Welcome to the 2013 USC Marshall International Case Competition.
Each year we invite students from schools around the world to participate in this competitive event. Of the thirty teams attending this year, 19 teams represent schools from outside the United States. We embrace all of you and hope you enjoy your brief visit to Los Angeles and the University of Southern California.
This year’s case presents issues which are current and very real to this business and their competitors in this and related industries. Thus, do not feel that the only relevant and available information is found within the four corners of this document. While some of the information provided here was only made available on the day we went to press, this industry is changing so quickly that there is no doubt in our minds that additional relevant information will appear in the days running up the time you receive this document. Thus, you should feel free to look for, and use, additional information which you may find online in completing your analysis of this case. References to some additional sources of information may be found in the Appendix.
In addition to testing your skills in strategic analysis this year’s case seeks to address a topic which is very relevant to each of you as consumers. Your own experience with this industry and with the companies covered in the case will no doubt influence your perspective. Give voice to your own insights. We are certain that the panel of judges and company representatives are willing and eager to listen to your recommendations for today and the future.
We encourage each individual to enjoy the event and admonish each team to follow our motto here at USC: Fight on!
Owens & Minor Inc.: Entering Europe
“Looking ahead to 2012, we believe we are well-positioned to support our healthcare customers, both providers and suppliers, as they navigate the course set by a changing industry. We have the teammates, the expertise, and the vision to serve the complex healthcare sector. But, as we serve this market, we will not stray from the values that have defined our company for 130 years. We will keep our eye on what’s next, but never lose sight of what matters.” Craig R. Smith President and CEO, Owens & Minor, Inc.
Owens & Minor is the leading distributor of medical and surgical supplies to the acute-care market in the United States and a leading provider of healthcare supply chain management solutions. In September 2012, Owens & Minor completed acquisition from Celesio AG in Germany of the Movianto Group, which specializes in third-party logistics for the pharmaceutical and medical device industries in Europe. When the acquisition was announced Craig Smith, President and Chief Executive Officer, announced: “The intended acquisition of Movianto provides Owens & Minor with a premier European healthcare logistics franchise, enabling us to significantly expand our existing third-party logistics and scale….Our manufacturer partners have increasingly expressed interest in working with Owens & Minor on a global basis, and Movianto provides us with an exceptional platform from which to serve them. Owens & Minor looks forward to working with the Movianto and Celesio teams to serve customers and create long-term value.” 1
Celesio announced that the sale of Movianto, which had been part of the Celesio group since 2004, was in line with a strategic realignment. Celesio is in the process of paring back its business in order to increase its focus on its core pharmaceutical wholesale and pharmacies business which accounted for more than 95% of the group business.2 Markus Pinger, Chief Executive Officer of Celesio, is overhauling the company, including selling units that are not part of the main business, after the company cut profit forecasts twice last year due to increased regulation and competition in Europe.3 He said: “We are about to sell Movianto more swiftly than originally planned. We can combine this with the opportunity to pursue partnerships with Owens & Minor, a leading U.S. company. We are implementing our new strategy with great consequence and step by step. The decision to sell is mainly driven by the buyer’s reputation for quality and integrity, thus defending the best interest of the Movianto employees. With Owens & Minor, we have found a potential investor who will drive Movianto’s successful development, offering new prospects. This will be an all-round positive solution for all parties
Professor Coombs and Kimberly Esser prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or a illustration of effective or ineffective management. Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 1 concerned.”4 Owens & Minor plans to integrate the two businesses, while keeping the Movianto teams and logistics centers located across Europe intact.5 Celesio and Owens & Minor will explore mutually beneficial projects in distribution and logistics in the healthcare markets.6
For Owens & Minor, the acquisition of Movianto enables the company to enter the European market with a broad and fully functioning third-party logistics platform. Owens & Minor will assume customer relationships, the logistics centers and the 1,800 team members across the network of 23 facilities in 11 European countries, including the United Kingdom, Germany, and France. Owens & Minor’s U.S.-based third-party logistics service and Movianto, share highly complementary services such as warehousing, transportation, cold chain logistics, as well as value-added services such as order-to-cash, repackaging and relabeling of products. Movianto served pharmaceutical and medical device manufacturer customers globally from 23 logistics centers in 11 European countries with approximately 1,800 teammates, providing warehousing, transportation, and cold chain logistics, as well as value-added services such as order-to-cash, repackaging and relabeling of products. The acquisition was funded by available cash and is expected to dilute earnings per share in 2012, be neutral in 2013 and accretive hereafter.7 With the acquisition of Movianto Owens & Minor will add a large pharmaceutical distribution business to its current medical/surgical product business.
