This was the message from Liam FitzGerald, chief executive of United Drug, at the recent annual general meeting of the European Association of Pharmaceutical Wholesalers (GIRP) in Budapest.
"The current model of purely relying on re-sale price earnings on pharmaceuticals is no longer sustainable, however, the industry as a whole is not evolving," FitzGerald told Outsourcing-Pharma.com after his presentation.
Over the past decade European pharmaceutical wholesalers have been facing tough times. Margins continue to be squeezed as a result of government efforts to reduce the increasing financial burdens of drugs on public health care expenditures and as a result, the industry has experienced considerable consolidation in order to remain economically viable.
In 2004, the three biggest European pharmaceutical wholesalers together had a market share of 70 per cent in the EU.
At the same time, drug manufacturers have also been feeling the pinch and are turning more and more towards outsourcing traditional functions such as pre-wholesaling, labelling, packaging and logistics in an effort to save on time, costs and infrastructure.
"Outsourcing to multiple clients across one fixed cost base is proving popular as a way of relieving the pressures in drug manufacturing," FitzGerald told Outsourcing-Pharma.com.
"When Bristol-Myers Squibb outsourced the drug distribution component of their business in Europe they claimed to have made very significant cost savings."
At the retailing end, the use of services such as contract sales and medical education are also now gaining momentum.
However, many European wholesalers are stuck in the past and are missing out key areas of this outsourcing market. While they fail to act they are losing precious business to the many specialist third party providers that are springing up to fill the outsourcing gaps.
"This is dangerous, wholesalers can't afford to let this market be owned by the specialist providers," said FitzGerald.
"This has already happened in the biopharmaceutical market in the US where wholesalers have already missed their opportunity and lost vital outsourcing business to specialist providers."
Wholesalers can achieve more weight in the industry by either backward integration to provide products/services to manufacturers or by forward integration to provide products/services to customers, said FitzGerald.
Services to manufacturers include subassembly functions, packaging, printing, finishing, reimbursement consulting, patient access/advocacy, AR and chargeback management, inventory management, information management, contract sales and pre-wholesaling.
Services to customers include dispensing and delivery, operating pharmacies, repackaging drugs, delivering automation technology, staff recruitment/training, practice management, disease management, inventory management, medical education, clinical trial recruitment and information outsourcing.
"Pharmaceutical wholesalers need to realise that they are perfectly positioned to provide these outsourcing services because they are the bridge between manufacturers and retailers and can effectively provide a complete and streamlined solution," said FitzGerald.
FitzGerald uses his Ireland-based firm as an example - United Drug, once purely a wholesaling business is now also a leading provider of services to pharmaceutical retailers and manufacturers.
United Drug is now the market leader in contract distribution outsourcing (pre-wholesaling) in both Ireland and the UK and in addition it provides contract sales & marketing and technical services with a market leading position in Ireland and an emerging presence in the UK.
"In 1996 when we moved into outsourcing it was nine per cent of business, now it is over 50 per cent," said FitzGerald.
"The time is now for other European wholesalers to stop dragging their heels and start looking to the future."