But things are changing.
Today, 42% of doctors practice as salaried employees of hospital systems, up from 24% in 2004, according to Cegedim Relationship Management, a marketing consultant. As a result, the pharmaceutical industry is shifting its sales efforts from doctors to the institutions they work for.
Hospitals get better prices than drug stores because they have the ability to steer patients to drugs on a formulary:
The superior bargaining clout of hospitals and HMOs relative to drugstores is attributable to their use of formularies, which enable them to solicit bids from competing manufacturers for an all-or-nothing contract. Drugstores, in contrast, typically stock their shelves with all competing brands of a drug, and cannot credibly threaten to withdraw their business from a manufacturer that fails to offer a discount.
Bottom line: the alternatives to agreement determine the terms of agreement. In this case, the ability of hospitals and HMO's to "steer" patients to particular drugs means that the alternative to agreement is much worse for the drug manufacturer. This makes the drug manufacturer more eager to reach agreement, which results in better prices.