Pharmaceutical Distribution Trends to Keep an Eye On

Pharmaceutical distribution plays a significant role for drug manufacturers. Manufacturers have a few things they need to keep an eye on this year as they plan for their future clinical and business needs. Here is five main trends that should draw the attention from everyone involved in pharmaceuticals from pharmacies to distributors to patients. The following trends will provide more clarity when it comes to the pharmaceutical industry and what to expect moving forward.

  • The number of manufacturers each distributor is willing to carry is slowly declining.

The average number of manufacturers from which one distributor purchased products from was 1,211 in 2016. That number has been dwindling down as months and years go by (down from about 1,474 different manufacturers in 2014). As pharmaceutical companies grow and expand their product inventory, the number of manufacturers needed to fully supply a distributor is expected to decrease moving forward.

  • The average number of individual products per distributor is rising.

Like previously mentioned, the number of manufacturers that each distributor handles is declining which in turn results in an increased amount of manufacturer SKUs per distributor. The average number of individual products per distributor saw a 5 percent increase in 2016 from the previous year. This number increased from 52,066 in 2015 to 54,692 in 2016. Also, the average number of brand-name prescription drug SKUs per distributor dropped from 6,383 in 2015 to 6,265 in 2016.

  • Distributors are increasing the amount of pharmaceuticals sales made through their facilities. 

While the number of manufacturers per distributor is decreasing, distributors are increasing the amount of pharmaceutical sales flowing through their facilities. In 2016, almost $450 billion in pharmaceutical sales were done through medical distributors. That number is up over 45% from a few years ago, when the figure was just above $300 billion. About 95.7 percent of pharmaceutical sales were made through distributors in 2016.

  • The most dominate form of product ordering continues to be done through electronic ordering systems. 

Electronic ordering systems was the most dominate method of product ordering for distributors, which includes both software-based and web-based systems. In 2016, 93 percent of all pharmaceutical distributors offered one (if not both) form of electronic ordering for customers to buy products, that percentage has increased by an average of 1 percent every year since 2014 and is expected to continue in 2018. The use of phone ordering and fax ordering continues to decrease making up for less than 8 percent of orders combined.

  • Distributor’s customers are starting to become more prevalent in hospitals and specialty pharmacies.

In 2016, hospitals accounted for a total of 15.8 perfect of pharmaceutical sales through distributors. That number is steadily increasing, compared to just 14.5 percent in 2014. During that two year period, purchases by specialty pharmacies also increased from 1.1 percent to 1.4 percent. These numbers are also both expected to continually increase in 2018. Chain pharmacies are still the biggest customers of distributors accounting for 42 percent of all sales.

These five main trends are something distributors and distributors-alike should be keeping their eye on moving forward. There’s also a couple other movements that will continue to impact the pharmaceutical industry such as an increase in barcoding individual items. This helps pharmaceutical manufacturers keep better track of smaller individual items like pill bottles. Manufacturers barcoded an average of 74% of individual items, compared to just 34% of shelf packs and 71.4 percent of product cases. An item’s size determines its chances of being barcoded, the smaller the unit the more likely it will be barcoded in the future, if not barcoded already. Another trend in the pharmaceutical industry is the overstocking and returning of health products to distributors. Overstocking continues to be the most common reason for returned pharmaceuticals to distributors and that trend is likely to continue in 2018. In 2016, overstocking of products caused 88.3 percent of returns to distributors.*

The AMSCO Medical staff is committed to providing advanced insights on prevalent topics in the industry. If you have a suggestion for a blog topic you’d like to see covered, let us know in the comments.

*Statistics were extracted from the 2017-2018 HDA Factbook.

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