The Role of Pharmaceutical Wholesalers in the Drug Industry
As price takers, wholesalers act as price makers in distributing brand-name drugs but are more active in setting generic drug prices.
FREMONT, CA: Pharma wholesalers buy drugs from manufacturers, store them, then sell and distribute them to chain pharmacies, independent pharmacies, hospital and clinic pharmacies, nursing homes, and mail-order pharmacies. Wholesalers distribute more than 90 percent of prescription drugs.
The wholesale industry plays an important and lucrative role in the supply chain, yet policymakers pay little attention to it. Research indicates that wholesalers retained about 4 percent of the pharmaceutical sector's total revenue, which is 18 billion dollars.
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Policymakers may not always realize how wholesalers make money, such as by forward-buying, which involves buying extra inventory at today's prices so they can sell it later at a higher price.
Brand-name drugs: Wholesale acquisition costs (WACs) are set by manufacturers for each drug. Brand-name manufacturers sell drugs wholesale to wholesalers for a discount that is kept confidential. Pharmacies purchase brand-name drugs from wholesalers at WAC less a negotiated discount. Wholesalers are often price takers in brand-drug markets, often buying at a discount from WAC and selling at WAC minus five percent.
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