While the Movianto Group acquisition provides Owens & Minor an opportunity to lift its operation to a global scale, there will be many challenges: Integrating the Owens & Minor structure, culture, and values with the employees and organization of the Movianto Group, managing enterprises in different geographies and time zones, conducting business across borders in Europe, dealing with different government regulations, exchange rates and health care delivery systems. Healthcare logistics differ between countries within the European Union and differ from the distribution industry found in the United States. Mr. Smith and James L. Bierman, Executive Vice President & Chief Operating Officer consider what they will find, what they will need to bring or build, and how the firm should organize itself in the European market to grow the Movianto distribution business.
COMPANY BACKGROUNDS Owens & Minor, Inc. Owens & Minor, Inc., a Fortune 500 company headquartered in Richmond, Virginia, is a leading national distributor of name-brand medical and surgical supplies and a healthcare supply-chain management company. With a diverse product and service offering and distribution centers throughout the United States, the company serves hospitals, integrated healthcare suppliers, and the US federal government. The company provides technology and consulting programs that improve management and streamline logistics across the entire medical supply chain—
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 2 from origin of product to patient bedside.8 For the first 110 years, the company provided pharmaceutical, and medical and surgical supplies to drugstores and hospitals throughout selected areas of the United States. In 1992, the company made a decision to sell their wholesale drug business and focus entirely on the medical/surgical marketplace.
Through the strategic acquisitions of other medical-surgical distributors over the decades, Owens & Minor gained national strength and stature to become the industry leader they are today. Currently, the company’s 4,800 (US) teammates in 51 distribution centers and the home office serve 4,500 hospitals, integrated healthcare systems, alternate care locations, and the federal government with a comprehensive offering of medical and surgical products. The majority of the company’s sales are consumable goods, such as disposable gloves, dressings, endoscopic products, needles and syringes, sterile procedure trays, surgical products and gloves, and urological and wound closure products. Owens & Minor has established a great reputation for providing superior, world-class service and continually strives to exceed their customers’ expectations.9 In 2010 Owens & Minor was recognized as the leading firm in the U.S. supply chain management industry.
Celesio Group (Stuttgart, Germany) Celesio is a leading international trade, logistics and services company working in the pharmaceutical and healthcare sector that proactively and preventively ensures that patients receive optimum care and support. It operates in 27 countries worldwide and employs around 46,000 people. With more than 2,200 owned pharmacies and 4,500 partner and brand partner pharmacies Celesio looks after more than two million customers daily. Celesio supplies around 65,000 pharmacies and hospitals with up to 130,000 medications through approximately 140 branches. 10 The firm operates in three segments: 1) pharmacy solutions, 2) patient and consumer solutions and 3) manufacturer’s solutions.
The pharmacy solutions segment is engaged in the pharmaceutical wholesale business. It operates more than 130 wholesale branches to cater to the needs of about 65,000 pharmacies on a daily basis. The segment supplies a range of products from pharmaceutical manufacturers to pharmacies. It operates its pharmaceutical wholesale business in twelve European countries and Brazil through its subsidiaries. The segment is also involved in pharmacy fittings and equipment business through Rudolf Spiegel Versand. In addition, it operates a development and marketing firm for pharmacy locations.
The patient and consumer solutions segment is engaged in the pharmaceutical retail business. It operates about 2,300 retail pharmacies in seven countries to serve over 550,000 customers every day. In the UK, the segment operates 1,700 retail pharmacies with Lloyds Pharmacy. It also operates mail-order pharmacies in Germany represented by Apotheke DocMorris, as well
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 3 as in the UK and Norway. The segment expanded its operations in Sweden in early 2010. Issues over government regulations led to the sale of Doc Morris in 2012.
The manufacturer’s solutions segment offers logistics and distribution solutions to pharmaceutical manufacturers and also supports them in sales and marketing. The segment offers specialized pharmaceutical logistics and related services such as storage, order picking, transport and packing in twelve European countries through Movianto. It provides marketing and sales solutions to pharmaceutical companies, including personnel services, direct marketing for OTC and medical products as well as sales support through Pharmexx which supported about 250 customers in 23 countries in 2009. The segment also operates a specialty pharmacy through its subsidiary, Evolution Homecare, to provide medical treatment at home.11 Pharmexx was sold in 2012 as part of Celesio’s restructuring.
