A Summary of Policies and Positions

Continuous Availability of Prescription Medicines to the American Public

It is our position that prescription medicines should be continuously available, regardless of holidays or seasons, from manufacturers to wholesalers for supply to pharmacists for dispensing to the public. Each year from the beginning of November through the end of January, NWDA wholesalers are challenged by a variety of circumstances which seriously affect their ability to provide uninterrupted product distribution to their customers. Product availability from the manufacturer may be affected for one or more of the following reasons: closings, vacations, holiday schedules, weather and trucking delays, out-of-stocks, work slow-downs, unanticipated product demand and early achievement of manufacturers' sales forecasts. As a result, orders placed in November are sometimes received by drug wholesalers after the first week in January, with the impact of these delayed shipments carrying on throughout the first quarter.

Patients, hospitals, retail pharmacies,online shops and drug wholesalers, as well as other customer classes of trade are subjected to all the hardships, expenses and inconveniences caused by the inability to provide needed health care products in a timely manner.

NWDA's position is that pharmaceutical manufacturers should fill and ship all orders through the end of the year. Programs such as purchasing allowances, winter dating and allocation/consignment programs may be used to effectively eliminate interruptions to supply. In addition, manufacturers should provide drug wholesalers with advance information concerning any deviation to their normal manufacturing and shipping schedules during this holiday time period. We also encourage the legalisation of making online pharmacies for low risk drugs such as soma and propecia which can reduce the cost and facilitae ease of supply to may ncustomers.Brief interruptions of service due to foul weather, mechanical breakdowns and the like should be the only exceptions to the excellent, uninterrupted service we all normally deliver to our health care customers.

Different Classes of Trade

The NWDA believes that manufacturers' policies and procedures must ensure that all classes of trade and individual customers are treated fairly and equitably regarding prices, terms, promotions, deals and package sizes within a particular level of distribution. NWDA encourages a marketing approach which is least disruptive to normal business functions and is equal among members of each distribution level.

Changes in the pharmaceutical and health care products industry, as well as changes in consumers' buying habits, have led to the evolution of a wider variety than ever before of specialized wholesaler formats utilized in the distribution of pharmaceutical and health care products. The historic distinctions among traditional classes of wholesalers have become blurred. Health care product manufacturers should be aware that, while there may be some wholesalers utilizing various specialized distribution formats which may have their own unique characteristics, these different classes of wholesalers are indeed competitors in the distribution and sale of pharmaceutical, health care and other products to health care providers. Health care product manufacturers should therefore recognize the importance of dealing fairly, consistently and lawfully with all wholesalers.

The Robinson-Patman Act also provides that in the pricing and promotion of products, manufacturers should not differentiate among competing wholesale customers within the same market area based on artificial "class of trade" or other types of distinctions. A manufacturer, in fashioning pricing and discount programs, must carefully consider how a customer performs in the marketplace and not what functional label the customer uses to identify itself. If a manufacturer develops prices, terms, promotions, deals or package sizes designed to meet the marketing needs or desires of a particular class of trade or specialized wholesaler format, the manufacturer should inform all competing wholesale customers within the same market area, regardless of class of trade or label, of their availability and should grant these wholesalers an equal opportunity to qualify for these offerings.

Wholesalers also should not request special prices, allowances or services from manufacturers or their agents if they know that to grant such prices, allowances or services would force the manufacturer to discriminate unlawfully against other customers within the same market area. This will promote fairness within the industry and benefit the consumer.

Direct Price Limitations

NWDA opposes limiting pharmacy drug cost reimbursement to direct prices on specific manufacturers' entire product lines or to the largest size packages only. These practices increase pharmacy inventory investment, create inefficiencies in distribution by adding to the cost of medication, and restrain choice of supply resulting in a restriction of free enterprise. Such programs penalize pharmacy, interfere with value-added wholesale distribution, and burden manufacturers with wholesaler marketing functions.

Electronic Data Interchange

NWDA encourages its members to:

Employee Testing and Monitoring

NWDA feels that polygraphs, drug testing, and other electronic monitoring are effective to avoid hiring high-risk employees and prevent drug diversion and abuse. NWDA supports their use when properly administered to screen prospective employees, to assist in investigating theft, and to prevent drug diversion and abuse.

Expiration Dating

NWDA recommends that legislation requiring expiration dates for health care products include a section to mandate standardized dating to end in the months of January and July when shelf life permits. Legislation should require the date be clearly and conspicuously marked and easily read on the label, shelf-pack and case. This practice will improve inventory control and reduce costs of return procedures for wholesalers and their customers.

