The Case for a Primary Wholesaler in Community Pharmacy

Balancing Rebates, Secondary Sourcing, and Long-Term Stability

In today’s challenging pharmacy marketplace, owners are faced with difficult decisions about how to manage purchasing, cash flow, and long-term sustainability. While secondary wholesalers may offer tempting short-term savings, a heavy reliance on them can lead to significant long-term challenges. Pharmacies that prioritize a balanced approach, maximizing their primary wholesaler agreements while selectively leveraging secondary options, are more likely to survive—and even thrive—in this difficult environment.

The Risk of Over-Reliance on Secondary Wholesalers

It’s becoming increasingly evident that pharmacies abandoning primary wholesaler rebate systems in favor of aggressive secondary shopping are struggling to stay afloat. Many have faced closures, or experienced reduced profitability. The allure of short-term cash flow gains often blinds owners to the long-term consequences of such decisions.

Key issues arising from over-reliance on secondary wholesalers include:

• Reduced Primary Control Allocation Limits: Pharmacies risk losing access to vital medications, especially controlled substances, when primary allocations are reduced due to insufficient purchasing volumes. If you are a traditional retail pharmacy this will impact your ability to serve your customers.
• Secondary Generic Purchasing Requirements: Meeting volume thresholds for secondaries can be costly and restrictive. You may find a deal on an item but have to add enough volume to meet minimum requirements for product shipping.
• PVA Renewal Challenges: Reduced engagement with primary wholesalers may result in rejected or downgraded Purchase Volume Agreements (PVAs), eroding rebate opportunities or decreased brand cogs concessions.
• Medication Access and Expense: A limited or inconsistent medication supply can lead to increased costs or inability to serve patients.
• Operational Complexity: Multi-wholesaler shopping increases staff workload, training demands, and ordering time, complicating day-to-day operations.
• Reputation Risk: Turning away brand patients, irritating local doctors, and failing to meet patient expectations can irreparably harm your pharmacy’s reputation.
• Reduced Growth Potential: Sacrificing long-term profitability for immediate savings limits your ability to reinvest in and grow your business.

The Power of Rebates and a Balanced Approach

Many pharmacy owners focus narrowly on the visible cost differences of a few hundred items when comparing secondary and primary wholesalers. However, the true value lies in the aggregate rebates and discounts provided by primary wholesalers through PVAs.

For example:

• Secondary wholesalers might offer savings of $15,000 per month on 500 items.
• However, your primary rebate for the same month could total $14,000, leaving a perceived net savings of $1,000.

At first glance, it might seem logical to shift heavily toward secondaries. But here’s what often gets overlooked:

1. Rebates Are Cumulative: The broader value of primary contracts comes from aggregate savings across a wide range of medications, including brands and less common items.
2. Lost Rebates Add Up: Without maximizing your rebate tier, the discounts and savings from your primary PVA diminish quickly, leading to a net loss far exceeding $1,000.
3. Operational and Patient Impact: The logistical challenges and reputation risks tied to reduced primary purchasing often create costs that are difficult to quantify but highly damaging.

Finding the Right Balance: Maximize Your PVA, Use Secondaries Strategically

The optimal strategy for most pharmacies in today’s market is blending primary and secondary sourcing. Here’s how:

• Maximize Primary Rebates: Focus on meeting your primary PVA tier requirements to secure the highest possible rebate and ensure access to all medications your patients need.
• Strategic Secondary Shopping: Use secondary wholesalers to target heavily discounted items selectively, aiming for additional savings of $2,000 to $3,000 per month without compromising your primary PVA.

By adopting this approach, pharmacies can achieve long-term stability, maintaining access to essential medications, maximizing rebates, and ensuring operational efficiency.

The Bigger Picture: Long-Term Thinking for Pharmacy Success

While the current marketplace is undeniably tough, sacrificing long-term profitability for short-term gains is rarely the right answer. Rebates, medication access, and patient satisfaction are critical to a pharmacy’s reputation and growth potential.

As the landscape evolves, staying adaptable and focusing on aggregate performance—not just individual cost comparisons—will yield the highest returns. Until PVAs change, maximizing their benefits while lightly leveraging secondaries remains the most effective strategy.

There is a “sweet spot” to drug sourcing where all parties can see value and here at Pharmacy Marketplace our technology is designed to show our Pharmacies where they can maintain that balance.