Friday, September 21, 2012

Tinkham Veale II, 1914-2012

Today, I want to acknowledge Tinkham Veale II, who built the predecessor to AmerisourceBergen. Mr. Teale passed away this week at age 97. Read the Wall Street Journal obituary.

Along with Cardinal Health’s founder Bob Walter, today’s pharmaceutical distribution industry can be traced directly to Mr. Veale, who built and ran consolidator Alco Standard for many years.

Here’s a brief history.

Prior to 1978, Alco Standard had been a highly diversified conglomerate with no drug wholesaling operations. Fragmentation offered Alco an opportunity to apply its consolidation strategy. Alco Standard had already acquired 100 small, mostly privately-held companies ranging from a maker of plastic auto parts to a paper distributor.

Alco offered its acquisitions a network through which legal, accounting, marketing and other operations are conducted from corporate headquarters, leaving the managers of the acquired companies to run their businesses. In 1978, Mr. Veale described his philosophy as follows: “The smaller businessman in America has been forced to spend more and more of his time doing things that he didn't know and understand well, rather than things he did well—making and selling the product.”

Alco Standard entered the drug wholesaling business in 1978 with the acquisition of The Drug House, a regional wholesaler based in Pennsylvania. Between 1978 and 1984, Alco acquired seven more regional drug wholesalers throughout the southeastern and midwestern United States. In 1985, Alco Health Services Corporation was spun off as a separate public company. Seven acquisitions followed in 1985 and 1986. A leveraged management buyout in 1988 temporarily halted acquisition activities, although one further acquisition was made in 1991.

In 1995, the company went public as Amerisource in 1995. Today’s AmerisourceBergen Corporation was formed by the 2001 merger of Bergen Brunswig Drug Co. (the second-largest drug wholesaler at the time) with Amerisource Corporation (then the fourth-largest drug wholesaler). Even though the past 11 years have seen facility consolidation and an enterprise-wide computer system, ABC still retains elements of Alco Standard's decentralization legacy.

You can catch up with today’s business model in the 2012-13 Economic Report on Pharmaceutical Wholesalers, available next week.

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