Drug Channels delivers timely analysis and provocative opinions on pharmaceutical economics and the drug distribution system. Drug Channels reaches an engaged, loyal and growing audience of more than 100,000 subscribers and followers. Learn more...
Mmmmm, rats. They’re not just for breakfast anymore!
Pfizer has started a new advertising campaign in the UK that’s designed to educate consumers about the dangers of counterfeit drugs. Watch the video for yourself at realdanger.co.uk or by clicking the picture below.
Warning: Don't watch it on an empty stomach.
Although the ad is stomach churning, it’s not really controversial. Is there anyone out there touting the benefits of counterfeit drugs?
To me, Pfizer’s ad campaign only makes sense if you also understand its UK distribution channel strategy. Otherwise, you will miss the as-yet-unstated goal of this campaign – eliminating the demand for parallel import product.
BAITING THE TRAP
Pfizer uses a "direct-to-pharmacy" distribution model in the UK. A single wholesaler -- Unichem -- operates as a fee-for-service logistics provider. Pharmacies are direct customers of Pfizer, not a wholesaler. I described Pfizer’s implementation plans in Behind the Scenes of Pfizer UK. You can also read the official FAQ from Unichem.
In my opinion, Pfizer has two different objectives for its direct-to-pharmacy model:
Lower the risk of counterfeit products entering the supply chain
Recapture lost revenue from parallel importing (since the UK is one the primary destinations for parallel trade product)
Unfortunately, a British pharmacy could still choose to purchase parallel import and gray market products, while a consumer could choose to bypass a pharmacy and buy from an online seller. So while Pfizer can guarantee the security of its own direct supply chain, the company can not force pharmacies (or consumers) to buy through the legitimate channel.
CLOSING THE RAT HOLE
Note that Pfizer’s channel strategy has created two side-by-side systems for drug dispensing:
A consumer can purchase through a Pfizer-supplied pharmacy for a guaranteed legitimate product.
Alternatively, a consumer can buy from an online website or from a pharmacy that lacks secure sourcing practices. The risk is that the pharmacy might be selling a parallel import (or outright fake) Pfizer product.
The rat ads imply (correctly, IMO) that diverted drugs -- such as parallel imports -- are suspect. Thus, Pfizer’s ad campaign lays the foundation for dealing with demand-side counterfeiting problems while also reducing any remaining parallel import demand.
For example, Pfizer could set up an “authorized pharmacy program” in the UK to help consumers identify pharmacies that buy exclusively from Pfizer. As the Pfizer's Real Danger web site states: "One in 10 UK men interviewed recently admitted to purchasing prescription-only medicines from unregulated sources, without a prescription." Your local British pharmacy could turn out to be one of those nefarious sources.
FOILED AGAIN
Did you know that Pfizer already used this strategy in counterfeit-laden Nigeria? As I wrote in 2007's Lessons from Nigeria, Nigerian pharmacies could earn a designation that signaled the availability of “genuine” Pfizer products. At the time, Pfizer’s Marketing Director said:
“We want to have strong allies who will say no to clones, no to parallel imports, no to fakes or counterfeits.”
So keep an eye on this campaign, which combines an innovative channel strategy with creative consumer marketing.
Plus, the next round of ads promise to be equally revolting given other ingredients often found in counterfeit drugs – paint, cement, anti-freeze, etc. BARF!
Will this disrupt the U.S. distribution channel and impact drug wholesalers?
Nope.
As I see it, Merck has made a pretty a straightforward outsourcing deal. Merck will use UPS’ supply chain solutions group to run its pick/pack/ship warehouse operations and outbound distribution. UPS will eventually convert the two Merck facilities in Reno and Atlanta to multi-client operations.
In the Wall Street Journal article about the deal (UPS Gets Merck Contract), I said: “Wholesalers will remain the preferred channel because of the pricing dynamics in the pharmaceutical industry.”
Why? As many of you may know, large pharmacy buyers purchase through drug wholesalers as a way to get additional discounts on brand drugs. Since UPS does not take title (ownership) to Merck products under this outsourcing arrangement, product flow in the supply chain won’t change.
