Why do pharmacies use wholesalers?

A trusted pharmaceutical wholesaler keeps costs low and inventory high, and gives customers better purchasing power. Pharmaceutical wholesalers also offer products for pharmaceutical retailers. Since pharmacies offer a wide variety of products, it's vital to get the best prices for your retail pharmacy. Pharmacies typically purchase prescription drugs from wholesalers at a discount contracted in the 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. Because wholesale revenues are tied to list prices, as mentioned above, they have little incentive to reduce total supply chain costs for pharmacies, payers, and patients. For example, instead of basing wholesale charges to providers and pharmacies on list prices, they could be structured as a fixed fee per unit of prescription drugs or per wholesale service.

In recent years, numerous lawsuits have arisen across the country in pharmacies, alleging unfair practices that cause irreparable harm to pharmacies. More powerful pharmacy chains, increased competition from specialty drug distributors, and public scrutiny of drug price increases are reducing margins for wholesalers. These wholesalers work by refereeing prices between major wholesalers (who purchase drugs directly from manufacturers) and other drug sources, to provide better prices to pharmacies and other drug buyers. These offers provide a portion of the profits to OptumRx, 
to the detriment of retail pharmacies, as the volume of prescriptions is reduced 
of them.

We trust pharmacies to dispense medication to patients every day as fully trained, authorized and educated healthcare providers. A fixed per-unit prescription drug fee might work similar to the way Medicaid reimburses drugs to pharmacies, where reimbursement includes the cost of purchasing the drug and a dispensing fee to cover the cost of pharmacy operations or, in this case, the cost of operations from the wholesaler. The pharmacy category can include independent and chain pharmacies, grocery stores, or large stores with pharmacies and mail-order pharmacies. Wholesalers buy medicines from manufacturers, store them, and then sell and distribute them to pharmacy chains, independent pharmacies, hospitals, clinics, nursing homes, and mail-order pharmacies.

Much of the secondary market depends on price inconsistencies for its business model, in which pharmacies sell prescription drugs to wholesalers because they have access to special prices. By combining their purchasing power, wholesalers can help smaller pharmacies better negotiate with generic drug manufacturers. Wholesalers compete with each other for contracts with providers and pharmacies and derive their main revenues from generic drugs. Wholesalers were also able to change distribution across channels to meet new demand, such as in-person pharmacies to mail-order pharmacies.

By serving as a critical interface between manufacturers, PBMs, and wholesalers, pharmacies make it easy to bill and pay consumers for those participating in group health benefit plans.

Rachel Celli
Rachel Celli

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