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Sales volume handled by primary wholesaler/distributors seems to be declining
Always a source of vital information on how the majority of drugs and OTC products get to market, the 89th edition of the HDA Research Foundation Factbook: Facts, Figures and Trends in Healthcare shows that business conditions are tightening for primary wholesalers (HDA membership is limited to “full line” wholesaler/distributors, who handle nearly all available pharma products, and who receive product directly from manufacturers).
At a macro level, the Factbook reports that 92% of all drug sales went through primary distributors in 2017, which is actually the first decline in many years (the estimated 2016 figure was 95.7%). A likely source of the decline is the growing trend of specialty products going through alternative distribution channels; as those products tend to be extremely expensive, their movement away from primary distributors is exaggerated. Financials are also tightening: Gross profit margin was 2.4%, decreasing by 0.1% from 2016. Inventory turnover increased from 12.8X in 2016 to 13.0X in 2017; correspondingly, days’ inventory on hand dropped slightly, from 28.5 to 28.1. The number of distribution centers stayed level at 211.
The number of stockkeeping units (SKUs) dropped from 54,692 in 2016 to 51,341 in 2017; surprisingly, while more non-prescription product SKUs are kept on hand (28,148 non-Rx, vs. 23,193 Rx), 98% of revenue for these distributors comes from Rx products.
A significant change can be seen in cold chain involvement: While 100% of distributors surveyed by HDA handle cold chain products, the percentage of their inventory (on an SKU basis) that require temperature control dropped from 7.6% to 4.5%. (this could be in line with more specialty products, which tend to be temperature-controlled biologics, going to alternative distribution channels; a report on the specialty business of HDA members usually follows the publication of this Factbook, which will have more specific data.)
This year’s Factbook was sponsored by Apotex Corp., Real Value Rx, Anneal Pharmaceuticals, IQVIA and Pharmacy First. It is available at no cost (registration required) at www.hda.org.