Jul. 31 at 6:44 PM
$CAH,
$MCK,
$COR it has to be understood, how big of an impact a pharma price reduction has on the big 3 distributors.
The main drivers for revenue are: distribution fees & cash discounts, these are calculated as a percentage of revenue.
Therefore if a drug is
$1,000, lets just say they would normally make say
$50.
If the gov't pushes
$LLY and others to reduce price, and the distributors now pay
$500 for the same drug, they will then make
$25. Same number of packages shipped, same number of invoices due from customers, same number of customer service calls...just a lower base of revenue.
It's devastating to the business model, one that assumes inflation, not massive deflation overnight.
