MANUFACTURER SURVEY GIRP-IPF STUDY 2016

DEFINITIONS USED IN SURVEY Direct-to-Pharmacy (DTP): In the DTP distribution model pharmaceutical manufacturers deliver their medicinal products directly to the pharmacies through one or more logistic service providers. Direct sales: In the case of direct sales, the pharmaceutical manufacturer or marketing authorisation holder sells its medicinal products directly to the pharmacist. In such scenarios, manufacturers or marketing authorisation holders may still opt to utilise the pharmaceutical full-line wholesaling route. Pharmaceutical full-line wholesaling: The activity of pharmaceutical full-line wholesaling consists of the purchase, warehousing, storage, order preparation and delivery of medicines. Pharmaceutical full-line wholesalers carry and distribute the complete assortment of products, both in terms of range and depth, within the framework set by the authorities and the market in order to meet the needs of patients through those with whom they have normal business relations. They deliver all medicines in their geographical area of activity on the same day/within less than 24 hours. Pharmaceutical short-line wholesaling: The activity of pharmaceutical short-line wholesaling consists of the purchase, warehousing, storage, order preparation and delivery of only a selective assortment of medicinal products.

DEFINITIONS USED IN SURVEY Pharmaceutical pre-wholesaler: Pharmaceutical pre-wholesalers act as logistic service partners for pharmaceutical manufacturers and marketing authorization holders and are highly specialised in bulk deliveries of pharmaceutical, healthcare and consumer products to wholesalers, hospitals and pharmacies. They use their own storage facilities ranging from ambient (either monitored or controlled ambient), refrigerated, to other specialised high security products (clinical trial logistics, narcotics). In addition to their supply chain management expertise, pharmaceutical pre-wholesalers provide additional value-added services such as product packaging and labelling for national markets. Pre-wholesalers are used for providing supplies to other wholesalers, as well as for carrying out direct deliveries to customers. Reduced Wholesale Arrangement (RWA): In the Reduced Wholesale Arrangement pharmaceutical manufacturers use only a small number of selected wholesalers to distribute medicinal products. 3rd Party Logistics Provider (3PL): A 3rd Party Logistics Provider is an entity that provides or coordinates warehousing or other logistics services of a product on behalf of a manufacturer, marketing authorisation holder, wholesale distributor, or dispenser of a product, but does not take ownership of the product, nor have responsibility to direct the sale or disposition of the product.

GENERAL DATA- COMPANY PROFILE Results of manufacturer survey Profile of participating countries/pharmaceutical manufacturers 123 pharmaceutical manufacturers replied to the survey on behalf of the following 33 countries: AT, BE, BG, HR, CY, CZ, DK, EE, FI, FR, DE, GR, HU, IE, IT, LV, LT, LU, MT, NL, NO, PL, PT, RO, SK, SI, ES, SE, CH,UK, Other: Israel, Russia, USA 60% of the companies operated at the international level 28% operated at the national level 12% operated at the European level Source: IPF research 2016

DISTRIBUTION SYSTEM I Results of manufacturer survey Distribution systems used by pharmaceutical manufactures for the following product categories Innovative Medicines Generics OTC Wholesalers* Direct deliveries from** manufacturers Other * Wholesalers: full-line wholesalers and non full-line wholesalers ** Direct deliveries from manufacturers include 3PLs and pre-wholesalers. A pre-wholesaler is an agent acting on behalf of a manufacturer and is responsible for the storage and distribution of the manufacturer’s products to other wholesalers and to hospitals: manufacturer -> (pre-wholesaler) -> pharmaceutical full-line wholesaler -> public pharmacy -> patient Source: IPF research 2016

DISTRIBUTION SYSTEM II Results of manufacturer survey Distribution systems used by pharmaceutical manufacturers for products with specific handling requirements Cold Chain Frozen Narcotics Wholesalers* Direct deliveries from manufacturers ** Other * Wholesalers: full-line wholesalers and non full-line wholesalers ** Direct deliveries from manufacturers include 3PLs and pre-wholesalers. A pre-wholesaler is an agent acting on behalf of a manufacturer and is responsible for the storage and distribution of the manufacturer’s products to other wholesalers and to hospitals: manufacturer -> (pre-wholesaler) -> pharmaceutical full-line wholesaler -> public pharmacy -> patient Source: IPF research 2016

