Janssen Korea to cut distribution margins… sparks pushback

sparks backlash from the distribution industry following announcement of 2% reduction in distribution margins… plans to discuss with individual companies

Industry “the measure threatens right to live”... “will take strong measures through the association.”

# i1 Janssen Korea, which has announced a 2% reduction in distribution margins, is expected to engage in dialogue with individual pharmaceutical distribution companies rather than the Korea Pharmaceutical Distribution Association (KPDA) to resolve the current issue.

 

The KPDA has sent two official letters to Janssen Korea, demanding negotiations via the association, but the company did not accept the request.

 

As a result, the KPDA has expressed concerns that the margin cut will become more of a unilateral notification rather than a matter for negotiation.

 

According to the pharmaceutical distribution industry on the 11th, Janssen Korea is expected to visit multiple pharmaceutical distribution companies this week to address the current issue of pharmaceutical distribution margins.

 

Notably, Christian Rodseth, the Senior Vice President of Janssen Korean, plans to visit the companies in person for the negotiations.

 

Janssen Korea recently notified its distribution partners of a 2% margin reduction.

 

However, the distributors have strongly opposed the additional margin reduction, arguing that it threatens their survival as they are already struggling with low margins.

 

In response, Janssen Korea sent a formal statement to the KPDA on the 29th of last month, stating that the decision to adjust pharmaceutical distribution margins was not a unilateral decision being imposed by the company, but rather a part made under the spirit of mutual cooperation.

 

It emphasized that it will continue discussions with individual distributors based on reasonable standards and procedures.

 

In the official statement, Janssen Korea stated, “Considering the number, scale, and diversity of the distribution companies we deal with, we believe it is unrealistic to uniformly apply the same transaction conditions to all distribution companies.” It further explained, “Transaction conditions between suppliers and distribution companies are typically determined through individual negotiations, which is the normal industry practice.” Previously, the KPDA had reached a consensus that Janssen Korea’s margin reduction measures threaten the survival of the distribution industry and agreed on joint countermeasures.

 

A representative from a pharmaceutical distribution company stated, “The margin reduction being pushed by Janssen Korea is at a level that threatens the survival of the pharmaceutical distribution industry.

 

Given that negotiations with Janssen Korea, a company that holds a dominant position in the relationship, are likely to amount to mere notifications, we have decided to have the association represent the positions of pharmaceutical distribution companies.”