1/2006, New Wholesaler Model Will Affect Hospital Pharmacies

http://www.pharmacypracticenews.com/ViewArticle.aspx?d_id=53&a_id=2982

The “Big Three” pharmaceutical wholesalers are changing the way they do business—and hospital pharmacies are likely to bear part of the cost.

In the past, McKesson Corporation, Cardinal Health and AmerisourceBergen made a significant portion of their money by buying drugs as an investment and selling them when prices rose—a technique called “buy and hold.” But a new fee-for-service model is emerging in which wholesalers earn their keep by charging manufacturers—and eventually pharmacies—for what they do….

Adding to the quandary of the GPOs is increased competition from wholesalers. Some experts believe the two industries are deliberately trying to put each other out of business by taking on each other’s roles.

“The epic battle is between GPOs and wholesalers,” said Mr. Johnson. But McKesson’s Mr. Felton said his company was not out to compete with GPOs and that “there is not an epic battle from McKesson’s perspective…”

His own guess is that in three or four years, “GPOs will be less powerful and wholesalers will be a lot more powerful.” Mr. Johnson said that the GPOs and wholesalers might fight until only one side remained, or else they might “merge and consolidate.” Government action might introduce a new factor. Dr. Hartmann suggested that if wholesalers continued to move into the sphere of GPOs, government oversight may result.

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Looks like Mr. Johnson and Dr. Hartmann were prescience:    McKesson is a wholesaler and has become more powerful.  The war on pain patients provided the government action that “might introduce a new factor.” Government oversight resulted.

“The DEA is closely monitoring production and distribution patterns… Such actions send a loud signal to drug wholesalers. One company, McKesson, said it is reviewing orders and setting thresholds to prevent drug diversion.”

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