According to the National Association of Wholesaler-Distributors, wholesale distribution accounts for approximately one in every 20 jobs in the United States. Certainly within healthcare distribution and as touted by the Healthcare Distribution Management Association (HDMA) – they are the vital link.
An annual report published by McGladrey, LLP on behalf of the nation’s distribution industry, reports that two-thirds (66%) of distributors expect to add jobs in the U.S. over the coming year, with an average expected workforce increase of five percent.
What may be driving this growth among U.S.-based healthcare distributors? And, is the growth sustainable? I believe four factors are driving potential expansion – and this growth may continue until the end of this decade.
1.Technology
Investments in technology have been rising over the past few years as the demands on legacy systems have inhibited their relevance. “Ten years ago, technology was a tool that could give a distributor a competitive advantage; today, the ubiquity of enterprise resource planning, customer relationship management and other software tools have made technology much more commonplace—and necessary to stay competitive,” the McGladery report notes.
2. E-commerce
Perhaps not every drug wholesaler is involved in supporting e-commerce at this time nor has a customer base that is actively engaged in the process. However, the acceptance of e-commerce and the concept of endless aisles and new delivery paths to the end-user are accelerating this change. Distributors need to plan now for their eventual role and begin challenging traditional paradigms to adjust for its impact.
3. Globalization
Geographic expansion beyond the borders has been in the news for each of the nation’s largest distributors over recent years: McKesson’s acquisition of Celesio, AmerisourceBergen moving into Brazil, and Cardinal Health’s foray into China. But globalization is not only affecting those pushing outward beyond the U.S; the global economy, marketplace, and pace of business is having an effect on all involved. HDMA’s active involvement with the International Federation of Pharmaceutical Wholesalers (IFPW) and October’s meeting in China are good indicators. Further, the forthcoming pedigree laws are most definitely not confined to the U.S.
4. Serialization
The Drug Supply Chain Security Act, signed into law late last year, establishes a ten-year initiative for entities involved in the pharmaceutical distribution chain to implement a national track and trace system. Manufacturers and wholesale distributors that transfer ownership of a product will be required to provide the subsequent owner with transaction history, transaction information and a transaction statement in a single document in paper or electronic format. This will require more coordination, more people, and more systems.
I’m not suggesting that drug wholesale is immune from the effects of the economy, consolidation pressures, pharmaceutical supply/demand issues, etc.; however, it is evident to me that the industry faces immense factors that will fuel continued expansion.