Drug wholesalers have many things to worry about – but logistical outsourcing deals are not even on my top 10 list for them.
=======
President Obama's inauguration is historic and moving, regardless of your political leanings. I'm also grateful to live in a country with 220 years of peaceful and orderly transitions in executive leadership.
Fair warning: This post will make some people quite uncomfortable.
In Who Pays for Prescription Drugs?, I showed you how the payer for prescription drugs has changed over the past 40 years. The next logical questions: How much money do pharmacies make from different payers? How will a dominant government payer influence pharmacy profits? And what happens as competitive pressures increase?
I only have data about independent pharmacies in 2007, but the answers may surprise you. Here’s what I found:
Medicaid remains the most profitable third-party payer for independent pharmacies.
Despite what you may have heard, gross margins on third-party insurance business are growing at independent pharmacies.
The generic price war that was triggered by Wal-Mart is squeezing pharmacy margins on cash-pay consumers. While $4 generics may be good news for uninsured/underinsured patients, they are bad news for pharmacy owners.
THE FACTS
The data in the table below come from the NCPA 2008 Digest, which summarizes self-reported survey data from a sample of independent pharmacy owners.
A few observations:
Margins for all three categories of third-party-paid prescriptions increased in 2007 versus 2006.
Medicaid prescriptions remain more profitable than either Medicare Part D (+160 basis points) or private third-party payers (+120 basis points). This is something to keep in mind the next time you hear that half of all independent pharmacies will close if Medicaid reimbursements drop by 2 percent.
Gross margins on Part D business jumped by 270 basis points in the second year of the program. The self-reported gross margins of 18.7% in the NCPA Digest correspond almost exactly with the 18.5% reported by the OIG last year. See Pharmacy Profits & Part D for details.
THE WAL-MART EFFECT
Look at the category labeled “Non Third Party” in the table above. This category includes primarily cash-pay consumers, i.e., people who pay the full cost of their prescriptions out of their own pocket.
In 2007, average pharmacy margins from these uninsured/underinsured people were 42.4%, a decline of over 1400 basis points compared to 2006.
These data confirm my supposition that the price war started by Wal-Mart in September 2006 will reduce pharmacy profits from uninsured/underinsured customers. And from the department of tooting-one’s-own-horn (ahem), this margin drop is consistent with the predictions that I made at the time that Wal-Mart announced its $4 generics program in Wal-Mart's Generic Pricing Will Trigger Big Changes and Reconsidering Wal-Mart (but just a little).
In September 2006, I wrote:
“Wal-Mart clearly struck a powerful chord with people. They are signaling their intent to remove profits from the retail pharmacy industry, to the ultimate detriment of pharmacy chains and independents. I believe that we’ll look back and acknowledge September 21, 2006, as a turning point in retail pharmacy's evolution.”
CONSUMERS WIN
Today, many independents will match prices to avoid losing a customer (and to avoid changing their U&C rates). Although they may deny the existence of price competition, Walgreens (WAG) and CVS Caremark (CVS) are also feeling the pressure on pharmacy profits.
Cash-pay customers love the generic price wars, which offer the most value for uninsured and under-insured patients. Price shoppers are fans, too, given the wide and apparently persistent variations in pharmacy prices for many common, high volume generics. (See The Price Might Be Right.)
Keep in mind that despite the drop in cash-pay margins, independent pharmacies also earned 2X margins from non-third-party scripts compared to third-party scripts. This differential reflects our health care system’s “soak the poor” approach, whereby cash-pay customer pay list price while those of us with insurance benefit from our pooled negotiating power.
Will this pattern continue in 2008 and beyond? Will PBM margins on third-party business trend downward as payers get more information about true profitability? Will direct-to-payer, cost-plus deals trigger another margin takedown?
Stay tuned, dear reader.
=====
Many readers have written to me asking about recent news stories – especially the UPS/Merck deal and CVS Caremark’s 2009 outlook. I’ll try to catch up on these stories in Drug Channels next week.
