Executive Briefings

Combined Procurement Helps Pharma Distributors Stay in the Black

One of the most powerful middleman industries in the global economy – pharmaceutical distributors – is emerging from more than a half-decade of difficult transition.

Drug distributors purchase drugs, often entire lines of drugs, from manufacturers. They warehouse and sell them to retail chains and mail-order, online and specialty pharmacies, as well as to physician offices and clinics.

Three companies dominate this key piece of the pharmaceutical supply chain. The largest, San Francisco-based McKesson, reported almost $138bin in fiscal 2014 revenue. The companies earn slim margins from their massive revenue, however. And those thin profits have come under harsh pressure in recent years due to shifting trends in health care.

AmerisourceBergen, McKesson and Cardinal Health have been able to withstand this squeeze largely because they've combined their purchasing power with major pharmacy chains Walgreen Boots Alliance, Rite-Aid and CVS Health.

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Drug distributors purchase drugs, often entire lines of drugs, from manufacturers. They warehouse and sell them to retail chains and mail-order, online and specialty pharmacies, as well as to physician offices and clinics.

Three companies dominate this key piece of the pharmaceutical supply chain. The largest, San Francisco-based McKesson, reported almost $138bin in fiscal 2014 revenue. The companies earn slim margins from their massive revenue, however. And those thin profits have come under harsh pressure in recent years due to shifting trends in health care.

AmerisourceBergen, McKesson and Cardinal Health have been able to withstand this squeeze largely because they've combined their purchasing power with major pharmacy chains Walgreen Boots Alliance, Rite-Aid and CVS Health.

Read Full Article