How do pharmaceutical wholesalers make money?

Pharmaceutical distributors make money by charging manufacturers a percentage of the wholesale acquisition cost (WAC) of their products, or list price, for distribution services. If these indicators are measured robustly and reported transparently, they would contribute to market consolidation towards wholesalers who can deliver better performance and win contracts from major suppliers. As middlemen, wholesalers have received little attention from legislators, but they play an important and lucrative role in the supply chain. While specialty drugs represent a small share of the drug market by volume, they account for a large part of pharmaceutical spending.

Legislators seeking to increase the affordability and accessibility of prescription drugs should pay attention to the role of wholesale intermediaries who distribute most drugs. The difference between what wholesalers pay for brand-name drugs and what they charge pharmacies can represent an important source of revenue for wholesalers, although it is still a very small fraction of the prices and overheads of brand-name drugs. Full-service pharmaceutical distributors supply their customers with a variety of products and services to meet the needs of customers and customers. Wholesalers also earn revenue from price increases for brand-name drugs through “term purchase,” the practice of creating an inventory of drugs that were purchased at older, lower prices and waiting to sell until manufacturers increase prices.

Wholesalers can also prevent and address potential drug shortages through management systems that predict shortages, track existing shortages, and recommend drug alternatives until shortages are resolved. Wholesalers have found ways to adapt and evolve in the changing healthcare system by diversifying their lines of business, helping to ensure stable supply chains, and playing a critical role in vaccine distribution during the COVID-19 pandemic. Combining this with barcode and other IT tools to verify receipt and stock flow will further strengthen the effectiveness of wholesaler supply programs. A wholesaler can earn margins of approximately 8 to 12% on brand name drugs and approximately 10 to 20% on generic drugs.

The wholesaler's complete business plan is based on buying shares in bulk and selling in small quantities. The Prime Provider Program selects a smaller number of better-performing wholesalers who derive a share of market demand from government health centers. There is a great reach in the pharmaceutical wholesale market, but collecting payments can eclipse your dream of entering the wholesale and distribution business. There are some challenges in the near future, but the wholesale of pharmaceuticals will be an important key element for the pharmaceutical supply chain for a long time to come.

In this way, pharmaceutical companies are freed from any financial burden and can work more freely on their services, products and innovation.

Rachel Celli
Rachel Celli

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