PROFILE OF THE PRESCRIPTION DRUG WHOLESALING INDUSTRY EXAMINATION by FDADocs

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									      PROFILE OF THE PRESCRIPTION DRUG WHOLESALING
                         INDUSTRY
                        EXAMINATION OF ENTITIES DEFINING SUPPLY
                           AND DEMAND IN DRUG DISTRIBUTION

                                                FINAL REPORT

                                                 Task Order No. 13
                                              Contract No. 223-98-8002



Prepared for:
Economics Staff
Office of Policy, Planning, and Legislation
Food and Drug Administration
Department of Health and Human Services
Rockville, MD 20857


Prepared by:
Eastern Research Group, Inc.
110 Hartwell Avenue
Lexington, MA 02421

                                                 February 12, 2001

                                          TABLE OF CONTENTS

LIST OF FIGURES AND TABLES
EXECUTIVE SUMMARY
SECTION ONE PROFILE OF THE PRESCRIPTION DRUG WHOLESALING
INDUSTRY
    1.1 Regulatory Framework for the Distribution of Prescription Drugs
        1.1.1 Federal Regulations
        1.1.2 State Regulations
    1.2 Role and Functions of Wholesalers
    1.3 Major Categories of Wholesalers
        1.3.1 The Big Five Wholesalers
        1.3.2 Regional Wholesalers
        1.3.3 Smaller Wholesalers
        1.3.4 Secondary Wholesalers
    1.4 Statistical Profile of Wholesalers
    1.5 Models of Prescription Drug Distribution
        1.5.1 Model 1—Distribution Directly from Manufacturer to Dispensing Organization
        1.5.2 Model 2—Distribution Through Major Wholesalers
        1.5.3 Model 3—Distribution from Large to Small Wholesalers to Dispensers
        1.5.4 Model 4—Distribution of Discounted Drugs, Via Secondary Wholesalers
   1.6 Topics Related to the Functioning of the Distribution Models
       1.6.1 Distribution of Branded vs. Generic Pharmaceuticals and Other Variations
       1.6.2 Handling of Recalls
       1.6.3 Combined Efficiency of Distribution Models
SECTION TWO PHARMACEUTICAL PURCHASING ORGANIZATIONS
   2.1 Health Care Institutions and Integrated Delivery Networks (IDNs)
   2.2 Pharmacy Benefit Management Companies (PBMs)
   2.3 Retailers
   2.4 The Influence of Pharmacy Benefit Management Companies (PBMs) and Health
       Maintenance Organizations (HMOs) on Prescription Drug Prices
GLOSSARY
REFERENCES



                                      LIST OF FIGURES AND TABLES

Figure 1-1 Views of the Distribution Chain and Drug Pedigrees Under Current Industry Practice and the Final Rule
(Text-Only)

Figure 1-2 1999 U.S. Prescription Drug Sales by Outlet (Text-Only)

Figure 2-1 Pharmacy Benefit Management Company (PBM) Network (Text-Only)

Table 1-1 State Wholesale Distributor Licensure Requirements, Renewal Schedules, And the Number of In-State
And Out-of-State Wholesale Distributor Licenses Issued by State

Table 1-2 Percent of Wholesalers Offering Each Type of Value-Added Service

Table 1-3 Sales and Market Shares of the Big Five Wholesalers

Table 1-4 Top Regional Drug Wholesalers in the U.S. by 1998 Sales Volume And Market Share

Table 1-5 1998 Net Sales of the Big Five and Regional Drug Wholesalers by Type of Customer

Table 1-6 1997 SBA Data on Prescription Drug Wholesalers (SIC 5122: Drugs, Drug Proprietaries, and Druggists's
Sundries)

Table 1-7 1998 Sales of Prescription Drugs to Dispensers, by Channel of Distribution

Table 1-8 Prescription Drug Sales of PhRMA Member Innovator Drug Manufacturers by Class of Customer

Table 2-1 Data on Selected Pharmacy Benefit Management Companies (PBMs)

Table 2-2 An Illustrative Example of Pricing for a Brand Name Prescription Drug



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