The economic significance of the pharmaceutical wholesaler in South Africa's health care industry

Abstract

The purpose of this research paper is to examine and evaluate the economic significance of the pharmaceutical wholesaler in South Africa’s health care industry. The pharmaceutical wholesaler experienced several challenges over the last decade. These challenges originated from changes in the competitive environment of the industry and more recent changes in the regulatory environment brought on by the State in its attempts to make medicine more accessible to the South African public. The wholesaler was forced by these changes to adapt its business model drastically in order to remain competitive. Historically the wholesaler made its profits by purchasing bulk at a discount, passing a fraction of the discount to its customers and adding a mark-up to the purchase price. It was now forced to abandon the discount and mark-up scheme and distribute medicines by negotiating a fee for the services it renders. Wholesalers now not only have to compete between themselves but also with distributors on the same basis - by negotiating logistics fees with pharmaceutical manufacturers. Operating efficiency and customer service have become essential ingredients for the wholesaler in its quest to remain competitive.