Section One: Profile of the Prescription Drug Wholesaling Industry: The Supply of Wholesale Drug Products
This section examines the market characteristics of the prescription drug wholesaling and distribution industry. Section 1.1 outlines the applicable Federal and State regulations governing the distribution of prescription drugs. Subsequent sections describe the components and characteristics of the entities that distribute wholesale drug products. Section Two examines the organization of purchasers of wholesale drugs. These sections also provide data on the number of companies and distribution of sales for each of the market players addressed.
This report generally refers to the companies being profiled as "wholesalers," in keeping with the terminology most commonly used in the industry. In fact, it is recognized that most wholesalers also perform substantial distribution functions and, therefore, can also be called "distributors." This report, however, will generally use the term wholesalers to refer to the larger companies that engage in wholesale purchasing and reselling of pharmaceutical products. While most of these wholesalers also perform distribution functions, their activities do not always primarily involve distribution in the sense of moving products closer to their eventual point of consumption. For example, some discount wholesalers could theoretically purchase an entire lot of distressed product and resell it, in its entirety, to another company, without "distributing" the product to smaller companies. The term "distribution" will be used to refer to the physical activity that generally is one of the primary functions of the wholesalers, namely, to divide large-volume purchases among customers for them to eventually resell to retail customers or to smaller wholesalers.
Much of the material collected for this report is derived from conversations with industry sources that did not wish to be quoted or for whom their identification posed a possibility of revealing sensitive material. Thus, some statements about the operation of the drug distribution industry are not attributable to specific sources.