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Distribution Industry Remained Efficient and Resilient During First Year of COVID-19

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ARLINGTON, Va. — Data released by the Healthcare Distribution Alliance (HDA) Research Foundation indicate that despite the challenges of COVID-19, pharmaceutical distributors maintained efficiencies to deliver millions of vaccines and medicines to providers — and ultimately patients. Published today, the 92nd Edition HDA Factbook: The Facts, Figures & Trends in Healthcare provides benchmarks and trends for the U.S. pharmaceutical supply chain.

For the first time, this year’s Factbook provides a view of the distribution industry during COVID-19. According to the research, in 2020, approximately 93 percent of all pharmaceutical sales continued to move through distributors, with 10.5 million units picked per day. Total sales grew at a rate of 6.6 percent to reach $570 billion. The industry maintained its high service levels on its lowest-ever reported margins, with distributors’ gross margins decreasing to 1.9 percent.

“For more than 90 years, the Factbook has quantified the significant value distributors bring to the healthcare industry, serving as the vital link between manufacturers and healthcare providers, pharmacies and other sites of care,” said Perry Fri, Executive Vice President of Industry Relations, Membership and Education, HDA; and COO of the HDA Research Foundation. “Despite the operational challenges brought on by the pandemic, the data show the distribution industry demonstrated resilience as they continued to deliver millions of products on a daily basis.”

The HDA Factbook is based on surveys collected at the corporate level of HDA traditional distributor member companies with annual sales greater than $1 billion, with secondary data included from healthcare and governmental organizations. Data reflect distribution industry performance metrics and overall supply chain management trends for the 2020 operating year.
Among the overall findings:

• Prescription medicines represented 75 percent of total SKUs picked, with non-prescription drugs (such as health and personal care products, general merchandise, durable medical equipment and home healthcare) making up the remainder.
• The average total number of SKUs that distributors held in inventory was 41,397 — a 9.3 percent decrease from 2019; approximately 80 percent of surveyed distributors stock personal protective equipment.
• Approximately 83 percent of distributors with more than $1 billion in sales report scanning barcode labels on inbound from suppliers; all report scanning the NDC number and barcodes at the case and item levels. The industry’s information technology investments, meanwhile, now account for half of their total capital expenditures.
• Total annual costs associated with the returns process averaged $5.6 million per company in 2020, an increase from $5.1 million in 2019. “Overstocked,” “damaged” or “outdated” products were the top reasons for returns to distributors and manufacturers, respectively.
• Distribution centers handled an average of 4,234 orders per day, with an average of 11 lines per order and 65 percent of distributors used automated picking methods. Distributors’ continued investments in automation helped generate gains in efficiency and productivity at a time when other sectors faced headwinds.
• Wages rose during 2020, with the typical healthcare distributor employee receiving $69,000 in compensation, compared with $64,000 in 2019. 

The 92^nd edition of the HDA Factbook: The Facts, Figures & Trends in Healthcare (2021-2022) is available as a complimentary download. The publication was made possible by gold sponsors Apotex Corp. and Real Value Rx dba Hospital Pharmaceutical Consulting; and bronze sponsors Ascend Laboratories, LLC, IQVIA, Johnson & Johnson Health Care Systems Inc., Pharmacy First and Teva Pharmaceuticals.