Marketplace Pricing For Drug Benefit Reimbursement

NWDA believes the primary responsibility of the health care delivery system in this country is to serve the needs of the consumer and that all health care decisions and policies must be developed with the public interest in mind. The public interest is best served when the free enterprise system is allowed to function. NWDA supports drug reimbursement plans that ensure fair and reasonable reimbursement to providers for the costs of product acquisition, distribution, dispensing, and other professional services. Therefore, NWDA favors marketplace pricing as the most effective way of ensuring that competitive forces provide fair and reasonable reimbursement to providers and cost control to payers in drug benefit plans.

Numerical and Automatic Identification of Drug Products in Distribution and Patient Care

In order to realize efficiencies in distribution at all levels of patient care, NWDA encourages drug manufacturers and labelers to:

Ownership of Data

It is the unqualified position of NWDA that data relating to the operations of member companies is owned by those member companies and, in turn, those companies may choose to sell or not sell that data to manufacturers, customers or third parties as they see fit without restriction.

Patient Freedom of Choice

A person receiving pharmaceutical services under Title XIX of the Federal Social Security Act is entitled to obtain such services from the pharmacy of the person's choice.

Pharmacy Education

Management expertise is an essential ingredient in successful pharmacy practice. NWDA encourages inclusion of mandatory courses in pharmacy practice management including at a minimum finance, planning, operations, and information systems in all undergraduate pharmacy curricula.

Physician Dispensing

NWDA believes that the traditional checks and balances provided by a system authorizing physicians to prescribe and pharmacists to dispense prescribed medications best serves the public health and welfare of the consumer. NWDA opposes the practice of physicians routinely dispensing prescription medication to their patients for profit while recognizing that there may be occasion, such as in emergencies or in areas where pharmaceutical services are not available, in which it may be necessary.

Preferential Pricing Policies

NWDA believes the primary responsibility of the health care delivery system in this country is to serve the needs of the consumer and that all health care decisions and policies must be developed with the public interest in mind. The public interest is best served when the free enterprise system is allowed to function. NWDA opposes preferential pricing policies that are not based on meaningful functional categories or volume purchasing of all products.

Preferred Provider Organizations

Preferred provider organizations (PPOs) represent a viable alternative in today's rapidly developing third-party health care delivery system. NWDA strongly supports the independent pharmacists' participation within this system and urges its members to support the PPO concept as well as their organized Pharmacy Services Administrative Organizations (PSAOs). PSAOs, with integrated purchasing groups, should allow their participants complete freedom of choice as regards their wholesale sources of supply.

Product Selection/Generics

In the interest of appropriate patient care, prescribers and pharmacists together should be allowed to exercise their professional judgment and individual expertise with regard to drug product selection without the artificial constraints of state formularies and mandatory pass-on provisions. Therapeutic interchangeability is a difficult question, which is still unresolved despite governmental efforts to approach the problem on the basis of nomenclatures and lists of "equivalence."

Returned Goods

It is the position of NWDA that returned goods facilitating or handling is an appropriate value-added service that drug wholesalers render for their customers and suppliers. Further, it is NWDA's position that with the exception of errors and misshipments, returns are created by actions of either customers or suppliers or both, not by wholesalers, and that, therefore, the costs involved are properly borne by customers and suppliers. Listed in order of preference from the wholesalers' point of view, appropriate procedures are:

  1. All returns from wholesalers' customers are sent directly to the manufacturer for credit through the wholesaler.
  2. Manufacturer pays a percentage allowance on wholesaler purchases or other appropriate compensation (separate from normal service allowance) to cover the cost of handling returns.
  3. Manufacturer's representative writes up a credit memo or authorizes "instant credit," sends it to his company, and removes merchandise from premises.
  4. Instant return. Manufacturer provides completed return authorization forms for wholesaler use.
  5. Return authorization form must be requested.
  6. Manufacturer's representative telephones his company for return authorization.
  7. Manufacturer's representative writes to his company for return authorization.

Right To Access

NWDA believes the primary responsibility of the health care delivery system in this country is to serve the needs of the consumer and that all health care decisions and policies must be developed with the public interest in mind. The public interest is best served when the free enterprise system is allowed to function. Therefore, NWDA strongly supports the concept that all health care providers should have the right to access all managed health care programs.

Robinson-Patman Act

NWDA believes the primary responsibility of the health care delivery system in this country is to serve the needs of the consumer and that all health care decisions and policies must be developed with the public interest in mind. The public interest is best served when the free enterprise system is allowed to function. NWDA encourages vigorous enforcement of federal and state antitrust laws, especially against preferential pricing policies that are not based on meaningful functional category discounts or volume purchasing of all products.

State Licensure of Wholesale Drug Distributors

NWDA firmly supports the implementation of a uniform system of licensing regulation nationwide that will both meet the federal licensing mandate established under the Prescription Drug Marketing Act and preserve the integrity of the wholesale drug distribution system. NWDA further believes that states should establish a formal process to include wholesale drug distributors in the regulatory process on matters pertaining to licensure. This will ensure that the appropriate expertise needed to address the complexities of wholesale drug distribution is available and that equability is maintained.

