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Distribution of medicines in the UK

2 May 2008

Government's response to OFT's recommendations

The OFT welcomes the Government's announcement that it plans to discuss the OFT's recommendations to prevent cost increases to the NHS as a result of new medicines distribution schemes as part of the current Pharmaceutical Price Regulation Scheme (PPRS) negotiations. The Government welcomed the OFT's timely and important report.

If the recommendations are adopted, they should protect the NHS from cost increases that could potentially run into hundreds of millions of pounds, by ensuring that medicines costs do not rise as a result of the increased use of 'direct-to-pharmacy' (DTP) distribution models.

We note that the Government has consulted with industry and concluded that there is no evidence to suggest that service standards to patients have been, or are likely to be, affected by changes in distribution. It will however, keep this matter under review.

The OFT published its report on 11 December 2007. In its report, the OFT considers the impact on the sector of increased use of DTP distribution schemes. The study finds that there is a significant risk that such arrangements will result in higher costs to the NHS. It recommends that the Government makes further changes to the PPRS to ensure that NHS medicines costs do not increase as a result of changes in distribution (this follows on from OFT recommendations to reform the PPRS in February (see press release 29/07)).

The OFT also finds that such schemes could affect services to pharmacies and patients through, for example, longer waiting times to receive medicines. The report recommends that if the Government is concerned about reductions in service standards to pharmacies, it should seek the agreement of manufacturers to adopt minimum service standards. Government should ensure that it pays less if service standards are reduced.

11 December 2007

The OFT has published its market study into medicines distribution in the UK.

The market study looked at new and proposed medicine distribution arrangements - known as 'direct to pharmacy' (DTP) schemes.

The OFT considered the impact on the sector of Pfizer Limited’s exclusive DTP scheme using only UniChem, and the likely impact of other manufacturers introducing DTP schemes and/or reducing the number of distributors they use. The study finds that there is a significant risk that such arrangements will result in higher costs to the NHS potentially running into hundreds of millions of pounds. The OFT also found that such schemes could affect services to pharmacies and patients through, for example, longer waiting times to receive medicines.

The market study recommends that the Department of Health makes further changes to the Pharmaceutical Price Regulation Scheme to ensure that NHS medicines costs do not increase as a result of changes in distribution, and follows on from OFT recommendations to reform the PPRS in February (see press release 29/07).

The OFT is also recommending that, if the Government is concerned about reductions in service standards to pharmacies, it should seek the agreement of manufacturers to adopt minimum service standards. Government should ensure that it pays less if service standards are reduced.

The OFT also found that any future widespread use of exclusive distribution arrangements might lead to longer-term competition concerns and it will monitor the situation with the prospect of future investigation, if appropriate.

Download Medicines distribution - an OFT market study (pdf 732 kb).

Annexes - all pdf files

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)