What is the Advantage and Disadvantage of Surgical Products Wholesale

The pharmaceutical industry reached an impressive market size of $1.56 trillion in and is expected to surpass $2.83 trillion by , according to Vision Research Reports.

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Despite the industry's massive financial standing and impact on public health, not everyone knows how their medications get from the manufacturer to their local pharmacy. In many instances, this method involves pharmaceutical wholesalers. Read on to learn more about how pharmaceutical wholesalers work.

What is a pharmaceutical wholesaler?

Pharmaceutical wholesalers, also called wholesale drug distributors, purchase medications directly from manufacturers and then sell the medications to pharmacies. 'Pharmaceutical wholesalers are the backbone of the supply chain, ensuring that providers have access to the medications and products they need to serve their patients,' said Lindsay Dymowski Constantino, president of Centennial Pharmacy Services. 'They act as intermediaries between manufacturers and the actual providers.'

There are two main business models that categorize pharmaceutical wholesalers. Full-line wholesalers purchase a company's complete product line. In contracts between manufacturers and distributors, certain medications may be excluded. The other type of pharmaceutical wholesaler is a specialized distributor that purchases specialty drugs to sell to clinics and hospitals.

The U.S. Food and Drug Administration urges all consumers to validate the licenses of pharmaceutical wholesalers. Each state has a specific agency responsible for licensing pharmaceutical wholesalers. This is extremely important for consumer protection. Without a license, a pharmaceutical wholesaler may be linked to serious offenses, including counterfeit prescriptions and unapproved medication distribution. Any websites with taglines like 'not a prescription pharmacy' are likely operating without a license.

How do pharmaceutical wholesalers make money?

Pharmaceutical wholesalers make money by following a concise business model: They buy medications at low prices in bulk and sell them to customers and pharmacies at an increased market price. Consumers typically pay the most through the supply chain, since pharmacies also need to profit from medications. 

However, some consumers discover that purchasing directly from a distributor instead of from a pharmacy can cut their overall medication costs. Wholesalers still make a profit from direct sales, but they sell the products to patients instead of to pharmacies. Because specialty drugs make up about 30 percent of wholesale revenue, this business model has experienced significant growth over the past two years.

Bottom LineBottom linePharmaceutical distributors make most of their money by charging a small percentage of each product's market price, also known as a wholesale acquisition cost, in exchange for distribution services.

What are the benefits of working with pharmaceutical wholesalers?

While some might argue that wholesale providers aren't needed anymore, pharmaceutical wholesalers offer several benefits to clients and customers.

Lower costs

Healthcare costs can add up quickly for healthcare providers, retailers and customers. Clients ' including retailers, hospitals and home healthcare companies ' can partner with pharmaceutical wholesalers to purchase medications and supplies in bulk at a lower price. Some wholesalers even offer discounts to customers who purchase from them frequently or in high quantities.

Pharmacies and other retailers can pass these savings on to consumers. For healthcare providers, lower costs reduce overhead without sacrificing the quality of the patient experience.

Did You Know?Did you knowHome healthcare providers rely on wholesale pharmacy supplies for medical equipment, wound care and sterile fields. Wholesale surgical gloves, sterile syringes, bandages and other supplies save patients money.

Competitive inventory

Pharmaceutical wholesalers can give small businesses access to a wide variety of drugs, including over-the-counter, generic and specialty medications they might not be able to get otherwise.

'Wholesalers use sophisticated logistics and inventory management systems to help build flexibility so that necessary drugs are always available at all times and in stock,' said Thomas Kluz, managing director of Venture Lab Niterra Group. 'For practices that rely on the timely delivery of temperature-sensitive drugs such as vaccines and biologics, this is hugely important.' [Read more about how to stand out from the competition.]

Convenience

Working with pharmaceutical wholesalers provides clients with a streamlined purchasing experience, including access to the supplies and associated information they may need. Some wholesalers even deliver supplies upon request.