State Regulation of Third Party Programs

The proliferation of third party programs puts pharmacies and their suppliers at financial risk if the viability and reasonable business practices of these programs are not ensured. NWDA supports legislation requiring private third party prescription programs to register with the state insurance commission and post a performance bond. Further, all third party programs should be required to provide pharmacies with adequate notice of program changes, pay interest on claims not paid in accordance with contractual agreements, update product price reimbursement levels monthly, have a due process procedure for disputed claims, and involve pharmacies in the construction of provider agreements.

State Rescheduling of Controlled Substances

State schedules of controlled substances conflicting with the federal Drug Enforcement Agency's listing create difficulties for interstate drug distribution. Drug product scheduling should be accomplished at the federal level. NWDA opposes state legislation and regulations setting different controlled substances schedules.

Suggested Manufacturer Price Change Notification Policies and Procedures

NWDA believes that manufacturers' policies and procedures must ensure that all classes of trade and individual customers are treated fairly and equitably when announcing price changes. NWDA encourages a system that is least disruptive to normal business functions and is equal and proportionate for all.

NWDA specifically requests that manufacturers first advise wholesalers of price changes before giving price change notices to or selling to wholesalers' customers, so that wholesalers have sufficient time to program these changes. This is a critical factor when any limits are placed on the buying opportunity.

NWDA believes that manufacturers should determine by product the weeks' supply appropriate for drug wholesalers to maintain in inventory. For example, if a manufacturer's contract requires a wholesaler to maintain a four weeks' supply of that company's products in inventory, then the minimum that a wholesaler may buy against a price increase should equal no less than a four weeks' supply. Any purchase limits against price increases should be based on that quantity. Any increase above normal weeks' supply should include extra dating terms.

Manufacturers should use electronic notification of price changes to drug wholesalers. Manufacturers who use a third party electronic ordering system should accept at the old price wholesalers' orders transmitted by 5:00 a.m. of the effective date. For manufacturers not using a third party ordering system, overnight guaranteed next-day delivery mail service or same day facsimile are acceptable for price change notification.

NWDA believes that manufacturers who give no advance price increase notification, or who limit quantities to be purchased against price changes, should announce the changes effective either at midnight on Wednesday or Thursday evening. This would allow wholesalers the opportunity to input the changes on Friday and ensure that the heavier weekend ordering by their customers is billed at current pricing.

NWDA also believes that manufacturers who do not provide advance notification of a price increase and who intend to limit quantities available should consider the option of providing the applicable price differential in the form of a credit memo.

Manufacturers who give 30 days' advance price change notification should offer equally to all an open/unlimited opportunity to purchase at old prices. Manufacturers who limit quantities to be purchased against price increases should: use a standard formula applied to all customers based on the manufacturer's stocking requirements; use a maximum of twelve recent months purchase history to determine quantities; allow the drug wholesaler the option to reduce any predetermined quantity established by the manufacturer; and provide a special, appropriately marked order form for this type of offer.

If a manufacturer intends to allocate price increase merchandise in some fashion, the manufacturer should notify wholesalers of the expected shipment/delivery dates for the products involved.

Manufacturers who give no advance price change notification should offer drug wholesalers one opportunity to purchase at old prices even with predetermined limits after the notification has been received.

For unscheduled price increases, manufacturers should avoid where possible the peak change periods of January and July. In addition, price changes several days before the 1st or the 15th of the month provide wholesalers time to input the changes prior to the heaviest order demand times of each month. When this is not possible, manufacturers should provide wholesalers an extra 10 to 15 days for processing time.

Manufacturers who have particularly fast-selling products should carefully monitor limitations and purchase quantities. A few customers can quickly deplete a drug wholesaler's inventory of these products causing significant dissatisfaction, ill will and inequities among the wholesalers' customers.

Manufacturers should use a notification period which assures security, equity and fairness. Minimum notification should include a post-notification purchase opportunity.

For price decreases, manufacturers should offer price protection on current wholesaler inventories.

Suggested Pharmaceutical Manufacturer Product Shortage Policies and Procedures

In order to more efficiently distribute pharmaceutical products to consumers and to advance the public health and welfare, NWDA believes that manufacturers' policies and procedures must ensure that all classes of trade and individual customers are treated equitably when the supply of specific products is insufficient to support all customers and patients who need them. NWDA encourages following a system which is least disruptive to normal business functions and is proportionate for all. While not all-inclusive in scope, NWDA recommends that individual manufacturers consider the following factors when faced with a shortage of pharmaceutical products:

The wide variety of trade classes that wholesalers service should be a primary consideration. Individual wholesalers can ensure that allocated product will go where it's needed, when it's needed, in an efficient, effective manner. An individual wholesaler could determine the priority of service to its customers, e.g.:

  1. Hospitals
  2. Chain drug warehouses
  3. Retail pharmacies

Drug wholesalers would be encouraged to maintain emergency safety stock on life-saving drugs for allocation purposes, when applicable.