Movianto GmbH The Movianto Group, a subsidiary of Celesio since 2004, is committed to being the preferred contract logistics service provider to the pharmaceutical, biotechnology and healthcare industry. The firm was built through a combination of acquisitions and organic investments to offer outsourcing services along the supply chain such as warehousing, transportation, cold chain logistics as well as re-packaging and re-labeling. Movianto’s international clients benefit from a pan-European network, the broad range of healthcare logistics services, the know-how of the local markets and uncompromising quality standards.
The Movianto Group has expanded rapidly over the last few years. More than 1,800 healthcare experts are managing over 275,000 pallet places spread over a network of wholly owned subsidiaries in 11 European countries. They provide a full range of innovative logistics and distribution services to store and deliver the goods for the pharmaceutical industry and beyond. Today the Movianto Group is represented in Belgium, Czech Republic, Slovakia, Denmark, France, Germany, Netherlands, Portugal, and Spain (Exhibit 1). Movianto developed a logistics network across Europe with local and regional warehouses plus a Central European Warehouse (CEW) from which to replenish the other sites (Exhibit 2). Movianto provides end-to-end services (Exhibit 3) from manufacturer to consumer or patient. In accordance with national regulations Movianto is able to ensure proper handling and storage for products which require special handling. In addition, the large scope of their operations allows them to ensure proper custody and control of product, thus reducing any concerns or liability for manufacturers (Exhibit 4).
THE PHARMACEUTICAL SUPPLY CHAIN IN EUROPE
The traditional structure of the pharmaceutical distribution supply chain in Europe is dependent upon the wholesalers for a variety of services including quality products, sufficient safety Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 4 stock,14 timely service, and storage of inventory at prices established by the government. Current supply chains move product from one player to another: transport to CEW, then to distributors and via local transport to points of use (Exhibit 5). Wholesalers operate as outsourced logistics operators—hubbing and distributing on behalf of manufacturers and as high-service aggregators and as outsourced managers for retail pharmacies. This allows pharmacies to receive “just-in-time” deliveries (between 2 to 5 per day), lowering the required invested capital on inventory in the shop. Most medicinal products (80 to 90%) are obtained by patients from an individual pharmacist who has their own neighborhood shop. The pharmacy retail business is both highly distributed (thousands of independent locations in each country) and highly fragmented due to the prevailing ownership restrictions that have historically blocked pharmacy chains from developing (Exhibit 6). This industry structure, especially in countries where fragmented ownership prevails, requires a distribution network that efficiently, safely and securely moves prescription inventory from a wide range of manufacturers to a highly distributed retail network (Exhibit 7).
On the supply side there are approximately 3500 manufacturers supplying the retail pharmacy market. Given that the customer base is so highly fragmented there currently is no centralized distribution network. Except in countries where chain and government-owned pharmacies are permitted the retail pharmacies may be owned by the distributors. Pharmacies could procure large batches of medicines from manufacturers, however, the result would involve large storage expenses with low inventory turnover, and the working capital required would be uneconomical.15 Furthermore, most pharmacies are in cities and do not have the physical space required to store large volumes of product. As a result, some pharmacies receive up to three deliveries a day.
European countries which allow modern ownership of retail pharmacies such as Ireland, United Kingdom, Netherlands and Norway have significantly fewer pharmacies per inhabitant (Exhibit 6). Additional suppliers such as mail order (1%) or internet pharmacies provide new sources of supply for patients with chronic ailments and who can plan their purchases in advance. Similarly some manufacturers have initiated sending product directly to the pharmacy (9%) effectively circumventing the wholesale market altogether (Exhibit 8). However, these new sources of supply were seen by many as disrupting the established wholesaler/pharmacy relationship and received severe resistance from established pharmacists. A Dutch internet pharmacy which opened a branch in Germany was sued. Critics felt alternative sources of supply could eventually do away with the country’s established system of pharmacies owned by individual pharmacists.16 Some pharmacists protested the legality of the online discounter on the grounds that they wouldn’t be able to match its prices.17 The case was appealed to European Court of Justice to assess the apparent contradiction between German’s pharmacy
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 5 law and the European Union’s freedom of establishment law. Paradoxically, online retailers offered product at price levels similar to prices established by the government for brick and mortar pharmacies which allows for increased margins to the online distributors.18
Local pharmacies within the European Union are serviced by a variety of suppliers. Most important to the distribution of pharmaceuticals are full-line wholesalers who carry the complete assortment of medicines available in one country. Full-line wholesalers often provide a variety of added value services to both manufacturers and retailers and may operate under either a one-channel or a multi-channel system. Under a one-channel regime pharmaceutical companies conclude an exclusive distribution agreement for their product range with a single wholesaler. Multi-channel system products are carried by all wholesalers at the same time. European Union member states established a multi-channel distribution system, except Sweden and Finland.
