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Legal Eye: Distribution disputes

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There are no fewer than three pharmacies within a five-minute walk from my office. Given this density of competitive points of sale, there must be a strong demand for pharmaceutical products in Poland. It’s no wonder then that disputes regularly erupt between the various interests in the pharmaceuticals sector. In these skirmishes, however, the politics by other means results in changes to Polish law, the latest of which relates to reimbursed medicinal products and affects distribution models.

Reimbursed medicines

As part of Poland’s universal health care, certain medicinal products subject to reimbursement (in other words, the patient pays less). As with the overall state of Poland’s health care system, this is a sensitive topic. During the last few years, the battles and scandals over which drugs make the list of reimbursed products have provided journalists plenty of fodder. Patients have also seen increased bureaucracy, such as the requirement to evidence current payment of withholding for the health portion of social insurance.

This has also been an active area for Poland’s legislative branch. In fact, the next round of amendments to the reimbursement regulations and Pharmaceutical Law comes into effect in January 2012. The amendments not only relate to monetary matters, such as the introduction of fixed pricing and margins. More fundamentally, they will create an upheaval in the manner of distribution of pharmaceutical products in Poland.

Uninterrupted supply

Poland’s reimbursement regulations and Pharmaceutical Law espouse the noble goal of ensuring that patients will be able to buy the medicine that they need. In legislating this goal, the Pharmaceutical Law requires producers and wholesalers to ensure “uninterrupted meeting of demand” of both retailers and other wholesalers for medicinal products. It sounds simple enough, but there is a catch. It all comes down to difference of opinion on how direct the distribution must be.

There are a lot of players in Poland’s pharmaceutical market. This is hardly surprising in a country with a pharmacy on nearly every corner. For logistical, financial and other reasons, pharmaceutical companies, in selling their own products, tend to prefer to work with one or more large distributors. These distributors then sell those products to other wholesalers or to pharmacies.

Some of the second-line wholesalers, however, insist that the pharmaceutical companies’ preferred model of exclusive or limited distributorship arrangements does not satisfy the requirement of “uninterrupted meeting of demand” of wholesalers. Thus, they believe that the pharmaceutical companies must sell their products directly to every wholesaler who wants to buy from them.

Up to the recent amendments, an impasse existed on this dispute. Everyone could have their own opinion on the appropriate model, but ultimately, there is no way to enforce one view over the other. The existing Pharmaceutical Law does not contain any sanctions for failure to supply to wholesalers. As of January 1, 2012, this changes.

New rules

The recent amendments weigh in on the dispute and side with the wholesalers with respect to reimbursed medicinal products. They set up a system for reporting and sanctioning of inappropriate distribution practices. If the Minister of Health receives information about a violation of the “uninterrupted meeting of demand” requirement, it must pass this information on to the Main Pharmaceutical Inspector. The Inspector licenses the various entities in the supply chain, including producer wholesalers. In case of a violation of this requirement, the Inspector will issue a decision to revoke a license.

Source: Judith Gliniecki, Bożena Ciosek, Warsaw Business Journal, 14th November 2011

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