As managed care continues to grow and healthcare providers further ally themselves in integrated healthcare systems, pharmaceutical companies have restructured their sales and marketing divisions to compete for large managed care accounts. Indirect distribution is the predominant method. Indirect distribution involves the use of an intermediary, such as a wholesaler, between the manufacturer and the consumer outlet. Wholesalers are the largest conduit for drug distribution. They purchase pharmaceutical products from manufacturers and resell them to community pharmacies and hospitals.
Wholesalers provide a national network for distribution of manufacturers' products.
Wholesalers face increasing competition from various sources, including chain stores, pharmacy networks and mail-order businesses. Many high-volume drug purchasers are joining group purchasing organizations. Community pharmacies and state pharmaceutical associations are forming buying groups to enable community pharmacies to offer price discounts to managed care organizations that buy in volume. Often, independent pharmacies and small chains cannot compete for bids with buying groups and managed care conglomerates. Many manufacturers also do some direct distribution to retailers, hospitals and government agencies.