Pharmaceutical Business Strategies Magazine Issue - Spring 2004


EDITOR & PUBLISHER'S LETTER: Our goal, and our commitment

(from the April 2004 edition of PBS)

Welcome to the inaugural issue of Pharmaceutical Business Strategies. We are dedicated to a simple, but rather contentious, proposition: The tools, technologies, and business practices for delivering pharmaceutical products to the health care consumer are as valuable as those products themselves. Collectively, these tools, technologies, and business practices can be called the pharmaceutical value chain. Thus, our motto: Forging the value chain from manufacturing to market.

Here is where the contentiousness comes in: Everyone gets excited when a new blockbuster drug clears the clinical trials and hits the marketplace. Stock prices zoom on a rumor; pharmaceutical "boutiques" can become, seemingly overnight, blue-chip corporate behemoths. And rightly so; many of the newly introduced pharmaceutical products have conquered - or at least given hope for overcoming - the scourges of humanity that cut lives short, or damage our quality of life.

Even before those headlines and accolades appear, there is an army of unsung workers who ensure that new blockbusters - as well as the cornucopia of existing pharmaceutical products - get to the health care consumer. This army includes these strategies set by sales and marketing, the logistics departments of the manufacturers themselves, and the developers of packaging and drug-delivery systems. It encompasses the distributors and wholesalers that supply pharmaceuticals' many distribution channels, and the transportation and delivery providers that handle the physical movement. It includes the developers of information technology systems that keep this value chain humming, and the providers of systems for script management and fulfillment. It reaches into hospitals, clinics, and retail pharmacies.

If the pharmaceutical value chain generates one tenth of the enthusiasm and excitement that pharmaceutical research and development does, we'd be surprised. But that's okay. We know that one wouldn't exist without the other.

This is our goal, and our promise, to our readers and advertisers - We will create a forum, in print and online, where the manufacturers and distributors of pharmaceutical products can learn from each other, and can learn what new products and services make this entire value chain run better.

We want to be your "go-to" source of information to make the pharmaceutical value chain run at peak efficiency. And we want to be guided by your knowledge, and your concerns, of how this essential health care delivery system can improve.

Nicholas Basta, EDITOR-IN-CHIEF
Mario G. Di Ubaldi, PUBLISHER


News Briefs

AmerisourceBergen touts its bar-code technology to meet new FDA requirements

(from the April 2004 edition ofPBS

Jumping quickly to take advantage of the FDA mandate to require bar coding of products used in hospitals, AmerisourceBergen (Valley Forge, Pa) says that it has a broad array of solutions to help both pharmaceutical manufacturers and hospitals. Noting that the company already has a substantial business in repackaging pharmaceuticals into the unit-dose format that some hospitals prefer (see related story on p. 14), Kurt Hilzinger, president and COO, says that "we are committed to utilizing our broad array of scalable and fully integrated barcode– enabled products and services."

Among these are the AutoMed pharmacy automation system, MedSelect bar-code–enabled cabinet storage solutions, and the Bridge Medical bedside-scanning system. AutoMed is currently being used to provide onsite packaging in unit-dose format. MedSelect cabinets store products by bar code as well as track inventory, patient use, provider use, and other data. The Bridge Medical point-of-care verification system ensures appropriate bedside administration of pharmaceuticals. The company emphasizes its compliance with the so-called "Five Rights" checking process: the right patient receiving the right drug at the right time in the right dose and via the right route.

DrugMax merges with Familymeds, gets additional financing

(from the April 2004 edition of PBS)

DrugMax, Inc. (Clearwater, Fla), a full-line wholesaler of pharmaceuticals, OTCs, and related products, is merging with Familymeds Group (Farmington, Conn), which styles itself as operating "apothecary-style pharmacies" at or near a patient's point of care. The combined company will have annual revenue in excess of $400 million. In the transaction, DrugMax will issue 11.5 million shares to privately held Familymeds, at the then-current stock price of about $4.70, which would value the deal at $54 million; however, DrugMax is also issuing restricted stock and options to certain employees of Familymeds.

In mid-March, DrugMax also announced that it had issued a private placement of stock, generating $3.21 million in funds that were earmarked for working capital and general corporate purposes.

When the merger is complete, Ed Mercandante, founder, president, and CEO of Familymeds, will become cochairman and CEO. Jugal Taneja, chairman and CEO of DrugMax, will continue as cochairman. Bill LaGamba, DrugMax president, will continue in that role.