If you’re like me, you spent Sunday afternoon drinking beer, watching the Eagles trounce the Giants (whoo-hooo!), and poring over the latest U.S. National Health Expenditure data from CMS. (For the record, scrutinizing health expenditure data is a lot more fun when done in combination with football and beer, but that’s a subject for another post.)
Anyway, as widely reported last week, U.S. spending on outpatient prescription drugs grew by only 4.9 percent in 2007, which was below overall health care spending growth of 6.1 percent.
Here are three links for your reading pleasure, listed in increasing order of policy wonkiness:
CMS economists attribute the 2007 slowdown to three major factors:
A generic dispensing rate of 67 percent in 2007, up from 63 percent in 2006 and 60 percent in 2005.
Safety issues – The FDA issued 68 “black box” warnings in 2007 compared to 58 in 2006 and 21 in 2003.
Part D spending, which declined following the one-time growth effect of adding the benefit in 2006
I was especially interested to see that public funds paid for 36 percent of total retail drug spending in 2007. The majority of public funds were associated with major CMS programs: Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP).
During halftime (with Eagles 10, Giants 8), I created the following chart to show how payments for prescription drugs (share of dollars) has changed during my lifetime.
Pretty amazing, isn’t it? Payment for drugs by private health insurance peaked in 2001 at 50 percent. Since then, public funds have been crowding out both public and out-of-pocket payments. CMS has not updated their forecasts yet, but public funds will probably pay more for prescriptions than private insurance within ten years.
So, how much money do pharmacies make from each of these payers?
Stay tuned later this week – the answer will surprise you!
In December, dearly-departed Pharmalot reported on an intriguing new Moody’s report about how credit market conditions could affect drug wholesalers. See Pharma Wholesalers Feel The Credit Crunch.Unfortunately, I can’t share the complete report with you, but you can order it by calling Moody’s.
The Moody’s report notes: “If external liquidity sources – particularly AR facilities and CP borrowings – become more costly, or distributors prove unable to access enough short-term debt to finance inventory when needed, the effects may show up in lower profit margins.”
True enough. But here are the more intriguing strategic questions for drug channel market participants: How will this shift affect (a) wholesalers’ fee-for-service negotiations with manufacturers? or (b) wholesalers’ selling terms with pharmacy customers?
BACKGROUND
Regular readers know that the drug wholesale industry changed dramatically with the widespread adoption of inventory management and fee-for-service agreements. Read Drive the Right Supply Chain Behaviors for my brief summary of this transition.
Thanks to inventory management agreements (IMAs) and fee-for-service, wholesalers have avoided adding billions of dollars of inventory to their balance sheets even as their sales grew. As a result, wholesalers’ operating cash flows soared as they reduced inventory investments.
But the transition is effectively over. Investment buying is still around, but much less prevalent or visible. (See Investment Buying: Not Dead Yet.) Wholesaler cash flows are now coming back in line with operating earnings. Here's some evidence from a talk that I gave in December called “Incorporating Wholesaler Economics into Trade Strategy.”
CONTEXT
In response to the report, Dave Yost, CEO of AmerisourceBergen (ABC), stated: “We have more than adequate liquidity and any access that we would need. We’re very comfortable with where we are and we're very comfortable with our prospects going forward.” (Source: AmerisourceBergen CEO: Comfortable With Liquidity, Outlook)
Mr. Yost may be correct, but the economic transition for wholesalers is occurring along with some very challenging trends:
The generic price war among retail pharmacies (and perhaps government actions such as AMP) will flow up the supply chain and reduce the profitability of generics for wholesalers.
Wholesalers must still “re-price” (translation: reduce) their margins for the biggest buyers.
Overall prescription growth will remain low.
CMS’ role as the dominant payer portends much slower drug inflation for branded drugs.
So, think of this issue as a crunchberry of uncertainty to mix into your morning bowl of strategic planning. Crunch-a-tize me, Cap’n!
I hope you all were able to enjoy some nice downtime with your families. I was once again fortunate enough to be on a beach that lacked wi-fi access. You can see my massive disappointment in the photo.
The article discusses “what some consider a generic-drug price war.” Yep, I am one of those “some” and am quoted in the article. No surprise to you, dear reader, if you saw CVS Escalates the Generic Price War in November.
