1.4 Statistical Profile of Wholesalers
Government data sources address the drug wholesaling industry, but do little to differentiate drug distributors from other medical and consumer product distributors. According to the U.S. Standard Industrial Classification (SIC) system, businesses primarily engaged in the wholesale distribution of drugs and druggists's sundries, including over-the-counter (OTC) drugs, health and beauty products, vitamins, and in-vitro and in-vivo diagnostics, are classified in SIC 5122, Drugs, Drug Proprietaries, and Druggists' Sundries (NAICS 42221, Drugs and Druggists' Sundries, Wholesalers). Based on 1997 data from the Small Business Administration (SBA) (see Table 1-6), there are a total of 6,500 wholesalers in SIC 5122, of which 83 percent are small (with less than 20 employees), 11 percent are medium-sized (with 20 to 99 employees), and the remaining 6 percent are large (with more than 100 employees). The average estimated revenues per firm ranges from $2.2 million for small to over $0.9 billion for very large wholesalers.
ERG judged that the estimate of 6,500 wholesalers is, at best, a rough approximation of the actual number of U.S. drug wholesalers because SIC 5122 (1) does not include firms that distribute drugs but generate the majority of their revenues from other activities, such as the distribution of groceries, distribution of medical and surgical equipment, and the operation of retail pharmacies, and (2) includes firms that may not distribute prescription drugs (i.e., firms that distribute druggists' sundries such as health and beauty products).
According to the Robert Morris Associates (RMA) Annual Statement Studies,(3) the operating profits of wholesalers classified in SIC 5122 range from 3.4 percent to 4.9 percent of annual sales in 1999 (RMA, 2000).
(3) Data provided in Robert Morris Associates Annual Statement Studies is compiled from bank loan requests of companies and includes ratios and common size financial statement percentages segregated by sales size and quartile