A NEW deal that will transform the way Pfizer, the world’s biggest drug group, distributes its medicines in Britain is being examined by the Office of Fair Trading (OFT), The Times has learnt.

Pfizer’s exclusive arrangement with UniChem, the distribution arm of Alliance-Boots, has come under attack from MPs as well as independent pharmacies and drug wholesalers. They argue that the deal, which restricts the distribution of all Pfizer products to a single UK supplier, poses a threat to patient welfare and the NHS.

An OFT spokesman told The Times: “We are considering whether Pfizer’s actions raise competition concerns and whether this is something that we should investigate further.”

On Tuesday the British Association of Pharmaceutical Wholesalers (BAPW) voted to explore the possibility of a legal challenge. Another trade association, the National Pharmacy Association, is considering lodging a formal complaint with the OFT.

Ian Brownlee, chairman of the BAPW, which represents all Britain’s major drug wholesalers, said: “With a single supplier the delivery system cannot ensure that pharmaceutical products are there in the dispensary when they are needed. Profit is being put before patient safety with a breathtaking arrogance.”

Pfizer rejected the concerns. “We are confident that Pfizer’s new distribution arrangement is in full compliance with applicable UK and EU laws,” the company said. “The distribution system is complex and fragmented and provides a vehicle for counterfeit medicines to enter the UK.”

News of the OFT inquiry came as Pfizer, delivering its third-quarter figures yesterday, admitted that it faced two years of zero sales growth, against a previous prediction of modest growth.

The company is fighting increasing competition from cheaper, generic versions of its drugs, such as the antibiotic Zythromax, antifungal treatment Diflucan and antidepressant Zoloft, all of which have recently lost patent protection.

Jeffrey Kindler, Pfizer’s new chief executive, who took over at the end of July, also faces huge challenges reining in costs at the company while ensuring that its pipeline of new medicines remains on schedule.

Yesterday Mr Kindler unveiled plans to cut $500 million (£266 million) more in costs this year than previously expected, and a new cost-cutting drive to save more than $4 billion by 2008.

“Pfizer needs to be realistic about its operating environment, embrace necessary changes and turn them to our advantage, for the benefit of our shareholders and everyone with a stake in our future,” he said.

Peter Cartwright, analyst at Evolution Securities, said that Pfizer was facing multiple patent expiries, but that its pipeline of new drugs was also weak. If the company failed to develop enough replacement drugs internally it would be forced to go out and make acquisitions, which could be expensive.

Pfizer’s third-quarter results, however, offered some grounds for optimism. Earnings doubled to $3.36 billion from $1.59 billion for the same quarter last year, when the company suffered a big one-off charge related to the acquisition of a smaller drug company.

The challenges ahead

2004 Diflucan (antifungal)
2005 Zythromax (antibiotic)
2006 Zoloft (antidepressant)

2007 Norvasc (blood pressure medication)
2006 Zyrtec (allergy drug)
2011 Lipitor (Anti-cholesterol agent, world’s bestselling drug with global sales worth $3.3bn in the third quarter alone)

Former CEO Hank McKinnell stepped down early because of a scandal over his $83 million retirement package

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