Photo courtesy of the Los Angeles Times
Market Arbitrage in the Pharmaceutical Supply Chain
Since the birth of commerce, there has always been market arbitrage – simply where traders find price discrepancies and then profit from them. In 21st-century pharmaceutical distribution, there is no exception and it is something we have covered extensively. The sheer number of trade classes in the pharmaceutical supply chain, and the differences between them (market power, volume, logistics) lead to significant pricing differences. One of the common trends has been for independent pharmacies, with favorable pricing and/or access, to obtain wholesale licensing and push that product back into the supply chain.
Diabetic Test Strip Diversion
With this, there is little to no assurance on temperature and humidity standards.
Diversion of insulin occurs in two major ways. The first is in the same way that test strips are diverted – patients get their insulin covered by insurance and then resell to companies that introduce it back into the supply chain. The second way is that bad actors will visit multiple Walmart locations to purchase the Reli-On brand of insulin for a low cash price – lower than what is available to independent pharmacies. By buying in volume, in cash, there is an attractive profit to be made in reselling to drug distributors or directly to independent pharmacies.
The Colorado price cap on insulin will introduce a significant price discrepancy, which will likely fuel exactly this type of diversion.
Accreditation: Industry Self-Regulation
The NABP VDIP® program specifically focuses on the diabetic testing supply market. The NABP VAWD® Accreditation Program, however, mostly focuses on prescription products and not over-the-counter insulin or test strips.
Based just outside of Philadelphia, Five Rivers RX provides actionable guidance and excellent administrative services with a focus on client care across Compliance, Commercial, and Quality solutions. Our mission is to improve the health and welfare of the American public by providing solutions and implementing best practices for companies in the pharmaceutical supply chain.