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Analysis

2019 report: The role of distributors in the US health care industry

Quantifying the value of core and extended services to the pharmaceutical ecosystem

Emerging and converging market trends are impacting and reshaping distributors’ traditional role of health care intermediary. These trends are providing both opportunities and challenges; in response, distributors are evolving and adapting to ensure that their services provide added value today and in the future.

The evolving role of pharmaceutical distributors

The numbers tell the story: Pharmaceutical distributors are at the heart of the US health care ecosystem. Distributors handle 92 percent of pharmaceutical sales and add efficiency and order to a supply chain that connects two highly fragmented markets: 1,300 manufacturers and 180,000+ points of dispensation.

Distributors amplify value in the health care ecosystem by supporting patient safety and delivering aggregation efficiencies and economies of scale that reduce capital and operating expenses. According to this report’s chosen valuation methodology, distributors’ core services of efficient product distribution, inventory management, financial risk management, and information-sharing generate $33 billion-$53 billion in value annually.

Many distributors are evolving beyond their flagship offerings to provide value-added services such as independent pharmacy support, generic sourcing programs, hub services, and innovative partnerships. This evolution is essential to remaining a critical player in the health care ecosystem: Numerous emerging and converging trends—among them, industry consolidation and integration, personalized care, technology advances, nontraditional competitors, and public scrutiny—will likely impact distributors’ existing business and offer new opportunities for growth through, for example, blended service offerings and analytics-driven insights.

As they model future scenarios, each pharmaceutical distributor should consider variables including changes to pharmaceutical pricing legislation and regulation, the rapid expansion of personalized care, a reimagined “last mile,” and increased use of transaction and patient data.

This report by Deloitte and the Healthcare Distribution Alliance (HDA) examines the current role of distributors in the health care ecosystem, the near-term challenges and opportunities they may face, and their potential future role in a transformed market.

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