empty

Interview: Jeremy Main

In his first interview since becoming independent chair of the Healthcare Distribution Association, Jeremy Main tells Neil Trainis he wants to give the organisation a more vibrant voice in the industry….

 

 

“The HDA I know extremely well,” Jeremy Main says with a slight chuckle in a boardroom somewhere in the London headquarters of the Healthcare Distribution Association.

Familiarity breeds composure and a conviction that, despite the difficulties facing all the players in the medicines supply chain post-Brexit, the future, deal or no deal, does not have to be disastrous for millions of patients who rely on pharmaceutical companies, wholesalers and community pharmacies to get them their medicines.

“Where there is a very serious patient problem in getting their medicine,” he says, “I think all manufacturers and all wholesalers will act to make sure that issue is diverted, either by getting medicine into the supply chain urgently, having it couriered to a pharmacy, taking an emergency order or even getting something delivered under police escort.”

Having been Alliance Healthcare’s managing director for nearly a decade before standing down this year for “personal reasons,” Jeremy returns to the pharmaceutical fold, this time as the first independent chair of the HDA which represents wholesalers and whose members include Alliance Healthcare, Phoenix, AAH and Day Lewis.

The role of independent chair is a first for the HDA but it is not one steeped in mystery as far as he is concerned.

“I’ve been coming to it for eight years or something. I know the people around the table well and I was chair twice when they were circulating it around the council member companies,” he says.

“It went from AAH to Phoenix to Alliance. The difference now is introducing it as an independent chair. That’s the new take on it.

“What that does it raise the profile of the association more but also it enables you to have some consistency because the issue or challenge with all organisations is the continuity of meetings and membership and attendance and all that sort of stuff. It’s not new territory but it’s a bit of a new dimension.”

Amid the seemingly endless turmoil of Brexit and appearances before parliamentary inquiries, the HDA has had to confront other issues over the last few months.

In June, a report by the National Audit Office (NAO) said the prices of some generic medicines increased “unexpectedly” in 2017-18, marked by an “unprecedented” rise in the number of requests from pharmacies for concessionary prices.

The price increases, the report would conclude, generated unforeseen costs for clinical commissioning groups (CCGs), the net spend on concessionary-priced medicines reaching £315 million in 2017-18, seven times more than in 2016-17.

The report also claimed that pharmacy wholesalers enjoyed an “unexpected” growth in their margins as generic drug prices rose in 2017-18. Jeremy insists pharmaceutical wholesalers are not making large profits from generics.

“Well, I think whole margins are generally under pressure anyway. I don’t think you can take one category and say ‘well you know, this is an amazing change and all the rest of it,’” he says.

“There is no question that wholesale margins are under pressure, not only here but on a global basis, and I think you can see that in share prices. You can see some of that happening in the (United) States as well.

“The supply chain is always under pressure. Generics are a relatively small part aren’t they. They are 4.3 billion out of branded drugs which are about 14 billion. The thing about generics is it is a fairly fluid market.

“It’s a commodity market, it works on supply and demand. There’s big financial benefits for pharmacists and the government out of that and it varies quite significantly.

“So I’m not sure one snapshot actually shows you too much about margins. But I think in general they are under pressure.”

The NAO report’s claims were based on an analysis by the Department of Health and Social Care in November 2017. Jeremy is asked if that gives the report much credence.

“No, I don’t think so. As I say, it’s a fluid market, it changes a lot, there’s a lot of dynamics, a lot of factors in it. I certainly don’t think that suddenly, the wholesalers are making huge amounts of money from generics that they weren’t making before.”

The NAO report noted that the DHSC “could not fully explain” the unexpected increases in wholesalers’ margins in 2017 but did say that concessionary prices were set “higher than necessary” above wholesalers’ selling prices which amounted to more than £86 million of additional costs for CCGs in 2017-18.

“Well, I don’t know. At the end of the day, they are working on list price I guess, which isn’t necessarily a good reflection because it’s a commodity market and trades a lot. So I don’t think there’s been a massive rise in wholesale profits,” Jeremy says.

Numark managing director Jeremy Meader has gone on record as saying wholesalers are working to “an extremely tight margin” which he insisted was considerably worse than grocery wholesaling. Jeremy Main is asked if he agrees with that assessment.

