Alex Williams: ‘There’s a risk to the resilience of the supply chain if government doesn’t invest’

Six months into his new role as chief executive of the Healthcare Distribution Association (HDA), The Pharmaceutical Journal speaks to Alex Williams about supply chain reform, the challenges that medicines wholesalers and pharmacies share, and how support for investment could make a difference.

Prior to his role supporting medicines wholesalers at the HDA, Williams spent 13 years in NHS England, where he became deputy director of medicines policy. He went on to run the national vaccine supply chain programme during the COVID-19 pandemic.

Medicines wholesalers “were just so helpful in supporting the NHS through what was a very difficult time” during the COVID-19 pandemic, Williams says. “It’s a real honour to be in the role now.”

What is your vision for your new role?

Particularly at this time, it’s so important for the wholesale sector to have a loud voice that’s heard within the government and the NHS. So I’m really hoping, with support from my colleagues, to dial up the advocacy that the HDA undertakes. 

We’ll also be reviewing our membership offer to make it even more relevant to our members. For example, there’s going to be a real focus on operational challenges and in September we are looking to introduce HDA Connect, which is a seminar series for our members to [help them] understand topics of interest. The first one is going to be on cyber security. 

While these are of direct benefit to our members, obviously there is an indirect benefit to our members’ customers, to pharmacists and to hospitals as well, because the more that we can refine our operational processes, the more we can ensure the supply chain remains secure.

What would the Healthcare Distribution Association like to see in terms of medicine supply reform?

The HDA would love to be a part of those conversations and we welcome that commitment from the government to review the supply chain. I can’t pre-empt what the future might look like, but there are clearly challenges in the supply chain. I think we’re seeing an increasing number of products on the concessionary scheme. I’ve seen data to suggest that even with price concessions, there are quite a number of medicines that are still costing our wholesalers more to purchase than the NHS will ultimately reimburse the pharmacy sector for. That isn’t how an efficient and resilient supply chain should operate. 

Where there is such a difference between the reimbursement price and the purchase price, they are looking at the difference between the two and hoping at some point that the concessionary price adjusts, so that they don’t make a loss on that item.

Our members also have to make decisions about whether they can invest in that stock to distribute it because, ultimately, they need to know that there’s going to be a demand for that stock. If there is a review of the supply chain, I think it’s important that the review focuses on how all parties within the supply chain, from manufacturers to wholesalers to pharmacists, are appropriately recompensed for distributing.

I’ve heard that some technologies pharmacies use to help them find the best price is causing challenges for wholesalers because they cannot plan what pharmacies will buy from them. Could you speak a little bit about that?

Well, you know, pharmacists are absolutely operating rationally. They are doing what the system incentivises them to do by using these platforms. But yes, it does make planning difficult for our members because prices are changing minute by minute, it makes forecasting difficult. I think that the platforms have altered the traditional relationship between pharmacies and wholesalers. You’ve got pharmacies now putting in orders across multiple wholesalers for smaller quantities and that inevitably is going to impact the relationship that has traditionally existed.

Jon Barlow

So, what’s the solution then?

I think that has to be wrapped up in this review that we spoke about. I don’t think that a review of the supply chain can be looked at only from the perspective of the wholesalers. 

I can’t give you an answer of what a perfect system would look like because I simply haven’t heard all of the views. We do have close relationships across the supply chain and, increasingly, we want to work together to look to how to improve the system across the piece.

Is the recent community pharmacy contract likely to make any difference to ease any of those purchasing pressures?

What did catch my eye [in the contract] was the Department [of Health and Social Care] agreeing to write-off over-delivery of the margin that was generated in the last financial year. It will be interesting to see if that does dampen down some of the volatility in medicines pricing and in the supply chain, so I think that could well have some positive benefit.

When there are medicines shortages, what’s going on behind the scenes to make sure that pharmacies can still get their medicines?

Our members do their best to notify pharmacies through the systems as to what’s available and what they have in stock, as they understand it. 

