Direct-to-pharmacy (DTP) distribution agreements will not stop counterfeit medicines entering the UK drug supply – in fact, they could “positively encourage” the trade, industry experts have warned.

Speaking at the annual conference of the British Association of Pharmaceutical Wholesalers, David Baker, chief executive of the Dispensing Doctors Federation, forecast that an across-the-board take-up of DTP distribution programmes could lead to pharmacists looking to buy their products elsewhere, including from “less reputable sources”.

Mr Baker’s view was echoed by a number of speakers at the meeting. The new DTP arrangements represent a distortion of power, with the risk that “big pharma” may exert undue influence, even though 80% of the medicines dispensed under the NHS are supplied by manufacturers whose annual turnover is under £50 million, said Keith Davies, UK logistics manager at ProStrakan. The new agreements also threaten the current successful “mixed economy” of high-volume low-cost and low-volume, high-cost products and they threaten the existence of niche products made by small companies on fixed margins, while a single-supplier system presents the risk of catastrophic failure, and a loss of choice and competition.

Mr Davies agreed that, with the new arrangements pioneered by Pfizer, “the genie is out of the bottle,” but stressed that any change to the system must be ordered and considered – not piecemeal and not purely for the benefit of narrow corporate interests. The new supply models should be tested to destruction, he said, and called for a moratorium on the signing of any new such deals until the Office of Fair Trading has published the results of its market study into the distribution of medicines in the UK.

The meeting was also addressed by Lord Hunt, the Minister of State for Quality at the Department of Health, who described the OFT probe as “a very good thing” which would allow a very detailed examination of the situation by a wholly dispassionate group. “This is the way forward,” he said.

The Minister pointed out that there have only been eight reported cases of counterfeit medicines appearing in the UK supply since 2004, which show that the problem is extremely rare, but, he added, there is no room for complacency, nor should we ignore our global role. He agreed with BAPW executive director Martin Sawer that penalties for counterfeiting should be made stronger but did not respond to the concerns expressed by Mr Sawer over the fact, in light of the recent discoveries of counterfeit drugs in the UK supply, that the number of wholesale licenses issued by the Medicines and Healthcare products Regulatory Agency currently stands at more than 1,700, up from around 1,590 this time last year. Lord Hunt urged the industry to discuss its concerns with the MHRA.

The meeting noted that all the recent counterfeits found in the UK – AstraZeneca’s Casodex (bicalutimide), Eli Lilly’s Zyprexa (olanzapine) and Sanofi-Aventis/Bristol-Myers Squibb’s Plavix (clopidogrel) – have arrived dressed as parallel imports. David Wood, executive director of the Independent Pharmacy Federation, said that the “grey trading” market, which has developed as a result of thin pharmacy margins, had broken the trust between wholesalers and pharmacists. All parties involved are to blame for this breakdown, including the government, said delegates, but they agreed that this trust can and must be restored, and the current system can still work.

Parallel importing is legal, Dean Arnold, partner in the EMEA healthcare practice at Deloitte reminded the meeting; it represents a 5 billion-euro business throughout Europe, with the UK and Germany being the major importers. But price differentials are diminishing; he said, and estimated that the 20% drop in the value of parallel imports caused by the Pharmaceutical Price Regulation Scheme across-the-board 7% price cut in January 2005 has been maintained since then by the imposition of quotas.

Mr Arnold told the wholesalers that they are in the best position to be able to supply the process, technology and solutions which can beat the counterfeit trade and, he added: “if I were government, I would reward this.”

The current supply changes are not confined to the UK; similar developments are taking place in Poland, Germany and other European nations, and every government in Europe is taking steps to better manage their pharmaceutical supply chains, said Mr Arnold. He was upbeat about the future of the industry, telling delegates that, with the purchase of Alliance Boots last month by the group’s deputy chairman Stefano Pessina and US private equity investors Kohlberg Kravis Roberts in Europe’s biggest-ever private equity deal, KKR and other banks had “placed a huge bet on your industry.” By Lynne Taylor