Short-line wholesalers offer only a limited product range and do not provide a wide range of services like the full-line wholesalers do. In several countries, pharmaceutical wholesalers are legally obligated by the government to provide the full range of products to pharmacists, thus prohibiting short-line wholesaling in these countries.
Full-line wholesalers either operate on a national or regional level with distribution networks strategically placed throughout a country or they only serve retail pharmacies, hospitals and other dispensing sites in a limited geographical area. Between 75% (UK) and 96% (Spain) of medicines supplied to retail pharmacies are delivered by full-line wholesalers.19 Pharmaceutical wholesalers operate in a market that has changed dramatically since the early 1990s. Government regulation of pharmaceutical sales increased in an effort to reduce public spending on pharmaceuticals resulting in a process of market consolidation in order to increase economies of scale.20 Added value services are among the key competitive advantages of the pharmaceutical wholesaling sector.21
Wholesalers differentiated themselves by providing additional services which benefitted the manufacturers or the pharmacies such as: pre-wholesaling (Exhibit 9) or inventory management or data analysis—receiving additional compensation on a fee-for-service basis (Exhibits 10 and 11). Most wholesalers were compensated by the difference between the cost from the manufacturer and the price they charged the pharmacy. Discounts offered by the wholesalers to the pharmacy attracted business and created loyalty to the wholesaler but reduced the wholesaler’s profits. Patients paid the pharmacists a price established by the government for which the patient was often reimbursed under the state health plan.
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Industry Consolidation The European pharmaceutical distribution market is becoming increasingly consolidated. Three players—Alliance UniChem (United Kingdom), Celesio (Germany), and Phoenix (Germany)— controlled more than 60 percent of the distribution market, with combined sales of more than 50 billion euros. These players grew through local market consolidation (purchase of domestic competitors) and horizontal integration (cross-border acquisitions). Their dominance over the supply chain ensured point-of-sale relationships with pharmacists. Some critics raised concerns about patient safety, quality of public service and regular stock-outs, and erosion of pharmaceutical manufacturer revenues due to parallel trade activities. Yet, most wholesalers vehemently opposed changing their traditional business model of fragmented pharmaceutical wholesaling in Europe.22
COMPETITORS The acquisition of Movianto by Owens & Minor is as one of “the latest in a growing series of cross-border healthcare-distribution deals. UPS acquired Pieffe, an Italian drug distributor last year, and failed in 2012 to finalize acquisition of TNT Express (which has healthcare operations in addition to other industries’ products) due to regulatory concerns. Walgreens, the big US chain pharmacy, is acquiring Alliance Boots, which is both a large pharmacy chain and a drug wholesaler, mostly in Europe. Also this year, AmerisourceBergen acquired World Courier, an international clinical-logistics firm. Cardinal Health significantly expanded its footprint in China by acquiring a major wholesaler there. While the logic of consolidating logistics operations globally is compelling, the intricacies of local markets and trading practices traditionally made international operations difficult. Global trading will only increase as the policies of at least national health authorities (as opposed to commercial practices) become more harmonized.23
Express delivery companies are trawling for acquisitions because growth in pharmaceutical logistics is expected to average 7.6 percent in coming years, reaching 63 billion euros by 2015, according to the research firm Transport Intelligence Ltd. Companies active in these markets include Deutsche Post, its U.S. competitors United Parcel Service (UPS) and FedEx Corp. as well as the Swiss freight-forwarding company Kuehne & Nagel International AG and the Danish trucking company DVS A/S.24 Express delivery companies will need to develop capabilities beyond taking a package from one location to another. Pharmaceutical products require special handling and controlled temperatures, must be delivered upon short notice, etc.
