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Features
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12/15/2011
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The Big Interview: Paul Smith
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Wholesale challenges for community pharmacy
Paul Smith believes there is no solution to the problem of medicines shortages and a dysfunctional supply chain even if the future of pharmacy is clearer. Neil Trainis catches up with the chief executive of Phoenix Healthcare Distribution...
Much weighs on Paul Smith's mind these days. The chief executive of Phoenix Healthcare Distribution and chairman of Numark already has his hands full ensuring that operations at one of the world's top five pharmaceutical wholesalers run smoothly. A hectic working life, though, has not preoccupied him enough to stem the flow of concerns festering on his mind.
As we sit down to chat in a cafeteria at the swish Park Plaza Hotel in Westminster it quickly becomes clear that the stresses of the pharmaceutical drugs supply chain and the irritation of foreign footballers who constantly feign injury have not blighted him. “Let me get this one,” he says cheerily, digging his hand into his pocket and glancing at two cups of tea resting on a tray.
Paul is affable and engaging, volunteering an opinion on many issues, including those outside of pharmacy. “It's no longer a man's sport. I used to support Newcastle United but I can't remember the last time I watched a game of football and enjoyed it,” he says with a wry smile before revealing he has “fallen out” with football because of all the diving and play-acting and expressing his bemusement at England's meek surrender to France in the Rugby World Cup. “That's a proper sport. Some of those guys come off the field with an ear in their hand,” he muses playfully.
A seriousness wafts into the discussion when the topic turns to pharmacy. The thing that strikes you about Paul, aside from an encyclopaedic knowledge of his business, is a deep appreciation of the problems facing pharmacists in obtaining medicines within 24 hours of ordering them.
An executive existence has not detached him from what is happening at ground level within community pharmacy, although, perhaps unsurprisingly, he is reluctant to back new legislation and the threat of prosecution for manufacturers and wholesalers failing to ensure a smooth and timely supply of medicines to pharmacies.
“From a wholesalers' point of view, the product gets there in 24 hours,” he says. “If you look at emergency supply because a manufacturer doesn't put enough product into the market place through the normal channel, but then if you've got a single route-to-market, what is a normal channel any way?
“I think the majority of product is dealt with in a timely fashion. Most people get, probably now, up to three or four deliveries a day. A pharmacist doesn't always know where his stock's coming from any how, so they're probably more likely to say to a patient 'don't come back this afternoon, come back tomorrow. You'll get your stock tomorrow. It'll come from one of the wholesalers I'm having to use. It's not always my choice to use them.' So I don't really know how you'd regulate that market in a market the government has decided not to interfere with as it's become more centralised.”
Approach
The problem behind the issue of medicine shortages, he says, is not easily defined and he views a blanket approach through legislation as akin to attempting to fit square pegs in round holes. “I don't see how you would do that and the same situation exists when the Euro was different. There's a lot of reasons why shortages exist today. Not all of them are about pharmacists trading,” he ponders.
“You could question the fact that there (are) quotas from manufacturers. Why is that allowed? You've also have the added difficulty that a UK pharmacy has to import PIs (parallel imports) as part of the (Category M) clawback. If they don't do so, they're disadvantaged. You can't then say, when it goes against you for a couple of years because of the Euro, 'why should the government take action?'
“Don't get me wrong, I believe that patient here should get first access to medicines. But you could argue that if we take a European view of this, you've got to tackle quotas on free trade. Why does a manufacturer have a quota? That's a restriction of trade. You can have all sorts of reasons. It's not primarily about counterfeit. It's trade because otherwise, they wouldn't do it. It's for commercial benefit.
“I don't see how you would legislate or how you would monitor that. How does an individual pharmacist know whether that product is extra? Because they put in about 120% of the UK volumes, so how does an individual pharmacist know, if he decides to trade that stock, that someone is losing out or not?
“What transparency do you have in a system if you're stood in your shop in Watford, for instance? How does that pharmacist know? Is he not allowed to trade products? You can argue that trading products is what pharmacists have done for years because the Government have required them to do that, and we've all benefited from that over the years. “Pharmacists are commodity traders which is why the prices come down. It's difficult to say, when it goes the other way, we need to stop that. And if you're going to stop that, you need to remunerate the whole thing differently.”
The notion that a medicine can be manufactured, packaged then sent across the country to waiting pharmacies suddenly becomes labyrinthine and riddled with difficulty. Is there a definitive solution to medicines shortages? “It's not the fault of any one process,” he says, exhaling in frustration.
“You could say they should stop quotas, you could say we should only give it to UK patients, you could say you should import or export, you could say there should be free trade. If there's no free trade, then the pricing mechanisms don't work and the government and the NHS won't benefit from the prices. It's a complicated answer. We've got a system that's not ideal and there isn't a quick fix for everyone.”
“The complexity for an independent is greatly increased by what manufacturers have done. They've reduced their complexity but pushed that down the line. It is much harder in a pharmacy than it used to be if you're fighting quotas or fighting to remember where the stock is coming from”
What have Phoenix been doing to ensure a smooth medicines supply? “We are quoted into our wholesale. We will then look at how we make sure that people who buy from us can buy an regular supply of that product,” he says. “It may not always be exactly the amount they want to do but we try and spread that evenly across our portfolio. We do have some caps on sensitive lines, things people are more willing to trade with.
“We put caps in place and we say 'you get that cap and you balance against that cap and that's what you get.' But everybody gets something. We can't have three or four pharmacies just buying everything from us. It wouldn't make any sense and we haven't got enough for the whole marketplace either.”
Paul is quick to agree with Sultan Sid Dajani's recent observation in Pharmacy Business that Direct-to-Pharmacy schemes “skew the discounts and make (pharmacists) servants to national wholesalers.”
