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Updated Nov 10, 2023

What Is a Pharmaceutical Wholesaler?

Danielle Fallon O'Leary
Danielle Fallon-O’Leary, Senior Writer & Expert on Business Operations

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The pharmaceutical industry is massive, generating nearly $1.48 trillion in revenue annually, according to Statista, but 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. 

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.

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. On average, pharmacies make up 75 percent of distributors’ profits. The other type of pharmaceutical wholesaler is a specialized distributor that purchases specialty drugs to sell to clinics and hospitals.

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 make a 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 line

Pharmaceutical 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, working with pharmaceutical wholesalers offers several benefits to clients and customers.

Lower costs

For health care providers, retailers and customers, health care costs can add up quickly. Clients — including retailers, hospitals and home health care 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.

For pharmacies and other retailers, these savings can be passed on directly to the consumer. For health care providers, lower costs reduce overhead without sacrificing the quality of the patient experience.

Did You Know?Did you know

Home health care providers rely on wholesale pharmacy supplies for medical equipment, wound care and sterile fields. Wholesale surgical gloves, sterile syringes, bandages and other supplies save patients money.

Competitive inventory

Pharmaceutical wholesalers carry a wide range of medications, medical supplies, and vitamins and supplements. By purchasing a breadth of products and keeping inventory varied, customers are more likely to find what they’re looking for — leading to higher satisfaction and an increased likelihood of repeat business. [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 all the supplies and associated information they may need. Some wholesalers will even deliver supplies upon request. Customers or retailers that shop with wholesalers enjoy a one-stop shopping experience for all of their health care needs.

FYIDid you know

Small 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?

These are some of the largest pharmaceutical distributors:

  • CR Pharmaceutical: This flagship subsidiary of the China Resources Group develops, manufactures and distributes an extensive range of pharmaceutical products.
  • Cardinal Health: This distributor and global manufacturer of medical and laboratory products is based in Dublin, Ohio.
  • Alfresa Holdings: This wholesaler and distributor, based primarily out of Tokyo, aims to “support the pharmaceutical supply chains that are part of Japan’s social infrastructure, and strives to meet the full range of medical needs,” according to its website.
  • Anda Inc.: This company distributes over 15,000 pharmaceutical products for nearly 400 manufacturers across a multitude of therapeutic categories.
  • AmerisourceBergen: Founded by Lucien Napoleon Brunswig in 1871, this company distributed numerous vaccines and other medicines across the U.S. for most of the 20th century. AmerisourceBergen acquired Alliance Healthcare in 2021, hoping to expand its global reach.
  • Medipal Holdings: Another pharmaceutical wholesaler based out of Tokyo, Medipal also distributes animal care products and food processing raw materials.

Looking for more ways to improve your medical practice’s workflow? See our top picks for medical software.

Sean Peek contributed to this article. 

Danielle Fallon O'Leary
Danielle Fallon-O’Leary, Senior Writer & Expert on Business Operations
Danielle Fallon-O'Leary is a longtime marketer with a passion for helping clients strengthen their online brands. She has managed clients' social media accounts, developed marketing campaigns and compiled key data for analytics reports. Other projects have included newsletter curation, workflow management and search engine optimization. Along with her marketing responsibilities, Fallon-O'Leary has had an up-close look at other aspects of small business operations, including invoicing and accounting, employee recruitment and training.
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