Deutsche Post, UPS, FedEx and other shipping companies have focused on growing their healthcare logistics units to take advantage of surging demand for drugs, aging populations and the higher profit margins that such packages typically bring. Deutsche Post’s DHL express unit cited healthcare as one of the areas driving growth. In 2006, the company won a 10 year
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 7 contract to supply as much as L 3.7 billion ($5.9 billion) a year of goods to the U.K. state-funded National Health Service.25
The logistics of European pharmaceutical product distribution remains to a large extent the business of the more than 700 full-line wholesalers making deliveries up to three times a day to the roughly 130,000 pharmacies in Europe. Although there are many wholesalers, the picture is quite different from country to country. Whereas in Italy and Spain there are about 130 and 60 wholesalers respectively, the number of wholesalers shrunk in France (13), the UK (11) and Germany (15). Significant consolidation led to the emergence of the three dominant groups; Phoenix, Alliance, and Celesio, which in France accounted for about 80% of sales, in Germany 60%, the UK 55%, Italy 40% and Spain 40%. There were no restrictions on foreign ownership of wholesalers, as cross-border consolidation demonstrated. However, none of the three major groups could offer pan-European distribution as each lacked depth in some countries. For example, Alliance was strong in the UK, France and Italy, but weak or not present in Spain and Germany. Celesio, on the other hand, was strong in Germany, France, and the UK, but hardly present in Italy and Spain. Phoenix was strong in Germany and Italy, but weak in France, the UK and Spain. The European Commission was studying the pharmacy retail market and expected that in the next three to five years, ownership restrictions would be further lifted, enabling more vertical integration.26
Alliance Boots Alliance Boots pharmaceutical wholesale businesses, together with its associates and joint ventures, supply medicines, other healthcare products and related services to more than 170,000 pharmacies, doctors, health centers and hospitals from over 370 distribution centers in 21 countries.
Its businesses provide high core service levels to pharmacists in terms of frequency of delivery, product availability, delivery accuracy, timeliness and reliability at competitive prices. Alliance Boots also offers its customers innovative value-added services which help pharmacists develop their own businesses. This includes membership of Alphega Pharmacy, a leading network for independent pharmacies, which has a membership of over 4,400 pharmacies in six countries.
In addition to the wholesale of medicines and other healthcare products, Alliance Boots provides services to pharmaceutical manufacturers who are increasingly seeking to gain greater control over their product distribution while at the same time outsourcing non-core activities. These services include pre-wholesale and contract logistics, direct to pharmacies, and specialized medicine delivery, including related home healthcare.
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Combined with local engagement, scale is very important in pharmaceutical wholesaling. In addition to being the largest pharmaceutical wholesaler/distributor in Europe, Alliance Boots typically ranks as one of the top three in the individual countries in which it operates.27
In October 2012, Walgreens’ the largest U.S. drugstore chain, announced it formally set up a new company, jointly owned with Alliance Boots to be based in Bern, Switzerland.28 Walgreens purchased a 45% stake in Alliance Boots for $6.7 billion. Walgreens is expected to take over Alliance Boots by 2015 in a deal that will create one of the largest drugstore and pharmacy retail chains in the world. At that time, Alliance will also gain presence in the United States.29 The combined company will handle 10% of the world’s prescription volume and delivery of products to 170,000 pharmacies, doctors, health clinics and hospitals around the world.30
Phoenix Pharmahandel (Mannheim, Germany) Phoenix Pharmahandel is expanding in Europe. The company is one of the largest pharmaceutical wholesalers in Germany and in Europe, with a presence in about two dozen countries. It delivers some 100,000 products to pharmacies, hospitals, nursing homes, and other retail and health care outlets through some 160 offices across the continent. Phoenix also provides pharmacy management services and runs an online ordering system, and operates the Rowlands and Newmark pharmacy chain in the UK. The company is owned by Germany-based Merkle Group, a conglomerate controlled by the Merkle family.31
The company operates in three primary business sectors: 1) Wholesale business: The pharmaceutical wholesale business is the most important link in the pharmaceutical supply chain. Phoenix operates in this sector in 22 markets of their country portfolio. Their wholesale customers are public pharmacies, hospital-supply pharmacies, primary care pharmacies run by dispensing doctors, and medical institutions, 2) Retailing: Public pharmacies are essential for reliable, secure, and community-based provision of pharmaceuticals. The local pharmacists also play an important role in healthcare by providing competent advice directly to patients. The Phoenix group operates a total of around 1,550 dispensing pharmacies in 12 European markets and 3) Supplier Services: Phoenix provides expertise as a logistical service provider to companies in the pharmaceutical industry in 19 countries. They manage cold chain and narcotics in addition to regular drugs and pharmaceutical products, on behalf of the pharmaceutical manufacturers. These goods place heavy demands on the logistical processes in terms of careful handling and security. Value added services complete their extensive portfolio of services available to their customers.
