How does the pharmaceutical supply chain work

The pharmaceutical supply chain delivers the manufactured medicines to patients. However, the process is not as simple as stated. It is a very complex process that runs on a number of steps that ensure the deliverability of medications.

Many stakeholders such as manufacturers, wholesale distributors, and pharmacy benefit managers are the stakeholders in the pharmaceuticals supply chain, and all are affected in case of even a minute glitch. Apart from the significant loss that each stakeholder faces, the healing process for patients too gets disrupted, causing mismanagement and strain on the public health sector.

The complicated process itself faces several challenges that include cold chain shipping, drug counterfeiting, supply chain visibility, and fluctuations in drug prices that overburden the patients with increased costs.

Working of the Pharmaceutical Supply Chain

To ensure there are zero disruptions in the pharmaceutical distribution to providers and patients, the smooth running of the following operations is essential.

  • The pharmaceuticals must be produced in the manufacturing sites
  • They must be sent to wholesale distributors
  • All the stock must be stored at retail, mail-order, and pharmacies
  • The price fluctuations and passing through quality and utilisation management screens by pharmacies is advantageous for the management companies
  • Pharmaceutical distribution to patients

Although this is the primary structure of the pharma supply chain, there might be variations and continuous evolution in the mechanism. All the manufacturers provide a certain quantity of their products that matches consumer demands. The manufacturers also monitor the distribution of drugs from facilities to drug wholesalers or pharmacy chains, hospital chains, and some health plans.

The pharmaceutical manufacturers have the edge and most influence over setting pharmaceutical prices, analysing the expected demand, future competition and predicting marketing cost to fix the wholesale acquisition cost.

Next in line are the wholesale distributors who buy the products from the manufacturers and provide them to the customers and pharmacies. Some of these products are sold to a vast range of clients, whereas some are reserved for clients who sell particular products. Another stakeholder in the pharmaceutical supply chain is the pharmacy benefit managers (PBMs), who, despite not having a direct link to the supply chain, are an integral part of consumer drug purchases. They work with third-party payers to oversee consumer drug purchases. It is the pharmacy benefit managers who determine the out-of-pocket money consumers have to pay. The supply chain ends at pharmacies, the final destination before the drugs are distributed to the patients. Pharmacies serve as the link between drug manufacturers, PBMs, and wholesale distributors. Pharmacies purchase medicines from wholesalers or from manufacturers without the involvement of any middlemen. Once the stock reaches pharmacies, they must maintain their stock and inform consumers about the safe use of prescriptive drugs.

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