How Does Surgical Products Wholesale Work?

The pharmaceutical industry reached an impressive market size of $1.56 trillion in and is expected to surpass $2.83 trillion by , according to Vision Research Reports.

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Despite the industry’s massive financial standing and impact on public health, not everyone knows how their medications get from the manufacturer to their local pharmacy. In many instances, this method involves pharmaceutical wholesalers. Read on to learn more about how pharmaceutical wholesalers work.

What is a pharmaceutical wholesaler?

Pharmaceutical wholesalers, also called wholesale drug distributors, purchase medications directly from manufacturers and then sell the medications to pharmacies. “Pharmaceutical wholesalers are the backbone of the supply chain, ensuring that providers have access to the medications and products they need to serve their patients,” said Lindsay Dymowski Constantino, president of Centennial Pharmacy Services. “They act as intermediaries between manufacturers and the actual providers.”

There are two main business models that categorize pharmaceutical wholesalers. Full-line wholesalers purchase a company’s complete product line. In contracts between manufacturers and distributors, certain medications may be excluded. The other type of pharmaceutical wholesaler is a specialized distributor that purchases specialty drugs to sell to clinics and hospitals.

The U.S. Food and Drug Administration urges all consumers to validate the licenses of pharmaceutical wholesalers. Each state has a specific agency responsible for licensing pharmaceutical wholesalers. This is extremely important for consumer protection. Without a license, a pharmaceutical wholesaler may be linked to serious offenses, including counterfeit prescriptions and unapproved medication distribution. Any websites with taglines like “not a prescription pharmacy” are likely operating without a license.

How do pharmaceutical wholesalers make money?

Pharmaceutical wholesalers make money by following a concise business model: They buy medications at low prices in bulk and sell them to customers and pharmacies at an increased market price. Consumers typically pay the most through the supply chain, since pharmacies also need to profit from medications. 

However, some consumers discover that purchasing directly from a distributor instead of from a pharmacy can cut their overall medication costs. Wholesalers still make a profit from direct sales, but they sell the products to patients instead of to pharmacies. Because specialty drugs make up about 30 percent of wholesale revenue, this business model has experienced significant growth over the past two years.

Bottom LineBottom linePharmaceutical distributors make most of their money by charging a small percentage of each product’s market price, also known as a wholesale acquisition cost, in exchange for distribution services.

What are the benefits of working with pharmaceutical wholesalers?

While some might argue that wholesale providers aren’t needed anymore, pharmaceutical wholesalers offer several benefits to clients and customers.

Lower costs

Healthcare costs can add up quickly for healthcare providers, retailers and customers. Clients — including retailers, hospitals and home healthcare companies — can partner with pharmaceutical wholesalers to purchase medications and supplies in bulk at a lower price. Some wholesalers even offer discounts to customers who purchase from them frequently or in high quantities.

Pharmacies and other retailers can pass these savings on to consumers. For healthcare providers, lower costs reduce overhead without sacrificing the quality of the patient experience.

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Competitive inventory

Pharmaceutical wholesalers can give small businesses access to a wide variety of drugs, including over-the-counter, generic and specialty medications they might not be able to get otherwise.

“Wholesalers use sophisticated logistics and inventory management systems to help build flexibility so that necessary drugs are always available at all times and in stock,” said Thomas Kluz, managing director of Venture Lab Niterra Group. “For practices that rely on the timely delivery of temperature-sensitive drugs such as vaccines and biologics, this is hugely important.” [Read more about how to stand out from the competition.]

Convenience

Working with pharmaceutical wholesalers provides clients with a streamlined purchasing experience, including access to the supplies and associated information they may need. Some wholesalers even deliver supplies upon request.

“Many wholesalers offer integrated ordering systems and inventory management tools, which reduce operational complexities for small businesses and provide small businesses with ‘big business’ technologies,” Dymowski Constantino explained. This opportunity allows small businesses to focus on providing personalized service to customers rather than on managing supply chain logistics, she noted.

Consistent, compliant treatment

One of the most important benefits of working with pharmaceutical wholesalers is built-in support for compliance. “Reputable wholesalers ensure that all products meet regulatory standards, which is crucial for maintaining compliance with state and federal laws,” Dymowski Constantino said.

Kluz added that, with dependable access to these medications, healthcare providers can ensure consistent treatment schedules for better patient outcomes and adherence.

Did You Know?Did you knowSmall businesses that offer health insurance can provide ways for their employees to save even more money on their medications.

What are the largest pharmaceutical distributors in the United States?

As of , these are the three largest pharmaceutical wholesalers, commonly known as the “Big 3”:

• Cardinal Health: This distributor and global manufacturer of medical and laboratory products is based in Dublin, Ohio.
• Cencora: Founded by Lucien Napoleon Brunswig in as AmerisourceBergen, this company distributed numerous vaccines and other medicines across the U.S. for most of the 20th century. The company acquired Alliance Healthcare in in an effort to expand its global reach and rebranded as Cencora in .
• McKesson Corp.: This San Francisco-based company operates in the U.S., Canada, Europe and other international markets. It provides pharmaceutical and medical supplies and healthcare information technology.

According to the most recent available data, these three companies account for 95 percent of the United States’ wholesale drug distribution.

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How to choose a pharmaceutical wholesaler partner

The right partnership is key for small businesses that are looking to work with a pharmaceutical wholesaler. “A comprehensive evaluation process is a must to ensure [businesses] will pick a wholesaler who will support them now and in the years to come,” Kluz noted.

