Changing Face Of Drug Wholesaling In USA

9 December 1996

A significant change in the landscape for drug wholesalers in the USA came in 1993, when a threat of major health care reform by the Clinton Administration forced most pharmaceutical companies to refrain from raising drug prices beyond the 3%-5% range, according to Hemant Shah of HKS & Co.

During the 1960s and 1970s, drug wholesalers got most of their profits from distribution margins, which ranged from 2% to 6%. Fearing backlash for brand-name drugmakers, they did not distribute generics, which then accounted for less than 2% of all prescriptions dispensed.

The dramatic consolidation in the retail drug business and the emergence of major drug chains began to impact on drug wholesalers during the late 1970s and continued to accelerate into the 1980s and 1990s, Mr Shah noted. During this period, more drug chains demanded efficient service and a low distribution margin, or threatened to order drugs directly from the manufacturer or another wholesaler. Drug companies themselves also began to offer their products direct to retailers at the same price as to wholesalers.

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