The European Pharmaceutical Wholesale Industry: - phagro

The European Pharmaceutical Wholesale Industry
8 From Distribution to knowledge-intensive Health
Care Provision
Over the last decade, the pharmaceutical wholesale industry has been shaped by a
variety of factors likely to maintain their influence. The ongoing rise in public
health care spending will result in further cost-containment measures implemented
by national governments. Recent trends in pricing, like the extensive application
of international price comparisons for ex-factory prices, will dampen drug
prices and therefore reduce absolute margins even further. Moreover, many
pharmaceuticals have already lost, or are likely to loose their coverage by national
reimbursement schemes, as these are reformed. Consequently, such medicines
are less demanded.
Here and there, attempts towards direct distribution can be observed. In some
countries, the market share of directly distributed pharmaceuticals has risen over
the last years. However, one may reflect on the fact whether this “cherry-picking”
in distribution is beneficial to the patients.
Another factor of direct distribution comes from an increase of mail order distribution.
However, as this form of distribution is rigorously controlled by national
health care authorities and important questions regarding the safe use of medicines
ordered are not answered yet, mail order can not be identified as an alternative
to the wholesale industry.
Faced with these threats, wholesalers adopted mainly the following strategies to
cope with increasing competition and the deterioration of external factors:
� Increasing their market share to generate economies of scale
� Vertical integration to generate economies of scope
� Regional diversification
� Developing business models based on the provision of services.
With respect to the last strategy, it seems that the pharmaceutical wholesale industry
is currently undergoing the same trend as manufacturing industries in the
1980s, when industry related services started to gain relevance. In this context,
the wholesale industry provides an interesting case as a service industry which is
developing towards an expanding service provider by adopting a thoroughly service-oriented
strategy in addition to its traditional distribution function. In combination
with the other three strategies implemented, the provision of added value
services along the pharmaceutical distribution chain contributes in blurring the
traditional boundaries between production, distribution and retailing. The establishment
of European-wide distribution and service networks increasingly pushes
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IPF Institute for Pharmaeconomic Research