DrugMax is a full-line wholesaler serving independent and small regional chains, and institutions, nationally. It has an inventory of 20,000 SKUs from 500 suppliers, and generated revenue of $291.8 million for the fiscal year ended in March 2003. There are two distribution centers, one in Pennsylvania and one in Louisiana. The company says that the merger will create a "new paradigm" for specialty prescription as well as generic pharmaceutical distribution. The services that Familymeds provides for chronic care, as well as mail order, call center, and Internet purchasing, are factors in this delivery structure.

The proposed merger will be put before DrugMax stockholders at a June meeting. First Albany Capital Inc. served as exclusive advisor to Familymeds.

Prefilled-pen delivery of hormone is cleared by EC

(from the April 2004 edition of PBS)

Serono (Geneva) announced that its Gonal-F hormone injection treatment for human reproduction has been approved by the European Commission (EC). Product deliveries will begin during the first half of this year.

Serono, a leader in human reproductive health, has been supplying Gonal-F in other forms for some time. The product, which is based on recombinant human follicle-stimulating hormone, is the world's leading treatment for infertility, according to the company. The filled-by-mass pen, which will be offered in three multidose versions, is designed as a ready-to-use treatment. "Having Gonal-F in a prefilled, ready-to-use pen will make the administration easier for the patients, and help them ensure that they have injected the right dose," says Christoph Keck, MD, a professor in the Department of Obstetrics and Gynecology at the University of Freiberg, Germany.

Boston Scientific to open new distribution center in the Netherlands

(from the April 2004 edition of PBS

Kerkrade, the Netherlands, will be the site of a new distribution center for Boston Scientific (Natick, Mass), serving its European, Japanese, and intercontinental (rest-of-world) markets. The company has purchased 400,000 square feet of land with the potential for future expansion. "Growth throughout the company has resulted in the need to increase our distribution capacity," says Jim Taylor, senior vice president of corporate operations.

A 250,000-square-foot center will be built initially, which doubles the size of its current distribution center in Beek, the Netherlands. The Beek center, about 15 miles from Kerkrade, will be closed when the new facility is complete. Construction is to start in this quarter, and to be finished in one year.

Boston Scientific to open new distribution center in the Netherlands

(from the April 2004 edition of PBS)

Kerkrade, the Netherlands, will be the site of a new distribution center for Boston Scientific (Natick, Mass), serving its European, Japanese, and intercontinental (rest-of-world) markets. The company has purchased 400,000 square feet of land with the potential for future expansion. "Growth throughout the company has resulted in the need to increase our distribution capacity," says Jim Taylor, senior vice president of corporate operations.

A 250,000-square-foot center will be built initially, which doubles the size of its current distribution center in Beek, the Netherlands. The Beek center, about 15 miles from Kerkrade, will be closed when the new facility is complete. Construction is to start in this quarter, and to be finished in one year.


Customer Management

Securing affordable drugs: A roundtable discussion on generic Rx drugs

(from the April 2004 edition of PBS

A group of industry panelists examines the impact of generics on pharmaceutical distribution. Affordability and quality are two of the key drivers

The publishers of Pharmacy Times and Generic Rx Pharmacy Report, in conjunction with the Generic Pharmaceutical Association (GPhA;, recently held a roundtable discussion on the topic of Securing Affordable Drugs. The discussion took place during the GPhA 2004 Annual Meeting (March 2, Boca Raton, Fla). The moderator was Fred M. Eckel, RPh, MS, Pharmacy Times' editor-in-chief and executive director of the North Carolina Association of Pharmacists.

Remarks from these panelists are provided here:

  • Jeff Herzfeld, PharmD; Senior Vice President, Pharmaceutical Product Management, McKesson
  • Steve Goodman, RPh; Senior Director, Pharmacy Purchasing, Rite Aid
  • James C. McAllister III; Director, Department of Pharmacy, University of North Carolina Hospitals
  • Judith Milford, RPh;Vice President, Government Affairs,Teva Pharmaceuticals, USA
  • Christopher J.Worrell;Vice President, Sales and Marketing, Sandoz

ECKEL: What is the generic drug market? How can we characterize it?

WORRELL: About 50% of all prescriptions dispensed in the United States are generics. On the spending side, because of the cost differentials, it's less than 10%. But we're not really that old of an industry. We're still going through dynamic growth all the time. Every five years, the look of the industry will probably change. There are about 60 to 80 generic manufacturers in business. That changes of course. There's consolidation at one time, and then there are new entrants at another time. There's always a huge transitioning and dynamics in this business.

