Medicines supply chain – working towards a solution

We have highlighted to the Government that fresh action is needed to guarantee supplies to UK patients. We will continue to participate in the Department of Health Supply Chain Shortages Forum, co-operating with all participants in the supply chain to address patient need.

We have contributed to the All Party Pharmacy Group’s enquiry into medicines shortages and you can read our Chief Executive’s blog responding to the report published on 15 May here.

Medicine shortages is a specific problem

  • Some medicines intended for use in the UK are being (legally) traded and sold abroad for a profit by a small number of retail pharmacies estimated at 11% by IMS Health. This puts UK patients at risk of not being able to get the treatments they need. This is a relatively new phenomenon of diversion of UK supply to other markets in Europe, which has arisen because the UK now has among the lowest priced medicines in Europe and because of fluctuations in exchange rates. See last section of this page for key facts on the pricing of medicines.
  • Only a limited number of products are seriously affected with 50% of the export in cash terms coming from 75 different packs of medicine.
  • Manufacturers can experience sudden and very large changes in demand for a medicine due to diversion of UK supply for exports.

Action already taken to protect patients

  • Both manufacturers and wholesalers have a legal duty to ensure continuity of supply of medicines to UK patients. To help ensure this, manufacturers already oversupply the UK market by between 115% and 130% on average – for some products this is far higher.
  • Manufacturers have put in place emergency supply routes and significant extra resources to help ensure medicines in short supply reach UK patients.
  • When others in the supply chain divert supply meant for UK patients, it is essential for manufacturers to manage stocks. Our members do this through the use of legitimate measures – such as quotas – to ensure that additional orders are due to genuine UK patient demand, thus preserving stock that is needed for UK patients. While we understand the frustration that quotas and other measures sometimes cause individual pharmacies, this is essential to manage stocks of medicines that are in short supply to ensure availability for UK patients.
  • Some retail pharmacies are increasingly finding ways around the measures put in place by manufacturers to ensure medicines in short supply reach UK patients. Therefore, a longer term solution is needed that sustainably addresses supply shortages.

Workable solutions

  • The ABPI is calling for the legal separation of pharmacy wholesaling and dispensing activities in order that pharmacies who serve NHS patients directly prioritise the UK patient over and above wholesaling activities which effectively divert supply of medicines. Increased transparency will allow suppliers to prioritise dispensing to UK patients when they supply a product that is in short supply. This already occurs in some other EU member states and is recommended as best practice by the UK regulator, the Medicines and Healthcare products Regulatory Agency (MHRA). This would also free up the time of pharmacists who are currently burdened with spending additional time sourcing necessary medicines.
  • In the longer term, the level of regulatory oversight and inspection of the trade in medicines needs to be looked at. There are approximately 1,800 Wholesaler Dealer Licences in the UK, which allow pharmacies to export medicines. With the exception of Germany, this is the highest number in Europe by a significant margin. The MHRA does not have the resources to inspect the premises of 1,800 wholesale dealers. Relatively unregulated wholesaling activity also brings an increased risk of counterfeit medicines entering the supply chain.
  • To fundamentally resolve the issue, manufacturers are calling on government for a change in regulation. The ABPI welcomes the recent proposed repeal of 10(7) of the Medicines Act that allows a pharmacy to trade up to 5% of its turnover without a wholesaler dealer licence but feels it should go further with a restriction on the exemption which currently permits pharmacies to wholesale trade (ie being able to hold a wholesaler dealer licence).

Collaboration for a long-term solution

  • The All-Party Pharmacy Group (APPG), supported by the PSNC, the National Pharmacy Association, the Company Chemists’ Association and the Royal Pharmaceutical Society, launched an inquiry at the end of 2011 into the issue of shortages in NHS prescription medicines. The Group stated that they are  ware that the reasons for shortages are complex and not the result of one single factor but are concerned that efforts to resolve the issue have failed to improve matters. The ABPI has given written and oral evidence to this inquiry.
  • The ABPI has been involved in the Department of Health's Supply Chain Forum and has been very active in discussions to resolve this problem.
  • The ABPI has also set up a Pharmaceutical Advisory Group (PAG) to provide a forum for discussion of various supply chain issues with pharmacy stakeholders.  

Medicines pricing key facts

  • In most EU countries, governments control medicines pricing, resulting in wide price variations, sometimes exacerbated by currency fluctuations
  • In the UK, companies set prices and their profits are regulated by the Government through the Pharmaceutical Price Regulation Scheme (PPRS), jointly negotiated by the pharmaceutical industry and Government
  • The UK currently has amongst the lowest prices in Europe, driven by a combination of UK and Euro currency exchange rate changes and successive price cuts jointly agreed by industry and Government under the PPRS
  • Due to current low UK prices, medicines intended for UK patients are being exported by intermediaries to other EU countries where they attract higher prices
  • This pricing discrepancy and the change in the exchange rate have created a financial incentive for some people within the supply chain to order extra medicines and sell them overseas for profit
  • IMS has estimated that around 10% of UK pharmacists are exporting medicines to other countries and that the value of exports is between £30–50 million per month
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