The UK pharmacy market is very fragmented, and almost half of all British pharmacies are independent. Many of these indie pharmacies often strike deals with single wholesalers to obtain preferential pricing in return for single sourcing. Therefore, major changes like Pfizer's can have a big impact, because these pharmacies will now have to set up additional contracts—and risk the loss of their preferential pricing.
"The main aim is to get better control of the market," says Lesley Ainsworth, partner in the law firm Lovells. "If a company sells direct to the pharmacy, then pharmacists are not likely to be parallel exporting to more expensive countries like the United States. Many pharmacists have contracts with UniChem anyway, but others who go through one wholesaler to get better terms will now be required to have a contract with Pfizer."Since Pfizer's announcement, companies such as Novartis and Lilly have indicated that they are reviewing their distribution arrangements. In April, AstraZeneca announced it would use only two wholesalers—UniChem and AAH Pharmaceuticals—while GlaxoSmithKline says it has no plans to alter its distribution arrangements.
OFT received more than 500 complaints from competing wholesalers and pharmacists (as well as letters of concern from MPs) over the Pfizer/UniChem deal. In response, the agency has launched a market study to better understand the situation. This falls short of the demands of rival wholesalers, who wanted OFT to conduct a full-scale investigation under the Competition Act to ensure that the arrangement doesn't abuse a dominant position in the market. "There has been concern among stakeholders as to what the potential impact of these arrangements could be on the National Health Service and patients," says Geoffrey Steadman, a principal case officer at OFT who is working on the report.
These complaints are largely focused on the services pharmacies will now receive and the impact on patients. "The concerns with respect to patients are along the lines of whether they will be able to get medicines as quickly as they could previously," says Steadman. Others worry that less competition among suppliers could mean higher prices and a bigger bill for NHS.
OFT is planning to announce the findings of its study by the end of 2007. Once the report is published, there are several possible next steps, Steadman adds. OFT could give the market a clean bill of health; it could refer the sector to the Competition Commission or launch an investigation under the Competition Act; or it could make recommendations to the government that changes to the law are necessary.
In the Pfizer case, UniChem is not, strictly speaking, acting as a wholesaler, as it is getting a fee-for-service from the company. "On the face of it, it's not against the Competition Act as it's perfectly feasible to deliver the drugs direct to the pharmacist," says Ainsworth. "There was some element of competition in the process as other wholesalers were allowed to tender, and the company is not obliged to use a multiplicity of wholesalers. It's not obvious that it abuses market dominance or infringes the Competition Act.
"The OFT is doing this partly because of the complaints it received, but also because it's part and parcel of their study of pharma pricing," Ainsworth concludes. "There's an element of 'let's have a dig around,' looking at it as a market study without getting into a full Competition Act inquiry. I don't believe it will come to a full inquiry—maybe the time has come that the world will change in terms of how drugs are distributed."
Sarah Houlton is Pharmaceutical Executive's global correspondent. She can be reached at firstname.lastname@example.org