Martin Sawer: ‘NHS hospitals owe wholesalers millions of pounds in overdue invoices’

If pharmacists are the face of medicines, it could be said that wholesalers are the blood — tirelessly circulating the nation’s arteries to get those medicines to exactly where they are needed. “Our warehouses are delivering [medicines], on average, twice a day, to every pharmacy, hospital and dispensing doctor,” says Martin Sawer, executive director of the Healthcare Distribution Association (HDA). Together, the HDA’s 51 member companies distribute more than 90% of the medicines used by the NHS. As Sawer says, they are part of the UK’s “critical infrastructure”— the medicines supply chain.

It is an infrastructure that has come under intense pressure and scrutiny in recent months, as the effect of medicine shortages on patient care has worsened year on year. 

However, this is just one of several issues facing wholesalers that the HDA needs the government’s help to solve. As a result, the HDA has drafted a call to action, in which it has set out eight policies that would reset the healthcare distribution sector. 

The Pharmaceutical Journal caught up with Sawer in August 2024 to find out what needs to be reset — and why now? 

What has prompted the Healthcare Distribution Association to set out this call for action to the new government? 

The reason why HDA full-service wholesalers exist is to try to supply all medicines appropriately for patients. It’s frustrating when there are some reasonably easy wins, which would help make demand meet supply. At the moment, elements of the supply chain are fragile. The money that businesses make in the supply chain is much smaller now than it used to be. There aren’t enough medicines, volume wise, within the supply chain, for when demand increases a little bit, or there is a product that’s out of stock somewhere. There’s not enough money in community pharmacy, so they’re not buying as much as they used to — they’re buying when they have to.

Our calls to move to a paperless supply chain have the objective of being safer, more efficient, saving costs eventually — but also being sustainable. Hospitals have a big agenda for going digital and sustainable, and we would like to help them do that. We want to make sure that medicines go to patients and don’t get diverted. By having a digital footprint, we’ll have better visibility of where medicines actually go. 

Around training and workforce: our workforce has to follow good distribution practice guidelines regulated by the Medicines and Healthcare products Regulatory Agency (MHRA). To help us in a low-margin sector, can there be incentives and support for training that the government could develop some schemes for, because we don’t fit into the apprenticeship scheme as it currently exists? Bear in mind that supplying medicines is part of the critical infrastructure of the UK, and our workers were key workers during the COVID-19 pandemic.

So, we brought all this together, to flag it up for the new government. We’ve sent the letter to Wes Streeting, [secretary of state for health and social care], and [health minister] Karin Smyth. 

What incentives are needed to ensure that manufacturers continue supplying medicines to the UK?

There has been concern that UK prices for generics are so low that it is disincentivising other manufacturers to come into the UK to compete against existing generics, create a more competitive market and provide more supply. A global manufacturer will probably be more attracted to a market that has higher prices. 

We’re concerned that the low pricing in some areas might be contributing towards a lack of supply of some medicines. I think that’s quite likely to be happening in the generics market, which is a commodity market. 

Then, of course, there’s community pharmacy funding. Pharmacists are not making enough out of dispensing medicines, so they’re looking for alternative ways of making some margin. The focus is sometimes not enough on dispensing medicines. And pharmacists, if that was easier for them, might be able to invest a bit more, might get a bit more stock, and be comfortable on the reimbursement, because some of the reimbursement is so low that they’re dispensing at a loss, which is not ideal at all. 

What is the issue you raise in the call to action around NHS hospitals needing to pay for medicines ‘in a timely manner’?  How is this impacting on distribution?

It’s not affecting the delivery and distribution of medicines, but it’s affecting our cashflow in our sector. NHS hospitals owe the HDA member companies literally millions of pounds in overdue invoices. These are invoices for medicines which are expensive, obviously, for hospitals, that are not paid within the 30-day normal terms, via the NHS. Our members are having to carry that debt on their balance sheet till they get paid. Some of that is about the NHS systems: they query something and then it gets lost in a bureaucratic wheel. But it doesn’t help our members’ cash flow for purchasing medicines. 

Over the years, the hospital sector has become worse at paying our bills and the overdue debt for hospitals is nearly approaching £40m at the moment, so it’s a lot of money.

Why do you think this is happening? 

We are working closely with NHS England to understand that. You can imagine that because the NHS is very cash strapped, it is paying all its bills at the last minute. You’d hope [the NHS would] prioritise medicines, but we have no evidence that [it is] prioritising medicines over anything else.

