Pharmacies rely on wholesalers to keep costs low and inventory high, and to give customers better purchasing power. Wholesalers offer a variety of products for pharmaceutical retailers, and pharmacies typically purchase prescription drugs from them at a discount. This 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. Wholesalers have little incentive to reduce total supply chain costs for pharmacies, payers, and patients.
To address this, 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. This would 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. In recent years, numerous lawsuits have arisen across the country in pharmacies, alleging unfair practices that cause irreparable harm to pharmacies. This is due to more powerful pharmacy chains, increased competition from specialty drug distributors, and public scrutiny of drug price increases reducing margins for wholesalers. 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. We trust pharmacies to dispense medication to patients every day as fully trained, authorized and educated healthcare providers.
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. 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.
They are also able to change distribution across channels to meet new demand. 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.