'Many wholesalers offer integrated ordering systems and inventory management tools, which reduce operational complexities for small businesses and provide small businesses with 'big business' technologies,' Dymowski Constantino explained. This opportunity allows small businesses to focus on providing personalized service to customers rather than on managing supply chain logistics, she noted.

Consistent, compliant treatment

One of the most important benefits of working with pharmaceutical wholesalers is built-in support for compliance. 'Reputable wholesalers ensure that all products meet regulatory standards, which is crucial for maintaining compliance with state and federal laws,' Dymowski Constantino said.

Kluz added that, with dependable access to these medications, healthcare providers can ensure consistent treatment schedules for better patient outcomes and adherence.

Did You Know?Did you knowSmall businesses that offer health insurance can provide ways for their employees to save even more money on their medications.

What are the largest pharmaceutical distributors in the United States?

As of , these are the three largest pharmaceutical wholesalers, commonly known as the 'Big 3':

• Cardinal Health: This distributor and global manufacturer of medical and laboratory products is based in Dublin, Ohio.
• Cencora: Founded by Lucien Napoleon Brunswig in as AmerisourceBergen, this company distributed numerous vaccines and other medicines across the U.S. for most of the 20th century. The company acquired Alliance Healthcare in in an effort to expand its global reach and rebranded as Cencora in .
• McKesson Corp.: This San Francisco-based company operates in the U.S., Canada, Europe and other international markets. It provides pharmaceutical and medical supplies and healthcare information technology.

According to the most recent available data, these three companies account for 95 percent of the United States' wholesale drug distribution.

FYIDid you knowThe best medical software can help streamline your healthcare practice and improve your patients' experience.

How to choose a pharmaceutical wholesaler partner

The right partnership is key for small businesses that are looking to work with a pharmaceutical wholesaler. 'A comprehensive evaluation process is a must to ensure [businesses] will pick a wholesaler who will support them now and in the years to come,' Kluz noted.

Here are some crucial factors to assess before choosing a pharmaceutical wholesaler:

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• Product range and availability: Look for wholesale partners with robust inventories, including any niche or highly utilized medications, and consistent product availability. Ideally, your business should be able to consolidate its purchasing through a sole trusted partner, Kluz said.
• Pricing: Budget is an especially crucial consideration for small businesses, so carefully review your prospective wholesaler's pricing structure and payment terms. 'Small operations greatly benefit from wholesalers that provide clear pricing models and help with insurance reimbursement,' Kluz said.
• Technology: Dymowski Constantino recommended seeking wholesalers with advanced digital tools to optimize your operations, including inventory tracking, automated ordering and analytics.
• Customer support: Seek wholesalers that offer responsive customer service, with consideration to your time zone. This ensures that issues are resolved quickly, thus minimizing disruption to your business, Dymowski Constantino said.
• Reliability and reputation: Perhaps most critically, ensure that your pharmaceutical wholesaler partner has a strong reputation for both quality and adherence to regulatory standards. This consideration is crucial to ensure legal compliance and patient safety, Dymowski Constantino emphasized.

Sean Peek contributed to this article.

Doctors and other medical professionals rely on high-quality equipment to treat patients. This equipment ranges from gloves and masks (PPE) to intricate niche tools used by specific surgeons, doctors and health professionals. Hospitals and office managers work closely with medical supply businesses to procure this equipment and ensure they always have the items they need.

With market size expected to reach 160 Billion USD by , and a CRGA growth rate of 7.2 percent, it's an opportunity to consider. Set yourself up for success by getting to know the ins and outs of starting a medical supply business.

Choose a medical niche or underserved market

Operating a medical supply business is no different from any other company in that you need to find what makes your brand unique. Once you know that, you can find your target market and work to set yourself apart from competitors. Ask questions like these to better understand what you bring to the industry:

• Are you an expert in a medical niche and know what certain specialists need?
• Are you an ex-doctor or medical professional with real-life medical experience?
• Is there an underserved market that needs a reliable source of medical supplies?
• Do you have an idea for getting supplies to doctors faster or better, like a subscription service or convenient online portal?

