Today, I heard a fascinating presentation from Steve Poulton, Director of Commercial Operations for Pfizer UK. He explained how Pfizer shifted from selling through wholesalers to selling directly to dispensers using a single wholesaler as a logistics partner (Alliance Unichem).
I’ve been covering Pfizer’s strategy in previous posts (See Pfizer's UK Deal: Change is Here! and Pfizer wins again). Briefly, Pfizer now pays a per-package logistics fee to one wholesaler to distribute its products to pharmacies, hospitals, and dispensing physicians in the UK. Customers are purchasing from Pfizer, even though Alliance Unichem handles ordering and fulfillment.
Steve provided a lot more detail on the mechanics and costs behind Pfizer's strategy shift. A few interesting things that I learned:
- Pfizer spent a lot of time and money setting up this program. There were many (10?) internal teams plus a steering committee. Total time from conception to "go live" was more than 3 years.
- Over 22 million packs have been delivered since the program began.
- Service levels to customers—defined as “on time, in full” deliveries—are now running at 99.4%, which is higher than when Pfizer used to sell through wholesalers. Hence, there have been very few actual customer complaints.
- Pfizer did not intend to use only one wholesaler. However, AAH was told by its parent company (Celesio) to withdraw from contract negotiations. Phoenix, the third large UK wholesaler, apparently did not submit a proper response to the original RFP. Ironically, both AAH and Phoenix are now working with other manufacturers on logistics deals.
Despite these positives, I’m still skeptical that Pfizer’s plan will stop counterfeits. UK pharmacies can still choose to be naughty and purchase parallel import or gray market products. Pfizer can guarantee the security of its own supply chain but can not force pharmacies to buy through the legitimate channel. Once again, pharmacies are the weak link in guarding the supply chain against counterfeits—a demand-side security problem that just won’t go away. (Sorry, pedigree fans.)
I also want to add that a Pfizer-type arrangement would be much, much more difficult here. There are only 15,000 points of dispensing over there compared to 150,000+ in the US. I saw a few US executives stop taking notes once Steve talked about the organizational and financial realities of direct distribution.
All in all, this was a great behind-the-scenes peek at an apparently successful channel redesign. Wish you were here!