SATISFACTION WITH DISTRIBUTION SYSTEMS Results of manufacturer survey Pharmaceutical manufactures‘ satisfaction with the distribution system Full-line wholesaler Non full-line wholesaler Direct deliveries from manufacturers** Satisfied Neutral Dissatisfied 78% of pharmaceutical manufacturers were satisfied with the delivery via full-line wholesaler 57% of pharmaceutical manufacturers were satisfied with the delivery via short-liners 78% of pharmaceutical manufacturers were satisfied with the delivery via 3PLs incl. DTP * Wholesalers: full-line wholesalers and non full-line wholesalers ** Direct deliveries from manufacturers include 3PLs and pre-wholesalers. A pre-wholesaler is an agent acting on behalf of a manufacturer and is responsible for the storage and distribution of the manufacturer’s products to other wholesalers and to hospitals: manufacturer -> (pre-wholesaler) -> pharmaceutical full-line wholesaler -> public pharmacy -> patient Source: IPF research 2016

SATISFACTION WITH DISTRIBUTION SYSTEMS Results of manufacturer survey Motivation for selecting certain distribution models I 21% of respondents selected the full-line wholesale model because of the delivery frequency 17% of pharmaceutical manufacturers selected short-line wholesalers because of their transportation function 14% of respondents indicated that they use the direct-to-pharmacy model because of the delivery frequency * From the industry to the wholesaler ** The costs and financial risks are transferred - the pharmaceuticals are paid for by the wholesaler and the financial risk of the goods has transferred to the wholesaler   Source: IPF research 2016

SATISFACTION WITH DISTRIBUTION SYSTEMS Results of manufacturer survey Motivation for selecting certain distribution models II 20% of respondents selected the direct-to-pharmacy model because of the control of the supply chain and point of sale 10% of pharmaceutical manufacturers selected the direct-to-pharmacy model for safety reasons 9% of respondents indicated that they use DTP in order to monitor purchases by pharmacies and regions *Reduced contacts, easier accounting  Source: IPF research 2016

SATISFACTION WITH DISTRIBUTION SYSTEMS Results of manufacturer’ survey The importance of added value services in selecting the full-line and/or short-line wholesale model 25% of respondents considered full-line wholesalers’ assistance with product recalls as being important 19% of pharmaceutical manufacturers considered short-liners’ support in launching a product as being important *e.g. time to market, opening sale channels Source: IPF research 2016

SERVICE LEVEL Results of manufacturer’ survey Pharmaceutical manufacturers would like to see improvements in the following areas of certain distribution models 81% of pharmaceutical manufacturers wished to see improvements in full-line wholesalers’ stock level transparency 79% of respondents also wished to see improvements in short-line wholesalers’ stock level transparency 59% of pharmaceutical manufacturers wished to see improvements in 3PL’s delivery arrangements to pharmacies * Direct deliveries from manufacturers include 3PLs and pre-wholesalers. A pre-wholesaler is an agent acting on behalf of a manufacturer and is responsible for the storage and distribution of the manufacturer’s products to other wholesalers and to hospitals: manufacturer -> (pre-wholesaler) -> pharmaceutical full-line wholesaler -> public pharmacy -> patient Source: IPF research 2016

FUTURE TRENDS Results of manufacturer’ survey Future trends in healthcare distribution, particularly specialty distribution In which areas do you expect future trends, e.g. chances and risks of the distribution system in general and special distribution models in particular? The most common trends were: Direct-to-patient Increase of direct-to-end customer distribution Increase of named patient supply Closer connection between producer and patient Direct-to-pharmacy Increase in direct-to-pharmacy Increase of hospital shipments Transparency & specialised distribution models Transparency of distributor stocks More transparency regarding the destination of products Central distribution models Specialised distribution models for different therapeutic areas Specialised models based on unique patient treatments Source: IPF research 2016

FUTURE TRENDS Results of manufacturer’ survey Future trends in healthcare distribution, particularly specialty distribution What do you expect/want from full-line wholesalers? The most common trends were: Transparency Transparency of information Stock visibility throughout the channel Transparency of stock levels More transparency in the final destination of the sales (in order to know better the final customer) Customer Service Improve service level to the end customer Increase access and service offering for pharmacies Improve the commercial and marketing functions Collaboration Closer partnerships Increase collaboration More collaboration regarding the destination of products Source: IPF research 2016

European Healthcare Distribution Association Rue de la Loi 26, 10th floor, box 14 B-1040 Brussels, Belgium T +32 2 777 99 77 F +32 2 770 36 01 E girp@girp.eu W www.girp.eu