Pharmaceutical Commerce - November/December 2011 - (Page 8)

Top News Matching Pharma Product Trends With Pharma Distribution Trends Shrinkage of branded product distribution, and growth of generics and specialties, could affect future distribution practices At a panel discussion at last month’s Logipharma meeting (Boston, Oct. 3-5), Volker Schulz, senior director, life sciences at Exel (Westerville, OH) presented a chart (Fig. 1) that has interesting implications for the future of logistics in the life sciences industry. Exel and its consultants (including Blue Fin Group; see p. 1) have plotted the projected growth of branded, generic and biotech products over the coming decade, then overlaid this with data on how much of each category is being distributed through wholesalers, and how much takes on various forms of “direct distribution” (which could include the practice of cross-docking—a shipment going from a manufacturer to a wholesaler but then immediate being cross-docked to go to the warehouse of a chain pharmacy, mass merchandiser or hospital network; mail order or other types of distribution). And there’s a sort of joker in the deck: the impact of specialty pharmacies, which will preferentially be dealing in high-value, high-touch products that generally are not distributed to neighborhood pharmacies. In many cases, these products are being drop-shipped, in small volumes, to clinics or hospitals, or even directly to patients. Fig 1 shows that at the end of this decade, the dollar values of branded, generic and biotech/specialty products will be nearly equal, with branded declining both absolutely and proportionately, and the others growing. No surprise there—that’s the general understanding of where the industry is going. But the implications for how the life sciences supply chains are going to change is less obvious. “There are more questions than answers in this chart, both for us and for pharma manufacturers,” says Schulz. “For manufacturers, it’s a question of what value they’re getting Fig. 1: US Pharma Market Forecast, Type and Distribution Channel Sales Volume Tegrant/ ThermoSafe Goes to Sonoco for $550 Million Multinational packaging company acquires a leading cold-chain supplier 34% $600B $500B $400B Direct 40% Specialty Pharma 40% Wholesale 20% $300B Bio $200B 13% 17% $100B 70% Direct 70% Wholesale 30% 34% Generic Wholesale 90% Direct 10% Branded 33% Sonoco (Hartsville, SC), a $4.1-billion, diversified packaging company, has signed a definitive agreement to acquire Tegrant (DeKalb, IL) from Metalmark Capital, a private equity firm, for $550 million, with the deal expected to close by the end of November. Tegrant has three divisions: ThermoSafe Brands, said to be the world leader in temperature-controlled packaging for foods and pharmaceuticals; ProTexic Brands, which serves some medical-device manufacturers; and Alloyd Brands,a manufacturer of high-visibility packaging and packaging machinery. More recycling? While the combined companies can be expected to continue development of healthcare packaging and temperaturecontrolled technologies for life sciences, one possible near-term result is to give greater credibility to ThermoSafe’s capabilities in recycling expanded-plastic packaging, a typical insulating material for cold chain shipping. Sonoco is a leading recycler of packaging materials, operates five material recovery facilities (MRFs) that handle municipal recycling, and followed its acquisition of Tegrant with another MRF, in South Carolina. Sonoco is also a member of the Dow Jones Sustainability World Index. 0 2000 2005 2010 2015 from wholesalers when products are going directly to large chains or healthcare providers. For us, knowing that many multinational pharma companies are looking to consolidate the number of logistics service providers they use, the question is how this game of musical chairs will play out.” Exel, part of DHL and one of the world’s leading 3PL organizations, has had some recent success in what it calls “prewholesaling” distribution services—acting as the warehousing and distribution function of manufacturers. A recent success (Pharmaceutical Commerce, Sept/Oct, p. 1) is performing warehousing and kitting services for Bristol Myers Squibb, and running one of its distribution centers. Wholesaler-distributors, 3PLs and contract manufacturers/packagers are all competing for these types of services, especially when they involve high-touch specialty products. But a constant of the current pharmaceutical distribution environment is that distribution occurs at no cost to the end customer, and thus generics, and to some degree branded products, support the high cost of specialty distribution. How that will hold up in the future remains to be seen. Traditional Business-to-Business Publisher Offers Online Contact to Physicians That Have Diagnostics Services Online medical-diagnostics catalogues will have links to live pharma rep interations While there are a growing number of e-detailing services that enable physicians to interact directly with sales reps, traditional publishers are building out their online capabilities to do the same. A case in point is Physicians Office Resource (POR; Bedford, NH), which has published a variety of directories for medical diagnostic equipment that might be purchased by physicians. Over the past few months, according to Andy Nimmo, president, the company has been upgrading its online capabilities to enable direct interaction with customer service reps at equipment vendors—no surprise there. But now it hopes to capitalize on the fact that physicians who might be looking at an in-office device would naturally be looking at the medications that such tests would be indicators for. Preliminary trials have been very encouraging, says Nimmo, because “the physicians are coming to you, essentially prequalified, rather than being pulled by a request from an e-mail, phone call, or visit.” For example, if a physician is running an in-office test for stomach ulcers, (for which there are antibody tests), that physician might also be interested in reading about the drug treatments available for ulcers. Behind all this has been a quiet transformation of the marketplace for in-office testing. According to Nimmo, after doctors went aggressively after in-office business years ago, HHS clamped down with its CLIA program to certify labs. The number of certified labs went from over 300,000 to around 35,000 in the early years of this century—but has since risen to 110,000, including many physicians’ offices. Now, POR has contracted with two well-known names in pharma marketing: SK&A, a unit of Cegedim, and First DataBank, a unit of Hearst Business Media, to connect the right physicians with the right medical information. The former provides updated contact information about doctors’ offices; the latter provides approved descriptions of over 80,000 medications available commercially. Nimmo says that the pharmaceutical program will allow manufacturers to go live with call-in or click-through resources from its website (which is free to physicians), for a startup fee of $25,000 and a graduated payment schedule that works out to about $100 per lead. 8 November | December 2011 www.PharmaceuticalCommerce.com http://www.PharmaceuticalCommerce.com

Table of Contents for the Digital Edition of Pharmaceutical Commerce - November/December 2011

Pharmaceutical Commerce - November/December 2011
Contents
Editorial
Op-Ed
Top News
Business/Finance
Brand Marketing & Communications
Supply Chain/Logistics
Information Technology
Manufacturing & Packaging
Legal & Regulatory
Meetings and Editorial Index

Pharmaceutical Commerce - November/December 2011

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