2016 HDA Factbook: primary distributors handle 93.8% of US drug distribution

Data from the just-released 2016-2017 HDA Factbook, its 87th edition, demonstrates, in broad terms, the continuing magic that distributors play in US healthcare delivery: delivering a wider array of healthcare products (primarily pharmaceuticals), more reliably, but with fewer man-hours. Some surprising softness shows up, however, in the industry’s pace of adopting to the traceability requirements of the Drug Supply Chain Security Act (DSCSA), even though distributors will be a central switching point for that tracking data, and that the association members themselves are leading the way in hashing out the required business practices.

In 2016, the Healthcare Distribution Management Assn. became the Healthcare Distribution Alliance; correspondingly, its Center

for Supply Chain Research (the source of the Factbook) became the HDA Research Foundation. Another subsequent change is that the Factbook (which Pharmaceutical Commerce highly recommends for both its distribution and pharma-industry data) is now free, requiring only a registration at the Foundation page.

In 2015, according to the new edition, HDA members accounted for 93.8% of drug distribution, up from 91.4% the previous year and continuing a six-year trend. HDA members are exclusively primary distributors, handling or accounting for pharma products directly from manufacturers; they are also mostly wholesalers, taking ownership of the products. (The increased proportion they handle is to some degree an artifact of changing membership; in the past two years the organization gained three new members—Louisiana Wholesale Drug Co., Prodigy Health Supplier Corp. and Seacoast Medical, LLC.) HDA members have also been upping their count of distribution centers around the country; there are now 203, up from 176 the previous year.

Those DCs handle an increasing array of products: the average number of SKUs in inventory is 52,066, up 10.4% from the prior year. At the same time, these DCs are shipping out 100,699 units per day, up from 91,125. Yet the average “raw order fill rate” (a measure of successful order filling) rose to 94.9%, up from 94.4% as reported in last year’s Factbook. And all this is being done with fewer workers—average DC staffing dropped from 977 in 2014 to 890 in 2015.

Another element of added complexity is “special handling,” primarily either temperature-controlled (cold chain) or DEA-regulated controlled substances. The former require refrigeration in storage and special packaging; the latter require added security, penetration-proof vaults for storage, and DEA paperwork. The average proportion of branded cold chain pharma products that required special handling rose from 3.2% of SKUs to 7.3% (however, the overall proportion of cold chain products dropped in the past year, from 7.8% to 6.3%). The proportion of Schedule II DEA controlled-substance SKUs rose by a single percentage point.

Traceability struggles

Wholesalers, distributors and even third-party logistics providers will have a varying degree of responsibility for collecting and transmitting traceability data under DSCSA; currently, they are required to collect the lot-level data of pharma shipments and convey that information to pharmacies and other clients; starting in 2019, they will be taking steps to report the unique serial codes of each pharma package. The Factbook survey data shows some wobbly trends here: the number of HDA members with serialization pilot programs or full-fledged production has stayed flat at 33 and 16.7%, respectively, even as the proportion of packages they receive from manufacturers has gone up slightly, from 1.8 to 2.6% (they’re supposed to be 100% 2D-barcoded by November 2017!). All that being said, these are data for calendar-year 2015; fresher data presented in an HDA survey released last month indicate that about two-thirds of both branded and generic manufacturers will be 100% serialized by November 2017.

This year’s edition is sponsored by Apotex Corp.; Boehringer Ingelheim Pharmaceuticals, Inc.; Inmar, Inc.; Pharmacy First Third Party Station; RDC-Rochester Drug Cooperative; Smith Drug Company, a Division of J M Smith Corp.; and Teva Pharmaceuticals USA.