Interview with Peter Behner

The legal right to delivery for wholesalers in Germany has left many pharmaceutical companies faced with the question: What do we do now? Peter Behner Partner at Booz & Company and expert in pharmaceutical distribution comments on the results of the 15th amendment to the Medical Preparations Act in Germany and explains what the key issues will be in future.

How do you assess the results of the 15th amendment to the German Medical Preparations Act (AMG)?

The amendment to the German Medical Preparations Act (AMG) encompasses many aspects. In regard to the provisions of §52b paragraph 2, which are applicable to pharmaceutical distribution, my impression is that there is general confusion. The legislature has left a lot of room for interpretation; with the result that each of the parties involved will interpret the text of the law differently. That has already happened in some cases. In my opinion, clarification will come via the courts. It could certainly be that it was a conscious decision by the legislature to leave certain points open; with the intention that the parties themselves would reach agreement in order to find practicable solutions. The pharmaceutical industry will act and wholesalers will react accordingly; that much is already clear.

What effect does the 15th amendment to the German Medical Preparations Act (AMG) have on pharmaceutical distribution structures in Germany?

It is interesting that the legislature has for the first time mentioned wholesalers and the pharmaceutical industry in a law in connection with the distribution of medications. Nevertheless, it raises many questions to which the text of the law fails to provide any clear answers, which will surely lead to a raft of court cases over the next few years. For instance, what is the meaning of ‘complete provision’? Does it mean that a wholesaler must have all existing medications in its product range or only certain products? How should the claim to delivery be interpreted? Does delivery have to be made to all wholesalers, or possibly to only one or two selected wholesalers, as Mr Getrost from Pfizer discussed in his presentation? Does the right to delivery refer to wholesalers per se or is it a matter of supplying the wholesale market with quantities that the pharmacies provide directly to the patients? There are many questions, a very broad range of possible interpretations and, consequently, a wide variety of conceivable distribution models.

What is your advice for a company that is currently reviewing its supply chain structures?

Selective channel management must be made more professional, and, despite the amendment to the law, direct delivery should certainly not be abandoned. In future, the pharmaceutical industry will still need to rely on direct-to-pharmacy and direct-to-patient distribution. In general, all available distribution channels and all scope for action should be utilised in an optimum way and it is vital to seek cooperation with the stakeholders involved. Wholesalers should be integrated in constructive cooperation. Where practicable, products should be distributed via wholesalers. In other cases, wholesalers should be given a minimumquantity, but the majority of products should be distributed via alternative channels, in order to serve the market efficiently.

What exactly does selective channel management mean and where do you see the potential benefits of this approach?

Future success will depend, above all, on improving the efficiency of the various sales channels on a sustainable basis: To achieve this, the product portfolio must be clustered. Each product must be checked individually to determine the best sales approach. For example, for products that are being discontinued, the direct-to-pharmacy model (DtP) might be the best option in order to achieve synergieswith other DtP products in the area of logistics costs. The key factors are the perspective and  strategic interests of the particular company.

When would you use the direct-to-patient approach?

The direct-to-patient model is useful for products that represent high sales from the manufacturer perspective and require special tracking. A partial or complete lack of patient compliance is cost-intensive – for everyone. The costs are not just reflected in the healthcare system. Patients who do not take their medicine as prescribed mean lost sales for the pharmaceutical industry. The costs resulting from non-compliance are incurred by all participants (healthcare insurers, patients and manufacturers). However, there is still no consistent understanding of this, particularly amongst healthcare insurers. The direct-to-patient approach can help increase patient compliance and thus help lower costs to the healthcare insurers over the long term and also reduce lost sales for manufacturers.

What would be the optimum design for this?

This approach focuses on patient service programmes, which make use of specific consulting and provision of information to help the patient and provide positive support for the course of therapy. The important thing is that
the patient enters such a programme voluntarily. If a patient fails to order a new prescription for medication, this is usually a clear sign that the patient is not compliant. This can be recognised immediately and direct measures
can be taken to counteract this failure to take the medication (for example by informing the attending doctor). If the pharmacist is also involved, this provides another level of support to help keep the patient compliant. It is important to address pharmacists directly and toencourage them to participate. Financial sharing models, for example, could be an excellent  means of involving pharmacists. A simple calculation clearly shows the advantages both for the pharmaceutical manufacturer and for the pharmacist. If we take a medication that results in costs of €20,000 per patient per year and we assume a very conservative non-compliance rate of 10%, that translates as €2,000 in lost sales per patient per year for the manufacturer. If a pharmacist is successful in helping keep the patient compliant, then the pharmacist can participate in a percentage of the financial gains; providing an additional margin to both pharmacist and manufacturer. The improved compliance behaviour of the patient will have a sustained positive effect on their progress, which in turn will help the patient and also reduce the overall costs for the healthcare insurer as the follow-up costs will be lower.