ECKEL: From today's perspective, how is the quality of generic drugs?

MILFORD: Generic drugs offer a safe, effective, and affordable alternative to the consumer. They go through a rigorous FDA approval process just like brands. They have the same standards for approval. The consumer is getting essentially the same product that is bioequivalent from a therapeutic standpoint. The main difference is cost, a substantial differential, which makes the health care system in America far more affordable. Cost containment is a major issue in all health care arenas - state and federal - so you're seeing more advocacy for utilization and access to these products.

ECKEL: Do purchasers of generic drugs have concerns about quality?

MCALLISTER: We want to create long-standing relationships with a generic manufacturer that "brands" their own drugs. I like to see a logo on a tablet because when you put patients at risk, from my point of view, you put yourself at risk. I like what I've seen in the past 20 years. When I was growing up, you really had to be careful about source of supply. The industry has come a long way, and there is some personal ownership of the quality of the product, which I like a lot. I'm pleased that quality in the generic industry is being addressed, because one bad event could drag the whole industry down. In a hospital setting, we are totally responsible for what goes on during that admission. It gets a little bit fuzzier when a patient goes home and other issues are at play. But if something happens in my environment related to drug quality and pharmacotherapeutic impact, we are totally responsible. From our point of view, quality is the number-one issue.

GOODMAN: I agree wholeheartedly. Rite Aid has approximately 3400 stores and when necessary any pharmacist may report back to purchasing if the quality of a product appears to be in question. Any compromise in quality can take the generic industry in a negative direction. We must continue to monitor and maintain quality. If, for example, there's a report that the tablet dissolves or crushes when a patient breaks it in half, we'll get back to the manufacturer because it's important that quality is continually maintained.

ECKEL: A number of blockbuster drugs are coming off patent in the next few years. What are the projections for generic market growth?

WORRELL: The projections are pretty interesting because this market is so dynamic. But clearly, growth is not a question of if, but when. Every pharmaceutical brand product has a certain life to it. We look at the long term—5, 7, 10 years - for absolutely dynamic growth. And we're interdependent with the pharmaceutical brand industry. To the extent that they are successful with products, then we become successful down the road. To take it one step further, if the belief is that patent life has a value, then it forces branded companies to innovate new and better therapies.

ECKEL: We've seen a lot of consolidation among the big pharma companies. Is a similar thing happening in the generic industry?

WORRELL: The generic business model is evolving. It's still going through cycles but there will be transformations. There are going to be times of consolidation and times when new entrants come in and see an opportunity. We'll always have that blend. One trend that may lead to consolidation is the cost to operate in the generic business is going up on a regular basis. Years ago few of us felt we'd be involved in as much patent litigation as we are today. Patent litigation expenditures now average $3 million to $5 million per product. That's part of your equation as you develop a product, determine its potential return, and how many you balance at any given time.

HERZFELD: There's been a fair amount of consolidation in the generic industry, but it's still very fragmented. I'm very surprised how often I'll get calls from companies around the world that want to figure out how to get into this market, because they see the potential for generics in the United States. They want part of a market that could double over the next five years. Now they're a little naive because they really don't understand all of the points it takes to achieve success. Still, overall it's a very attractive market.

ECKEL: There's a trend of switching brand drugs to OTC status toward the end of a patent life. How does that affect the generic industry?

WORRELL: Our company was involved in two of the biggest OTC switches in the past 18 months - Claritin and Prilosec. There's a different dynamic for our business to consider about how we're going to manage those products. For consumers, a lot of people in general feel this is great - consumers have access. But they had insurance coverage on the product before and now they don't. That certainly causes angst for some consumers who thought this was a panacea. Some type of insurance covers the vast majority of our population, and now with Medicare even more, so that's something to consider.

ECKEL: Do you see a trend where the FDA is going to encourage more OTC switches?

HERZFELD: I wouldn't call it a trend. We've had a couple of situations where products like Prilosec and Claritin went OTC after many years of use. There will be times when the right product is in the right place in its life cycle and the usage has been acceptable. You'll see it go that way as the manufacturers look to manage the life cycle of the product more effectively. There's definitely a payer involvement in terms of them looking for ways to decrease costs associated with pharmaceuticals. In some cases, it's a cost shifting back to the consumer.

WORRELL: The branded companies look at OTC as an opportunity to extend a product's life cycle a few more years. It may not be what they have today, but maybe it's better than ceding to generics overnight. They're seriously looking at certain therapeutic categories and molecules in their portfolio and how OTC might fit in.


