The pharmaceutical distribution supply chain will be the focus of a three-part series over the next several weeks. Why? This topic has only gained in importance since the turn of the 21st century. As medications, delivery methods, and technologies change rapidly to meet expanding patient needs, manufacturers and distributors must adapt and evolve. They have the obligation to ensure that medicines and vaccines are safely, securely, and efficiently delivered to a complex network of pharmacies, hospitals, clinics, and other healthcare providers across the country. In this post, we’ll take a closer look at each link in the supply chain before moving on to best practices and temperature control issues in Parts 2 and 3.
At the most fundamental level, the pharmaceutical distribution supply chain is the route a prescription medication takes from the time it is manufactured to the time it is delivered to the consumer. Traditionally, pharmaceuticals are developed and produced at a manufacturing site, transferred to wholesale distribution centers, transported to providers, and then administered to patients.
Of course, there are many variations on this basic structure, given variations in geography, type of medication, and commercial relationship between distribution centers and providers.
Pharmaceutical manufacturers develop products and transfer them to the marketplace for sale to generate profits. Because each pharmaceutical company is both heavily invested in and legally responsible for the safety of the medications they produce, they typically decide which route in the supply chain is best for each product. During much of the 20th century, manufacturers trusted large, centralized wholesale distributors to manage the supply chain. Today, this model remains the most efficient for a large percentage of products.
However, with improvements in transportation, changes to health insurance coverage, and the explosion of medications for rare disorders, manufacturers are increasingly shipping directly to national retail pharmacy and hospital chains, mail-order pharmacies, and specialty pharmacies. They also distribute products directly to government purchasers, such as the Veterans Administration (VA), AIDS Drug Assistance Programs (ADAPs) and Vaccines for Children (VFC).
After the manufacturer develops, tests, produces, and packages a medication, the next link in the chain is a wholesale distribution facility responsible for maintaining the integrity of medicines from the manufacturer to the provider. Primary and secondary distribution centers are strategically located throughout the country to reliably deliver medicines as fast as possible, especially those needed in times of emergency, such as vaccines, or those requiring temperature monitoring and control.
Efficiency is the primary purpose of large distribution centers, which manage and coordinate the delivery of products in bulk to smaller regional centers, which then ship to individual provider locations. Without wholesale distributors, manufacturers would need to maintain separate relationships with every provider coast to coast and coordinate the delivery of their products – which would not only be a costly logistical nightmare, but more importantly, would most likely create inventory shortages and compromise quality controls that ensure medications are transported safely and securely.
Every day, distributors deliver 15 million prescription medicines and healthcare products to hundreds of thousands state and federally licensed healthcare providers. Some wholesalers sell to a broad range of potential clients while others specialize in sales of particular products (e.g., biologics) or sales to particular types of customers (e.g., nursing homes). Many distribution companies also provide a range of specialized services, including electronic order, specialty drug distribution, pharmaceutical repackaging, drug buy-back programs, and reimbursement support.
Providers are the last link in the pharmaceutical supply chain before drugs reach the consumer/patient. Sometimes referred to as “dispensers,” there are more than 200,000 such outlets including hospitals, long-term care facilities, healthcare clinics, physician offices, and, of course, pharmacies.
Pharmacies account for approximately 75% of the prescription drug market. The traditional pharmacy category includes both independent and chain pharmacies, as well as supermarkets or big box stores housing pharmacies. In addition to these retail pharmacy services, consumers have increasingly been using specialty and mail-order pharmacies over the past several years as demographic trends shift, and institutions and health insurance plans look to manage the growth rate of pharmaceutical benefit costs.
For example, residents of long-term care (LTC) facilities rely almost exclusively on dedicated LTC pharmacies. Commercial health insurance plans offered by employers increasingly require the use of mail-order services for maintenance medications such as statins.
Dramatic changes in the pharmaceutical industry will require corresponding changes to its supply chain. Factors motivating these transformations include:
In our next post, we’ll see how these changes, along with recent regulations, are also impacting pharmaceutical distribution best practices ensuring safety.
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