The Big 3 Distributors: Generics

Generics

Some question how long the current generics ride will last for wholesalers. Medco Health Solutions, a pharmacy benefits manager, says it expects 2011 to be weaker for generic drug contributions. IStockAnalyst reports that $14 billion of brand-name drugs will turn generic in 2011, a potential distribution bonanza. But that figure includes the $11.4 billion Lipitor, which is scheduled to go off patent in November. So rather than next year, the big generics bump may come in 2012.

For its part, ASB sees good generics potential for 2011. "It's not just about new generics," says Peyton Howell, senior VP. "It's greater use of existing generics, too." Pera says ASB's value proposition is to integrate generics-buying with that of brand drugs. "It all comes in the same order and simplifies the retailer's life."

McKesson is enjoying strong generics gross profit growth in 2010. Its distribution solutions business' operating profit of $505 million was up 17 percent in the first quarter; operating profit margin was 1.9 percent compared with 1.7 percent a year ago.

"We continue to benefit from our generics offering across all of our distribution businesses," says John Hammergren, chairman and CEO, in a statement. Given existing customer offerings and a "focus on execution," he expects continued success.

Cardinal says it is enhancing Source Generics, a pricing and ordering system for generics that includes next-day distribution of newly launched products. A Q1 10 percent increase in generics sales helped offset a 17 percent profit fall in the pharma division caused by price increases on branded drugs.

As Fitch recently noted, Cardinal has renewed its focus on distribution, which is helping its relationships with customers. Generic drug sales are an indicator: its generics business posted 10 percent revenue growth during the quarter, the company reported.

The Big 3 Distributors: Generics
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