Thursday, September 16, 2010

Forces of Change for Drug Wholesalers

Stock prices of the Big 3 drug wholesalers—AmerisourceBergen (NYSE:ABC), Cardinal Health (NYSE:CAH), and McKesson (NYSE:MCK)—all jumped yesterday on analyst upgrades. Combined market capitalization rose about $1.6 billion. See Big 3 US Pharmaceutical Distributors Post Sharp Gains or this stock price chart. Tom Gallucci of Lazard Capital Markets referred to drug distributors as "The kind of group to own in this environment."

While I never comment on stock valuations, I do believe that the biggest wholesalers are positioning themselves as indispensable intermediaries in the supply chain and staking out a powerful position in high-growth channels for specialty drugs. Like it or not, manufacturers and pharmacies will be negotiating with wholesalers for some time.

To understand what keeps drug wholesaler CEOs up at night, check out my article Forces of Change for Pharmaceutical Wholesalers from the latest Pharmaceutical Commerce. Forewarned is forearmed when developing your next fee-for-service contract.

The Pharmaceutical Commerce article highlights six trends from my 2010-11 Economic Report on Pharmaceutical Wholesalers:
  • Consolidation of the Pharmacy Industry
  • Slowdown in U.S. Pharmaceutical Spending
  • Pressure on Generic Profitability
  • The Battle for Control of Specialty Drug Spending
  • Manufacturer Consolidation and Value of Fee-For-Service Agreements
  • Supply Chain Regulation and Compliance Costs
The summary article is free, but you'll have to spring for the full report to read the full details. Of course, you could win a free copy of the report by responding to the anonymous and non-invasive Drug Channels Reader Survey. Hint, hint.

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