| SIC Codes: | 5122 |
| NAICS Codes: | 424210 |
The US pharmaceutical distribution industry includes about 6,300 companies with combined annual revenue of about $410 billion. Major companies include McKesson, Cardinal Health, and AmerisourceBergen. The industry is highly concentrated: the top four companies account for more than 40 percent of revenue; the top 50 companies account for nearly 85 percent.
Demand for pharmaceutical distribution is driven by the need to treat illness and disease. The profitability of individual companies is determined by the efficient distribution of a wide variety of drugs and medications. Large companies compete intensely on price, size of generic drug portfolio, product volume and variety, and the quality of value-added support services such as supply chain management. Small companies can compete by focusing on rural areas, independent community pharmacies, or the distribution of drugs that have special handling requirements. The industry is capital-intensive: average annual revenue per employee is more than $2 million.
Major products include branded and generic patent drugs (70 percent of industry revenue), over-the-counter (OTC) medications, personal care products, and surgical and medical supplies and equipment. Distributors generally act as intermediaries in the ordering and delivery of pharmaceuticals and related products obtained from manufacturers. Some companies may purchase inventory from a fairly small number of suppliers; it is not uncommon for about half of a distributor's purchases to come from as few as 10 suppliers.