But as you can appreciate, it also relies on the wholesalers themselves knowing from the manufacturers what’s likely to become available, and that is something that wholesalers are constantly trying to improve as well, that information flow from the manufacturer. 

The UK pays a low price for medicines. Have there been issues with getting that stock from manufacturers?

Our members still do quite a good job in terms of keeping the system supplied. Pharmacies will see what proportions of their orders are coming through [and] that is still over 90%, so that’s quite positive. 

But you do have a valid point about whether the UK pays enough for its medicines. We know that around about 80% of all NHS medicines are generics and 54% of generics supplied to pharmacies are typically reimbursed at less than a pound. Compared to, for example, France and Italy, the UK enjoys some of the lowest prices for medicines.

That’s good news for taxpayers. The problem is that when manufacturers are looking at where to allocate limited stock, obviously they will make a commercial decision on where to allocate that stock and there have been some examples in the past of manufacturers withdrawing product lines from the UK simply because the UK doesn’t pay enough for those medicines. That’s not the fault of pharmacies, that’s a fault of the drug tariff. So I think that in any future review, the amount the NHS pays for medicines will have to be seriously thought about in terms of building that resilience for the supply chain. It’s often not the case that a medicine just does not exist or that it hasn’t been manufactured. It may be the case that a limited number of manufacturers have sought to deprioritise the UK because of the low pricing regime.

Jon Barlow

What are the big changes happening within wholesale?

Our members are experiencing real challenges in terms of their cost base, as a result of government decisions on national insurance, minimum wage and business rates. In addition, we’ve seen the Iran crisis raise fuel prices by upwards of 25%. We at the HDA, on behalf of our members, have sought to raise these issues with government and seek some relief, to be honest, to improve the resilience of the [medicines supply] chain. Government has declined to offer any relief to our members, which is disappointing.

One of the things we have proposed to the chancellor was some kind of a super deduction that would allow our members to claim tax deductibility on investment expenditure. A similar example existed during COVID, so basically, if you invest 1 million pounds in equipment or automation, you would be allowed to write 1 million pounds off your profit, so it wasn’t then taxed. We have proposed similar again to help our members, and to incentivise them in investing in the latest technology and the latest automated equipment, but again government has not offered to do that yet, which is disappointing. 

We have written to the government as well, seeking some relief on fuel costs. You may recall there was an announcement on vehicle excise duty for HGVs [heavy goods vehicles] – any vehicle over three-and-a-half tonnes would have its road tax basically for free for a year from the first of July. That was to support the haulage industry, but sadly it didn’t include the majority of vehicles used by our members, [because] they’re typically medium goods vehicles, less than three tonnes. That was, in our view, a missed opportunity.

It sounds like a perfect storm — an increase in costs and no signs of increased funding. Is medicine supply at a crisis point?

I don’t think it’s such a crisis point. One must not get sensationalist about this, but with an ever-increasing cost base, and with the constrained funding environment for medicines that the NHS operates [in], I think it is fair to say that the service from wholesalers that customers have historically been used to, potentially could come under review. 

For example, that might mean reduced delivery frequencies or reduced product ranges. I don’t think we’re going too far down this road yet, but if the pressures continue and if government doesn’t support some relief or doesn’t review the supply chain, then yes, I think consequences of those decisions could well be seen further down the line. I think there is a risk to the resilience of the supply chain. 

Is there anything that wholesalers would like pharmacists to know?

I would like them to know that wholesalers are there to support the NHS, and to support both primary care and secondary care. 

Our members do fully appreciate the challenges that pharmacies are facing. We know that pharmacies and pharmacists are under stress, and we are very aware of that. I absolutely want to avoid a “them and us” mentality existing between wholesalers and pharmacies, I think they are, to an extent, dependent on each other. Pharmacies are our customers and wholesalers are pharmacy suppliers, and it’s a relationship that has historically delivered a resilient supply chain and I hope that can continue.

Jon Barlow