“I don’t know the ins and outs of grocery wholesaling. I think the point about wholesaling in the pharmaceutical industry is that, at the end of the day, it’s about managing a very wide range of products.

“On some of them, you may make no margin or zero margin. On some of them, you make a decent margin. And actually, it’s about that total mix. In overall terms, I don’t think there’s been any massive change in the total margin.

“The mix does change from time to time based on market forces. But it is a very, very tight margin business and there are obviously products that are distributed at a loss. But it’s managing the full range.

“I don’t know what grocery margins are. I should imagine they are probably between 2-4%. But wholesale overall is operating on way less than 2%. I don’t think (Meader) was exaggerating.”

Whatever the intricacies of pharmaceutical wholesaling, the report’s claims would not have done the industry any favours.

“This is part of the role of the HDA. What we need to get across is that wholesalers provide really high levels of service to ensure pharmacies get supplied, dispensing points get supplied and patients get their medicines as and when they need them. Right product, right place, right time," he says.

“We need to get across that all wholesalers and supply chain partners do that tirelessly in the interests of dispensing point and pharmacists. It is an extremely low business, low-margin business. It requires high levels of capital.

“One thing I think people forget is how much money has to be invested in stock and also, very high logistics and infrastructure costs. Twice a day, vans, fuel, now with the advance of chilled distribution. So, it’s sufficient, it’s very well regulated but the margins are tight and we need to get that message across.

“We did our PwC report which demonstrated that if manufacturers supplied themselves, their own products twice a day to pharmacies, the distribution costs would be absolutely enormous. So acting as a wholesaler is really saving the health system a lot of money.”

Steve Oldfield, the chief commercial officer at the DHSC, told an inquiry this year that its decision to use manufacturers’ prices rather than those of wholesalers when calculating concessionary prices saw prices fall and pressure on CCGs reduce “very significantly.”

“It’s very difficult to draw conclusions from the generics market because it’s a volume-led supply and demand situation. It kind of regulates itself. If we buy from a manufacturer, at the end of the day, to make a margin we’ve got sell at a higher price,” Jeremy suggests.

“Alternatively, a wholesaler may choose, for different reasons, to sell at a lower price. But day to day, generic prices change and vary depending on what’s available in the market, who’s supplying at what price, et cetera, et cetera.

“I think it’s very dangerous to draw conclusions about what’s happening in generics globally. One day a molecule may make a decent margin. In a weeks’ time, if the market decides to change, then it won’t. It also depends what model you’re selling it through. If you’re a short-liner, you’re doing something very different to a full-liner.

“So it’s dangerous taking any number in isolation, any period of time in isolation, and saying ‘this is showing someone making excess profits’ or ‘it’s better for CCGs if they do this or don’t do that.’ The generic market is very tight, it’s very, very competitive and it works well in terms of being cost-effective for the NHS.”

In the past there has been a disconnect between the generics industry and pharmacists at the coalface when it comes to generic shortages.

A few years back the then chairman of the British Generic Manufacturers Association Thomas Broeer insisted generic shortages were “a slogan rather than the truth.” Around the same time All-Party Pharmacy Group chair Sir Kevin Barron was claiming generic medicines shortages were “getting worse.”

As recently as September 2017, the PSNC reported that contractors were having “very great difficulties” sourcing “a large number of products” which was having a “catastrophic” impact on cash-flow. Those anxieties are being inflamed with Brexit on the horizon.

Jeremy is asked if he thinks there is currently a shortage of generics. He suggests there are a lot of rumours and disinformation circulating about shortages.  That, he says, is something the HDA can put right.

“I’m not close enough to know exactly how many molecules are short or are in short supply. We know, as an industry, there are always shortages though on branded medicines and on generics.

“What we also know is there are many, many, many, many, many reasons why products go short. The point is that doesn’t help the pharmacist or the patient because if you don’t have your medicine, it’s a problem and it causes a lot of frustration and a lot of costs.

“What we want to do at the HDA is spend some really serious quality time looking at shortages which is an industry issue and doing two things. One is explaining why they happen better because there’s a lot of reasons.

“Secondly, how we can explain that better, make people aware of why these things are happening and thirdly, think about ways in which we can improve the situation by working collaboratively across the industry.”

