Monday, February 28, 2011

COOL Karel, ZEMSKY Peter, BUTLER Charlotte
Pfizer and the Distribution of Pharmaceuticals in Europe in 2009
© 2011 INSEAD Case Study

Faced with increasing parallel imports, Pfizer in Europe decides to change its drug distribution strategy. It introduces a 'Direct to Pharmacy' scheme whereby distributors become mere logistics companies. Pfizer also introduces 'dual pricing' to force wholesalers to sell the drugs in the targeted country. The background is a pharmaceutical industry supply chain where prices and profits are under pressure from parallel imports by wholsalers that undermine drug prices in high-price countries.

Pedagogical Objectives: The case illustrates the use of distribution strategy to capture value and set prices. It shows how profit pressure in the supply chain (the pharmaceutical industry and the wholesalers) influences the value capture strategies of the key players, how various tactics may be used to enforce different prices in different countries, and how vertical integration may be used to set prices. It also illustrates how cost and profit pressures lead to industry restructuring, and the role of industry leadership.