Distribution Optimization Committee
Interview with Chairman Kumagai
The distribution of ethical pharmaceuticals plays an extremely important role in ensuring a stable supply to patients and the formation of an appropriate market. However, the complex commercial and logistical distribution is constantly faced with various challenges. The way communication with the medical community over "one-company distribution," the transparency of "rebates and allowances," and the structural issues of rising logistics costs and drug price margins triggered by the "2024 problem" may affect the process by which pharmaceutical products reach the hands of patients. We spoke with Yusuke Kumagai, chairman of the committee, about how the pharmaceutical industry is facing these issues and working to achieve sustainable distribution.
Examining distribution that can sustain trade and stable supply based on the value of pharmaceuticals into the future
Difficulty in consensus building at the distribution site and transparency are issues
The primary mission of the Distribution Optimization Committee is to make the distribution of ethical drugs sustainable into the future. Our role is not only to ensure the quality and stable supply of pharmaceuticals, but also to investigate and analyze all matters related to commercial distribution and logistics in order to form a sound market, and to study what it should be.
Specifically, our activities include evaluating the impact of trends in the healthcare system, such as medical fees and the NHI drug price system, on distribution, as well as seeking more rational and standardized forms of transactions. In an ever-changing environment, it is the responsibility of the Distribution Optimization Committee to support the fundamentals of pharmaceutical distribution and to make proposals with an eye to the future.
Among the challenges facing the distribution of pharmaceuticals, one of the most difficult is reaching consensus among the parties involved. For example, when a company implements "one-company distribution," which limits the distribution of a particular drug to one company, it is required to work with the wholesaler to carefully explain the reasons for this to medical institutions and pharmacies. However, with approximately 240,000 business partners nationwide and a decreasing number of MRs, MSs, and other front-line personnel, it is very difficult to provide thorough and complete explanations to all of them.
This problem suggests the importance of all parties involved, including pharmaceutical companies, wholesalers, and medical institutions/pharmacies, having a common understanding of the basic premise of "stable supply to patients" in all transactions, regardless of the form of distribution.
In addition, the long-standing issue of "rebates and allowances (sales incentives)" has been steadily improving as transparency has increased through the revision of distribution improvement guidelines. In particular, since the publication of the Guidelines for Improvement of Distribution (Guidelines for Improvement of Distribution) in 2018, which should be followed by those involved in distribution to improve the distribution of ethical drugs, reviews have been conducted every year. This trend is expected to continue, as it has been confirmed that many companies have been reviewing the guidelines on an ongoing basis since 2018.
Where once the mainstream drugs were widely used by a large number of patients, today there are an increasing number of high-cost specialty drugs, and more transparency is important going forward. We are working to address each and every one of these issues on the ground, and through dialogue with all parties involved, we are striving to realize smooth distribution based on trust.
Solving structural issues by securing lead time and improving efficiency
In order to maintain a stable supply into the future, we must also focus on larger structural issues. One such issue is the rise in logistics costs, represented by the so-called "2024 problem," and the problems surrounding the NHI price differential.
Although there is currently no direct demand from wholesalers for higher logistics costs, both wholesalers and medical institutions are facing a difficult business environment as the gap between NHI prices and actual market prices (NHI price margin) shrinks year by year. There was a time when NHI marginal profit was a management resource for medical institutions, but we believe that this structure itself should be reviewed and that it should be appropriately allocated as part of reimbursement for medical services. As a pharmaceutical company, we are also conscious of the question of whether the value of drugs developed at great cost and over many years can be properly evaluated in the distribution process, and whether this is really a normal situation.
Of course, we are not just sitting on our hands. The industry is steadily making efforts to secure lead times and improve efficiency, such as by shifting from same-day to next-day shipping and promoting joint deliveries. We are also investigating and analyzing the use of digital tools and other promotional activities, which have changed dramatically since the Corona disaster, to find ways to provide information in the new era.
The environment surrounding pharmaceutical distribution will continue to change. We will continue to work toward building a sustainable distribution system that can accurately respond to these changes and ensure a stable supply of medicines needed by patients at a fair value.
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Distribution Optimization Committee | Information from the Committee | Japan Pharmaceutical Manufacturers Association (JPMA)