US Pharmaceutical Business Stages of Development

The pharmaceutical business is one of the oldest retailers in the United States. By 1905, there were about 46,000 conventional drugstores in America. The rapid growth of pharmacies and concern over the quality of drugs contributes to the establishment of the Food and Drug Administration (FDA) in 1927. FDA was responsible for quality monitoring and certification of food and medications. By the way, in the first half of the 20th century, pharmacies also earned sales of effervescent drinks, confectionery and ice cream. They also sold household chemicals, cosmetics and hygiene products. In small towns, pharmacies were often places of public activity.

US Pharmaceutical Business - Stages of DevelopmentThe beginning of the 1920s saw the formation of pharmacy networks, which made centralized purchases and used marketing communications to form their reputation on the market. At the same time, pharmacies began to compete with retail networks and cafes, which offered customers basically the same products.

Since the 1930s, pharmacies began to offer atypical products, such as tobacco products, books, magazines, dishes and haberdashery. Then, they began to place goods on today’s existing principle: pharmaceuticals were located in the back of the store, and “non-pharmaceuticals” were placed in front, for example, cigarettes, magazines, and haberdashery. During the 1950s, pharmacy chains changed their strategy: they refused to sell effervescent drinks and ice cream, but significantly expanded their range of both medical and non-medical purposes. Also, many pharmacies have moved from urban centers to the suburbs and, for the first time, began to be located in shopping centers.

During the 1940-1960s, pharmacies were in serious competition from retail supermarkets and grocery stores. By the end of the 1960s, 7 out of 10 retail chains and/or supermarkets had Rx and OTC product sales departments in their stores. Due to increased competition with supermarkets, many pharmacy chains had to rethink their strategy at the turn of the 1970s. To ensure growth and maintain profitability, they needed, firstly, to have a retail network that would not be inferior in coverage to the main supermarket chains, and, secondly, to sell drugs and medical products at fairly low prices. At the same time, the first chains (Thrif D Discount and Harry’s Discount Drug Store) appeared, which offered drugs at a significant discount. Traditional networks, and especially individual pharmacies, could not carry out these tasks, so the industry took the path of consolidation and acquisition – in the early 1970s, all significant networks (for example, Eckerd Drugs, Longs Drugs, Genovese, etc.) entered IPOs in the market and transformed from family enterprises to corporations, which allowed them to raise significant funds for further development.

MedicareThe development of public health programs for the poor (Medicaid) and the elderly (Medicare), which were introduced in the early 1960s, allowed pharmacies to attract buyers from these categories. However, pharmacies received compensation for drugs at a fixed price, which led to a significant decrease in pharmacy margins. A certain incentive to the development of the pharmacy business was given at the turn of the 1970s, when the FDA revised the rules for registering, dispensing and advertising drugs. The new rules forced manufacturers to use complex (and expensive) methods for testing new drugs and dosages. Also, manufacturers began to dictate selling prices for prescription drugs, so the growth of pharmacy profitability could occur only due to cost reduction. Pharmacies were one of the first among retail chains that introduced automatic accounting of balances (1980s), as well as automated packaging and dispensing of drugs.

Thus, during the first half of the 20th century, the development of American pharmacy chains took place according to a fairly standard scenario of B2C (business-to-consumer) companies: consolidation, centralized procurement, diversification of supply, i.e. expansion of the assortment through non-medical products, the development of a corporate brand and geographical expansion, which largely repeated the development of retail chains. Pharmacies actively used innovative technologies (computerized accounting and dispensing), which allowed them to significantly reduce the cost of skilled pharmacists. Then, some pharmacy chains took the path of lowering costs and retail prices, primarily on over-the-counter drugs.

At nowadays, there is no more way to buy medications – online pharmacies. There are many different brands, websites. These services are dispensed medications from any corner of the world. According to the statistics, more and more people prefer using online services like to buy medications online. There are several reasons why it attracts so many people. They are:

  • low prices for generic medications (Generics are a complete analogs of branded medications with the same therapeutic effect);
  • diverse online catalogs;
  • convenient ordering procedures;
  • medications are constantly in-stock;
  • international delivery;
  • no additional costs and fees;
  • no additional documents like Rx;
  • fast processing and delivery of goods;
  • regular and express delivery;
  • discounts, coupon codes and special offers.

It is much more convenient to make an order online sitting in a comfortable armchair than visiting a drugstore with a great line.

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