Medical Products Distribution: An Overview

June 2020

While the medical supply chain is global, U.S. healthcare distribution is local, with hundreds of distribution centers within a 50-mile radius of most urban centers.

Distributors have established relationships with 300,000 hospitals, physician offices, nursing homes and extended care facilities across the U.S. These healthcare providers rely on distributors to procure, store and deliver medical products that are critical to everyday operations. Because distributors usually operate under contracts with healthcare providers that specify prices for their supplies, distributors provide predictability for their healthcare provider customers.

Without distributors, each healthcare provider or facility would have to deal separately with thousands of manufacturers and tens of thousands of products – from diagnostics such as swabs and specimen cases; to infection prevention such as hand sanitizer and alcohol prep pads; to personal protection such as gowns, gloves and masks; and to treatment such as syringes, IV supplies and respiratory supplies. Distributors save providers time, money and effort while delivering the FDA-approved supplies they need.

Different types of distributors serve different types of healthcare providers.

• 8-10 large national and hundreds of regional distributors offer dedicated warehouse space, formulary support, data services, and low-unit of measure programs that help hospitals manage inventory that risk expiration, damage and obsolescence, and allow providers to optimize space for patient care rather than storage.
• The medical distribution channel delivers the full range of medical products to the nation’s 6,000 hospitals, 13,500 nursing homes, 28,000 assisted living facilities, 11,600 home health agencies, and 230,000 physician offices every day.

With the advent of the novel coronavirus, the U.S. domestic medical supply chain was challenged by both decreased supply and increased demand. The shutdown of major manufacturing facilities in China due to the COVID-19 outbreak created a shortage of supplies just as demand for equipment in the U.S. was skyrocketing. This created an opportunity marketplace where brokers with no healthcare experience engaged in fraud and profiteering. The differences between brokers and U.S. distributors couldn’t be more clear:

• Price: Where brokers engage in one-time deals at the highest price, distributors’ prices are based on long-term relationships and contracts with manufacturers and healthcare providers.
• Safety: Where brokers provide no guarantee that manufacturers were checked for safety, distributors provide supplies sourced from vetted and FDA-approved manufacturers.
• Quality: Where brokers only negotiate a price with no guarantees of product delivery or condition, distributors take possession of products and are responsible for direct delivery to healthcare providers.