Packaging & Drug Delivery

Packaging council unveils winners of annual competition

(from the April 2004 edition of PBS)

In preparation for its May annual meeting, the Healthcare Compliance Packaging Council (HCPC; Falls Church, Va) has announced the top three winners of its "Compliance Package of the Year" award. In order of ranking, they are: the Actonel 35-mg Dosepak by Procter & Gamble Pharmaceuticals (Cincinnati, Ohio); Emend by Merck and Co. (Whitehouse Station, NJ); and Prevacid NapraPac Combination Therapy Dosepak by TAP Pharmaceutical Products (Lake Forest, Ill). Dosepak, a patented blister-package design from MeadWestvaco (Stamford, Conn), is used in the overall winner and the second runner-up.

HCPC is a trade association organized to promote the benefits of unit-dose blister and strip packaging in the United States. Its members include the manufacturers of these types of packaging machinery, foil and film producers, and contract pharmaceutical packagers. For several years, the association has been touting the benefits of unit-dose packaging for reducing patient noncompliance in pharmaceutical regimens, prevention of accidental poisoning, and tamper resistance/anticounterfeiting features. The recent FDA push for bar coding of unit-dose medications in hospital settings (see p. 12) adds momentum to this technology.

Each of the HCPC award winners presents a complex or combination therapy challenge to the patient. Procter & Gamble's Actonel, an antiosteoporosis treatment, requires taking a pill weekly. Emend, Merck's postchemotherapy regimen, requires three pills to be taken over three days. TAP Pharmaceutical's Prevacid NapraPac combines two drugs, Prevacid and Naprosyn, to be taken in concert to prevent nonsteroidal anti-inflammatory drug users against ulcers. Coincidentally, Procter & Gamble's Actonel was also the "Ameristar" award winner of the Institute of Packaging Professionals during the PMMI PackExpo International 2003 show (Oct. 13-15, Las Vegas, Nev).

Noncompliance worries

According to HCPC citations, some 50% of pharmaceutical prescriptions are taken incorrectly. Other data, cited by the market research firm Cutting Edge Information (Durham, NC) indicate that 40% of patients receiving outpatient drug therapy will experience a "treatment failure," and that as much as 85% of prescription refills "never leave the pharmacy." While HCPC emphasizes the value of unit-dose packaging to correct these ills, Cutting Edge says that innovative packaging, combined with online education efforts and related "personalization" actions are necessary. In a 2003 report, "Pharmaceutical Patient Compliance and Disease Management," the company says that such customer-focused programs are "an area needing immediate attention."



  • The countdown begins for bar coding
  • RFID will involve more than the supply chain for pharma, says consultant
  • Approaches for implementation
  • FDA lays down the bar-code
  • Regulation
  • Regulators, industry closing in on counterfeiting
  • FDA is still coming to grips with the problem, as states look to tighten regulatory requirements. Proposed solutions, like RFID, are still on the horizon.
  • Angelo DePalma, PhD


Information Technology

  • SAP touts "compliant manufacturing" for factory-floor IT Content management, under Sarbanes-Oxley
  • Content management, under Sarbanes-Oxley​



  • Diabetes: new delivery systems spur a booming market
  • Specialty distributors attract attention
  • New sales training book available


Upcoming Meetings

  • Pharma supply chain is the focus of D.C. meeting
  • HDMA will highlight electronic codes at 2004 DMC
  • Pharma meeting will emphasize cross-disciplinary business issues


Business & Finance

  • Wholesaling reimbursement system is "fundamentally broken," says consultant

New industry study sees a transition to fee-for-service relationships between manufacturers and distributors. All the same, wholesalers are going to have to run faster to stay in place.



  • Pharmintech will be first pan-European pharmaceutical exhibition
  • Australian group will handle European sales of U.S. drug


This website was created to introduce the inaugural online issue of PBS Magazine as imagined by Nicholas Basta, EDITOR-IN-CHIEF and Mario G. Di Ubaldi, PUBLISHER. The site was live for a number of years furthering its goals of delivering high quality information and becoming the "go-to" source of information to make the pharmaceutical value chain run at peak efficiency. At some point the domain's registration expired and the site disappeared from the web. Recently I saw that's domain was available so I bought it with the intention of recreating a snapshot of the site that would retain the spirit of the original website. I definitely didn't want someone else purchasing the domain and re-purposing it for something that had nothing in common with PBS Magazine.

Consider the information on this site for its historical value.