Here are some crucial factors to assess before choosing a pharmaceutical wholesaler:

• Product range and availability: Look for wholesale partners with robust inventories, including any niche or highly utilized medications, and consistent product availability. Ideally, your business should be able to consolidate its purchasing through a sole trusted partner, Kluz said.
• Pricing: Budget is an especially crucial consideration for small businesses, so carefully review your prospective wholesaler’s pricing structure and payment terms. “Small operations greatly benefit from wholesalers that provide clear pricing models and help with insurance reimbursement,” Kluz said.
• Technology: Dymowski Constantino recommended seeking wholesalers with advanced digital tools to optimize your operations, including inventory tracking, automated ordering and analytics.
• Customer support: Seek wholesalers that offer responsive customer service, with consideration to your time zone. This ensures that issues are resolved quickly, thus minimizing disruption to your business, Dymowski Constantino said.
• Reliability and reputation: Perhaps most critically, ensure that your pharmaceutical wholesaler partner has a strong reputation for both quality and adherence to regulatory standards. This consideration is crucial to ensure legal compliance and patient safety, Dymowski Constantino emphasized.

Sean Peek contributed to this article.

The medical supplies industry is critical to the healthcare system, ensuring that essential tools and products reach both healthcare providers and patients. Retail and wholesale medical supplies are two distinct sectors within this industry, each with unique demand dynamics.

Understanding these differences can help stakeholders, including manufacturers, distributors, and buyers, make informed decisions and optimise their operations.

Understanding retail and wholesale medical supplies

Retail Medical Supplies

Retail medical supplies are products sold directly to end-users, including patients, caregivers, and healthcare providers. These supplies are available in a variety of outlets:

●      Pharmacies: Pharmacies sell over-the-counter (OTC) medications, personal protective equipment (PPE), and small medical devices like blood glucose monitors.

●      Medical Supply Stores: Bricks and mortar stores specialise in products like home healthcare equipment, wound care items, and mobility aids such as wheelchairs and walkers.

●      Online Platforms: Retailers like online medical equipment suppliers such as CIA Medical provide a convenient and broad selection of medical products, catering to individual consumers as well as smaller healthcare providers.

Wholesale Medical Supplies

Wholesale medical supplies involve large-scale distribution to entities such as hospitals, clinics, and healthcare systems. These intermediaries bridge the gap between manufacturers and healthcare providers. Key characteristics of wholesale operations include:

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●      Bulk Transactions: Wholesalers handle high-volume orders tailored to the needs of healthcare facilities.

●      Logistics and Supply Chain: They focus on efficient storage and distribution, ensuring timely delivery of essential medical supplies.

●      Regulatory Adherence: Wholesalers must meet stringent regulatory requirements for safety, quality, and storage, especially for critical items like pharmaceuticals and surgical tools.

Demand dynamics in retail medical supplies

Retail demand is shaped by several consumer centric factors:

Health Trends and Consumer Behaviour

The increasing prevalence of chronic diseases, such as diabetes and hypertension, drives demand for home healthcare products like blood pressure monitors and insulin syringes. Preventive care, including the use of fitness trackers and diagnostic kits, further boosts retail sales.

Aging Population

The growing elderly population increases demand for products like mobility aids, adult diapers, and home monitoring devices. As many seniors prefer to manage their health at home, retail medical supplies play a crucial role in enabling independent living.

Public Health Crises

Pandemics and other health emergencies, such as Covid-19, have a profound effect on retail demand. Items like masks, gloves, and sanitizers saw exponential growth during the pandemic, reflecting the importance of retail channels in meeting urgent consumer needs.

Demand dynamics in wholesale medical supplies

Wholesale demand is influenced by the operational needs of healthcare institutions:

Institutional Consumption

Hospitals, clinics, and nursing homes require a steady supply of medical items, from surgical instruments to bulk PPE. Wholesale distributors ensure the consistent availability of these essential products.

Technological Innovation

The adoption of advanced medical technologies, such as robotic surgical systems or specialised diagnostic tools, drives wholesale demand. Healthcare providers rely on wholesalers for access to these high-cost, high-tech supplies.

Policy and Regulation

Changes in healthcare policies, such as new guidelines on infection control, can significantly affect wholesale demand. For example, stricter sterilisation protocols increase the need for sterilization equipment and disposable supplies.

Key differences in demand dynamics

While both retail and wholesale sectors are integral to the medical supply chain, they differ in fundamental ways:

Volume and Scale

●      Retail: Transactions are smaller and targeted at individual consumers or small healthcare providers.

●      Wholesale: Deals involve high volumes, catering to large institutions and facilities.

Customer Base

●      Retail: Serves individuals and families, as well as small-scale practitioners.

●      Wholesale: Caters to hospitals, clinics, and larger healthcare networks.

Product Range

●      Retail: Focuses on diverse, consumer-friendly products that address a wide array of individual needs.

●      Wholesale: Concentrates on high-demand items required in bulk, such as surgical gloves, syringes, and diagnostic kits.

Supply chain considerations

The supply chain processes for retail and wholesale differ significantly in terms of complexity and focus:

Retail Supply Chain

Retailers procure products directly from manufacturers or distributors. They emphasise:

●      Inventory Management: Stocking a wide range of products while minimising excess inventory.

●      Consumer Accessibility: Ensuring availability through online and physical stores.

●      Responsive Stocking: Quickly adapting to consumer demand spikes, as seen during health crises.

Wholesale Supply Chain

Wholesalers manage large-scale logistics involving storage and delivery. Key considerations include:

●      Bulk Storage: Maintaining significant inventory levels to meet institutional demands.

●      Efficient Logistics: Coordinating large shipments with healthcare facilities’ schedules.

●      Cost Management: Leveraging economies of scale to offer competitive pricing.

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