The use of 3PL companies is a growing trend in the global pharmaceutical supply chain, as cost cutting measures encourage businesses to use outside companies, who can offer services at competitive prices. However, while Direct to Pharmacy (DTP) and Reduced Wholesaler Agreements (RWA) models play a vital role in the UK, other EU countries are boosting their direct sales, and only time will tell which approach will succeed.

Around 772 full-line wholesalers in Europe supplied pharmaceutical products to pharmacies, hospitals and doctors in 2010, according to the European Association of Pharmaceutical Wholesalers (GIRP). During this year, the overall sales turnover generated within EU-27 countries was valued at $180bn. The Institute for Pharmaeconomic Research (IPF) concluded that over 703 million transactions took place between pharmaceutical full-line wholesalers, pharmacies and manufacturers every year within France, Germany, Italy, Spain, the Netherlands and the United Kingdom collectively.

However, the number of full-line wholesalers in the UK is decreasing due to a rise in the adoption of alternate distribution systems such as DTP and RWA.  The impending absence of full-line wholesalers is expected to increase the number of transactions to 97.9 billion per year, and result in unnecessary transportation and delays for doctors who desperately need medicines.

Logistical help has been prevalent in the pharma industry for several years, as Merck's partnership with United Parcel Service in 2003 set the scene for business collaborations. UPS agreed to provide distribution and logistics services in the U.S., and this was later extended internationally. UPS now manages the distribution, warehousing and transportation of medicines and vaccines manufactured by Merck in North America, and according to the new deal, the company is set to additionally provide distribution, warehousing and transportation services for Merck in some Asian countries and Latin America, and transportation in Europe. While Merck benefit from a comprehensive delivery service, UPS have secured an enormous contact, and work in the upcoming pharma powerhouses of China and Brazil. However, does this deal signify a loss of control for Merck, as aspects of their business are run by another company?

A study conducted by (IPF) in 2010 revealed that Spain had the highest involvement of full-line wholesalers in the pharmaceuticals supply chain process, with 96 percent of total turnover in the country, while the DTP and RWA models had a high market share of 25 percent in the UK. Whether these two differing approaches lead to disparity between the Europe's quality of healthcare remains to be seen.

A full copy of the report, Pharmaceutical Supply Chain in Europe: Adoption of Direct to Pharmacy (DTP) Model to Boost Efficiency and Optimize Pricing, is available, click here.

Source: GBI Research