How Drug Distributors Work: An Expert's Guide

Drug distributors are the backbone of the US healthcare system, acting as the vital link between pharmaceutical manufacturers and pharmacies, hospitals, and other healthcare facilities. They manage a complex supply chain, leveraging innovative technologies to ensure safe and efficient delivery of prescription drugs and other medical products. In this article, we'll explore how drug distributors work, their role in the healthcare supply chain, and how they are helping to ensure access to life-saving treatments and vaccines during the COVID-19 pandemic. Distributors' revenues come from the difference between what they paid for the drugs and the price at which they were sold. Pharmacies typically purchase prescription drugs from wholesalers at a discount contracted in the Wholesale Acquisition Cost (WAC).

The fee varies depending on the size and purchasing power of the pharmacy. Pharmacies hire wholesalers to supply their facilities with prescription drugs and use agreements that facilitate full and timely payment for drug purchases and compliance with other obligations in exchange for a discount. The Healthcare Distribution Alliance (HDA) is a trade association that brings together members and key stakeholders in the healthcare supply chain to share industry information, learn about best practices, and learn about new products and services. HDA and HDA Research Foundation produce a variety of resources to improve supply chain value and increase industry knowledge. State and federal licensed pharmacies, hospitals, and healthcare providers place orders from distributors for the drugs and products they need, and distributors process and deliver orders daily. Healthcare distributors offer unmatched logistics expertise, technology solutions and support to providers who treat patients on the frontline, as well as those who innovate to find tomorrow's treatments and cures. Without distributors, manufacturers would spend substantial financial, logistical and personnel resources that could be used in other important ways.

Thanks to distributors, the system is more efficient, reliable and secure. As logistics experts, distributors don't manufacture, prescribe, or promote drugs. They also don't make clinical decisions about who should or should not receive a medication or what medication is best for a particular patient. Getting a drug starts with a prescription, and distributors help ensure that what your healthcare provider prescribes reaches your hospital, pharmacy, or other healthcare facility safely and reliably. In the first six months after the first vaccine authorizations, the healthcare distribution industry played a critical role in ensuring that millions of life-saving COVID-19 vaccines and their associated supplies were safely delivered to patients.

That number is increasing every day. Public health partners and federal, state, and local governments regularly turn to distributors during national emergencies to gain their leadership and expertise to deliver vaccines safely, efficiently and reliably in thousands of locations across the country. In addition, distributors manage extensive relationships with domestic and international manufacturers to provide medical supplies, including critical personal protective equipment (PPE).Healthcare distributors have been fully involved in COVID-19 response efforts, working with federal, state and local government agencies to distribute medical supplies, PPE, therapeutic treatments and vaccines. From managing the unique inventory demands of the first critical points to ensuring access to emerging treatment and testing options, HDA members have leveraged its extensive supply and distribution networks, logistics expertise, and expertise in managing public health emergencies. HDA distributor members now work tirelessly to overcome the exceptional and unprecedented demands of vaccine deployment across the country by acting as centralized distributors, working with states to move products to dispensing sites, and supporting independent pharmacies in the first administration line. Manufacturers create drugs and sell them in bulk to wholesalers who then sell them to pharmacies. Wholesalers use complex logistics and packaging methods to receive and deliver medicines on time in good condition.

The complexity of the drug supply chain means that the pharmaceutical landscape is changing. The wholesaler's role in managing the life sciences supply chain is to make the drug purchasing process from pharmaceutical manufacturers more efficient. While some supply chain logistics companies focus on seamlessly transporting medicines from manufacturers to pharmacies, others focus on direct delivery to patients' homes. The drug supply chain involves a range of stakeholders from manufacturers who create drugs to pharmacies that distribute them as well as Pharmacy Benefit Managers (PBMs) that oversee the process. From larger entities taking on multiple roles in the drug supply chain such as Express Scripts benefit purchasing manager for insurance company Cigna to tech startups simplifying drug distribution this is how the complex pharmaceutical market is changing. These men's health companies recruit patients online or through apps prescribe generic drugs or over-the-counter products then deliver medicines directly to patients' homes in discrete packaging. Pharmaceutical manufacturers manage drug distribution from point of production to drug wholesalers or directly to retail pharmacy chains specialty pharmacies hospital chains or some health plans. By combining purchasing power wholesalers can help smaller pharmacies better negotiate with generic drug manufacturers.

Rachel Celli
Rachel Celli

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