Not only will answering these questions help you establish your business, but it will also guide your marketing and help you secure funding.

Determine your business type

Once you have a business idea, you will want to form your company. Decide whether you want to operate as a Limited Liability Corporation (LLC), C-Corporation, or S-Corporation. The type of business you choose will depend on your business structure and affect how you're taxed, what fees you need to pay, whether or not you need to raise capital and more.

Work with a local accountant to help you decide what is best for your business and refer to the BizFilings business type comparison tool to get a better understanding of your options. Each state has its own guidelines and costs for forming a business, such as whether you need to produce annual reports or pay annual fees to stay operational. Knowing all of these details will help you choose the right business entity for your new medical supply venture.

Beneficial ownership information reporting

There are certain compliance obligations with having an LLC or corporation, such as maintaining a registered agent and filing annual reports and/or franchise taxes with the state.

In addition, you may need to file a beneficial ownership information (BOI) report for your corporation or LLC with FinCEN (U.S. Department of Treasury's Financial Crimes Enforcement Network). This is a new federal requirement that went into effect on January 1, . While there are exemptions from the filing requirement, most small-business LLCs and corporations will not qualify for an exemption. Take this quiz to see if your business may be subject to the new BOI filing requirement.

For more information, visit: Beneficial Ownership Information Report

Secure your operating licenses

In addition to registering your company, you need to secure business licenses and permits necessary for a medical supply business. Forming an LLC or C-Corp doesn't necessarily mean you can legally operate, just that the state knows you exist'you must get your licenses or permits secured before beginning.

You can use the BizFilings' Business License Wizard to identify which licenses would be relevant to your business and check with your local business regulations and requirements to ensure you have all the correct paperwork to begin operating. Note that fees will vary from state to state and may be based on annual revenue. 

Fund your business

Important to any good business is accurate bookkeeping and a strong financial footing. You must have a clear understanding for how you plan to fund your medical supply company and how this funding will affect your budget now and in the future. A few funding options include:

• Bootstrapping: This refers to relying solely on your own money.
• Small business loan: To secure a loan, you'll work with a financial lender to get financing.
• Investors: With an investor, you'll work with private entities to receive funds and then share part of your profits as your business grows.
• Crowd-funding: Use a site like Kick-Starter to fund your business with donations from people around the world. This is a good option for companies with a socially-driven mission.

The viability of these medical supply financing options will vary depending on your business size and startup costs and, each option also has its own benefits and drawbacks. For example, you don't have to share your profits or make interest payments by bootstrapping, but that may not be an option if you don't have access to startup capital.

Identify vendors and distributors

The foundation of your business will be working closely with medical distributors and vendors. These are large-scale manufacturers who produce millions of supplies each year who then sell to distributors like yourself so you can market and sell the wares on a smaller scale. When choosing your supplier(s) and vendor(s), consider a few key factors:

• Future innovation: Does your supplier have plans to grow and innovate in the coming years, ensuring that you stay relevant as a business as well?
• Communication: How well are they at communicating with you? Are their terms and business details clear?
• Expertise: How well do they know their market? How much can you benefit from their expertise?
• Quality: Are they as committed to quality as you are?
• Delivery systems: Will their delivery systems make it easier to run your business or are they complicated and difficult to manage?

Work with a medical supply mentor or expert to better understand the qualities of successful medical supply partners and determine which potential vendors and distributors would be best for your specific needs.

Build your business and market your brand

Once you have established what your business is and how it operates, the only thing left to do is execute your business and marketing plan. During this period, you will open your warehouse, website or both, ensuring that you have a place to house the medical supplies and/or manage orders.

You also need to use this time to develop marketing materials and start reaching out to potential clients. Your industry may require different marketing methods, so be sure to do your market research first. This will help you dial in on who you want to target and how to best reach them.

Let us help you build a medical supply business

With the right planning, you can build a successful medical supply business. You don't necessarily need a strong medical background to do this, just knowledge of what medical professionals need and a marketing plan to make them more effective at what they do.

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