Behind the Scenes of Pfizer UK's Distribution Plan

Implications: A Pfizer executive provided some new details about the company’s UK distribution plan. The program appears to be a success, although I’m skeptical that Pfizer’s plan will stop counterfeits. However, the plan will help the company recapture revenue lost to parallel importing. A Pfizer-style distribution plan would be virtually impossible in the US, so wholesalers will remain somewhat protected for this particular threat.

Analysis:

I’m writing from the 2007 PharmaLink conference in Las Vegas, where I heard a fascinating presentation from Steve Poulton, Director of Commercial Operations for Pfizer UK. He explained how Pfizer shifted from selling through wholesalers to selling directly to dispensers using a single wholesaler as a logistics partner (Alliance Unichem).

I’ve discussed Pfizer’s strategy in previous posts. Briefly, Pfizer now pays a per-package logistics fee to one wholesaler to distribute its products to pharmacies, hospitals, and dispensing physicians in the UK. Customers are purchasing from Pfizer, even though Alliance Unichem handles ordering and fulfillment.

Steve provided a lot more detail on the mechanics and costs behind Pfizer's strategy shift. A few interesting things that I learned:

• Pfizer spent a lot of time and money setting up this program. There were many (10?) internal teams plus a steering committee. Total time from conception to "go live" was more than 3 years.
• Over 22 million packs have been delivered since the program began.
• Service levels to customers—defined as “on time, in full” deliveries—are now running at 99.4%, which is higher than when Pfizer used to sell through wholesalers. Hence, there have been very few actual customer complaints.
• Pfizer did not intend to use only one wholesaler. However, AAH was told by its parent company (Celesio) to withdraw from contract negotiations. Phoenix, the third large UK wholesaler, apparently did not submit a proper response to the original RFP. Ironically, both AAH and Phoenix are now working with other manufacturers on logistics deals.

Clearly, the title of my most recent post on the UK situation was not accurate in stating Pfizer's UK Distribution Plan in Trouble (Council Site). In particular, Steve claims that the use of a single wholesaler is not a problem because the government is only concerned that (a) costs to the National Health Service don’t go up, and (b) patients can still access Pfizer drugs.

Despite these positives, I’m still skeptical that Pfizer’s plan will stop counterfeits. UK pharmacies can still choose to be naughty and purchase parallel import or gray market products. Pfizer can guarantee the security of its own supply chain but can not force pharmacies to buy through the legitimate channel. Once again, pharmacies are the weak link in guarding the supply chain against counterfeits—a problem that won’t go away easily.

I also want to add that a Pfizer-type arrangement would be much, much more difficult here. There are only 15,000 points of dispensing over there compared to 150,000+ in the US. I saw a few US executives stop taking notes once Steve talked about the organizational and financial realities of direct distribution.

All in all, this was a great behind-the-scenes peek at an apparently successful channel redesign.