Pharmaceutical Distribution in Canada. GIRP Annual General Meeting

Transcription

1 Pharmaceutical Distribution in Canada GIRP Annual General Meeting

2 About CAPDM The Canadian Association for Pharmacy Distribution Management (CAPDM), founded in 1964, is identified as the authoritative voice of the pharmacy supply chain Represents participants in one of the world s most advanced pharmaceutical supply chain - serving as both a resource for Members, and an advocate for the industry Members are distributors of pharmaceuticals and other healthrelated products, and self-distributing pharmacy chains Associate Members include brand, generic and OTC pharmaceutical manufacturers, and a variety of companies that supply goods and services to the pharmacy distribution business 2

3 CAPDM Distributor Members in Canada AmerisourceBergen Canada Kohl & Frisch Limited McKesson Canada unipharm Wholesale Drugs Ltd 28 Distribution Centres Compliant with CAPDM bylaws for fully consolidated wholesalers Over 5,000 employees across Canada Additional thousands employed in Canada through supporting service providers; i.e. transportation companies 3

4 CAPDM Self-Distributor Members in Canada Shoppers Drug Mart London Drugs Lawtons / Sobeys Jean Coutu Familiprix McMahon 4

5 5 Canada

6 Canada by the Numbers 9.9 million sq kms - roughly equal to Europe 9,306 kms east-west 4,634 kms north-south Population 34 million - vs 700 million in Europe 59% English, 23% French, 18% Other 6

7 7 Large area small population

8 Pharmaceutical Distributors are the preferred channel for pharmaceutical purchases Share of Brand Pharmaceutical Shipments to Retail in January 2013 MAT (IMS Brogan) Share of Generic Pharmaceutical Shipments to Retail in January 2013 MAT (IMS Brogan) 8

9 Pharmaceutical Distributors bring cost-saving efficiencies to Canada s healthcare system Pharmaceutical Distribution Costs in Canada in $ M, With Wholesalers vs. Without (Booz Allen Hamilton, 2007) A 2007 study by the Booz Allen Group concluded that without a vibrant Canadian pharmaceutical wholesaler industry, it would cost the healthcare system an additional $928 M to replicate the current service levels in safety and efficiency under daily deliveries 9

10 The pharmaceutical distributor system is the system of choice for government, manufacturers and pharmacies Greater than 95% of pharmaceutical products in Canada pass through the pharmaceutical distributors to 100% of the retail pharmacies, hospitals and other dispensing points 15K SKUs of prescription & OTC product Closed system not an example of a counterfeit or compromised product going through the distributor system Same day delivery to 80% of locations, 99% for next day delivery No additional costs for rural, remote or frequent deliveries No minimum order size Most brand manufacturers no longer have the capacity to distribute The large generic manufacturers (ie TEVA, Apotex) still able to distribute but smaller manufacturers do not have capacity 10

11 Pharmaceutical Distributor Reimbursement Branded Pharmaceuticals: Wholesalers work within the provincial reimbursement framework and apply an upcharge based on a percentage of the products list price average net of 2% Generic Pharmaceuticals: Wholesalers receive a fee for service from the manufacturer for their services based on a percentage of the products price, resulting in no markup being charged to pharmacies average FFS of 5% 11

12 But margins are being squeezed Similar to other markets Generic market share growing Generic prices have declined by greater than 50% across all provincial jurisdictions Costs rising Increased regulations and reporting Provincial healthcare budgets at 3% growth until

13 Pharmaceutical distributors are the bank of the pharmacy supply chain Average credit extension per pharmacy - $150K Industry credit risk of $1.2 billion Credit extension is an integral part of the business model of pharmacy 13

14 Other Sources of Revenue for Distributors Inventory Management Agreements (IMAs) Manufacturers occasionally seek additional services from distributors outside of traditional pick/pack/ship distribution or not included within the scope of existing generic FFD agreements Customized reporting Rental of warehousing space Policing against cross-provincial & cross-border arbitrage Other business services (e.g., advertising services, patient programs, etc.) These manufacturer-initiated requests are for customized services that would normally not be made available to all manufacturers Distributors do not have IMAs with all manufacturers and some manufacturers do not have an IMA with any distributor To compensate for these additional requests, distributors are paid a fee for the service rendered, which varies depending on the number and type of value-added services requested, as well as the province(s) to which the IMA applies 14

15 There is growing activity across Canada to leverage distributors for public health distribution Within the Council of Federation Health Care Innovation Working Group: Pan-Canadian initiative to leverage pharmaceutical distributors to replace government/public health and establish pilot studies in fall of 2013 for; Vaccine distribution Anti-viral distribution Critical medicine stockpiling Pandemic distribution 15

16 Pharmaceutical distributors expanding specialty distribution Increase in biologics and other specialized products with sophisticated distribution requirements Increase in direct to patient distribution at both clinics and home Brand manufacturers and distributors discussing the future of distribution and the required adaptations 16

17 Returns remain a costly issue for pharmaceutical distributors Pharmacies have unrestricted return options for ambient temperature products. Distributors cannot return product to manufacturer until expired Health Canada making it increasingly difficult for distributors to restock returned ambient temperature products Distributor morgue of products waiting for return is growing Pharmacies cannot return refrigerated, liquid or injectable products until expired More restrictive return policy may be implemented but difficult when so many other elements are impacting all business sectors - not a priority for manufacturers, resisted by pharmacy distributors in the middle 17

18 Pharmaceutical Distribution in Canada Summary Safe, secure and efficient system that stakeholders identify as system of choice Changing business conditions (generic price reductions, increased regulations, increased costs) are squeezing the distributors Business model for distributors will need to evolve 18

19 Pharmaceutical Distribution in Canada Summary But. There are Opportunities As a major distributor deceases operations the gap must be filled Governments are recognizing they have altered the business model and are considering compensatory action Pan-Canadian recognition that vaccines can be more comprehensively and efficiently distributed at lower costs through the pharmaceutical distributors Discussions with both brand and generics on future products and the new requirements for the pharmacy and patient supply chain 19