Challenge in the channel: A critical review of the U.S. pharmaceutical industry

This white paper by Pembroke Consulting examines the impact of new distribution arrangements on the U.S. pharmaceutical industry. Over the past few years, manufacturers and wholesalers have implemented agreements designed to reduce investment buying in the pharmaceutical channel. There have been few attempts to assess the overall supply chain effects of this new arrangement. In theory, the goal of manufacturer-wholesaler inventory agreements should be to shift costs to the most efficient point in the supply chain without compromising patient access to medicines.

Empirical analyses suggest that inventory management agreements (IMAs) have had the opposite effect. In fact, manufacturers have added assets to their balance sheets and increased operating expenses due to higher inventory carrying costs. Wholesalers have lost a major source of compensation for their services. Furthermore, these agreements may have also increased the risk of drug shortages that could affect patient care, product access and pharmaceutical prices.

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