Pharmaceutical Commerce just published my article on the risks to wholesaler profitability from the generic price war among retail pharmacies. You can read the article for free on the PC site: Drug Wholesalers and the Generic Price War.
My key point:
While the drug wholesaling industry appears reasonably healthy right now, the ongoing generic drug price war among retail pharmacies will create the risk of reduced wholesaler profitability. Understanding this dynamic is crucial for predicting the future of wholesaler relationships with manufacturers and pharmacy customers.The article is adapted from my 2009 Economic Report on Pharmaceutical Wholesalers and has particular relevance to the drug distribution businesses of the largest companies -- AmerisourceBergen (ABC), Cardinal Health (CAH), and McKesson (MCK). As always, please feel free to post comments on the article – pro or con – here on the blog.
On a related note, yesterday's acquisition of Arrow Group by Watson Pharmaceuticals once again highlights the need for scale by generic drug makers, who face increasing concentration of generic buying power in the supply chain.
Not convinced that there is a price war? Here's are three background articles with my POV:
Would you like to play a game? (obligatory 80's movie reference)
I am surprised at the lack of comments. I guess everyone agrees with you (as do I) and is thinking "he is right on the target". I am hearing that at least a couple of manufacturers (large) are wanting lower FFS rates. No surprise there. I do think market consolidation on both sides of the wholesaler is going to squeeze them. I'd not be surprised if we didn't see some additional speculation going on either at the wholesaler or downstream level...or a significant emphasis on going direct to large chains to mitigate risk. Something will have to give.
ReplyDeleteWell, Al, I guess everyone agrees with me. There's a first time for everything!
ReplyDeleteSlightly off topic question.. not related to wholesalers, but keeping with the Generics theme. What are your thoughts about the possibility of CVS acquiring a big generic manufacturer? I've actually been expecting them to do it for years now, but I think they're still trying to payoff whoever it takes to settle the whole Caremark merger mess and people trying to reverse it. But really, what would stop such a deal from happening? What would the effect be on the rest of the industry?
ReplyDelete