Pfizer Says No To "Fee-For-Service" Contracts With Wholesalers
This article was originally published in The Pink Sheet Daily
Executive Summary
The manufacturer maintains that wholesalers "purchase and resell products for their own account and not as a service to Pfizer." Cardinal will no longer distribute Eisai products, including the Alzheimer's drug Aricept, marketed in partnership with Pfizer.
|
Pfizer is not engaged in "fee-for-service" negotiations with wholesalers, the company declared in a fourth quarter earnings release Jan. 19. "Pfizer is not engaged in any fee-for-service negotiations with U.S. wholesalers. We believe that wholesalers purchase and resell products for their own account and not as a service to Pfizer as a manufacturer." The announcement is a powerful strike against efforts by the three major wholesalers - AmerisourceBergen, Cardinal, and McKesson - to convert manufacturer contracts to a fee-for-service model. Drug distribution fees would be used to cut down wholesaler reliance on revenue derived from buying margins from manufacturer price increases. The three wholesalers began the transition to fee-for-service contracts when Bristol-Myers Squibb said in 2003 that it would no longer allow forward buying following inventory management difficulties that forced the manufacturer to restate its earnings. Cardinal and McKesson have threatened to cut off distribution services for manufacturers that fail to reach a fee-for-service agreement by March 31 (1 (Also see "Cardinal Fee-For-Service Ultimatum Has “Accelerated” Contracting, CEO Says" - Pink Sheet, 27 Oct, 2004.)). Eisai recently announced that Cardinal will no longer distribute its products after the two firms failed to reach an agreement. The action may have further repercussions since Eisai has marketing relationships with Pfizer for the Alzheimer's drug Aricept and with Johnson & Johnson for the proton pump inhibitor Aciphex (2 (Also see "Eisai No Longer Distributing Aricept, Aciphex Through Cardinal" - Pink Sheet, 13 Jan, 2005.)). Cardinal said it was pleased with Pfizer's latest round of price increases, which were in line with the wholesaler's expectations (3 (Also see "Pfizer Price Increases Reassure Cardinal" - Pink Sheet, 13 Jan, 2005.)). - Adam Eckstein |