Full-line distributor sales reached $350 billion in 2013, representing 91% of pharma sales

Late last year HDMA published its annual Factbook, a compilation of HDMA member survey data as well as relevant industry statistics. Given that 91.4% of US pharma products flow through these wholesale/distribution companies (up from 90.1% in 2013), even pharma executives not directly involved in distribution have important lessons in the Factbook data.

For 2014 (the date of most of the financial and operational data; some survey data was collected for 2015), HDMA members were handling more product lines (average number of SKUs: 47,024, up 8.5% from 2013). By 2015, they were operating more distribution centers (DCs) around the country: The count went from 153 in 2014 to 176 (however, while the membership in HDMA rose by one company, to 33, in 2015, HDMA members have been on a building boom since 2013, when there were 140 DCs). Financially, the companies’ profits (net profit after taxes to net sales) has been declining, going from 1.4% in 2012, to 1.3% in 2013, and 1.0% in 2014. Also in 2014, turnover (a measure of how quickly the wholesalers moved product out of their DCs) declined, from 5.7X in 2013 to 5.6X.

Chargebacks—the payments made by manufacturers to wholesalers to account for differences between the sale price of a branded drug to a buyer, and the sale price to the wholesaler—rose in 2014, from 20.3% of net sales in 2013 to 23.6% in 2014.

This year’s Factbook shows industry preparations for the Drug Supply Chain Security Act (DSCSA), the 2013 law that will eventually provide for tracking each individual package of pharma product from manufacturer to patient. In 2014, wholesalers were receiving paper 66.7% of the time for orders from suppliers (manufacturers), and a customized software solution 16.7% of the time (all suppliers were exchanged some order data via EDI with wholesalers); order exchanges with downstream customers (i.e., pharmacies) were done the opposite way, with custom software solutions being used 66.7% of the time, and paper, 16.7%. EDI was used with 33% of customers. (Soon—if not now—all these exchanges will be done electronically.)

Cold chain products (those that require refrigerated shipping and storage) continue to increase: the percentage of prescription products requiring this handling rose from 5.3% in 2013 to 7.8% in 2014.

The 2105-6 Factbook was produced by the HDMA’s Center for Healthcare Supply Chain Research; sponsors were Boehringer Ingelheim, Apotex, Rochester Drug Cooperative, Teva Pharma, Pharmacy First and Smith Drug. Co. Copies are available for purchase at the HDMA store.