Considering the scenario: FDA is been in the process for the potentially curative multiple sclerosis therapy. The pharmaceutical distributors have a lot of stake with this product. The company has spent mostly decades discovering, researching and developing this medicine. Just not decades, they also invested a lot of money behind it. And therefore, there are many people who are eagerly waiting for this medicine and transform their lives by getting rid of the diseases.
Accordingly, the market is eagerly waiting for the product’s approval. It has been likely that it determines the channel strategies. This has payer conversation and has selected a distribution partner. If the manufacturer has been disciplined with the commercialized planning, a complex pharmaceutical supply chain is ready to activate.
In 24 hours of approval, the therapy will be over thousands of sites of care and ready for the patient access. Additionally, the manufacturer can recognize revenue for that newly approved therapy right away.
I know this scenario seems to be true, but the truth is it is routine. When you consider a lot of life-changing therapies which are launched every year, it’s always a meaningful impact on the process for society. Having the right partners before having the FDA approval for the product is the key to the successful launch. Now its the most critical to get the pharmaceutical distributor partner.
Pharmaceutical Distributor’s Role…
Pharmaceutical wholesalers are well known for enabling access to medication by a highly effective and efficient logistics partnership. What pharmaceutical distributors do is purchase the products from manufacturers, bring them down to the inventories and rapidly supply pharmacies and provide customers with innovative therapies. Other than logistics, the distributor enables access through the financial service they provide.
The pharmaceutical distributor provides the financial services to the manufacturer as a part of a fee-for-service of arrangements. For this arrangement, the distributor takes the financial ownership to the manufacturer’s product and also takes the responsibility for receiving the payment from the customers.
Besides providers having the tight flow of cash, satisfaction is constantly at flux. The pharmaceutical distributors are also providing them with the short-term financing to help cover the cost carrying the inventories between the dispense and reimbursement.
Now with this system, the patients feel confident about the provider having the product they need. Alongside with this system, the manufacturers would not have to worry about any of the payment. The fees expectation for services totally depends on the product list paid percentage by the pharmaceutical wholesaler. It also depends on how much product the distributor purchases.
For instance, the distributor takes the title of $100 therapy and makes the rate 5 percent for the manufacturer for the medication. This means that the manufacturer would pay $5 to the distributors. The wholesalers take the title to pharmaceutical products between $5 to $50,000 and soon it will be about as high as a million dollars.
The fee-for-service fairly compensates with the distributor to assume the economic risk for the product. This arrangement is fairly similar to the concept of the interest payment: you pay the lender the percentage of principals to use the money. The principles increase with the size of the loan. In the same way, the global financial market compensates for risk.
It may happen that the pharmaceutical prices go high, but still, the pharmaceutical distributors are benefitting disproportionally. With the increase in revenue, it doesn’t reflect the profit margin of the pharmaceutical distributors. The fact is, the distributors have a history of leaning the profit margin.
To clearly understand the benefit of the current system, imagine for a minute the world without the distributors, titles and fee-for-service arrangements. The healthcare cost would be around $42 billion per year. This situation would be if the manufacturer were to take the delivery directly to the providers. The distribution cost of the specialty drug supply chain would increment and reach to $8.6 billion.
The estimation provides incur about 6.5 percent in the financial costs for the specialty drugs.
Here is an era of modern pharmacotherapy where it’s curing the devastating diseases, stabilizing the chronic conditions and mostly preventing serious conditions every day. Besides all, on the top, the use of pharmaceutical proves to be the most efficient form of healthcare.
Despite having success, you cannot neglect the fact that the patients are struggling financially to afford these medications.
The supply chain’s ability to get the novel therapy for the patients is 24 hours of the launch is remarkable. While we believe in today’s model, its cost-effective access, we should continue to strive the value and support the affordability.
Moreover, cost constraints put pressure on all aspects of the healthcare supply chain, with this distributor remains dedicated to the work with the partners. This is to address the market challenges to head on. With the new complex therapies entering the market, you need a creative and collaborative approach the logistical and financial models that you can deploy.