API: Exclusive supply still a ‘very big issue’

The CEO of one of Australia’s leading pharmaceutical distributors says he wishes a solution had been organised “yesterday”

Exclusive supply of medicines is still a “very big issue”, says Richard Vincent, CEO and Managing Director of Australian Pharmaceutical Industries (API) and Deputy Chairman of the National Pharmaceutical Services Association (NPSA), which represents Australian pharmaceutical wholesalers.

Late last year, AstraZeneca and Amgen joined Pfizer and other manufacturers in deciding to bypass the CSO wholesalers in directly supplying their medicines to community pharmacies.

In publishing API’s half-year results for 2018 in April, Mr Vincent called for remedial regulatory action on the issue, saying that exclusive distribution of PBS medicines was undermining the intent of the CSO.

Nearly six months later, not much has changed.

Asked when a solution may be arrived at, he replies: “I’d like it to be yesterday.

“It’s still a very big issue. The National Medicines Policy is about product being available to all Australians anywhere in Australia to access every day, and at the same price,” Mr Vincent tells AJP.

“That’s the government’s approach to healthcare, which is a fantastic principle to start with. It’s quite different to other countries around the world so Australia is looked at as one of the unique and best healthcare systems in the world.

“A pharmacist has to be able to supply every customer with a product immediately. A wholesaler needs to carry every product and be able to supply every pharmacist every day.

“I don’t understand why a supplier can have the option not to fulfil product through all the wholesalers, I don’t think that’s right. What it’s doing is it’s reducing the redundancy in the system, so if you can only get product through one source and there’s an issue in the supply chain, then you’ll break down the ability to service the end patient and the end customer.”

Mr Vincent isn’t alone in his sentiment.

NPSA chairman and Sigma CEO Mark Hooper has often spoken out about the arrangements, recently saying “exclusive direct supply from manufacturers to pharmacies creates a dangerous dependency on sole distribution for the medicines they carry, with no redundancy of supply.”

The Pharmacy Guild of Australia has called for action on the issue, saying that when a medicines company decides to bypass the full-line wholesalers by instituting exclusive direct supply arrangements, it operates outside the requirements and safeguards of the CSO.

“Because exclusive direct supply arrangements operate outside the CSO, patients may have to wait longer for their medicines if the manufacturer’s delivery times do not enable timely access for all pharmacies,” the Guild has said.

However Medicines Australia says it’s all about providing for competition in the sector.

“We’re talking often about very complex medicines, and manufacturers are often best placed about how they should get to where they need to go, and in a cost-effective way,” said Medicines Australia chair Wes Cook at a pharmaceutical media event in May.

“Medicines Australia think manufacturers should be able to choose, each member company.

“The supply chain is a competitive aspect of our companies. The view at the moment is each company has a legal right to choose how they distribute, I’m not saying anything’s impossible but that competition underlies everything that we do.

“It has to be about the patients, getting medicines to them where they need it, when they need it,” said Mr Cook, adding: “I think there’s lots of different models to get there.”

In May, the Department of Health announced a CSO review that would look at exclusive supply arrangements, among other things.

Department of Health acting deputy secretary Penny Shakespeare said the government needs to make a decision based on the evidence.

“That’s why we have reviews. This is not the only part of government where we have stakeholders that don’t agree with each other,” said Ms Shakespeare.

The review is still currently underway.

Mr Vincent says the solution to the issue is “very simple”.

“Suppliers can put commercial arrangements in place if they choose, but they should make product available to each and every CSO wholesaler,” he tells AJP.

“I’ve got a lot of faith in Greg Hunt the Health Minister, he’s very strategic, he’s got a good understanding of the supply chain, and I know he’s looking at this issue. We haven’t got a solution yet, but we’re close.

“He’s all about patient outcomes, having drugs that are relevant and solve particular conditions and all conditions, so he’s very big on listing new products that give us a good health outcome and looking after patients, but he understands the whole supply chain, so that gives me a lot of confidence that we’ll get a solution.

“But the reality is there’s a whole lot of priorities in Canberra right now, so we’ll just continue to work with the Minister and his department until we get a solution.”

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  1. Noel Slabbert

    The view at the moment that each company has a legal right to choose how they distribute is correct, however I believe that the moment a medication is listed on the PBS it should be automatically have to be made available through the CSO Wholesalers as well.

  2. Jarrod McMaugh

    “Suppliers can put commercial arrangements in place if they choose, but they should make product available to each and every CSO wholesaler,” he tells AJP.

    That is a very important point.

    Vegemite, for instance, cannot choose to limit the availability of their product to retailers.

    They can have preferential contracts in place that make it less viable for every retailer to range their product, but they cannot restrict trade by denying access.

    They could also have specific contracts in place that would require certain things (like volume, for instance), but they can’t just decide to say that Aldi, for instance, is not allowed to range their products.

    This is illegal under the ACCC regulations.

    I have made enquiries with ACCC on this matter. If there is only one complaint/enquiry, there is unlikely to be any change…. and they want to hear from “consumers” (ie individual businesses, or even patients affected by this), not from advocacy groups.

  3. M M

    Here is the answer to the CEO who is not able to remain competitive https://m.facebook.com/groups/578873398904330?view=permalink&id=1131559943635670

  4. Nicholas Logan

    Some great points by Mr Vincent.

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