The aim of this book is to identify the major drivers of change within the European healthcare systems and to evaluate risks and opportunities confronting pharmaceutical full-line wholesalers. These businesses are the most important link between pharmaceutical manufacturing and the point of sale providing one-stop-shopping for healthcare professionals across Europe. While on the one hand European governments are interested to ensure broad access to healthcare provision for the general public with a high level of quality, they are on the other hand concerned with limiting cost increases and with the need to cap healthcare spending. In addition, the pharmaceutical industry faces a strong need to cut costs by outsourcing non-core activities and establishing new routes to the customer, often bypassing the established supply chain. Changing healthcare environments across Europe ask for new strategies of pharmaceutical wholesalers to be fit for the future. This book deals with the advantages that can be derived from the changing landscape of healthcare provision. Aging populations, markets in transition, outsourcing activities of manufacturers and legal changes provide the potential to turn threats into opportunities and further develop the business model of pharmaceutical wholesaling. Even with profound structural changes in healthcare systems, pharmaceutical wholesalers are provided with significant potential to remain a vital part of the pharmaceutical supply chain and to prosper in the future.

Textprobe: Kapitel 3.4.1, Direct Deliveries: While shifting demographic structures will be a major growth driver in the future, sales growth is currently triggered by innovation. The introduction of innovative medicines at higher ex-factory prices supports a sustainable market development. Nowadays, innovative medicines are finding their way into the wholesale channel to a lesser extent, as some manufacturers have started to assess the potential of direct distribution as a method to increase the control of product flow and to gain access to end-consumers. A beneficial side effect, from a manufacturer’s perspective, is the limitation of parallel trade. Direct to pharmacy distribution models are gaining ground across Europe. In Germany, the share of direct distribution increased from 8 percent in 1997 to more than 16 percent in 2005. DTP distribution either bypasses wholesalers completely or includes wholesalers as pure trading agents on behalf of a manufacturer. In this case, wholesalers lose their original trading function and become an outsourcing partner of pharmaceutical manufacturers. In 2007, Pfizer was the first one to break up the traditional supply chain in the UK by exclusively distributing its Rx products through UniChem, a local wholesaler that belongs to Alliance Boots. This solus DTP model compels British pharmacies to engage in business relations with this wholesale company. Solus-DTP models not only decrease the overall efficiency of the supply chain but also increase the dependency of product availability and drug safety from one supplier only. The American fee for service compensation model is linked to the direct distribution of pharmaceuticals. In a fee for service model, wholesalers are providing their logistics network for the distribution of medicines but they are losing their original trading function. Instead of a margin-based compensation, they negotiate a fee for their services offered. Wholesalers no longer own the products but distribute them in the name of the respective manufacturer. Product ownership is transferred at the pharmacy. In 2007, Booz Allen Hamilton, an international strategy and technology-consulting firm, predicted that the market share of European wholesalers in pharmaceutical distribution would decline by 35 percentage points in the future. Today’s market share of 75 percent would thus decline to 40 percent across Europe. A survey among top managers in Europe’s largest pharmaceutical manufacturing companies reinforces these estimations. The survey revealed that across manufacturers, every third CEO supports the extension of DTP distribution models. The economic efficiency of the wholesale business model is increasingly coming under pressure. The linking of profits and prices, and the continuous disintegration of the product portfolio at the same time, is putting the wholesale model to a test. Pharmaceutical wholesalers still provide the most efficient form of medicine supply to pharmacies. Cherry picking by pharmaceutical manufacturers leads to a weakening of today’s effective and efficient supply chain. While distribution costs for manufacturers may be lower for certain products, overall costs will increase. The full supply of pharmacies via DTP will immensely increase time and costs for ordering, goods in and invoice processing. The entire process in the pharmacy will become more complex, time consuming and finally more expensive compared to a full supply through wholesalers. The Institute for Pharmacoeconomy and Drug Logistics at the University of Wismar calculated the process costs of pharmacies for purchasing from wholesalers and for direct purchases. Wholesale was significantly more efficient and economic. Purchases from wholesalers led to process costs for the pharmacy in the amount of 2 Cents per Euro of purchasing volume. Direct orders cost more than 7 Cents per Euro of purchasing volume. An extensive spread of DTP models across Europe might cause the entire pharmaceutical supply chain to trip over and lose the valuable and essential services fulfilled by pharmaceutical wholesalers today. Moving profitable products from the classic supply chain into new DTP distribution models will ultimately destroy the hybrid-costing model of pharmaceutical wholesalers. Currently, profitable products are cross financing non-profitable products. Hybrid costing is an important tool for wholesalers to meet their self-commitment of providing a full-line assortment. If wholesalers are economically forced to abolish hybrid costing due to DTP distribution, they will ultimately need to delist non-profitable products that cannot cover their costs. The availability of these medicines will not be guaranteed any longer and patients will experience negative effects in their medical treatment. Wholesalers have already become more flexible in their operations and demonstrate their ability to provide classical wholesale services at the same time as acting as a logistics service provider for manufacturers. The hybrid model of providing full wholesale and pure logistics services simultaneously is one way to cope with current supply chain developments. The separation of pre-wholesale and wholesale activities is another model that is currently being practised across Europe. Which model is chosen largely depends on national legislation, manufacturer needs, local requirements and national gross profit levels in distribution. Celesio’s German pre-wholesaling company Movianto combines the logistical competencies of pre-wholesaling and wholesaling and even offers combined models to manufacturers.

• pharmaceutical distribution

• full-line wholesaler

• supply chain

• healthcare system

• outsourcing

• transition

Andreas Cmolik was born in 1975 in Upper Austria. He successfully graduated from his business studies in 2002 with the academic title Magister der Sozial- und Wirtschaftswissenschaften. In 2010, he passed his Master of Business Administration at Danube Business School Krems with distinction. The author was able to gain comprehensive practical experience in pharmaceutical distribution. Over the course of his career, he has worked in warehousing and distribution, held the position of the assistant of the management board and established the business development department in Austria’s largest pharmaceutical trading and service business. Andreas Cmolik has excellent international knowledge in pharmaceutical trading and currently holds several positions as member of the supervisory board in international pharmaceutical wholesalers.