Wholesalers threaten a GlaxoSmithKline boycott

Tensions between local wholesale distributors and multinational pharmaceutical manufacturer GlaxoSmithKline (GSK) intensified after the wholesalers accused the London-based company of enforcing low margins, banning credit card payments and making distributors pay commissions.

The Korea Pharmaceutical Distribution Association, a group that represents medical wholesalers nationwide, announced that its members will stop handling GSK medicines starting in October unless GSK Korea accepts the association’s demand to increase margins shared with the distributors and allow for credit card payments.

The pharmaceutical distributors have long argued that profit margins imposed by GSK Korea are so slim that they can barely break even.

“The minimum margin that we need is 8.8 percent,” said a source at the Korea Pharmaceutical Distribution Association in a telephone interview with the Korea JoongAng Daily.

“But many multinational pharmaceutical companies insist on a lower rate,” the source continued. “The rate by GSK is among the lowest.”

Another complaint targets GSK’s reluctance to accept credit card payments.

“It’s hard to carry a large sum of cash,” the source said, “so we prefer credit card deals but GSK refuses to make deals by credit card due to commission fees.”

The source said that such tensions have existed since 2006.

The distributors association held a board meeting last week to discuss collective action against the pharmaceutical company.

“It is widely agreed that wholesale distributors operate in the red when they deal in GSK products,” Im Maeng-ho, the committee head, said.

“We’ve notified GSK that we will no longer supply their medicines unless they agree to our requests.”

Wholesale distributors that supply medicines to hospitals, a sub-group of the Korea Pharmaceutical Distribution Association, also expressed the intention to join the boycott on Thursday.

A subcommittee of hospital distributors said that the move is needed.

“Both wholesale distributors and hospital distributors face troubles because of low margins,” said Goh Yong-gyu, head of the subcommittee.

Association members and GSK Korea may meet Monday.

“We’ve learned that there is disagreement and we are seeking to solve it,” said an official from the public relations division at GSK Korea.

“What we can say for now is that we are trying our best to find middle ground.”

By PARK EUN-JEE [ejpark@joongang.co.kr]