What Is a Pharmaceutical Wholesaler?

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.

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.

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.

What are the largest pharmaceutical distributors in the United States?

As of 2024, 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 1871 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 2021 in an effort to expand its global reach and rebranded as Cencora in 2023.
• 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.

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.