Despite pandemic challenges, pharmaceutical distributors maintained logistics efficiencies in 2020 to deliver millions of vaccines and medicines to providers and patients, according to a report released yesterday by the Healthcare Distribution Alliance (HDA) Research Foundation.
By the numbers, 93% of all pharmaceutical sales in 2020 continued to move through distributors, with 10.5 million units picked per day. Total sales grew at a rate of 6.6% to reach $570 billion, while distributors’ gross margins decreased to 1.9%, the lowest-ever reported, the group said in the “92nd Edition HDA Factbook: The Facts, Figures & Trends in Healthcare.”
The report is based on surveys collected at the corporate level of HDA traditional distributor member companies with annual sales greater than $1 billion, with secondary data included from healthcare and governmental organizations. Data reflect distribution industry performance metrics and overall supply chain management trends for the U.S. pharmaceutical supply chain.
For context, the report found that prescription medicines represented 75% of total SKUs picked, with the remainder being non-prescription drugs such as health and personal care products, general merchandise, durable medical equipment, and home healthcare. That inventory shrank in 2020, with the average total number of SKUs that distributors held in inventory hitting 41,397, marking a 9.3% decrease from 2019.
To move those goods, distribution centers handled an average of 4,234 orders per day, with an average of 11 lines per order. Sixty-five percent of distributors used automated picking methods.
Looking at costs, the report found that the industry’s information technology (IT) investments in 2020 accounted for half of their total capital expenditures. And the total annual costs associated with returned good averaged $5.6 million per company in 2020, an increase from $5.1 million in 2019. The reasons those items were sent back included “overstocked,” “damaged,” or “outdated” products.
In another cost increase, the report found that wages rose during 2020, with the typical healthcare distributor employee receiving $69,000 in compensation, compared with $64,000 in 2019.
“Despite the operational challenges brought on by the pandemic, the data show the distribution industry demonstrated resilience as they continued to deliver millions of products on a daily basis,” Perry Fri, HDA’s executive vice president of industry relations, membership and education, and the HDA Research Foundation’s COO, said in a release.
The report was funded by donations from Apotex Corp., Real Value Rx (dba Hospital Pharmaceutical Consulting), Ascend Laboratories LLC, IQVIA, Johnson & Johnson Health Care Systems Inc., Pharmacy First, and Teva Pharmaceuticals.