There are lessons to be learned about the invoicing systems and our invoicing system needs to talk to the hospital invoicing system better, so I accept that the whole system probably has got some challenges in it, but this overdue debt amount is bigger than it’s ever been. 

It’s not a community pharmacy issue — it’s a hospital issue. But community pharmacy is also having trouble paying off bills, because of cashflow problems. Some community pharmacies, unfortunately, have gone under, so the whole cashflow in the system is a challenge at the moment. Obviously we can’t buy the medicines, or we have to borrow money to buy the medicines, or at least make sure we’ve got some insurance to cover all the debtors. So it becomes a bit more inflexible at times, if we’ve always got to carry debt on our balance sheet.  

It feels like medicines shortages are constantly coming up in the news. What factors have impacted this — for example, Brexit, COVID-19 or financial factors? How is the situation now?  

Brexit itself didn’t really produce the shortages that we hear about now. When the world came back from COVID-19, lots of supply chains had become much more lumpy: car parts ran out, cardboard ran out, and bits of aluminium ran out — the war in Ukraine probably exacerbated some of this — China and India became different types of economies, and they produce a lot of the active pharmaceutical ingredient. Sometimes they protected their own people first, so that produced shocks in the supply chain. Maybe global supply chains became too much just in time — there wasn’t enough fat in the system, if you like. 

Manufacturers — because of the quiet period in COVID-19 (apart from the COVID-19 medicines) — perhaps hadn’t appreciated how high demand for some of their products would become. ADHD [medication], for example: in 12 months, you’ve probably seen how demand has gone up. There’s better diagnosis, and some of the patients are older. The Creon issue is about a huge demand globally, and the manufacturer can’t keep up with that yet.

Alongside that, when generic prices are low, there’s not enough fat in the system and new competitors coming in. Pharmacies, being in a desperate financial state, are really shopping around to make sure they’re buying medicines they can afford to dispense. That means there might be an availability issue, because they can’t always get the medicine they want at the price they want, straight away. 

And there’s these pharmacy buying platforms: electronic buying platforms are quite a new innovation — are they building in fragility to the system? [Pharmacies] automatically order from the wholesaler who is offering the lowest price, but that wholesaler may not realise that until [its] wiped out of stock — they can’t necessarily plan what the demand might be going forward. 

But I’m not pessimistic. I think the supply chain survived COVID-19; it can adapt. We probably need just to share more information, learn from each other better and communicate more when there is a shortage. We just need to try to understand each other’s position and try to work together to make it better.

Has the closure of the Falsified Medicines Directive in Great Britain had an effect on the supply chain? In 2023, fake weight loss pens were discovered in the UK, including at two wholesalers.

We work closely with the MHRA — our regulator — and I know that the supply chain is concerned about the potential of product to be diverted out of the legitimate supply chain. But most of the challenge at the moment comes from online. The fake Ozempic was bought online by individuals in the UK from abroad, and it was a wholesaler who spotted it.

To answer your question, the Falsified Medicines Directive probably didn’t do what it was supposed to do. If we’re going to go forward looking at concern about falsified medicines, it needs to be a more considered approach: maybe concentrate on the specific medicines that might be falsified and look at those in more detail. 

Is there anything else you would like to add? 

Regarding Brexit, we got through it OK with loads and loads of planning. The Department of Health and Social Care was really supportive in this, which helped us get through COVID-19 as well — because we had that planning in place. But Northern Ireland was really tricky and that still proves to be a challenge, making sure we can get medicines to Northern Ireland on the same basis as they are distributed around the rest of Great Britain.

We support the Windsor agreement, which comes into force on 1 January 2025, so we’re all waiting to make sure that the green lanes for medical products across the Irish Sea are frictionless, but we’ve still got quite a lot of regulatory work and declaration work for HMRC to make sure that happens. 

The emphasis of the healthcare distribution sector is: it does work, but — as we mentioned in the call to action — we just want a few things that would help it work better. Some of that’s financial, but medicines are very important. We want to evolve with the times and make sure that we have a sustainable future, both for the climate, but also for the businesses in the supply chain. 

We, as a sector, completely support pharmacists’ concerns over their funding issues. If we don’t have a strong community pharmacy sector — which, of course, is now much more of an independent community pharmacy sector, because of the sell-off of Lloyds and the decoupling of Boots from Alliance Healthcare, for example —  the supply chain will suffer.