But spare a thought for the poor chain executives who must convince shareholders that there is no price war. Walgreen's (WAG) senior vice president of pharmacy pooh-poohed the price war idea and then said: “I think that the pricing is competitive within certain therapeutic categories, and I think what you see is all of the retailers promoting their competitive price.”
Really? Then why did pharmacies have *no* promotion of prices until Wal-Mart (WMT) made its move? Why did Walgreens initially state that it would not match Wal-Mart’s “promotional drug pricing” but then switch course? (See “Walgreens Reacts” in Walgreens’ $4.33 Surrender to Wal-Mart.) Why is Giant Supermarkets now giving away generic antibiotics? Why is Walgreens now emphasizing cost-efficiency instead of growth?
On a related note, I think that I am not going bald. I think what you see is that I am follicly challenged.
-------
FYI, there is some sad news in the blogosphere. Peerless pharma news junkie Ed Silverman is hanging up his T-1 over at the Newark Star-Ledger’s Pharmalot. Check out his eloquent goodbye and leave him a note. Ed will be moving to Elsevier Business Intelligence, which publishes The Pink Sheet and other pharma titles. Best wishes, Ed!
Well, here it is -- my 95th (and final) post for 2008.
Before I wrap up for the year, I want to give you a brief update on Drug Channels and then highlight key trends (riddles?) for 2009. I hope you find these useful whether you’re a drug channel market player building a strategy, a manufacturer that wants to incorporate trade economics into your channel strategy, or an investor assessing company prospects.
Since this is a longer-than-average posting, you will be rewarded with a bit of multi-denominational holiday humor -- my two favorite holiday songs -- once you get past the yada yada.
AN UPDATE ON DRUG CHANNELS
Since I began tracking site statistics carefully in March 2007, total monthly traffic to Drug Channels has grown by 600% to about 15,000 per month. My readers continue to come from a diverse set of companies throughout the healthcare industry – see question 4 in my blog FAQ for more details. Fortunately, enough people keep hiring me for advice or speaking engagements, so I can pay my mortgage and keep this site free for everyone else.
I’ve also been privileged to hear that many readers have been generous with their time and insights in 2008. For example, the former owner of an independent pharmacy recently chatted with me about his reasons for selling his six-store chain to Walgreens. His feelings on the bittersweet nature of the transaction really help to put the economics of the industry into perspective. (Thanks, BG!)
Here are some major topics that I expect to be watching in 2009, framed as “strategic questions” with links to my relevant background posts.
1) How deep will the pharmacy shakeout be? The price war started by Wal-Mart is reducing the profitability of generic prescriptions, which are a major source of profits for both retail and mail order pharmacies. At the same time, overall prescription market growth has slowed, which will make the competition for market share even more intense. Look out below!
2) Will CVS Caremark finally prove the strategic value of a PBM-Retail combo? It’s not yet clear how CVS and Caremark will gain a competitive advantage under common corporate ownership. The purchasing gains are well-known, but will initiatives such as Maintenance Choice or Bridge Supply really be enough to sway their PBM market share or boost mail order? If they show traction, then I expect Medco (MHS) and Express Scripts (ESRX) to seek retail partners. If not…
3) Will direct-to-payer reimbursement models get more traction? Wal-Mart’s “direct-to-payer” model with Caterpillar introduced a new source of competition into the system. Wal-Mart’s cost-plus reimbursement methodology favors larger, more efficient dispensing operations. Even Walgreens is promising a billion dollars of cost savings and experimenting with more central fill operations.
4) How will the generic price war affect wholesalers? The generic price war is having a secondary effect on wholesalers, which provide generics for about half of the retail market. The largest retail chains and mail order pharmacies bypass wholesalers and buy generics directly from manufacturers. Yet brand manufacturers and customers still prefer to have wholesalers in the supply chain rather than setting up direct relationships, especially given wholesalers’ tendency to perpetually “re-price” (translation: reduce) their margins for the biggest buyers.
