How do pharmaceutical distributors make money?

Pharmaceutical distributors buy products from manufacturers at list price and we sell them to customers at list price. Pharmaceutical distributors make money by charging manufacturers a percentage of the wholesale acquisition cost (WAC) of their products, or list price, for distribution services. As logistics experts, distributors don't manufacture, prescribe, or promote drugs. Distributors 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 absence of a wholesaler, pharmaceutical companies may have to designate their own distribution team or have to give their sales team additional work to distribute along with sales as well. The role of pharmaceutical wholesalers is to act as an intermediary between pharmaceutical companies and their customers (for example, 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. A pharmaceutical provider that offers products such as wholesale medicines and over-the-counter pain relievers saves time and money for independent pharmacists and home care companies.

Previous studies estimated that the life of R%26D projects for pharmaceuticals was equal to 9.8 and 11.8 years (Hansen 1979; DiMasi et al. Chemists and pharmacies are the key customers for the pharmaceutical wholesaler, but at some point the wholesaler may supply small distributors or designate an additional distributor for adequate supply. We compared excessive returns, which are calculated as the net return on investment of the cost of capital for investment, for manufacturers and intermediaries in the pharmaceutical supply chain and compared their returns with those of companies in the S%26P 500. Distributors manage a complex supply chain, leveraging innovative technologies to ensure safe and efficient delivery at all times.

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. There is a great reach in the pharmaceutical wholesale market, but collecting payments can eclipse your dream of entering the wholesale and distribution business. The pharmaceutical supply chain is already well-established, with a few companies controlling several key sectors. Ultimately, drug spending is determined through negotiations between multiple stakeholders, including pharmaceutical companies, insurers, pharmacy benefit managers (PBM), pharmacies and wholesalers, and each stakeholder earns a share of the profits from the sale of medications.

Starting a pharmaceutical distribution business with a big brand costs about 3 to 5 thousand rupees, and for the small pharmaceutical organization, it cost an investment of almost 1 to 2 lakh.

Rachel Celli
Rachel Celli

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