Healthcare Wholesalers, Distributors, Medical Suppliers Market Sector Overview
The pharmaceutical and medical supply chain in the United States is complex and heavily regulated; even more so with the emergence of the opioid health crisis. Like the pharmacies, hospitals and other provider segments it supplies, healthcare wholesalers, distributors and suppliers are consolidating.
McKesson In Perpetual Transformation As The Largest Drug Wholesaler
McKesson has made a long run at strategic acquisitions; most notably Echo in 2019, MSD in 2018 and CoverMyMeds in 2017. Early in March '16, McKesson acquired Rexall from Katz Group for $2.2 billion dollars. There are about 470 Rexall units in Canada with the highest concentration in the western region. Rexall is the second largest retail pharmacy in Canada. This vertical integration maneuver gave McKesson an immediate nationwide retail presence across Canada.
McKesson has solidly diversified its business model and positioned itself well in advanced pharmaceutical and healthcare services sectors. In February '16, they acquired Vantage Oncology and Biologics, Inc. in two deals totaling $1.2 billion. Vantage was a leading national provider of radiation oncology, medical oncology and other integrated cancer care. Biologics, Inc. was the leading independent oncology-focused specialty pharmacy in the United States.
McKesson's reach into the specialty pharmacy and oncology market enables it to interface directly with patients, providers and payers. In 2013 McKesson accquired Celesio AG (a large, Stuttgart, Germany-based drug distributor) for $5.4 billion. Celesio operatesd 132 facilities which provide drugs and other healthcare products to hospitals and pharmacies in 14 European nations and other select locales. The deal provided McKesson with deeper reach into global markets and greater leverage in negotiating with generic pharmaceutical manufacturers and other makers of healthcare products. Meanwhile, AmerisourceBergen, Cardinal, Owens & Miner and other supply chain heavy hitters moved forward to boost the scope and scale of their product and service portfolios.
AmerisourBergen Business Model Robust Aside From Compounding Pharmacy Challenges
AmerisourceBergen acquired privately held pharmaceutical and medical products distributor H.D. Smith for $815 million in 2018. Their acquisition of pharmacy compounder PharMEDium in 2015 provided them with a high margin business which they will use to augment their pharmacy services as they ramp up moving forward. This strategy may be confronted with new regulatory issues / restrictions over the course of 2019 and beyond. A number of State and Federal regulatory agencies have expressed concern about and seek clarification on the status of compounding pharmacies as being manufacturers of product versus pharmacy providers.
Much of this stems from the New England Compounding Center's (NECC) safety violations which produced defective product that caused deaths and hospitalizations for patients who contracted meningitis from their use. NECC was affiliated with a larger compounding pharmacy entity, Ameridose. Both commercial enterprises have ceased to operate. As new potential regulations and commercial categorizations are laid out, AmerisourceBergen will have to account for their impact on PharMEDium.
AmerisourceBergen And Walgreens
About 28% of AmerisourceBergen is owned by Walgreens Boots Alliance. If Walgreens does go private they may choose to jettison their share of Amerisource Bergen through a sale of stock or other maneuver to help pay off deal costs. Globalization of healthcare supply chains is an important industry trend to reinforce buying power and logistical efficiencies. Walgreens/Boots is well underway in its efforts to integrate itself plus complete its acquisition of the Rite Aid units it acquired. The growing organization will be supported by its respectable 23% stake in the global healthcare distributor/wholesaler AmerisourceBergen; undoubtedly Walgreens/Boots can be expected to advance with other sizable acquisitions or ownership stakes in the near future.
Cardinal A Top Contender Competing With McKesson and AmerisourceBergen
Cardinal took significant steps to fortify and expand its position through their $6.1 billion deal with Medtronic in 2017. Cardinal acquired Medtronic's patient care, deep vein thrombosis ( DVT ) and nutritional business assets; the deal diversified Cardinal's business model and Medtronic gained cash to help offset their $42.9 billion outlay to buy Covidien.
Owens & Minor A Leader In Surgical / Hospital Specialties
Owens & Miner expanded their global footprint through purchasing the surgical and infection prevention assets of Halyard Health for $720 million in 2017.
The Threat Of Amazon In The Healthcare Supply Chain Marketplace Lurks On The Perimeter
Amazon has robust business initiatives underway in the healthcare sector. Their product selection is growing in variety and in sophistication. They have the ability to compete with traditional group purchasing organizations, healthcare distributors, wholesalers, suppliers and retailers for consumer, patient and healthcare provider organization customer sector business. Their purchase of and fortification of online mail order pharmacy PillPack exemplifies its commitment to directly engaging with consumers while aligning itself with contracted market access strategy through payers. Its current issue with SureScripts may be decided by an upcoming antitrust lawsuit filed by the Federal Trade Commission against SureScripts.
Amazon's introduction of its integrated employee health services " Amazon Care" plus their medical and patient information platform acquisition of startup Health Navigator are essential building blocks to not only improve care and reduce healthcare costs for employees but also to commercialize these components and produce new revenue streams,