Some Eivolutionary Changes in Pharmaceutical Wholesale Distribution

The pharmaceutical wholesalers in Japan are still in the dynamic process of merger and acquisition. In the late 1990s, this process seemed to have been accelerated and some large-scale mergers among big wholesalers caused more turbulence and uncertainty. The wholesale consolidation in Japan is rather moderate, but if this process continues, there would be two or three big wholesalers which would dominate over the distribution. Shrinking demand, severe competition and consolidation of manufactures and customers could stimulate wholesale consolidation. In pharmaceutical distribution, one critical factor, changing public health care policy (cutting public drug prices and reducing R-zone), should not be dismissed. Annoyed by reduced wholesale margin and squeezed profit, wholesalers seem to choose the way of merger and acquisition on the premise that the scale could strengthen their power to negotiate with manufactures and hospitals. However, it should be emphasized that their relational strings with manufactures and hospitals have been weakened through wholesale consolidation. Another underlying factor of the structural changes in distribution is integrated supply. Supply chain management, the know-how to optimize the total inventory in the value chain by synchronizing sales activity and logistics, is now catching eyes. In pharmaceutical distribution, logistics has been underestimated because hospitals buy drugs in large quantities and keep their own stocks. But the increasing of pharmaciesing which need frequent deliveries of drugs in small quantities, generates new problems for wholesalers. The question is whether or not existing supply chain management could solve the problems in pharmaceutical distribution. I assume wholesalers need to develop a new marketing system model and customer-based demand chain management, which would integrate logistics, marketing, sales force and customer service to satisfy their customers.