Chapter 5: Drug Distribution & Supply Chain

Question 1

A wholesale distributor of prescription drugs must be licensed by the state where it does business. True or false?

Answer 1

True

Question 2

What is PDMA?

Answer 2

Prescription drug marketing act

Question 3

Wholesalers buy in large quantities from drug manufacturers and resell in smaller quantities to pharmacies, hospitals, etc. True or false?

Answer 3

True

Question 4

What are primary wholesale distributors?

Answer 4

Buy most of their drugs directly from manufacturers. Legally considered authorized distributors. Usually have ongoing relationships with manufacturers.

Question 5

What are secondary wholesale distributors?

Answer 5

Buy from primary and other secondary wholesalers, as well as manufacturers, but are not considered “authorized distributors”

Question 6

What three companies account for nearly 90% of all drug wholesale sales?

Answer 6

Cardinal Health
McKesson HBOC
AmerisourceBergen

Question 7

What is an authorized distributor?

Answer 7

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

Question 8

What is average wholesale price (AWP)?

Answer 8

The AWP is a published wholesale price or “list price” suggested by the manufacturer of the drug. Serves as a reference for pricing, negotiations and reimbursement.

Question 9

What is brokerage?

Answer 9

The combination of drop-ship, and dock-to-dock delivery services provided by the wholesalers. In brokerage services, wholesalers do not bring the products into their warehouses.

Question 10

What is buy-side margin?

Answer 10

The term refers to the early payment discounts and other earned or negotiated rebates and discounts, received by wholesalers from drug manufacturers.

Question 11

What is a chain drugstore?

Answer 11

A company that owns and operates four or more pharmacies

Question 12

What is dock-to-dock delivery?

Answer 12

A wholesaler obtains the drugs from the manufacturer, and delivers them to a dispenser’s own warehouse without taking the drugs into its own inventory. Also referred to as non-stock sales.

Question 13

What is a drop shipment?

Answer 13

A drug manufacturer directly delivers the drugs to a dispenser, but the order and payments are made through a wholesaler.

Question 14

What is float?

Answer 14

The time differential between when a wholesaler receives payment from a customer, and when the payment is due to its supplier.

Question 15

What is a group purchasing organization (GPO)?

Answer 15

An 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.

Question 16

What is an in-state wholesaler?

Answer 16

Wholesaler that distributes drug products in a state in which it is physically located.

Question 17

What is an independent drug store?

Answer 17

A company that owns and operates three or fewer pharmacies.

Question 18

What is an integrated delivery network (IDN)?

Answer 18

Also known as integrated healthcare delivery network (IHDN), integrated delivery system (IDS), or integrated health/healthcare system (IHS).

This is a financial and management structure that unites hospitals, physicians, ambulatory care sites, and managed care plans through ownership or exclusive formal agreements to provide a system to deliver a continuum of healthcare services.

Question 19

What is a mail order pharmacy?

Answer 19

Pharmacy that dispenses prescriptions to patients who submit their prescriptions by mail or fax.

Question 20

What is a manufacturer direct sale?

Answer 20

The type of sale that bypasses the need for any intermediary distributor.

Question 21

What is a mass merchandiser?

Answer 21

An establishment, like a department store, that sells many items. A pharmacy is included within the building. Examples are Walmart, Target, and Costco.

Question 22

What are non-stocks sales?

Answer 22

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

Question 23

What is an out-of-state wholesaler?

Answer 23

A wholesaler that distributes drug products in a state in which it is not physically located.

Question 24

What is a pharmacy benefit management company?

Answer 24

An entity that administers the prescription drug parts of health insurance plans on behalf of plan sponsors, such as self insured, employers, insurance companies, and health maintenance organizations (HMOs). These provide pharmacy claims processing and mail order pharmacy services in addition to other services.

Question 25

What is a rebate?

Answer 25

The amount that the manufacturer of the drug pays to an insurer or health plan for each unit of drug dispensed.

Question 26

What is self warehousing?

Answer 26

A type of distribution system, where the retailer of the institutional dispenser takes on the task of distribution itself.

Question 27

What is sell side margin?

Answer 27

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

Question 28

What is upcharge?

Answer 28

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