Millions of medicine packs reach European pharmacies every day, on time, regardless of weather, shortages, or logistical complexity. The companies making that happen are largely invisible in EU policy discussions. The models they are paid by are 30 to 40 years out of date — and if nothing changes, you may one day walk into a pharmacy to find the shelves empty.
The market those models were built for no longer exists. Pharmaceutical portfolios are shifting toward high-value, low-volume specialty treatments. New direct-to-patient models bypass traditional channels. Online pharmacies, third-party logistics providers, and specialty distributors have carved out the profitable segments. Systemic wholesalers must deliver everything, everywhere, including products they distribute at a loss. They supply 93 per cent of pharmacy volumes and manage 85 per cent of retail product lines. For about 40 per cent of medicines, they are the only distribution channel. The largest countries in Europe are now down to four or five of them. Several are running deficits.
“Look at what you actually want delivered in your health system from our part of the chain,” says Kasper Ernest, Director-General of GIRP, the European Health Distribution Association. “And check whether what you are paying for matches that expectation. Right now, it does not.” In an exclusive interview with EU Perspectives, he explains how the sector reached this point. He outlines what a reformed remuneration model might look like. And he warns that the time to act is running out.
The European health distribution sector is invisible. Is that invisibility a policy problem or a communication problem?
Both, but the policy consequences are the more serious ones. Policymakers do not have a sufficient understanding of what sits behind the medicine supply chain. And that is a shame, because it does affect the quality of policymaking. Part of our job is to make sure they receive that information, which is why we would also like to do more site visits. It is actually quite hard to convey the complexity in words. We deliver 69 million packs daily to 200,000 pharmacies and hospitals. There are 100,000 different product combinations. Each day brings a new mix, so everything must be ready right away. You only really understand the complexity when you stand in the warehouse and see it in action.
There is not enough knowledge. And therefore not enough appreciation of why maintaining that infrastructure requires something: funding, attention, and regulatory restraint.
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What is the concrete risk if that appreciation continues to fall short?
We are at the point where members are running deficits. In the largest countries, we are down to four or five systemic wholesalers. One or two bankruptcies can lead to serious consequences. We have reached the limits of what consolidation and efficiency gains can deliver. Beyond technological advances, there is little headroom left. So yes, we are close to a tipping point where patients will feel it.
We are at the point where members are running deficits. In the largest countries, we are down to four or five systemic wholesalers. One or two bankruptcies can lead to serious consequences.
— Kasper Ernest, Director-General, GIRP
The first impact lands on pharmacies. On the current economic trajectory, we would have to reduce the frequency of daily deliveries. If you go to a pharmacy in the morning with a prescription and are told to come back after lunch, it is because we made that delivery just a few hours before. Moving to next-day delivery has very real costs for patients and for the wider economy. A sick day is expensive, especially the first and second.
The sector has a tradition of doing more than the remuneration model requires. It often delivers medicines at a loss and responds to urgent calls after hours. Is that a strength or a weakness?
It is a defining feature of the sector. When I joined, we commissioned research into the organisational DNA. The results were surprising. Words like “altruism” appeared, which you don’t usually link to business. But it is accurate. If someone calls with a life-saving medicine, it gets there. There is a professional ethic like a doctor who cannot say no after office hours.
The issue is that this spirit has allowed the situation to persist longer than it should have. They go the extra mile, even without remuneration. As a result, they’ve absorbed financial pressure for years. Now we are at the point where you do not have the staff or the capacity, however much you want to deliver. The lack of recognition of that dynamic is becoming critical.
The remuneration model is 30 to 40 years old. Why has it been so difficult to reform?
The model was built at a time when systemic wholesalers were essentially the only providers of public service. The logic worked. The problem is we have not kept up with time.
Reform means changing the underlying logic, not just adjusting the margin parameters. Today’s model remunerates all operators on broadly equal terms, regardless of what they actually deliver. What once made sense in a market with a single type of provider makes much less sense now that new entrants have carved out the profitable segments while the public service burden remains concentrated with full-service operators. A future model needs to reflect that distinction explicitly.
