Wednesday, November 29, 2006

Pfizer UK Gets “Closer to Customers”

“Increased patient safety” drove Pfizer’s recent deal with UK wholesaler Alliance UniChem, according to the partners. But no one’s buying the story.

Following a tender process allegedly involving all UK wholesalers, Pfizer earlier this Fall chose UniChem as its sole distribution partner in the UK. The move, says Pfizer, will reduce the number of counterfeit drugs getting into the system—including those from parallel trade—and ensure ease of supply and simplified logistics.

Critics claim that patient access is put at risk by reliance on a single supplier for such a wide portfolio of drugs. Perhaps. But that’s not the biggest concern—Alliance is one of the biggest distributors, and it’s not likely to mess around where its largest and most lucrative customer is concerned. Which brings us to the next problem: the deal smells highly anti-competitive. Alliance promises to “maintain excellent service all around,” but the Office of Fair Trading isn’t convinced. Nor are 33 Members of Parliament who have signed a motion opposing the deal.

Pfizer has gotten into deeper political waters than it might have liked. The Big Pharma's UK division has written to MPs defending the deal.

Trouble is, this tie-up is more than about two partners getting extra-friendly. It introduces an entirely new model to UK drug distribution—a model that is clearly about price and market share. From March 2007, Pfizer will deal directly with customers—pharmacists—on cash discounts for its products, with UniChem acting only as a “logistics service provider” (its own words).

So Pfizer ekes out better deals across its entire range by cutting out the middleman and leveraging the breadth of its offering to compel pharmacists to choose its products over its rivals---take our statin and we’ll discount the nasal sprays---and UniChem, in exchange for its cut on the cash discount, accesses a bunch of new customers that want—need—to keep buying Pfizer’s drugs.

It’s all about patient safety.

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