Friday, October 19, 2007

Pfizer's UK Plan in Trouble

Pfizer may have to end or amend its exclusive distribution deal with UniChem, the wholesale arm of Alliance Boots (AB), under proposals being considered by the Office of Fair Trading (OFT). See Pfizer May Have To Unpick Exclusive Distribution from the Times (London).

Pfizer’s new plan (first discussed here last September) has at least two primary objectives: (1) Lower the risk of counterfeit products entering the supply chain, and (2) Recapture lost revenue from parallel importing.

My prediction: The OFT will require Pfizer to expand its network to at least one other wholesaler, but not require them to sell to all wholesalers.

In March, the UK wholesalers failed to get a legal injunction to stop Pfizer from implementing its new distribution plans.

Yet wholesalers have been much quieter about the announcements from other manufacturers like Sanofi-Aventis or Novartis, especially since these manufacturers plan to include other wholesalers (AAH or Phoenix). From what I hear, most major drug makers will announce more selective UK distribution plans by the end of 2007.

Frankly, the whole issue really comes down to basic business economics. Manufacturers in many industries can and do legitimately limit the number of wholesalers who are authorized to sell its products. Channel mavens like me refer to the degree of distribution selectivity – from one wholesaler (exclusive distribution) to an unrestricted number of wholesalers within a given market (intensive distribution).

I believe that any excluded UK wholesalers will continue their attempts to stop Pfizer (or others) from implementing strictly exclusive distribution, but will not be able to stop selective distribution.

It’s interesting to note the contrast with the U.S. Here, U.S. wholesalers successfully stopped the FDA from implementing the pedigree requirements in the Prescription Drug Marketing Act. Robert Drucker is probably a hero to any non-selected UK wholesalers given his company’s legal battle against the big three wholesalers and 16 major drug manufacturers. (See RxUSA’s July 2006 complaint for the alleged details.)


P.S. Readership at Drug Channels is waaaay up since last year. In case you weren’t reading back in August ‘06, here is a background post on European drug channels: Curious about European Drug Distribution?

I discuss the US angle on distribution deals in light of U.S. importation bills (such as S.242) in Will US logistics deals be illegal?.

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