Drug and Druggists' Sundries Wholesalers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 7,000 drug and druggists’ sundries wholesalers in the US distribute biological and medical products; botanical drugs and herbs; pharmaceutical products; and related goods. Prescription drugs account for over 80% of industry sales. Other product categories include cosmetics and beauty supplies; vitamins and nutritional supplements; non-prescription drugs; and personal care items.

Regulated Environment

The distribution, compounding, purchase, and storage of pharmaceuticals is highly regulated by the Drug Enforcement Administration (DEA), FDA, and US Department of Health and Human Services (HHS).

Reimbursement Rates and Coverage

The drug wholesale industry is affected by changes to medical reimbursement rates, which continue to fall as the healthcare industry looks for ways to cut costs.

Industry size & Structure

The average drug wholesaler operates out of a single location, employs 31-32 workers, and generates about $110 million annually.

    • The drug and druggists' sundries wholesale industry consists of about 7,000 firms that employ about 222,500 workers and generate $770 billion annually.
    • The industry is concentrated; the top 50 companies account for 86% of industry revenue.
    • Large companies include McKesson, Amerisource Bergen, Cardinal Health, and JM Smith. Large firms may have international or pharmacy retail operations.
                                Industry Forecast
                                Drug and Druggists' Sundries Wholesalers Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Jan 3, 2024 - Sales Growth Continues
                                • Industry sales increased during the first nine months of 2023, continuing a long-term trend driven primarily by the aging of the Baby Boomer generation. Employment increased slightly during the first 11 months of 2023 and wages for nonsupervisory employees rebounded slightly from a significant 2022 decrease.
                                • About 70% Of the $11.8 billion spent on 45 generic drugs by Medicare Part D in 2021 went to intermediary gross profit, according to a study published in JAMA Health Forum. Researchers estimated that Medicare Part D spent, on average, $22.50 per claim on generic drugs, resulting in a gross profit of $9.18 for pharmacy benefit managers, $3.87 for pharmacy gross profit, $2.71 wholesaler gross profit and $6.73 manufacturer revenue. The researchers say that the analysis showed that many members of the pharmaceutical supply chain rely on spread pricing to earn profits, not just pharmacy benefit managers. Curbing spread pricing practices has been a rare point of bipartisan consensus for lawmakers in Congress, according to Fierce Healthcare. The US Senate Finance Committee introduced in September 2023 the Modernizing and Ensuring PBM Accountability Act. Spread pricing was one of the major components of the bill.
                                • Pharmaceutical distributors are calling for the US Food and Drug Administration to grant a two-year delay in enforcing the pharmaceutical tracking provisions of the Drug Supply Chain Security Act (DSCSA), saying that industry still does not have the necessary tracing systems in place to comply with the law. DSCSA required manufacturers, wholesalers, distributors, and dispensers to exchange serialized product information beginning on November 27, 2023, marking the culmination of the law’s phased implementation. The Healthcare Distribution Alliance is instead calling for a phased approach to implementation to minimize supply chain disruptions and avoid drug shortages.
                                • Patients are having difficulty obtaining drugs to treat conditions including anxiety, attention deficit hyperactivity disorder, and addiction, according to the New York Times. Some experts say that a 2022 opioid settlement which imposed new requirements on distributors that provide medications to pharmacies may be a key contributor to lack of access. The $21 billion settlement, which was brokered between the three largest American pharmaceutical distributors and the attorneys general of 46 states, was designed in part to correct practices that had flooded the country with prescription painkillers which intensified the nation’s opioid crisis. Distributors are placing stricter limits on drug supplies to individual pharmacies and heavily scrutinizing their dispensing activity. Oversight is not limited to opioids, however. It applies to some potentially addictive or habit-forming controlled substances like muscle relaxants or medications like Xanax, which is used to treat anxiety and panic disorders.
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