Allocation shipments to wholesalers should be based on an average of the last twelve months' purchases, with allowances for any major shifts that may have occurred in the wholesalers' customer base during the previous twelve months.

Allocated product orders should not automatically be shipped on a first-in, first-out basis. Manufacturers should take into consideration the individual wholesaler's overall business with the manufacturer's entire product line and adjust product allocations accordingly.

Wholesalers should, upon request from the manufacturer, supply information concerning current on-hand inventory of product(s) in short supply.

Manufacturers should communicate shortages/backorders to a designated person at each drug wholesale distribution center. This can be done by facsimile, in addition to duly noting that shortage/backorder on the packing slip or invoice.

Manufacturers should communicate to the wholesalers the anticipated duration of the allocation, shipping cycles, and the approximate quantities to be shipped.

Each drug wholesaler should communicate to each manufacturer what that individual wholesaler's policies are regarding acceptance of backorders.

Unit-of-Use Packaging

NWDA believes that inadequate information is available concerning additional storage space requirements, increased packaging costs and handling costs for unit-of-use packaging. We believe that the competitive marketplace is the appropriate laboratory for testing the utility and cost-effectiveness of the unit-of-use concept. Federally mandated specifications are premature.

Universal Immunization Program

NWDA strongly supports for a program of universal immunization of the nation's children. We urge however, to ensure that these goals are achieved in the safest and most efficient manner possible. NWDA is concerned that direct government purchase and distribution of the vaccines - one of the most prominent distribution methods being considered - could undermine both the health and savings goals of the program.

The quality of the vaccines used to immunize our nation's children is as important as the issue of access. Government distribution of vaccines from manufacturers raises safety concerns as vaccines not only have special handling needs, but also short shelf lives. What may be saved in cost can be lost to waste if products expire and must be destroyed. Moreover, the federal government must take responsibility for buying from multiple manufacturers, maintaining proper storage/product temperatures, physically storing the product, monitoring expiration dates, and distributing the product to clinics and physicians.

As government-licensed operations, wholesale drug distributors adhere to stringent storage and handling procedures designed to ensure the integrity of the medications they distribute. Traditionally, they have invested heavily in state-of-the-art distribution technologies. Recently they have expanded even those high levels of investment to further upgrade facilities in response to the federal Prescription Drug Marketing Act and state regulations implementing it. They are now fully equipped to maintain product integrity as they distribute products, such as vaccines, which require refrigeration and other special handling characteristics. Additionally, the more than 225 NWDA member distribution centers deliver daily so end users can avoid wastefully overstocked inventories, yet always have current product when they need it.

According to 1991 statistics, the commercial wholesale distribution network delivered more than 75 percent of all prescription drug products to market. Wholesale drug distributors have established this market share because the thousands of retail pharmacies, hospitals, clinics, nursing homes, health maintenance organizations and other health care entities they service recognize the contribution they make not only in safeguarding product but in reducing costs as well. Over the last decade, wholesale drug distributors have dramatically reduced their operating costs. To remain competitive, they have passed these savings on to their customers. This practice, coupled with that of routinely offering a wide range of value-added services, has resulted in billions of dollars of savings to the marketplace.

Recognition of the value of commercial wholesale drug distributors recently has extended beyond the private market. Sectors of the federal government, specifically the Department of Veterans Affairs (DVA) and the Department of Defense, have recognized that their depot systems featuring manufacturer-direct purchasing wasted money. They have turned to wholesale drug distributors to save millions in expenses, while simultaneously improving service quality. The DVA alone projects that it will save approximately $75 million by using commercial wholesale drug distributors. The Public Health Service also is developing a program utilizing wholesale drug distributors for all its patient needs.

Wholesale drug distributors have experience and efficiency in distributing vaccines and other pharmaceutical products and are willing to work with the administration to make its call for a universal immunization program an effective reality.

Volume Purchase Plans

NWDA opposes any purchasing scheme that adversely affects the quality of patient care and disrupts existing drug distribution practices. Adequate compensation for pharmacies and wholesalers combined with wholesale availability of product must be incorporated as bid criteria into all plans.

Warranty and Product Liability

When the wholesale function makes no change in the product, there is no rational basis for the inclusion of wholesalers in product liability suits. Therefore, NWDA supports efforts to establish federal and state product liability laws that recognize this distinction.