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INDUSTRY TRENDS Outsourcing distribution and the rise of Pre-wholesalers Increased competition for new blockbuster drugs, generic substitutes and rising costs pushed pharma manufacturers to outsource activities previously conducted in house. Research and development costs to develop new blockbuster drugs increased significantly. Complex compounds require greater time to obtain government approvals. Partnerships with biotech firms for specific compounds can be less expensive than maintaining fully staffed research facilities themselves. Within Europe and the US, manufacturers are striving to rationalize production and distribution costs. Although direct delivery of pharmaceutical products to dispensing sites is an option, it is not economically viable due to pharmacy space constraints coupled with availability of twice-daily deliveries through the wholesale channel. Consequently, pharmaceutical manufacturers are increasingly recognizing distribution as a non- core activity and are outsourcing their regional distribution to specialist pharmaceutical pre- wholesalers licensed to handle pharmaceutical products with the ability to process and deliver orders though the supply chain properly. Two key aspects distinguish pre-wholesaling from the traditional wholesale channel:
Manufacturers retain title to goods through the distribution process. This sales visibility (without expensive repurchase of data from infomediaries) means production can be targeted to best satisfy demand.
Manufacturers are assured that product is stored and handled in compliance with licensed practices. 32
Thus, manufacturers continue to off load secondary activities such as pre-wholesaling, labeling, packaging, and logistics in order to devote attention to their core competencies and save on time, costs and infrastructure.33 Liam Fitzgerald, chief executive of United Drug stated that “wholesalers can achieve more weight in the industry by either backward integration to provide products/services to manufacturers or by forward integration to provide products/services to customers.”34 Services to manufacturers include subassembly functions, packaging, printing, finishing, reimbursement consulting, patient access/advocacy, AR and chargeback management, inventory management, information management, contract sales and pre- wholesaling. Services to customers include dispensing and delivery, operating pharmacies, repackaging drugs, delivering automation technology, staff recruitment / training, practice management, disease management, inventory management, medical education, clinical trial recruitment and information outsourcing.
In Europe, Alliance/Unichem, Celesio and Phoenix have been slowly diversifying their business models in a bid to offer outsourcing services to big pharma manufacturers in order to stay
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 10 viable….In the past such outsourcing contracts have always been arranged on a per-country basis between the big pharma firms and the local country branch of the pharmaceutical wholesaler.35 In the United States Merck sent at least 80% of its U.S. drug distribution through two facilities in 2008. Previously Merck handled distribution in-house from dedicated warehouses working with a number of transportation service providers. The agreement with UPS allowed Merck to reduce costs and focus resources on core drug discovery and new compound development activities.36 Based upon the success of the first two warehouses UPS would open a distribution facility in the Netherlands in early 2010. “Many aspects of the European healthcare market remain unique—as in each regional market—and despite the European Union’s intentions of facilitating cross-border trading, there are still many different jurisdictional requirements in place across Europe. Most countries have an individual approach to things like labeling requirements, so that means more special kitting and so on.”37
Direct to Pharmacy (DTP) In 2007 some manufacturers (9% in Exhibit 8) began shipping product Direct to Pharmacy (DTP) in an effort to reduce the handling and charges paid to middlemen in the distribution chain and to ensure proper management of controlled substances in the channel. Fierce economic pressures from competition, fuel and transportation price shocks, and increased regulation pushed drug manufacturers and health product shippers to look at entrusting their logistics operations to cost-cutting third-party experts in a Direct to Pharmacy (DTP) distribution process. “An increasing number of branded pharmaceutical manufacturers are seeking further efficiencies and control by switching from selling via multiple pharmaceutical wholesalers to either selling direct to pharmacies using relatively few distributors, such as Alliance healthcare, to deliver the product, invoice customers and collect payments, or selling via a select number of national wholesalers such as Alliance Healthcare.”38 Under that model, manufacturers enter into contracts with certain wholesalers to deliver products to pharmacies on their behalf, missing out on general wholesalers. Phoenix Healthcare took an L 37m charge in 2007 when pharmaceutical giant Pfizer chose to switch to a direct to pharmacy (DTP) model. In its latest accounts, Phoenix again warned that it could be affected if more manufacturers switch to that model—which it said “reduces wholesalers’ ability to compete with competitors on the basis of service and discounts offered to customers, and also reduces choice.”39
