MEMORANDUM BY BRITISH ASSOCIATION OF PHARMACEUTICAL
WHOLESALERS
THE SHORTAGE OF GENERIC DRUGS (GD3)
WHOLESALE ORGANISATION
1. The British Association of Pharmaceutical
Wholesalers (BAPW) represents all of the full-line wholesalers
in the UK.
The market sector is divided into full-line
wholesalers, short-line wholesalers and self-distributors.
(a) Full-line Wholesalers must carry
a comprehensive stock of prescription products and over the counter
medicines for which there is a demand even if such a demand is
irregular and also sufficient depth of stock to ensure continuity
of supply to the customer from shelf stock. The consequence of
this commitment is that three quarters of the lines held are non-profit
making. They deliver twice a day and provide a full range of services
required to support community pharmacists, hospitals and dispensing
doctors. There are 16 full-line wholesalers, all of whom are BAPW
Members, and they provide 80 per cent of the medicines used in
the UK.
(b) Short-line Wholesalers trade
in a small range of only the most profitable lines, including
generics and parallel imports. They provide no services to customers
and consequently have very low overheads. There are many hundreds
of them, ranging from quite large to small community pharmacy
buying groups. They collectively have about 8 per cent of the
business.
(c) Self Distributors—This
is the Boots operation, who supply only their own shops.
2. Reason for Shortages
The reasons for the present shortages can be
summarised as follows:
(a) Regent Laboratories—They
were closed down by the Medicines Control Agency Inspectors at
the beginning of the year. They had 2 per cent of the market under
their own brand but were the contract manufacturers for other
companies and thus provided between 12 per cent and 15 per cent
of the generic products for the UK. They were the exclusive producers
of some generic products.
(b) Relocation—Two of the largest
generic manufacturers have moved their production facilities out
of the UK. APS to Hungary and Norton to Ireland. This inevitably
has a disruptive effect on supply.
(c) Patient Packs—The Department
of Health's lack of direction on a timetable and refusal to provide
financial assistance for the introduction of Patient Packs has
contributed to the shortages. This has resulted in manufacturers
being reluctant to make the considerable investment necessary
in new packing plants. This of course, has been exacerbated by
the move of APS and Norton as they had not installed new packing
plant in their old production sites.
Much of the packing plant that could have been
used to produce Patient Packs is now turned over to the production
of small packs of Paracetamol under MLX231.
Bulk packs of generics are often resisted by
customers, as each prescription has to be dispensed from bulk
with a patient leaflet. It is virtually impossible to distribute,
hold and marry-up leaflets with the appropriate medicine. Consequently,
many pharmacists either refuse to dispense from bulk or act outside
the law in providing medicine without the leaflet.
(d) Prices—The generic market
has been a commodity market for many years, providing robust price
competition, both on existing generic products and for products
newly off patent. In such a market, prices go up as well as down.
This commodity market has been disrupted by the Regent situation,
the move of production outside the UK and the need for manufacturers
to see that they can recover the costs of the introduction of
Patient Packs. This has resulted in lack of competition, shortages
and inevitable price rises. Consequently, more short-line wholesalers
are entering the generic market, which leads to additional, albeit
short-term shortages as the new distribution chain is filled.
Due to the shortages and present volatility of
the market, every day brings higher prices. These price rises
have been successfully forecast by traders, which encourages hoarding
and speculation. The point should be made that whilst full-line
wholesalers also attempt to forecast price increases, they cannot
profit by hoarding, as they need constantly large volumes of profitable
sales to compensate for the large tail of unprofitable lines in
order to maintain the additional services they provide to the
community.
It is unfortunate that generic manufacturers
still sell large volumes of products to short-line wholesalers
with the full knowledge that they may be profiteering.
(e) Demand—The formation of
PCG's is beginning to have an effect, as doctors prescribing is
being more closely scrutinised and more patients are being prescribed
generic drugs. The overall generic market is growing rapidly and
the sheer size of the demand would, by itself, have created significant
shortages, irrespective of other factors.
3. Present Situation
Generally, full-line wholesalers run with a
stock availability in excess of 98 per cent. The availability
of generic products has been falling since January 1999, and in
April reached an all-time low of 50 per cent. The situation has
improved and today it is near 80 per cent. However, it is not
uniform and many specific generic products are either not available
at all or in very short supply. Much of this can be traced back
to Regent, in that few manufacturers are prepared to invest in
the Regent specialist range knowing that they will be returning
to the market sooner or later.
The point needs to be made that today in
every case of a generic shortage, there are branded equivalents
or acceptable alternatives so that the patients' needs can always
be met. This could not be said six months ago.
4. Y2K
Under "Action 2000" the Department
of Health was instrumental in establishing the "Pharmaceutical
Alliance", which has brought together all those involved
in healthcare. Everyone has been working for two years to ensure
Y2K Compliance and have been independently audited in order to
confirm their status.
The message from the industry is that it is
"business as usual" and that there is absolutely no
requirement to panic-buy or hoard by anyone, especially consumers.
Doctors have been discouraged from over-prescribing and there
is full confidence that the pharmaceutical distribution chain
will be able to provide for every eventuality.
It was therefore disappointing to read the Terms
of Reference of the Select Committee Inquiry, as raising awareness
of the current generic shortages could generate panic buying of
all pharmaceutical products. It cannot be emphasised enough that
the present shortage of generics, which will be largely overcome
by the end of the year, should have little or no effect on the
ability of healthcare professionals to serve the public, although
it is conceded that there may be a cost penalty. I would urge
the Committee to make this abundantly clear.
RECOMMENDATIONS
It is recommended that:
(a) The Department of Health gives greater
direction and produces a timetable for the introduction of Patient
Packs. This may require some changes in tariffs and reimbursement
but should be cost neutral for the Government.
(b) Until Patient Packs are universally available,
give pharmacists dispensation to dispense from bulk without having
to provide patient leaflets in every case.
(c) Rescind MLX231, which has actually increased
the volume of Paracetamol in the public domain. This will free
up some packing plants to be used for the production of Patient
Packs of other products.
(d) Encourage the Medicines Control Agency
to do everything they can to re-license Regent without compromising
on safety.
(e) The Select Committee does nothing to
alarm the public into panic buying as this could turn a difficult
situation into a crisis.
CONCLUSION
It is believed that Regent may be about to have
their licence restored and that APS and Norton will have overcome
their production difficulties by the end of the year. This will
redress the shortages and restore competition. Prices will fall
on many products but are unlikely to fall to the pre-1999 level.
The shortage of generics was created by a number
of factors operating simultaneously and has been exacerbated by
entrepreneurial exploitation. In a commodity market this cannot
be prevented.
October 1999
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