ARLINGTON, Va. — Pharmaceutical revenue through primary health care distributors has climbed as distributors continue to enhance their value to the prescription drug industry, according to a report by the Center for Healthcare Supply Chain Research.

The center said Thursday that its study, "The Role of Distributors in the U.S. Healthcare Industry," tallied 5% growth in pharmaceutical sales via primary health care distributors since the report was last released in 2007.

The Center for Healthcare Supply Chain Research is the research foundation of the Healthcare Distribution Management Association (HDMA).

Primary distributors  handled 87% of the $307 billion total market, up from 82% in 2006, according to the industry assessment, conducted by Booz & Co. Traditional, primary distributors accounted for 79% of the sales, with specialty pharmaceutical distributors accounting for the rest. Distributors deliver products to 200,000 providers on a daily basis, with fill rates exceeding 95%.

With the onset of the so-called the "patent cliff," when some leading drugs will lose patent protection, branded pharmaceuticals have declined, the study noted. Sales of generic drugs rose 5% from $17 billion to $21 billion between 2006 and 2010, while specialty/biotech products remain the fastest-growing category, with revenue jumping 69% from $7 billion in 2006 to $59 billion in 2010.

Improvements in efficiencies, fueled by investments in technology and business operations, trimmed distributors’ "cost to serve" as a percentage of sales from 6.5% to 5.7%, the report said. Distributors’ return on equity has remained stable at 15% and historically below the average for many health care sectors, the Center for Healthcare Supply Chain Research noted. The average operating margin for the industry also has been consistent over the past four years at 1.6%.

An economic analysis conducted by Booz for the study compared the cost of today’s distribution model with increased expenses under alternative scenarios, in which manufacturers would replicate distributor functions and service levels. Through this comparison, the assessment concluded that the value distributors deliver to the pharmaceutical supply chain has surged since 2007 — nearly $42 billion if manufacturers were to deliver drugs directly to providers on a daily basis.

"Despite many significant industry changes that have developed since the last Role of Distributors study, the nation’s primary health care distributors continue to improve operations, invest in technology and create efficiencies that enhance their value in the U.S. healthcare system," John Gray, president and chief executive officer of HDMA, said in a statement.