Supply Chain Industry in Europe - Company Profiles of Leading Logistic Providers

  • 11.1. UPS
  • 11.2. DHL

12. Pharmaceutical Supply Chain in Europe - Appendix

  • 12.1. Market Definitions
  • 12.2. Abbreviations
  • 12.3. Bibliography
  • 12.4. Research Methodology
    • 12.4.1. Coverage
    • 12.4.2. Secondary Research
    • 12.4.3. Primary Research
    • 12.4.4. Expert Panel Validation
  • 12.5. Contact Us
  • 12.6. Disclaimer

List of Tables

  • Table 1: Pharmaceutical Supply Chain in Europe, Top Five Countries in Europe, Split of Turnover of Distribution Channels in Respective Countries (%), 2010
  • Table 2: Pharmaceutical Supply Chain in Europe, Number of Deliveries per Week and Time Taken for Each Delivery (Hours), 2010
  • Table 3: Pharmaceutical Supply Chain in Europe, Discount Rates Offered by Wholesalers (%), 2010-2011
  • Table 4: Pharmaceutical Supply Chain in Europe, Total Number of Pharmacies in EU-32, 2011
  • Table 5: Pharmaceutical Supply Chain in Europe, Pharmacist Remuneration Systems for Reimbursed Generic Medicines in Europe, 2011
  • Table 6: Pharmaceutical Supply Chain in Europe, Overview, Share of Parallel Imports in Pharmacy Market Sales (%) 2009
  • Table 7: Pharmaceutical Supply Chain in Europe, VAT Rates for Outpatient Prescription Medicines, 2009
  • Table 8: Pharmaceutical Supply Chain in Europe, Import and Export in European Pharmaceutical Industry ($bn), 2009-2011
  • Table 9: Pharmaceutical Supply Chain in Europe, The UK, Companies Implementing Distribution Changes in the Supply Chain Model, 2011-2012
  • Table 10: Pharmaceutical Supply Chain in Europe, Company Profile of Leading Wholesalers, Celesio, Full-Line Wholesaler Brands, 2012
  • Table 11: Pharmaceutical Supply Chain in Europe, Company Profile of Leading Wholesalers, Celesio, Pharmacy Trademarks, 2012
  • Table 12: Pharmaceutical Supply Chain in Europe, Company Profile of Leading Wholesalers, Celesio, Business Marketing and Logistics Trademarks, 2012

List of Figures

  • Figure 1: Pharmaceutical Supply Chain in Europe, Overview, Supply Chain Structure, 2012
  • Figure 2: Pharmaceutical Supply Chain in Europe, Overview, Customized Supply Chain Structure, 2012
  • Figure 3: Pharmaceutical Supply Chain in Europe, Overview, Breakdown of The Retail Price of A Medicine (%), 2010
  • Figure 4: Pharmaceutical Supply Chain in Europe, Overview, Breakdown of the Retail Price of A Medicine (%), 2009
  • Figure 5: Pharmaceutical Supply Chain in Europe, Manufacturer's Role in the Pharmaceutical Supply Chain, 2011
  • Figure 6: Pharmaceutical Supply Chain in Europe, Profit for Pharmaceutical Manufacturing Company, %, 2011
  • Figure 7: Pharmaceutical Supply Chain in Europe, Market Share of Full-Line Wholesalers, 2010
  • Figure 8: Pharmaceutical Supply Chain in Europe, Top five Countries in Europe, Split of Turnover of Distribution Channels in Respective Countries (%), 2010
  • Figure 9: Pharmaceutical Supply Chain in Europe, Number of Deliveries per Week and Time Taken for Each Delivery (Hours), 2010
  • Figure 10: Pharmaceutical Supply Chain in Europe, Working Capital Flow Through Supply Chain, 2010
  • Figure 11: Pharmaceutical Supply Chain in Europe, Wholesale Distribution Margin, 2009-2010
  • Figure 12: Pharmaceutical Supply Chain in Europe, Total Number of Pharmacies in EU-32, 2011
  • Figure 13: Pharmaceutical Supply Chain in Europe, PSCI Founding Members, 2012
  • Figure 14: Pharmaceutical Supply Chain in Europe, Principles of Pharmaceutical Supply Chain Management, 2007
  • Figure 15: Pharmaceutical Supply Chain in Europe, Overview, Share of Parallel Imports in Pharmacy Market Sales (%) 2009
  • Figure 16: Pharmaceutical Supply Chain in Europe, Case Study
  • Figure 17: Pharmaceutical Supply Chain in Europe, Case Study
  • Figure 18: Pharmaceutical Supply Chain in Europe, Case Study
  • Figure 19: Pharmaceutical Supply Chain in Europe, Case Study
  • Figure 20: Pharmaceutical Supply Chain in Europe, Case Study, 2011
  • Figure 21: Pharmaceutical Supply Chain in Europe, Factors Leading to Changes in the Business Models of Pharmaceutical Companies in Mature Markets, 2012
  • Figure 22: Pharmaceutical Supply Chain in Europe, Import and Export in European Pharmaceutical Industry ($bn), 2009-2011
  • Figure 23: Pharmaceutical Supply Chain in Europe, Global Supply Chain Model, 2012
  • Figure 24: Pharmaceutical Supply Chain in Europe, Using Free Trade Agreements to Generate Cost Savings, 2012
  • Figure 25: Pharmaceutical Supply Chain in Europe, Raw Material Procurement, 2012
  • Figure 26: Pharmaceutical Supply Chain in Europe, Reforming Costs by Optimizing Cash Flow and Working Capital Structure, 2012
  • Figure 27: Pharmaceutical Supply Chain in Europe, Strategic Sourcing Model, 2012
  • Figure 28: Pharmaceutical Supply Chain in Europe, Case Study, 2011
  • Figure 29: Pharmaceutical Supply Chain in Europe, Agile Supply Chain, 2012
  • Figure 30: Pharmaceutical Supply Chain in Europe, Centralized Supply Chain and Local Logistics Presence, 2012
  • Figure 31: Pharmaceutical Supply Chain in Europe, Risk Management, 2012
  • Figure 32: Pharmaceutical Supply Chain in Europe, Drivers and Restraints, 2012
  • Figure 33: Pharmaceutical Supply Chain in Europe, Company Profiles of Leading Wholesalers, Celesio, 2012
  • Figure 34: Pharmaceutical Supply Chain in Europe, Company Profile of Leading Wholesalers, Alliance Healthcare, 2012
  • Figure 35: Pharmaceutical Supply Chain in Europe, Company Profile of Leading Wholesalers, Phoenix Healthcare, 2012
  • Figure 36: Pharmaceutical Supply Chain in Europe, Company Profiles of Leading Logistic Providers, UPS, 2012
  • Figure 37: Pharmaceutical Supply Chain in Europe, Company Profiles of Leading Logistic Providers, DHL, 2012
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