Even logistics/fulfillment house Kuehn + Nagel concluded in a recent study on the pharmaceutical industry that it could not compete against the aggregation capabilities of the big distributors. Vice president Dirk Reichart told RTM: "The big wholesalers deliver thousands of different products to thousands of pharmacists up to six times a day. There is no way we can compete there."

Equally, it is clear that the big distributors have struggled to set up fulfillment/logistics operations themselves. In IT, wholesalers like TechData and Ingram Micro have found it all but impossible to win fulfillment contracts in Europe.

Marc Schnyder, a director of distribution/logistics house Also in Switzerland, reckons he knows why: "The skills you need to run a successful logistics/fulfillment operation are totally different from wholesale. We set up a fulfillment arm 6 years ago and we found we had to re-learn the business. In fulfillment IT systems are everything. We deliver mobile phones for Swisscom and we have to be completely integrated into its SAP system. To succeed in fulfillment, we have had to hire people with IT and logistics skills from mature industries like food and pharmaceutical."

It is interesting to note that GlaxoSmithKline has not extended the fulfillment model it adopted in the UK to other European markets. This is despite the fact that by keeping title to the goods GSK would have much greater control than it does with resell. In the UK GSK pays a fee of around 3.5% to distributors for delivering products to pharmacies. But competitors say that the complexities of the European market make fulfillment a no-no in most places. One competitor said: "In France, for instance, there are two pre-wholesalers who break product for other distributors. In Italy and Spain there are 400 to 500 distributors - not a dozen as in the UK. Fulfillment contracts don't work in these environments.'

Other industry insiders say that European pharmaceutical distributors would simply refuse to accept the fulfillment model. The head of one big distributor said: "in practice distributors can make money from fulfillment, but that doesn't mean they like it. Eli Lilley was forced to abandon its move to fulfillment fees in the UK because distributors switched customers to other products. GSK was only able to introduce fulfillment in the UK thanks to its strength in the market."

Our Analysis: There may be a few pools such as the delivery of simple products to mass retailers where fulfillment works but not elsewhere. But is GSK trying to scare its European distributors into signing fulfillment contracts?