About Pharmaceutical Wholesalers
When it comes to buying pharmaceuticals, you’ll probably have several questions. You may want to know what makes a pharmaceutical wholesaler work, how it’s different from other pharmaceutical companies, and how to get the best deals on your prescriptions.
Drug wholesalers sell generic drugs to pharmacies and other healthcare providers, such as hospitals and medical centers. They buy in bulk from manufacturers and sell at discounted prices to these providers. This makes them a critical part of the pharmaceutical industry.
The wholesaler industry is a vital part of the pharmaceutical market in the U.S. Because of their role in the supply chain, they influence the prices of prescription medications and affect the distribution of specialty drugs.
Pharmaceutical wholesalers are the primary source of generic drug distribution. They sell these drugs to independent pharmacists, supermarkets, and regional and chain pharmacies. Their profits come from two sources. First, they receive a discount for prompt payment. Second, they can earn fees for providing their services.
Wholesalers have evolved as an industry to adapt to the changing health care system. They have also become more competitive with generic drug manufacturers. Many are now developing their own sources of generic production. Some have even entered preferred contracting with generic drug manufacturers.
While the wholesaler industry appears healthy, its profit margins are under pressure from ongoing pharmacy industry changes. As more consumers seek out lower-cost drugs, big chains will use their own supply chains instead of the wholesalers.
Generics represent a smaller percentage of wholesalers’ revenues than brand-name drugs. However, they have higher gross profit margins. Manufacturers, insurers, and other intermediaries generate more than $41 of every $100 spent on prescription drugs at retail pharmacies.
Pharmacy chains are now battling to maintain their retail pricing advantage over generic drugs. In response, they are implementing low-cost programs. A study surveyed 136 wholesale drug firms. It found that the incidence of drug product recalls and price are equally important to wholesalers.
Manufacturers make three times more on branded drugs than on generics. This has led to a trend of increasing scale. Several leading generic companies will need to think differently about the market.
With the rise of generic purchasing partnerships, the price discount offered by a wholesaler has increased by 2 to 5 percent. But wholesalers still face a tighter market for generics as the number of suppliers decreases.
Specialty drugs and pharmaceutical wholesalers are a growing segment of the health care industry. These products require unique handling and storage requirements, and they also have their own set of reimbursement and therapy regimens.
As the health care industry transitions to more patient-centric care, specialty pharmaceuticals and wholesalers are adapting to the changes. For example, some companies are developing a specialty pharmacy-to-provider channel for health plans.
In the United States, one of the largest wholesalers, McKesson, is a large player in the market. In addition to its overall sales, McKesson has become a leader in specialty drug distribution, as well.
Another example is the AmerisourceBergen Specialty Group, which has a specialty pharmacy and three segments involved in a wide range of aspects of specialty pharmaceutical distribution. The company’s specialty distributors handle the highest-cost, most complex medications, while its full-line wholesalers deliver more traditional drugs to retail pharmacies and physician offices.
Manufacturers of specialty drugs have a lot of control over how their products are distributed. They can restrict channels to ensure the integrity of their product and limit the number of specialty pharmacies that can provide their products. Some manufacturers also restrict their distribution of specific drug categories in order to generate higher margins.
Limited distribution models have a number of benefits for both the manufacturer and the pharmacy. In addition to enabling better achievement of therapeutic effect, the combination of bulk purchasing economies of scale and patient management services can help reduce overall health costs.
Specialty drug manufacturers can develop a fine-tuned distribution strategy, and a good distribution partner will help minimize risk throughout the entire drug journey. A specialty distributor can also offer financial services, inventory management, and other capabilities.
However, some providers may prefer to purchase specialty products from a larger, more established specialty pharmacy, which often purchase products directly from the manufacturer of a specific drug. This type of product is usually more expensive and often requires specialized handling and storage.
Pharmaceutical manufacturers, wholesalers, and healthcare organizations must use cost-management strategies to address the high-cost of specialty drugs. For instance, a health plan may classify a drug differently than a traditional prescription, limiting the beneficiary’s access to that particular product.
Influence on the purchase and distribution of drugs
Drug wholesalers play a pivotal role in the distribution of prescription drugs. They influence the pricing and purchase of both brand-name and generic drugs. While manufacturers and pharmacies play a dominant role in the drug market, wholesalers have found ways to adapt to the changing health care system.
The industry has become highly integrated. Wholesalers compete for contracts with pharmacies and providers. Manufacturers and insurers also play important roles in the supply chain. Unlike the manufacturers, wholesalers keep the net profits they make. This makes them one of the most profitable players in the pharmaceutical industry.
However, the wholesaler industry’s profit margins are often squeezed by powerful chain pharmacies and specialty drug distributors. A track-and-trace system for the distribution of drugs is the best way to monitor the supply chain. Moreover, it protects patients from unsafe medicines. It allows pharmacists to trace the path of a drug.
Many countries have ineffective and porous supply chains. Inefficient distribution causes drug stock-outs. Unlicensed vendors exploit this chaos. These companies sell substandard and counterfeit medicines. Some charge up to 10 times the standard price.
In the United States, the branded pharmaceutical market is dominated by manufacturers. They have higher gross profits than generic drugs. Nevertheless, some branded drugs are routinely discounted. As a result, the average list price of branded drugs in the US is usually lower than the actual cost paid by the manufacturer. Despite the discount, the average list price for branded drugs has increased 12.4% annually since 2012.
In some countries, resale of free drugs is a common practice. Patients who are desperate for prescription drugs are lured to unlicensed vendors. These unscrupulous businesses seek the softest regulatory systems.
Many countries in the developing world do not have a budget to provide safe and affordable medicines to their populations. Therefore, these countries can provide a good environment for the private sector to invest in the distribution of drugs.
If the government wishes to encourage private-sector investment in medicines, it should focus on understanding the forces that drive the rising prices. A comprehensive review of financial data can reveal opportunities to reduce total drug spending.
Legal consequences of not having a license
The legal consequences of not having a license for pharmaceutical wholesalers may be more severe than one might think. For example, the Florida grand jury recently found several drug wholesalers to be a “rank amateur” and have criminal records. In some states, such as California, they are required to meet even more rigorous licensing requirements. However, these requirements vary from state to state. And some states do not share information about wholesalers, which leaves unscrupulous wholesalers free to move from state to state.
It’s important for regulators to create a database of wholesalers with accurate, timely information. This will help ensure that only authorized pharmacies can buy from them and avoid selling dangerous or substandard products to patients. There are also several ways to track medicines before they reach a patient. Some of the most effective include tracking the primary package of a product. Those packages will not be destroyed, which makes it easy to identify the source of a contaminated product.
A second way to improve the security of the distribution of medicines is to create a more rigorous system for licensing wholesalers. This will prevent wholesalers from moving from state to state, as happened with some of the illegal drug distributors in the Florida case. Additionally, it will reduce the number of transactions in the drug distribution chain.
Lastly, it’s vital that regulators publish a process for collecting accurate and reliable information. One of the most effective ways to do this is by creating a public database of suspended wholesalers. If a wholesaler is cited for a violation, the state should report this to the national database, which will then allow other states to check on the wholesaler’s status. As an added benefit, this will provide better oversight of the drug wholesale market in the U.S. and help build momentum for increased control of the wholesale market in developing countries.
In short, improving the regulatory and licensing processes for wholesalers can help protect the integrity of the drug supply and improve the overall quality of medicine in the United States. At the same time, states should not hesitate to work with the FDA to tighten regulations on the wholesale market.