Chapter 5 - Drug Distribution & Supply Chain

Question 1

What are the two legal classifications of drug wholesalers?

Answer 1

Primary Wholesale Distributors (buy most of their drugs directly from the manufacturers), and Secondary Wholesale Distributors who buy from primary and secondary wholesalers and manufacturers. (Not considered “authorized distributors” of the manufacturer’s).

Question 2

What is PDMA?

Answer 2

The Prescription Drug Marketing Act.

Question 3

How many companies account for nearly 90% or all drug wholesale sales?

Answer 3

Three (Cardinal Health, McKesson HBOC, and AmerisourceBergen).

Question 4

Published wholesale price or “list price” suggested by the manufacturer of a drug.

Answer 4

Average Wholesale Price (AWP)

Question 5

Entity consisting of two or more hospitals or other healthcare entities that is formed to offer its members access to purchasing contracts for health supplies.

Answer 5

Group Purchasing Organization (GPO)

Question 6

A company that owns and operates three or fewer pharmacies (Community or neighborhood pharmacies).

Answer 6

Independent Drug Store

Question 7

What does IDN stand for?

Answer 7

Integrated Delivery Network

Question 8

What is the average size of prescriptions dispensed by mail-order pharmacies compared to those dispensed by retail pharmacies?

Answer 8

3 times larger.

Question 9

Brokerage sales, dock-to-dock delivery sales, drop shipments, and any other form of sales not placed in inventory.

Answer 9

Non-Stock Sales

Question 10

What is another name for a rebate?

Answer 10

After-market arrangement (They do not affect the prices paid at the time of service).

Question 11

As a pharmacy, what is the benefit of buying from Wholesalers?

Answer 11

They can buy by-the-bottle and receive a delivery daily, so there’s no need to keep a large stock. This situation also lowers costs, and requires paying only ONE supplier instead of dozens of manufacturers.

Question 12

Who’s responsibility is it to visit distributors and distribution centers?

Answer 12

NAMs

Question 13

What type of sale bypasses the need for intermediary distributors?

Answer 13

Manufacturer-Direct Sales

Question 14

The average size of prescriptions dispensed by mail-order pharmacies is usually ____ times larger than those dispensed by retail pharmacies.

Answer 14

Three

Question 15

Name 3 examples of Non-Stock Sales.

Answer 15

Brokerage Sales, Dock-to-Dock Sales, and Drop Shipments

Question 16

By FDA law, large chain pharmacies are not allowed to buy directly from manufacturers. True or False?

Answer 16

False. Some large pharmacy companies DO buy directly from the drug manufacturers, but they are exceptions.

Question 17

Any distributor of prescription drug that has a written agreement with the manufacturer of the prescription drug and conducts at least two transactions with the manufacturer of the prescription drug within any 24-month period.

Answer 17

Authorized Distributor

Question 18

The percentage fee that is paid by the dispenser to the wholesaler for the cost of distribution.

Answer 18

Upcharge

Question 19

The combination of drop-ship and dock-to-dock delivery services provided by wholesalers. Wholesalers do not bring the product into their warehouses.

Answer 19

Brokerage

Question 20

Wholesaler revenues that are generated from fees and other charges obtained from dispensers.

Answer 20

Sell-Side Margin

Question 21

A wholesaler obtains the drugs from the manufacturer and delivers them to a dispenser’s own warehouse without taking the drug into its own inventory. (a type of “non-stock sales”)

Answer 21

Dock-to-Dock Delivery

Question 22

The type of sale that bypasses the need for any intermediary distributor. The product is sold and shipped directly by the manufacturer to the dispenser.

Answer 22

Manufacturer Direct Sale

Question 23

Refers to the early payment discounts and other earned/negotiated rebated and discounts received by wholesalers from drug manufacturers. Increases in the value of the wholesaler’s inventories as manufacturers prices rise, are also considered this…

Answer 23

Buy-Side Margin