Thursday, November 29, 2012

Two Useful New Data Reports on Drug Distribution

Need stocking stuffers for the channel economics nerds on your holiday shopping list? Good news! The Center for Healthcare Supply Chain Research, the research arm of the Healthcare Distribution Management Association (HDMA), just released two useful new reports: the 2012-2013 HDMA Factbook and the 2012 Specialty Pharmaceuticals: Facts, Figures and Trends.

These reports combine surveys of wholesalers and distributors with compilations of external research. Both are valuable data resources on the economics of full-line pharmaceutical wholesaling and specialty distribution. You’ll have to work to extract meaning from the data avalanche in these reports, but there is gold to be mined. I highlight one such interesting nugget about specialty distributor sales below.

If you like this sort of stuff, then be sure to join me at the 8th Annual Trade and Channel Strategies Conference next week. It’s a great networking opportunity for trade and channel executives. I’m delivering the keynote address and moderating a panel of Wall Street analysts. Use promo code ESX239 for a $300 discount!

THE FACTBOOK

The 2012-13 HDMA Factbook publishes responses from companies with annual sales greater than $1 billion. Thus, the respondents include the big three public wholesalers—AmerisourceBergen (NYSE:ABC), Cardinal Health (NYSE:CAH), and McKesson Corp (NYSE:MCK)—along with the larger regional wholesalers. HDMA claims 100% response rate from these seven (?) companies. There are also some survey responses from manufacturers and reverse distributors.

As usual, the Factbook presents a confusing array of figures—weighted averages, averages, medians, and middle ranges. IMHO, the weighted average summarizes the overall industry’s economics most accurately by reflecting the influence of the big 3 wholesalers.

There are useful statistics on productivity, at either a company or a distribution center (DC) as the unit of analysis. The DC-level data presumably strip out the effect of ancillary businesses such as packaging or automation. The data exclude pure specialty distribution facilities and the large redistribution centers that supply other, smaller DCs within a wholesaler’s network.

THE SPECIALTY REPORT

The 2012 Specialty Pharmaceuticals: Facts, Figures and Trends publishes responses from an unknown sample of specialty distributors and manufacturers.

The more interesting specialty distributor results are broken down by distributor size—more than $1 billion in revenues vs. less than $500 million in revenues. Although the report does not identify the distributor survey respondents, I presume that the large distributor sample primarily includes AmerisourceBergen Corporation’s Specialty Group (Oncology Supply, ASD Healthcare, and Besse Medical), McKesson Specialty, and Express Scripts’ CuraScript SD business.

As an example, here’s a look at the customer mix for large vs. smaller specialty distributors:


Physician-owned/operated clinics, hospitals, and hospital-owned outpatient clinics account for 97% of unit shipments by specialty distributors with more than $1 billion in revenues. The largest specialty pharmacies (See 2011 Pharmacy Market Share for Specialty Drugs) often bypass the wholesale channel and purchase products directly from the manufacturers of a specialty drug. As a result, retail and specialty pharmacies account for only 1% of larger specialty distributor sales.

By contrast, smaller retail and smaller specialty pharmacies account for 54% of sales by specialty distributors with less than $500 billion in revenues. These distributors focus on the next tier of specialty pharmacies. The smaller specialty distributors also sell to physician-owned/operated clinics, but sell comparatively little to hospitals or hospital-owned clinics.

FINAL THOUGHTS
  • Both reports are now available as downloadable PDFs. Kudos to HDMA for finally making the reports available in more convenient electronic formats. It’s a big improvement from a hard-copy spiral-bound book (in 2010) and a hard-to-search Kindle version (in 2011). As a content provider myself, I encourage you to respect the copyright by not sharing the reports beyond the appropriate license terms.
  • I also salute HDMA for having the guts to release these reports. Trade association must tread lightly when publishing industry data. Consider NACDS, which unexpectedly stopped published its long-running and well-regarded Chain Pharmacy Industry Profile. Perhaps they’re fearful someone would actually learn about the chain drug industry?

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