“I can't readily disagree,” Paul replies, “if he wants to use the term 'you are a servant' to a manufacturer who chooses to take whatever route-to-market he chooses to put his stock through. And he can choose single channel, dual or three or all and it's difficult to argue against the cost savings that the manufacturers make by going through a reduced channel and probably get some synergy savings and stock savings.
“If you're not delivering to, say, 50 people, you're delivering to four or five. You can easily see the synergies of that saving. You've got to move past what was. We are not going to go back to an open market in wholesale. Some people would tell you that services have improved because of that and that is today's reality.
“The days of where discount came from through wholesale isn't where your business is going to be founded on in the future. Remuneration is changing that from government capping the £500 million. It should take us away from being commodity traders in a way and asking 'how does pharmacy get involved in the health of the nation?' rather than just saying 'what it has done very well is bring the price of medicines down.' It's got to move on past that to affect the health of patients.”
The view in some quarters persists that single manufacturer-to-wholesaler arrangements are against the public interest and make pharmacists' jobs in sourcing medicines harder as they battle through quotas. “I can see that,” Paul says. “You get to a point when a manufacturer has saved itself costs by going through a reduced wholesaler model. They've been able to look at their own staff and say 'this is how many I need and I don't need all of these' and cut their cloth accordingly.”
The wholesale company executive continues to display a refreshing empathy for pharmacists. “What you don't see is the consequences of their decisions which ends up at pharmacy. They say 'where do I get the stock from? It used to come from this source.' Now, most pharmacists don't understand who manufactures the product they're dispensing.
“You see it on a prescription but that's not always connected to the manufacturer. Then you think 'who actually makes that? Where does it come from? I've got to trade with somebody else.' You can see the complexity for an independent, or anyone in pharmacy, is greatly increased by what manufacturers have done by taking the synergies out of their business.
“They've reduced their complexity but they've pushed that down the line. It is much harder in a pharmacy than it used to be if you're fighting quotas or fighting to remember where the stock is coming from.”
The subject of the Health and Social Care Bill, making its way through the House of Lords, causes Paul to puff out his cheeks. “I've been following it,” he says less than assertively. “I don't think anybody will argue against the fact we need to change. The NHS is a massive, massive business and there are undoubtedly things wrong with it.
“If you take a business my size which, compared to the NHS is nothing, would I want to have a new management team coming in every two to three years, changing the mind about what we do and hoping your workforce at the coalface actually understands anything that's going on? Not a chance.
“I do believe that a lot of healthcare can be provided at point of access. Pharmacy can do a lot more but GPs can do a lot more. They're just an access to service, they don't provide a service. They could do a lot more care and social care but they don't. That needs to get solved.”
Suddenly the irritations of foreign play-actors scarring the British Bulldog football landscape appear a million miles away. Competition for the right to provide health services in a reconfigured NHS are at the forefront of Paul's mind. He does not see competition as an unknown phenomenon that should generate fear.
“But pharmacists already (face competition). You can open a hundred hours (pharmacy) next door to any one of them but it's about what they do, how they do it and do they do it well? I understand nobody likes the idea of somebody opening up next to you,” he says.
“Interestingly, when that happens 10 miles away, it's good for competition. It's only when it really affects you that it becomes an issue.” He challenges pharmacists to look at themselves rather than worry about what is going on around them. “You've got to be good at your own job and look at your own services first. If you're doing it well, people won't look at you as an opportunity, they'll look at you and say ' that's going to be too hard to take the business away.'
“The same with the government. There wouldn't be external providers if the service you were providing was the best service. But it's not. Is it value for money? No it's not. It's unfortunate that we've spent the last 10 or 12 years moving from health authorities to PCTs. We train them all, then we make them all redundant. Who would do that in normal business?
“Nobody would. Then we give that to GPs and consortia of people not trained to do it and hope they're going to do something.” A smile suddenly forms on Paul's face... “It's a bit like Martin Johnson. Untried, give him a whole team then sit and watch TV and think 'how did the French beat us?' The analogy is there.”
An amusing comparison provides a momentary distraction from the issues facing pharmacists. Paul appears not to have cast aside his anguish over England's rugby collapse and Newcastle's impressive form under Alan Pardew's guidance in the Premiership has not restored his joy. Paul quickly regains his pharmacy bearings.
“What you can do is interact with your patients when they're there and pharmacists are willing to do that,” he asserts. “I have no problem with MURs, which should be moved to targeted, but we were left with an MUR process that was given to pharmacy, seemingly last minute, and wasn't connected with GPs because they didn't have to pay any attention to it. So, it was a case of giving pharmacy something to play with but nobody to play with you.”
The evolution of pharmacy appears to engross him. It is not far-fetched to envisage Paul taking a prominent role on an Independent Pharmacy Federation or a Pharmacy Voice and speaking up for the profession.
“Pharmacy is more willing to (engage and evolve) but how does it make sure the rest of the NHS, either GPs, consultants, everything else, see (it) as a valued part of the process? That has to come out of government change and not just out of saying 'let's give pharmacy the option of driving this' if nobody is listening.
“At local level you see a lot more engagement. I still believe, long term, it will be wrapped around dispensing. It has to be. I don't see how you would ever move away from that and why pharmacy should move away from that.”
The British Bulldog spirit within Paul surfaces. A 21st century, competitive NHS, he exclaims, offers the chance for pharmacy to progress not regress. “You're allowed to train your people, you're allowed to do different things in that marketplace now, so pharmacy can be more efficient,” he says.
“If I was having some kind of procedure done, I want it done by the best possible person in the best possible way in the cleanest possible place. Does it really matter to me that it has 'NHS' over the door? If a provider can do that better, then why not?”
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