Martin Sawer, executive director, Healthcare Distribution Association (HDA), tells P3pharmacy about the its recent call to action to the new Labour government and the progress wholesalers wish to see

In July, the HDA published a set of eight policy proposals it wishes to see adopted by Labour as it grapples with the medicines supply chain. What feedback have you received so far?

We’re confident that the new ministerial team are keen to find out as much as they can about a sector like ours. The civil servants they work with were all copied into our call to action, and I know they’ve been briefing the ministers in the early days of the administration; Karin Smyth is our specific minister for the supply chain.

We know the Government is looking at trying to make supply chains more resilient; Labour put this into their industrial strategy 18 months ago. The trouble with all this is that the summer holidays intervened.

The HDA press release contains the claim that at present the supply chain is fit for purpose, which may surprise some of our readers. Could you elaborate?

The supply chain survived through the major stresses and strains of Covid – two years of incredible demand. A lot of what we’re seeing on the shortages front now is because demand is not being matched by supply, which is often a global issue. That’s specifically true about some of the big headline products you read about, like hormone replacement therapy.

Those products, and the same is true of the current Creon problems, are often manufacturing supply or global supply issues. We needed 10 per cent more attention deficit hyperactivity disorder medicines in the last 12 months compared to the previous 12 months, because more people are being diagnosed. That’s hard to build into planning.

There’s a lot of concern about everyday generic shortages; sometimes there aren’t enough manufacturers because the price is so low it’s not attractive. What might support both the pharmacy sector and manufacturers would be to make the UK a more attractive market for drugs companies.

And if pharmacies are given more funding – which we support – they might actually be able to buy a few more medicines and create a buffer stock rather than having to shop around for the cheapest drugs all the time.

It’s not about changing the system but trying to put a bit more money into it, which would help manufacturers and pharmacies at both ends. The biggest lever the Government could pull in terms of both cost and benefit to the supply chain would be to pay more to drugs companies, because it would give them incentives to supply the UK.

We distribute all we can. Often it’s like water in a reservoir – if there’s not enough in it, we can’t distribute it. Or the water goes to the wrong place at the wrong time. The demand patterns have changed because pharmacy is much more day-to-day now. They haven’t got the money to stock up. Sometimes they’re buying based on patient demand at the time, which is becoming more variable.

Why is it important that wholesalers get government support to transition to net zero? 

Apart from the desire to be more sustainable, which makes complete sense both for the planet and for patients, globally manufacturers and wholesalers have a lot of stakeholders who are requiring them to become more sustainable. 

The NHS is a good example. It has its own sustainability programme which we sign up to, for example in secondary care for hospitals. There is a need for manufacturers to prove that their whole supply chain is becoming more sustainable. They have to produce carbon reduction plans to get on NHS procurement lists. And we have to work with our manufacturing partners to prove that our sector is improving its sustainability.

That might mean going from twice a day deliveries to hospitals to once a day to reduce the van impacts. We have to give a carbon footprint per pack of medicines to our manufacturing partners so they can build that into their carbon reduction plans.

Some of our members now have thousands of solar panels on their warehouses and they’re only buying electricity from renewable sources.

Transport is 75 per cent of our carbon footprint. We’re working with big transit van and lorry manufacturers to try and get green electric vehicles; they are providing several vehicles to trial and some companies are using 20+ of these already.

But of course, it’s easier in urban areas and much harder in rural areas where there are fewer charging points. We’re working with other sectors like bus companies to consider using their charging points; they have rapid charging points which I believe were funded partly with financial support from government. Hospitals may let us use some of their charging points, but it’s really about having a national programme.

You’ve asked Labour to mandate hospitals to pay their wholesale bills on time. Is this a big problem?

In a supply chain with low margins, cash flow is important. Community pharmacies sometimes can’t pay their bill because they are strapped for cash – and sometimes we don’t get paid by hospitals, and the value of drugs going to them is very high. We’re talking about literally millions of pounds here that are overdue – the hospital debt has almost doubled in 12 months. If we could reduce that number it would help our members’ cash flow in being able to buy more stock, we only keep about 10 days’ stock, so the supply chain is perhaps too ‘just in time’. If the hospitals paid us on time we could perhaps have more of a buffer.

Because of the hospital debt we have less flexibility when dealing with struggling community pharmacies. Some of them are cancelling direct debits with us, we’re having to give them credit and take out insurance in case it becomes a bad debt. There’s just not enough money in the system.

Some pharmacies have been criitical of your members, for example questioning the price hikes that can appear on their bills.

It is complicated and I do have sympathy. I would only suggest that the pharmacy concerned take it up with their wholesaler because we don’t really deal with exact pricing queries. But with wholesaler bills, the surcharges and minimum purchases and all that type of thing are usually completely transparent and available on the wholesaler’s website. 

In the past you have said that small pharmacy businesses with wholesale licences have an impact on the wider supply chain. 

There are a lot of wholesale licences in the UK – around 2,000. Our members have about 50 of them, and we distribute 95 per cent of NHS medicines. There are a lot of very small companies, brokers and traders who don’t actually handle the medicines, but there might be other businesses like pharmacies who have a wholesale licence.

Because they’re cash strapped, they may wish to use that licence – which they have for legitimate reasons – to share product around.

We would like more transparency in the wholesale licensing scheme so we can see more visibly which part of a particular business we’re selling to. We’d rather sell to those who are dispensing medicines to patients rather than those trying to do something else with it for commercial gain. 

You also argue that wholesalers should be treated as a special case when it comes to business rates. What impact do rates currently have on your members? 

We’re saying don’t penalise the medicine supply chain sector because our profits are totally based on NHS medicine prices, we don’t charge a fee for distribution. Our distribution all comes out of the price the medicine achieves when we sell it to the hospital or pharmacy, that’s why it’s such a low margin business.

We don’t have a membership scheme or anything like that. We’re not the same as the warehouse next door, we’re delivering critical medical products. We’re asking ministers for a response to this and I hope we get something by the end of September. 

Looking over the years, the average margin for the sector is about two per cent. Any increase in the cost base will impact us.

What other regulatory changes would you like to see? 

We believe the MHRA should concentrate its resources on the parts of the supply chain that are the most risky, and not have one flat inspection regime that only looks at the big companies – there are hundreds of very small companies that never get inspected. I think in this online world the safety and security of medicines is more of a concern.

You’ve seen the GPhC inspecting a lot of online pharmacies, and I would hope the MHRA reflects on the potential diversion of product that’s going on there.” 

Another regulatory issue is the question of whether we really need temperature controlled transportation. In France they’re happy for medicines to be at 40 degrees for two weeks before they worry about them, whereas we have much more stringent controls. We have to map the medicine and make sure it never exceeds 25 degrees on its journey.

We are also hoping to change regulations to encourage our sector to go paperless. At the moment, we have to produce a physical document to accompany every tote of medicines. We want a digital document instead that can go ahead to the pharmacy or hospital; we think this is more accurate, safer and more sustainable.

This would require a statutory instrument going through parliament and a consultation, but we are confident that we have the support of the Department of Health on this. 

How optimistic are you about making progress on these goals? 

We think they are pretty moderate, and each one can be given some movement by policymakers without being particularly costly. It could be seen as an evolution within the existing framework. We don’t think it’s revolutionary or confrontational. It’s moving with the times and it would help ease some of the current pressures and oil some of the cogs in the machinery that delivers medicines.