Janssen, Pharma distribution industry agree on margin adj

Small and medium-sized distributors will maintain existing trade relationships, while also improving the margin reduction terms…"achieved mutual growth"

The Korea Pharmaceutical Distribution Association says, "Successfully conveyed demands from member companies…we derived fair negotiations"

The conflict between Janssen Korea and the pharmaceutical distribution industry over distribution margin reductions has been resolved with a negotiated settlement.

 

The distribution industry achieved an outcome that maintains existing trade relationships, including with small and medium-sized distributors, while also improving the proposed margin reduction terms.

 

Janssen Korea, in turn, reconfirmed its commitment to cooperation with the distribution industry, setting a precedent for mutual growth.

 

According to industry sources, on August 1, the Korea Pharmaceutical Distribution Association recently announced that it has reached a final agreement with Janssen Korea regarding the reduction in distribution margin, following numerous negotiations.

 

Notably, trade was maintained even for small and medium-sized distributors whose contracts were nearing expiration, and the entire distribution industry is deemed to have secured fair trade conditions without the involvement of the Fair Trade Commission.

 

Previously, Janssen Korea had notified its distribution partners of a plan to pursue a two percentage point reduction from existing margins.

 

While there were variations depending on individual contract terms, for example, a distributor with an existing 8% margin would see it adjusted to 6%.

 

The distribution industry's position was that while some pharmaceutical companies had attempted margin adjustments of around one percentage point, a two percentage point adjustment was unprecedented.

 

In response to this measure, member companies in Korea protested, standing firm and expressing their intent to refuse the distribution of Janssen products, stating that "they cannot handle products at a loss if margin cuts are enforced." In response, the Association immediately formed an emergency response committee and held several rounds of negotiations with Janssen Korea.

 

Both sides narrowed their differences and finally formulated a negotiation proposal.

 

While the specific details remain confidential, according to the Distribution Association, the distribution margins have been adjusted to an acceptable level, and trade terms that had burdened the distribution industry have been improved.

 

The fact that small and medium-sized distributors whose contracts were expiring were not marginalized and could continue their business is considered a significant achievement.

 

The pharmaceutical distribution industry and Janssen Korea officially convened a meeting to discuss distribution margin reductions.

 

The Korea Pharmaceutical Distribution Association feels that this margin reduction conflict with Janssen Korea has strengthened its internal cohesion and external negotiation power.

 

An official from the Distribution Association said, "Throughout numerous meetings, we conducted negotiations, conveying the strong voices of our member companies and the demand for mutual growth with the distribution industry.

 

As negotiations continued, Janssen Korea, which had initially been unyielding, came to a consensus with the association and the distribution industry regarding the margin reduction, thus concluding the negotiations." Janssen Korea also issued a positive statement.

 

The company said, "Through this negotiation, we were able to derive positive alternatives related to margin rates with our distribution companies," and added, "We thank the pharmaceutical distribution industry for their cooperation and are pleased to be able to continue a patient-centered collaborative relationship in the future." Park Ho-young, Chairman of the Korea Pharmaceutical Distribution Association, said, "This is the result of conveying the opinions of our member companies directly and not giving up until the end." He added, "While the outcome may not be entirely satisfactory for some member companies, the fact that we created an opportunity for mutual growth through the united strength of the distribution industry is positive." Park stated, "With margin reductions recurring over a long period, the distribution industry has already reached its acceptance limit," and added, "Pharmaceutical companies should refrain from easily resolving their management difficulties through margin adjustments."