So the HDA want to explain to pharmacists more clearly why shortages happen?

“Exactly. We want to explain why they happen. (There was) recently a list and there’s probably at least 50 to 70 different reasons why there can be a shortage in the marketplace. And it varies all the way through from the manufacturer to the dispensing point.

“To give you some examples, it can be a change in regulation for the manufacturer, it can be a change in manufacturing location, it can be logistics problems, it can be a bottle-up at Calais, it can be stock forecasting. There’s a lot of reasons.

“At the HDA, we want to make all stakeholders more aware because I think the problem is a lot of rumours go around the place and a lot of disinformation which we want to correct.”

Jeremy is asked how the HDA will illuminate pharmacists on the reasons for a shortage.

“We want to work with all stakeholders and partners to think about ways to make people more aware of why shortages happen and have more visibility and more communication.

“We don’t currently have a blueprint but it’s something we are keen to work on. And the reason we are keen to work on it is because we did a stakeholder survey where we did an in-depth discussion with all stakeholders in the industry.

“That included manufacturers, pharmacists and regulatory bodies and talked to them about knowing and understanding what happens with healthcare distribution and so on, and the biggest single point that came out was around shortages.

“So having had that feedback, we’re really keen to educate, talk about it and work on some ideas.”

He suggests “there is not enough knowledge and information about why a shortage is happening and then also there is quite a lot of disinformation which goes around as well. Transparency would be a good thing…as much as possible.”

It is tempting to wonder where this disinformation has come from. The national press? Perhaps the pharmacy press? Jeremy pauses for a moment.

“I think it’s easy to pick on something specific or a moment in time. It’s a bit like the generics stuff about oh suddenly prices have gone up.’ In the media you only get a certain piece of information at any one time. I think you find that in the national press don’t you.

“There’s a specific piece of information that’s valid today, it may not be valid tomorrow. It’s (about) trying to get some of the more holistic messages across, the bigger picture and the whole context in terms of what is really happening.”

He does not hesitate when asked about the impact of Brexit on the medicines supply chain.

“Brexit is very disruptive to the pharmaceutical and UK wholesale and pharmacy industry because, in terms of the EMA (European Medicines Agency) moving out of the UK, that’s job losses. We’re governed by EU law in terms of licences and many, many things.

“It’s a fact it’s very, very disruptive in its own right anyway and therefore it’s difficult to see in terms of the pharmaceutical industry anything positive coming out of it. Maybe there is. But it’s difficult to see it. It just seems very disruptive, very challenging, very hard.

“Most manufacturers have got global manufacturing facilities haven’t they, so logistics, crossing the Channel, getting product into the country, so much touches the EU. This is creating a lot of work and a lot of disruption I think for a lot of people…which isn’t great.”

What are the ramifications of Brexit for pharmaceutical wholesalers?

“In a sense, less than for manufacturers because, at the end of the day, our companies are generally UK-based, so it’s relatively straightforward to carry on applying the operational model. We don’t need to repackage medicines or doing encodes and all the rest of it.

“I think there’s an active role in terms of making sure stocks are available, in terms of trying to make sure everybody gets their fair share of stock and really working hard on the things we already have in play to build supply chain consistency and resilience.

“It’s not as hard for us as it is for some other industries. My bigger concerns about Brexit is the economic impact in global terms because if there’s pressure on government expenditure, if there’s pressure on jobs, if there’s pressure on car manufacturers in the UK, if there’s pressure on financial services, like anything else, in our economy that’s finding it’s difficult, there will be more pressure on wholesale and distribution businesses because you’re not immune from the economic big picture.”

A challenging time for everyone involved with medicines awaits.

Welcome back Jeremy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recommended

Interview: Danielle Hunt

Interview: Hemant Patel




This website is for healthcare professionals, people who work in pharmacy and pharmacy students. By clicking into any content, you confirm this describes you and that you agree to Independent Pharmacist's Terms of Use and Privacy Policy.

We use essential, performance, functional and advertising cookies to give you a better web experience. Find out how to manage these cookies here. We also use Interest Based Advertising Cookies to display relevant advertisements on this and other websites based on your viewing behaviour. By clicking "Accept" you agree to the use of these Cookies and our Cookie Policy.