5) What happens when AMP resurfaces? A delay in the implementation of Average Manufacturer Price (AMP) until 10/1/09 was included in the physician payment fix bill over the summer. The pharmacy litigation continues. What will happen when this issue comes up in the FY2010 budget negotiations? Will the AMP hype continue? Does everyone realize that the generic price war is now removing generic margin dollars from drug channels much faster than AMP ever would have?
6) How will Democrats reform Medicare Part D? There is little doubt that the new administration and Congress will focus on changing certain elements of the Part D program – an achievable health care reform compared to some other potential areas. I wonder if branded drug makers are having second thought about the Medicare Part D benefit, especially since the much-maligned “donut hole” also appears to be encouraging greater generic substitution.
7) What will wholesalers want from manufacturers? Fee-for-service negotiations between manufacturers and wholesalers are taking place in a very different environment compared to 2004. The financial condition of the big three drug wholesalers has been relatively good, especially as the wholesalers refocus on their core businesses. The remaining regional wholesalers are starting to sell out, further strengthening position of the Big Three. At the same time, the wholesalers' cash flow cycle is reverting back to historical norms, perhaps suggesting lower profitability in 2009. So what’s next?
8) Will drug importation be resurrected again? HHS Secretary-to-be Daschle has been a long-time fan of drug importation. I believe that importation (a.k.a. legalized diversion) is risky. I doubt that Daschle will be able to certify the safety and effectiveness of imported drugs before they can be imported, but some sort of political compromise is possible.
9) Will we ever get national supply chain security standards? I’ve had fun (?) tracking the ups and down of pharmaceutical supply chain regulation this year. The good folks at the California Board of Pharmacy provided me and all Spinal Tap fans great fodder when they debated e-pedigree legislation going to 2011. However, I was disappointed that a more coherent national approach did not get very far. Let's see what the FDA does to meet the March 2010 deadline set by the FDA Act of 2007.
In March, the California Board of Pharmacy went to ’11. In their honor, I present…Christmas with the Devil by Nigel and the gang! (Click for a link to the video -- the song starts at the halfway point after a brief interview with the boys.) There’s someone up the chimney hole, and Satan is his name!
And for those of us celebrating the more minor festival of lights, can I interest you in Hanukkah? (my new favorite holiday song)
The European Commission released its “pharmaceutical package” yesterday. As I mentioned in Monday’s post, a strict ban on repackaging of parallel traded drugs was not included in the final proposal. However, the Third Legislative Proposal, which deals with counterfeit drugs, proposes “security devices” with traceability for pharmaceuticals. Yup, that means serialization (actually, serialisation), but nothing like the Californian vision of serialized e-pedigree that’s due to take effect in only 2,212 days.
The Financial Times emphasized the anti-counterfeit nature of the proposal in European Drugs To Carry Barcodes, but I see some significant concessions to parallel traders in the proposed legislation. The proposal puts some limits on the extent of repackaging but seems to contain a major loophole (described below) that could negate any benefits from serialization.
Be forewarned – the proposal is written in the international language of “bureaucratese” and perhaps should be read only by true fans of supply chain security. Here are a few items for your consideration:
A serialized track-and-trace foundation. Product must have “safety features making it possible to ascertain identification, authenticity and traceability of medicinal products.” In other words, the proposal lays the groundwork for a full track-and-trace system, but does not require it.
On-package security will grow. These safety features must allow wholesale distributors and pharmacists to: “(a) verify authenticity by assessing overt, covert, or forensic devices; (b) identify individual packs; (c) verify whether the outer packaging has been tampered with.” Note that point (b) also supports serialization.
Multiple serial numbers? The proposal states that the safety features can not be removed or covered-up. However, there is an exception (loophole?) that allows the repackager to remain compliant even when "replacing the safety feature with a safety feature that is equivalent as regards the possibility to ascertain identification, authenticity and uninterrupted traceability of the medicinal product" Replacing?!?
The last point sure makes it sound like the manufacturer’s original serial number could be covered up by a repackager’s number. Presumably, there would have to be some sort of mapping between the two numbers. In practice, I wonder if replacement could end up negating the benefits of serialization by creating multiple sets of numbers on packages from the same production lot.
