User:Elflikejulius/Vertical Integration in the Pharmaceutical Supply Chain

Vertical integration is where two companies involved in different parts of the supply chain are owned by the same parent company. This is common in the pharmaceutical supply chain in the UK, the United States and increasingly across Europe, particularly where the community pharmacies and pharmaceutical wholesaler are owned by the same parent company. Some of these companies are also involved in manufacturing, and further vertical integration may occur with prescribing, with an increasing number of pharmacists prescribing independently, or doctors' surgeries being sited within pharmacy premises. This may mean that up to four separate levels of the supply chain become vertically integrated, i.e. delivered by the same company: prescribing, manufacture, wholesaling and supply.

Effect on Pharmaceutical Care

One of the primary results of vertical integration as a business model in the pharmaceutical supply chain is that the pharmacy may be treated as a mere outlet for a wholesaling operation. This can mean less investment in the pharmacy (if that is not where the majority of the profit is made) and a focus on supplying medicines in the highest possible volumes. It may limit the extent to which the business is interested in clinical and professional development of pharmacy and the roles of pharmacists, unless it coincides with the increased supply of medicines.

Profits and accounting

Where the same parent company owns multiple other businesses beneath it, the profits can be shifted from one to the other. The businesses may sell to one another, and can vary the prices they charge, meaning that money is moved between the businesses, causing difficulties in tracing it - and getting a true picture of where the profitability lies.

Business may argue that it reduces costs to consumers by reducing internal costs. However, whilst it may certainly be true that internal costs can be reduced, there is no requirement for the savings to be passed on to the consumer. Concurrent monopolisation of the market (due to the competitive advantages it bestows) may in fact serve to increase consumer costs.