Launched: April 2007
To determine how recent and proposed changes to distribution arrangements may affect competition, the NHS and patients. The study focuses on actual and proposed decisions by pharmaceutical suppliers to change distribution arrangements, and the implications of the introduction of 'direct to pharmacy' distribution models, including Pfizer's current exclusive arrangement with Unichem and other models using more logistic service providers from the outset.
Significant risk that the Direct to Pharmacy schemes will result in cost increases to NHS, and reduced service levels to pharmacies and, potentially, patients.
OFT recommended changes to Pharmaceutical Price Regulatory Scheme (PPRS) so that discounts currently given in supply chain (12.5 per cent) are instead formalised in the manufacturer's list price or to have minimum discounts to pharmacies agreed in the PPRS (or tied into the re-negotiation of the same).
If NHS is concerned about unsatisfactory service levels, it can seek manufacturers' agreement on standards and, if lower standards are introduced, cost savings should be shared with NHS. Highlight to manufacturers need to protect their long term interests by ensuing competition in wholesaler/logistics/distribution sector.
Government responded to the OFT's recommendations in May 2008. It agreed that the recommendations on changes to the PPRS should be discussed as part of the current PPRS negotiations. It concluded that there had been no change in the standard of service offered to patients and no evidence to suggest that this will be the case in the foreseeable future. Therefore it concluded there was no need to bring forward legislation to clarify service standards at this stage - but it would keep the matter under review.
Download the OFT Report Medicines distribution - an OFT market study December 2007 (pdf 732 kb)
Download the annexes of the report:
Annexe A - (78 kb)
Annexe B - Related OFT work (127 kb)
Annexe C - (269 kb)
Annexe D - Financial flows relevant to medicines (150 kb)
Annexe E - Regulation of the medicines sector (172 kb)
Annexe F - Surveys (1.25 mb)
Annexe G - International survey (481 kb)
Annexe H - Competition Act 1998 and Enterprise Act 2002 considerations (83 kb)
Annexe I - Supplementary analysis (150 kb)
Annexe J - Glossary (84 kb)
See press release 'OFT makes recommendations to Government on UK medicines distribution' 11 December 2007
See press release 29/07 'OFT report recommends reform to UK drug pricing scheme' 20 February 2007
See press release 'The OFT launched a market study into the distribution of medicines in the UK' 4 April 2007
For more information on the reasons for the market study, download Distribution of medicines in the UK April 2007 (pdf 91kb)
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