Los Angeles, CA (PRWEB) April 08, 2012
The $679.0 billion Drug, Cosmetic and Toiletry Wholesaling industry is supported by the essential nature of its main product: pharmaceuticals. “Since healthcare spending is a necessity,” says IBISWorld industry analyst Kevin Boyland, “demand for many of the industry's products is largely unaffected by swings in the larger economy.” The aging population has also strengthened demand for drugs; because they are more likely to suffer from medical ailments, older individuals spend more on healthcare. Consequently, the industry suffered only slightly during the recession. Revenue dropped 1.6% in 2009 due to decreased disposable income, but growth returned in 2010. Revenue is expected to increase in 2012, contributing to average annual growth of 2.2% from 2007 to 2012.
The mounting use of generic drugs has helped maintain industry profitability despite cost pressures from new regulations and the negotiating power of manufacturers and retailers. Generic drugs carry higher margins for industry firms because their manufacturers rely more heavily on wholesalers compared with brand name producers. Generics have penetrated the market as many brand-name drugs lost patent protection. According to Boyland, “This trend will intensify in the five years to 2017 as $115 billion in brand-name drugs lose patent protection.” However, this gain will be offset by rising fuel costs and pricing pressures from both ends of the supply chain. Consequently, the Drug, Cosmetic and Toiletry Wholesaling industry’s profit margin is forecast to stay relatively flat.
The healthcare reform of 2010 is likely to be a net benefit to the industry, due to increased access to insurance coverage. During the five years to 2017, revenue is forecast to increase, with a sharper jump in 2012. However, the reform also includes provisions to revise Medicare and Medicaid reimbursement rates paid to manufacturers and retailers. In response, these players in the pharmaceutical supply chain will likely pressure prices at the wholesale level. Consolidation among drug manufacturers and drug stores is forecast to continue. As these players in the supply chain grow in size, their price-negotiating power increases, pressuring profit margins. In response, during the five years to 2012, the number of industry firms is expected to decline at an annual average rate of 3.5% to 7,609. The number of players is forecast to fall further in the five years to 2017. However, major players like McKesson Corporation, Cardinal Health Inc. and AmerisourceBergen Corporation are expected to continue dominating almost half of the industry’s market. For more information, visit IBISWorld’s Drug, Cosmetic & Toiletry Wholesaling report in the US industry page.
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IBISWorld industry Report Key Topics
Drug, cosmetic and toiletry wholesalers primarily distribute medicines intended to diagnose, treat or prevent diseases; preparations designed to modify or improve the appearance of physical features; and articles used in personal grooming or dressing. Industry operators take ownership of the goods to be distributed. The industry does not include manufacturers that sell medicines, equipment and supplies directly to hospitals or doctors' offices.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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