- Original post: A New Era for Distribution
- News Story: Drug wholesalers fail to block Pfizer deal in UK
Drug manufacturers have been trying to regain control over their distribution channel in Europe for some time. Glaxo won some notable legal victories last September that paved the way for Pfizer's UK agreement, as I predicted in A Partial Win for Glaxo Means More Change for EU Drug Channels.
Pfizer has been very active over the past few years in asserting its legitimate commercial interests to engage in strategic channel management. Today's high court decision is the second victory against wholesalers in a week for Pfizer. Recall that Pfizer successfully prevented Danish wholesaler Nomeco from selling a generic version of Lipitor.
For now, these attempts are not needed in the US because manufacturers have much more control over the larger wholesalers. US wholesalers still derive a majority of their gross margin from the buy-side via fee-for-service agreements and payment terms.
In contrast, wholesaler sell-side margins are regulated or fixed in most EU countries. Some countries, such as France, even regulate the maximum discounts to these margins that wholesalers can offer to pharmacy customers. As a result, I estimate that manufacturers only control about 25% of the larger wholesalers' gross margin versus 90%+ in the US.
PREDICTION: The likelihood of EU-style channel management efforts in the US will increase if US wholesalers begin to derive a greater proportion of their buy-side margins from activities that are not controlled or compensated by branded manufacturers. (This is the underlying theme of my Generics=Channel Strife? post).
Check back in 12 months and see if my prediction comes true.
P.S. BTW, I received many emails on Thursday's post (Generics=Channel Strife?), most of which asked for clarification or a customized analyses. If you are not one of my advisory consulting clients, I'd prefer that you post your question as a public blog comment. Naturally, you can also feel free to inquire about the services offered by your friendly neighborhood blogger...