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AAH cites 'competitive' wholesale market for failure to secure Glutafin

Celesio chief Stuart Lucas: "disappointed"

AAH still offers its customers a "compelling" range of services to manufacturers and its downstream customers despite losing the solus distribution partnership with Glutafin says Celesio pharmaco director Stuart Lucas

EXCLUSIVE

AAH Pharmaceuticals has admitted it was "disappointed" to lose out on the sole distribution rights of Glutafin products to Alliance Healthcare.


Stuart Lucas, pharmaco director of AAH parent company Celesio UK, said the "very competitive" wholesale sector was to blame for its failure to secure the deal, which will see Alliance Healthcare become the exclusive distributor of the gluten-free products from Wednesday (October 1).


However, AAH remained positive that it still offered both manufacturers and pharmacists a "compelling" range of services, Mr Lucas told C+D in an exclusive interview last Thursday (September 25). 


At "any point in time", wholesalers were likely to be in discussions about potential changes to distribution arrangements to suit manufacturers' needs, Mr Lucas said.


AAH's strong position was demonstrated by its announcement last month that it had secured the rights to solely distribute products from manufacturer MSD, the sixth deal of its kind for the wholesaler in the past year, he added.


Announcing its deal with Glutafin last week (September 23), Alliance Healthcare said the arrangement should "streamline the ordering process" for pharmacists. Glutafin products would arrive as part of a pharmacy's usual Alliance Healthcare delivery and would not be subject to any surcharges if purchased in isolation, it added.


In April, Celesio predicted a growth in exclusive wholesaling deals as manufacturers put more products out to tender.


The previous month, PSNC warned that AAH's exclusive deal with Archimedes, following similar distribution arrangements by other manufacturers, would "further reduce competition in the wholesaler market". 



What effect could exclusive distribution deals have on your business? 

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6 Comments

Gerry Diamond, Primary care pharmacist

I dont like these exclusive distributor deals for medicines as it is not good for the patient and smacks of rationing access to drugs to push up prices. Scrap it!

Anton Sobala, Locum pharmacist

Choice goes down.... discounts go down... prices go up. Happens every single time without fail.

Cod Fillet, Community pharmacist

Why this "big opportunity" doesn't happen with normal shopping in supermarkets!

It would just be great! We could go to Tesco for the Lurpak, then Asda for the Vimto, than sainsburys for Garnier products, then Morrisons for the Warburtons etc ! shopping would be a great experience! People are missing out on the good fun we have in pharmacy.

Stephen Eggleston, Community pharmacist

Yet another opportunity - for Alliance to say I've gone over my quota.

Dave Downham, Manager

This is fantastic news. Another opportunity for pharmacists...(tongue<->cheek interaction.)

Oh, and thanks for the warning PSNC. Very helpful. Most useful.

Anton Sobala, Locum pharmacist

The PSNC appear to have given up on reporting a significant proportion of new distribution arrangements, and the 'distribution deals' section of their website is neither complete nor up-to-date. This is really something the PSNC should keep on top of, regardless of whether they have the power to do anything about it.

Pharmacists, buyers, dispensary staff and contractors need to be kept informed, with as much advance notice as possible - although in some cases notice given by manufacturers/wholesalers is now only a matter of days.

The desire of branded manufacturers to control their supply chain and minimise distribution costs is certainly reaching a peak. Considering that the major branded manufacturers only sold to a few major wholesalers anyway, in substantial bulk, a small number of deliveries by lorry have been replaced by hundreds of extra vans dropping off little boxes and bags with a couple of items which could much more logically have arrived in the pharmacy's main order. Traditionally, additional deliveries were normally from short-line, which at least served the purpose of keeping down prices to pharmacies and hence the NHS. Now we have deliveries which only serve the largest distributors and branded manufacturers, most of which are headquartered overseas.

Every new deal (without fail) rewards pharmacies with an irresistible combination of fewer (or no) choices in terms of who to buy from, and (usually) fixed discounts which are not only less than clawback but increasingly approaching zero, or if we're especially lucky, actually 0%! Few of these items are on the Drug Tariff 'Discount Not Deducted' list so are often dispensed at a loss in spite of the dispensing fee. The current reimbursement situation is inexplicable in that almost all branded medicines now receive substantially less discount (often 0% to 8.5%, usually about 7%) than the clawback which is applied by the DoH (can be up to 11.5% - consistent with larger discounts which haven't been achievable on most branded medicines for several years).

So, now that pharmacies make a *negative* purchase profit when dispensing most branded drugs, pharmacies in areas where branded or branded generic prescribing is high inevitably lose out in comparison to pharmacies where branded prescribing is low, since most purchase profit comes from generics and the odd special. ...Hardly a fair or logical method of reimbursement. Pharmacies that dispense mostly 4-weekly scripts for generic items make far more money that pharmacies unfortunate enough to receive a lot of scripts for 2-3 months plus of patent protected items. Pharmacies dispensing large amounts of meds from the likes of Pfizer, Boehringer, Novartis and MSD being among the most unfortunate. Something is surely wrong when we have a reimbursement system which makes us so obviously at the mercy of local prescribing patterns.

Why can't the PSNC negotiate for the discount deduction/clawback scale for branded meds to mirror the discounts which are actually available from the big three wholesalers? And why is the clawback scale applied to generics at all when Cat M clawbacks are already in place? One would expect the Cat M Tariff prices to already have taken the available wholesale prices into account, but apparently not?

At present, our system of reimbursement is perhaps the most opaque affair that one could possibly imagine!! The scripts go off in a bundle with the hope, but not confidence, that correct and reasonable payments will be received... because if not, it will hardly be a simple matter to find out what went wrong. The major chains can get by due to overpayments to some branches and underpayments to others, and are greatly strengthened by their associated wholesale operations. Independents with one or two pharmacies can't afford not to receive a fair and correct payment.

On top of all this nonsense we have the additional non-reimburseable fuel and low spend surcharges being applied by some of our largest suppliers. AAH, I must say, have made the commendable decision to scrap their low spend surcharge entirely for all customers, but the fuel surcharge does still apply. It will be a good thing if the others followed suit.

Alliance Healthcare, unfortunately, still continue to operate an unusually complex and seemingly unjustifiable low spend surcharge which penalises pharmacies which use them as a second-line DTP/RWM supplier (with a consequently low monthly spend) and yet order one or more non-exclusive products during a given month, sometimes by accident. Alliance, of course, profit from selling every one of these additional non-exclusive products but then charge the pharmacy £300 per month for the pleasure. Considering the number of products which we now have to order from Alliance whether we want to or not, I have no idea how they can continue to justify penalising pharmacies in this way. I have little doubt it would improve Alliance's sales figures and more so their reputation if they followed AAH and scrapped this bizarre system entirely.

The PSNC are always keen to point out that we're operating in a tough financial environment, which may be true, but at the present time, the opacity and illogicality of our entire payment infrastructure barely even receives an explanation. It seems that few even understand it, and even fewer have the power to improve it. No doubt those with among the greatest financial understanding of the entire sector work for the largest vertically-integrated multiples, which inevitably have their own interests at heart. Pharmacy is so disjointed as a profession it's often its own worst enemy!

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