Nonetheless, I suspect that most pharmaceutical manufacturers in Europe will take the first step and ramp up serialization efforts in anticipation of this proposal being formally adopted. Keep in mind that all proposals still need to be approved by the member countries.
As always, just my €0.02.
----
P.S. Check out the latest Health Wonk Review at the e-CareManagement blog.
Drug importation into the U.S. has been declared dead more times than a narcoleptic Jason Voorhees. As a follow-up to Monday's post about parallel trade in the European Union, I regret to inform you that we may be headed for another sequel.
A couple of months ago, I was relieved to note that both Presidential candidates were backing away from drug importation into the U.S. (See Getting a Clue on Importation.)
Unfortunately, former Senate Majority Leader Tom Daschle, who has been nominated by President-elect Obama to head the Department of Health and Human Services, is a big fan of importation.
Second, to lower drug costs, we can pass bipartisan legislation supported by Republicans John McCain and Olympia Snowe and Democrats Byron Dorgan and myself that allows for the safe importation of lower-cost drugs from Canada and other countries.
FYI, he is referring to his co-sponsorship of the 2004 Senate importation bill (S.2328), which didn’t get very far. He was no longer in the Senate by the time the 2007 version (S.242 Pharmaceutical Market Access and Drug Safety Act of 2007) came along, so he could not join then-Senator Obama in supporting this bill.
The conventional wisdom suggests that the contaminated heparin incident, among other things, has pushed drug importation off the radar screen. But I’m not so sure given Sen. Daschle’s many, many public pro-importation comments over the years. And some groups, such as wholesalers, will potentially benefit from legalized importation, as I note in Drug Importation and Global Wholesale.
In my opinion, dropping the ban is a very bad decision. Repackaging eliminates the benefit of just about every practical anti-counterfeit tracking technology, including the emerging serialization requirements in some EU countries. Apparently, tablets can even be removed from blister packs under EU law. It’s hard to see how this will benefit consumers. “Hey, it’s a bit cheaper, but it might be fake. Good luck!”
The issue relates to our old friend parallel trade. Combining the European Union’s market integration principles with national price controls has created an enormous cross-border gray market, often called parallel trading. Wholesalers in countries such as Spain and Greece sell to importers in higher priced countries such as Germany and the U.K. Drugs may pass through dozens of hands before reaching their destination.
Surprisingly, the average European consumer receives almost no price break from parallel trade, especially in countries with flat-rate patient co-payments such as the U.K. and Germany. Instead, wholesalers, importers and exporters are the big winners from parallel trade because they absorb 80% or more of the price differences between countries. Hence, these are also the groups that oppose the repackaging ban.
Unfortunately, parallel trade also means that products are often repackaged by multiple intermediaries along the supply chain and may pass through dozens of hands before being resold. Legitimate products can easily get mingled with counterfeits, with no feasible way to introduce pedigrees across countries. It’s no surprise that counterfeit cases are growing quickly in Europe. As I pointed out in a June 2008 posting, seizures of counterfeit drugs at the EU border rose 51 percent in 2007 compared with 2006.
Only one thing is certain – litigation over parallel trade will continue.In September, the European Court of Justice gave GlaxoSmithKline a partial victory in its long-running attempt to limit parallel exporting from Greece. See Europe Allows Companies to Limit Drug Sales from the Wall Street Journal.
----
FYI, I wrote two background posts on parallel trade in August 2006.Amazingly, all of the links in these posts still work if you are curious:
BTW, you'll notice a lack of pictures in my 2006 posts. Hope you'll agree that Drug Channels is much more fun with the accompanying photos. In fact, one client recently confessed that he sometimes reads my blog for the pictures, not the articles. Hmmm, I recall using that excuse in reverse during my youth...
Now that Cardinal Health (CAH) has finally resolved its long-standing DEA issues, the company has quietly launched a series of intriguing Medication Safety web pages.
I’m impressed by these initial public efforts at education and greater transparency, although it’s obviously a work-in-progress.Cardinal needs to more clearly describe how a more secure supply chain will translate into sales growth among its now highly monitored pharmacy customers. I’d also like to see the initiative evolve into anti-counterfeit education aimed at changing behavior by pharmacy buyers and consumers.