New entrants have come in, including agencies and 3PLs. These players manage the profitable parts of the portfolio. They benefit from a system designed for full-service operators.
Everyone receives lower margins overall, but the savings go into a fund that remunerates operators only if they actually deliver the public service, verified by audit. Competition is preserved. You stop overcompensating those who cherry-pick profitable products and undercompensating those doing the hard work.
You wouldn’t give a concession in postal services or energy without a clear, enforceable public service guarantee. In pharmaceuticals, we somehow never made that transition.
— Kasper Ernest, Director-General, GIRP
The state is happy. The sector is happy. It has been running for nearly 20 years. You wouldn’t give a concession in postal services or energy without a clear, enforceable public service guarantee. In pharmaceuticals, we somehow never made that transition.
Are you trying to bring that model to Europe?
Yes, and we are now at a very early but concrete stage in two countries. When remuneration negotiations arise in a country, the typical approach is to review the numbers and adjust the margin cut-off points. It’s the same system, just updated with a spreadsheet.
What we are now saying is: when that revision comes up, use it as the moment to examine the fundamental architecture, not just the parameters. If we secure one or two proof-of-concept cases in Europe, the domino effect will follow. There is always a first-mover hesitation. Everyone watches everyone else. Getting that first breakthrough matters.
How significant is the impact of fuel price fluctuations on the sector?
It’s very direct, it comes straight off the bottom line, and you can’t change that. At around $110 a barrel, we calculated it cost the sector approximately €11m per month.
The European Commission issued a state aid communication that includes our sector. This could cover 70 per cent of the increase. However, this only works if member states offer state aid and include our sector in it. We have also seen countries impose fuel quotas outside the EU, but there was one case inside. Restricting fuel access for distribution operators restricts medicine delivery too.
Shortages have been a dominant policy issue for years. Where do things stand?
IQVIA’s transparency platform currently tracks about 3,500 shortages. What we did see in 2025, for the first time, was a slight decrease after years of increases. My sense, and it is partly a feeling backed by informal industry feedback, is that we may have seen the peak.
A key point often overlooked in policy discussions is the move to contract manufacturing. When a company outsources 50 to 60 per cent of its production, it loses flexibility.
In a vertically integrated structure, production runs can be redirected by management decision. With contract manufacturers, that flexibility is governed by contracts, and contracts are not as agile as internal decisions.
There was a real learning curve. You needed to learn how to reserve capacity, set prices for buffer stock in CMO agreements, and manage relationships. This way, a sudden demand spike won’t leave you without a production slot for the next year. That change is done now, which is partly why we may have hit the peak.
The new EU pharmaceutical legislation has been seen as a milestone. How does GIRP assess it from a distribution perspective?
With some frustration, though I want to be proportionate. The legislation did important work, particularly on the manufacturing and shortage prevention side. The Public Service Obligation (PSO) for wholesalers has been strengthened. The recognition of wholesalers’ role in supply security is clearer than before. But on the distribution side, the practical operating framework, very little has changed. Online pharmacies: not a comma moved, and that chapter was negotiated in 2009. Some might say nothing needed to change, but that is not our reading. Three decades of change, new entrants, new technologies, shifting product portfolios, warranted a more substantive conversation.
What matters going forward is the Good Distribution Practice (GDP) guidelines which will become a delegated regulation. That is our operational constitution. It will affect most of our costs. And there are some areas where GMP thinking has crept into GDP in ways that are not proportionate. You cannot control humidity in a delivery van, when you open the door, ambient humidity enters. The product’s blister packaging is specifically designed to protect against humidity variation; that is where the protection lies.
Requiring van-level humidity control is not about patient safety. It’s a laboratory logic used in the wrong environment. We want clearer and fairer principles in the revision. This question will be prominent in our discussions later this year.
What is your one ask for policymakers?
Nurture your critical infrastructure. Don’t throw the baby out with the bathwater. Look at what you actually want delivered in your health system from our part of the chain, and check whether what you are paying for matches that expectation. Right now, it does not.
You cannot continue on the same trajectory and assume the same level of service will be there. That mismatch, between what the system expects and what it is willing to pay for, is the central challenge. Everything else follows from that.
