Pharmaceutical distribution models are set up to ensure patients receive drugs when they need them. While most pharmaceutical products and supplies are ordered through wholesalers, there are times when hospitals purchase direct from a manufacturer or a 503A or 503B compounding pharmacy.
Each patient setting may call for a different distribution model. Outlined below are four of most common distribution scenarios.
1. Traditional Distribution Channels for Hospitals
Traditional distribution, also known as mainline or acute care distribution, plays a central role in hospital pharmaceutical procurement. Here, distributors or wholesalers simplify the buying process for hospital systems. Instead of placing orders with numerous manufacturers, hospital buyers can save time and resources by ordering from a single distributor.
Acute care and retail pharmacy products are obtained through wholesalers who hold a pharmacy license issued by the state where the pharmacy operates. The range of products includes brand-name drugs, generics, biosimilars and pharmacy supplies. These items are essential for running a pharmacy and ensuring comprehensive patient care.
Wholesalers maintain large distribution centers across the country to fulfill order requests efficiently. While three major wholesalers (Cardinal, McKesson and Cencora) dominate the market, regional players like Morris and Dickson also contribute significantly. Both national and local courier services are utilized for product distribution, ensuring timely delivery to hospitals.
2. Specialty Distribution
Specialty distribution is tailored for medications that treat chronic, complex or rare diseases. These medications are often high cost, require special handling (like refrigeration) and may involve limited distribution or orphan products. Examples include blood factor products like IVIG, albumin and coagulation factors.
Specialty medications necessitate higher touch distribution and tighter inventory controls due to their high costs. Like acute care products, they are procured under a pharmacy license and are typically ordered for hospital patients or outpatient infusion departments.
All major wholesalers have dedicated specialty distribution business units. For instance, McKesson has McKesson Plasma and Biologics, Cencora uses ASD and Cardinal employs Cardinal SPD. Additionally, independent specialty distribution options are available, like FFF and Prodigy.
3. Specialty Oncology Distribution for Physician Clinics
Specialty oncology distribution for physician clinics shares similarities with hospital specialty distribution but also has distinct differences. The drugs distributed are similar in scope but are purchased under a clinic license for use in a physician’s office or infusion suite, which may be provider- or hospital-based.
This channel focuses on a limited number of products, around 300, encompassing:
- Oncology
- Rheumatology
- Neurology
- Immunology
- Gastroenterology
- Other specialty areas
Each major wholesaler has a Specialty Group Purchasing Organization that utilizes its own distribution channels.
4. Traditional Physician Practice Distribution
The distribution model for traditional physician practices aims to supply pharmaceuticals, medical-surgical products, lab equipment and other supplies needed to run a physician’s office. These distributors can break down package sizes into smaller units to cater to the lower volume needs of physician practices. As a result, practices receive smaller and less frequent orders from distributors.
Unlike specialty oncology GPOs, distribution for physician practices occurs under the license of the practice rather than a pharmacy. Examples of distributors in this category include Henry Schein, Cardinal MD, Besse and McKesson MedSurg.
Ready to Learn More
Traditional distribution channels streamline procurement processes for hospitals, while specialty distribution addresses the unique needs of high-cost, complex medications. Specialty oncology distribution provides tailored solutions for physician clinics, and traditional physician practice distribution caters to the specific needs of medical offices.
Understanding these models is essential for healthcare professionals involved in pharmaceutical procurement and distribution.
Watch this short video with Ken Gagnon, AVP of Strategic Partnerships for HealthTrust Performance Group to dive deeper into distribution models:
Connect with the HealthTrust Pharmacy team or reach out to Ken Gagnon, Pharm.D., BCPS, AVP Pharmacy Services and Strategic Partnerships, at ken.gagnon@healthtrustpg.com to learn more.
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