Cardinal posted their long-awaited explanation about plans to prevent diversion by its customers at The Cardinal Health Suspicious Order Monitoring Program. According to the site, the system “flags and holds orders that warrant further inspection,” presumably with enough accuracy and effectiveness to avoid catching innocent pharmacies in their net.I hope Cardinal provides details on the system’s effectiveness, especially given the risk of false positives among the customers they are trying to win back.
The new system is reportedly devoted solely to controlled substances and DEA compliance (per Mark Hartman, SVP of supply chain integrity and regulatory operations as cited in Pharmaceutical Commerce).In other words, the company “continues to work” on systems for complying with the December 2006 (!) Assurance of Discontinuance signed with the New York Attorney General. See my post Cardinal's Sins for background on that matter.
BTW, there are links to some good article on diversion prevention under Resources.
FFF GETS AN “A”
Cardinal has also added web pages about counterfeit drugs called What you can do, although I don’t understand the target audience for this material. Are they speaking to consumers, most of whom have never heard of a “drug wholesaler”? Are they communicating to the pharmacies that they will now be monitoring?
IMO, Cardinal should take a look at the approach used by privately-held distributor FFF Enterprises for years.
While I don’t have first-hand knowledge of FFF’s operations (nor do I have a business relationship with FFF), I have been very impressed by their public commitment to educating pharmacy buyers on the benefits of supply chain security.FFF’s website has a set of pages labeled Patient & Product Safety, trumpets a concept called “Guaranteed Channel Integrity,” and recently announced its (trademarked) 8 Critical Steps to Guaranteed Channel Integrity™.
SELL BENEFITS, NOT FEATURES
I have long argued that the risk of counterfeits could be reduced by tackling the demand-side security problem, i.e., making sure that pharmacy buyers and consumers purchase within a secure supply chain. Thus, consumers shouldn’t buy from random online websites, pharmacies should be very cautious about secondary sourcing, there should no be “trading networks” to facilitate transfers between unaffiliated independent pharmacies, etc.
Regulatory and technology solutions are necessary but are not sufficient to close these diversion gateways and stop counterfeits from entering the legitimate pharmacy supply chain. But with regulation on hold and technology in flux, manufacturers and other wholesalers should follow the examples of Cardinal and FFF to emphasize WIIFM (What’s In It For Me) for pharmacy customers and consumers.
----- Disclaimer: Any similarities between Daniel Craig and Cardinal Health executives, current or past, is merely coincidental.
Hope you all had a nice Thanksgiving holiday. Here are a few interesting articles for your reading pleasure.
As always, I welcome links to interesting stories from Drug Channels readers.
AmerisourceBergen's Scrimp-and-Save Dave (Business Week) – Ever wonder about the glamorous life of a Fortune 28 CEO? Then read this Business Week article about Dave Yost, President and CEO of AmerisourceBergen (ABC). He “answers his own phone, flies economy class, and rarely strays beyond a shortie turkey hoagie with provolone from the local deli near his sterile industrial park headquarters in Valley Forge, PA.” Dave apparently conducted the interview from “a 1970s-era plaid chair … that looks like a yard sale find.” Interesting article, but I wonder if cost-cutting is the same as efficiency.
Pharma Ponders a Track-and-Trace System (RFID Journal) – A review of this year’s NACDS/HDMA RFID Track & Trace Healthcare Summit from an unabashed pro-RFID booster, i.e., the editor of RFID Journal. The following conclusion caught my attention: “At the meeting, I got the feeling many attendees were there to hear the latest regarding which regulation is in the offing, and that they were happy to learn that no regulation is imminent. There was little discussion of the potential business benefits of employing RFID and 2-D bar codes for track and trace.” Yikes!
Knockoff Report – A fascinating blog devoted to collecting stories about counterfeit goods of all types, including: pharmaceuticals, liquor, DVDs, tires, Madonna tickets, condoms (?), and just about anything else you can imagine. Fun but scary reading. Hat tip to Pharmacoma.
Mmmmm, rats. They’re not just for breakfast anymore!