Favorable demographic trends in UK will spur demand for homecare services Senior citizens and their families increasingly look for healthcare solutions that let at-risk senior citizens manage their health and wellness at home. In the UK, there are more people over the age of 60 years than under and the number of people more than 60 years old is forecasted to rise to 38% of the total population by 2016, and 40% by 2026. The number of people aged 45 to 60 years is growing at the rate of 50,000 every month in the UK. According to NHS
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 11 estimates, healthcare spending in the UK increased from L65.4 billion in 2003 to L105.6 billion in 2008. Distributors and wholesalers could gain significant revenues, as the growing homecare market in the UK and rising healthcare spending fuels the demand for Celesio’s Evolution Healthcare’s patient care and support services.40
Debt Crisis Countries hit hardest by the financial debt crisis—Greece, Spain, Portugal and Ireland— struggled to bring down their debts. They raised taxes, laid off workers, reduced services and begun charging for medical care that had been free for decades. Each country had its own formula. But they were joined in the misery of trying to make do on less—and then even less. Many cancer patients cannot afford the expensive drugs they need.41 Greece once had an extensive public health care system that ensured near-universal coverage. But reducing costs yet again, public hospitals instituted new fees and co-payments that many poor and unemployed residents could not afford. At the same time, several drug companies, tired of not getting paid, stopped supplying some of their drugs to the country’s hospitals.
Citizen Unrest and Loss of Productivity Austerity measures implemented by welfare states severely limits healthcare delivery to citizens. In Sweden many patients have to wait weeks, months, or even years to take advantage of various public services. In the average Swedish municipality, the wait time for elderly care is almost two months. In some parts of Sweden elderly in need of aid have to wait on average 150 days. Behind the statistics lies an even more disturbing reality. Municipalities do not like to report long waiting times. Therefore officials can delay the process of actually registering applications for elderly care, as well as other welfare services. The healthcare guarantee in Sweden means that a patient can wait 90 days before seeing a specialist and an additional 90 days for the actual treatment to take place. Only after this contract has not been fulfilled can you seek help abroad—180 days after initially seeking treatment.42
Cost containment measure in Europe affects wholesaler margins Prices of pharmaceutical products could be restricted by price controls imposed by government and health care providers in most countries apart from normal price competition in the marketplace. Requirements governing product pricing vary widely from country to country and can be implemented disparately at the national level. In many countries the prices for the group’s products are regulated.
Many governments introduced healthcare reforms in an attempt to curb increasing healthcare costs. In response to rising healthcare costs, many governments and private medical care providers instituted reimbursement schemes that favor the substitution of generic pharmaceuticals for more expensive brand-name pharmaceuticals. For instance, a 15-18%
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 12 reduction in the price of all generics and branded pharmaceuticals for which a generic exists came into force in France in 2006, in addition to the introduction of lower reimbursement rates for certain products and larger pack sizes with lower percentage margins. In the UK, prices for generics were reduced effective October 2009. Prices for generics were cut by 30% in Portugal effective October 2008. Changes in coverage and reimbursement policies or healthcare cost containment initiatives that limit or restrict reimbursement for the group’s drugs have a negative impact on wholesaler profitability.43
Intensifying competition could lead to a pricing war Competition from direct competitors and alternative supply sources, including importers, domestic traders and manufacturers who supply products direct to pharmacies or patients intensified. The parent companies of some of the largest pharmacy chains in the UK also have pharmaceutical manufacturing or wholesale operations.44
Governmental Issues A special law in Germany prohibits the consolidation of pharmacy chains—pharmacists can only operate up to four pharmacies. Celesio had high hopes the EU would force Germany to repeal this law, and bought the Dutch mail-order pharmacy Doc Morris in 2007 for nearly 200 million euros in order to penetrate the German market. However, the law was upheld by the European courts in 2009.45 Celesio sold Doc Morris pharmacy business in mid-2012.
