A few weeks ago, the three largest drug wholesalers reported quarterly earnings. McKesson (MCK) cited sell-side pressure by a national competitor who was undercutting current pricing, thereby forcing them to adjust their current book, negatively impacting margins in their independent retail pharmacy business. Some expected the competitor was AmerisourceBergen (ABC), but surprisingly ABC made a point of refuting these claims publically. Company executives commented that they were uninterested in using such tactics to gain market share, but instead prioritized maintaining the Walgreens Boots (WBA) partnership, as well as growing the services offered to existing clients in the independent retail pharmacy space. Thus, alleviating some fears that a price war among drug distributors was evolving in the market.

Adding another level of complexity, wholesalers are facing a number of critical headwinds such as generic deflation, limited brand inflation, and challenges in the specialty space. Regarding generics, after years of accelerating price increases, deflation has become the new normal and other than the recent national elections, leading indicators suggest the bottom is nowhere in sight. A similar problem has occurred on the branded side, where lackluster inflation numbers have hurt the top line for distributors as well. Regarding specialty pharmacy, many see this area as a big opportunity, but challenges remain as stakeholders debate the definition of the specialty product bucket as well as the pricing and payment structure moving forward.

In our call (ABC) (CAH) (MCK) – Commentary on Generic Deflation, Sell-Side Discounts, and Recent RFP for a New Drug Wholesaler, an executive at a 72 store retail pharmacy chain recently conducted an RFP for a new wholesale distributor, and provided our clients with an in depth analysis of the current dynamics at play in the market, as well as the key stakeholders strategies for defending their books and gaining market share amongst independent pharmacies.

A few weeks later, we hosted another event (ABC) (CAH) (MCK) – Will Lower Brand Inflation, Generic Deflation, & Sell-Side Pricing Pressures Continue? where the CEO of a regional retail pharmacy operating 85 locations in the Maryland and Washington DC area discussed the reasons why he chose McKesson to continue as his sole wholesale distributor. His perspective was even more relevant to the current conversation as he formerly served as an executive at AmerisourceBergen and Cardinal Health (CAH), and shared insights on each company’s go-to market strategy.

Finally, our most recent event (ABC) (CAH) (MCK) – Purchasing Alliance CEO on Brand Inflation, Generic Deflation, Specialty, & Sell-Side Pricing Pressure, the former VP of Generic Commercialization of AmerisourceBergen, who now operates a 360 pharmacy GPO with purchasing power of $600 million, provided insightful commentary around sell-side discounts, pharmacy consolidation, and generic deflation.