Future of the independent pharmaceutical distributor

Three firms — McKesson, Cardinal Health, and AmerisourceBergen – who control up to 90% of the market, dominate pharmaceutical distribution. Competing for the remaining share of the market are thousands of regional and local distributors.

There are an increasing number of trends that will impact the success of independent wholesalers. These include:

- Pharmaceutical wholesalers earn low margins, which makes scale and efficiency vital, providing a barrier to entry.

- Larger wholesalers have the resources to add value-added services to their distribution efforts.

- A new trend, restricted distribution, is providing new opportunities to companies providing technologies that track goods from the manufacturer to the consumer.

- Pharmaceutical manufacturers are increasingly bypassing traditional distributors in the US altogether, and shipping medicines directly by using courier services such as DHL, UPS and FedEx.

Where does this leave the independent pharmaceutical wholesaler? Our recently published Drug Wholesalers Market Overview identifies about 50 of the independents and sheds some light on their activities. Many of the independents have carved out niche markets for themselves, either by product, geography or market served and will remain viable entities. Some of the larger regional players will remain acquisition targets for the largest wholesalers.