A Bernstein Research report published in 2007 compared the largest markets in Europe. Their analysis highlighted the flows of product, cash, inventory and also the reimbursement structures of each of these countries. They examined the role of governments as regulatory bodies (setting pricing of medicines, restricting margins that can be earned in the supply chain), and also as providers of revenue (for both medicines and services). Summaries of their analysis of three countries (UK, France, and Germany) are provided in Exhibits 13 through 15 of this paper.46
Movianto faces additional variations doing business in the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) where there are five languages, four currencies, five sets of legislation, and five medical agencies with different interpretations of the EU Guidelines. Distribution channels also vary in each country. Finland is characterized as a single channel market with product moving from manufacturers to competing logistics providers to wholesalers and on to end users (Exhibit 16). Norway is characterized as a multi-channel market with third-party logistics companies at multiple points in the distribution chain and deliveries through multiple wholesalers to a variety of end users (Exhibit 17). Additional providers and complexity exist in Denmark and Sweden with multiple players at the wholesale
Copying or posting is a violation of copyright. USC Marshall School of Business, University of Southern California, February 2013. Page 13 stage and duplicate distribution channels for Over-The-Counter (OTC) products versus products requiring a prescription (Rx) (Exhibits 18 and 19).
ALTERNATIVE MODELS OF HEALTHCARE LOGISTICS AND DELIVERY Delivery of quality healthcare in Europe requires examining many contributing factors that currently work against a timely and cost effective alternative. The time has come for the pharmaceutical industry to change its distribution model. Changes to the traditional European wholesaler model which is characterized by a mix of route-to-market strategies with wholesalers taking the central position would alleviate some of the inefficiencies currently in the delivery system. A Booz and Company reviewer in 200748 suggested several alternatives— each with pros and cons (Exhibit 20). Perhaps additional alternatives can be found.
Alternative models for alleviating these issues need to be considered and tradeoffs evaluated. Specifically, Owens & Minor needs to consider what actions to take in integrating the Movianto acquisition into the Owens & Minor organization. How much direction should Movianto receive from Owens & Minor? Should Movianto stand alone as a European subsidiary or be integrated with Owens and Minor? What opportunities exist for improving the delivery system across the European Union? Which activities should be implemented first? Which, if any, services that O&M provides in the United States could be successfully launched in the European Union? Craig Smith and James Bierman consider how to integrate the Movianto acquisition and deliver quality health on a global scale. What recommendations do you have for them?
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APPENDIX A--Terms and Definitions
Biological--Medicinal preparation made from living organisms or their by-products (e.g., vaccines, antigens, serums, and plasmas); also called a biologic.
Cold Chain – It is vital for some medicines to remain in the cold chain as leaving it even briefly can reduce product efficacy and shelf-life. Movianto carries out up to 50,000 cold chain deliveries per month in temperature monitored vehicles. The extensive transportation fleet also enables 24-hour delivery within the U.K. (http://ww.movianto.com/en/locations/UK/index.html).
Formulary--Select list of drugs that a healthcare insurer has approved for reimbursement.
Generic Drug--A compound that contains the same active ingredients as a branded drug. A company cannot market a generic version of a rival’s branded product until the patent expires on the branded drug.
Negative List--List of medicines that a government or health insurance fund will not include in its coverage. Negative lists usually include medicines that have not proven to provide therapeutic benefits.
NME--New molecular entities
Over-the-counter (OTC) drugs—Medicines sold in pharmacies and other outlet without need of a prescription.
Reference Pricing—A system that sets the reimbursement rate or price for a group of similar drugs, including generics. Often a reference system sets a price based on the average of the same or similar products in that or several similar markets. If a medicine is priced above the reference price, the consumer has to pay the difference.
Wholesale-Full line--A full line pharmaceutical wholesaler offers a full range of pharmaceutical product lines, including products that are not typically kept in stock by pharmacies and therefore require twice daily delivery from wholesalers.
Wholesale-short line--A short line wholesaler offers a limited range of pharmaceuticals (typically, fast moving product lines that sell in large quantities) that do not necessarily require frequent deliveries to pharmacies.
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APPENDIX B
Owens and Minor Statement on Company Culture
Owens & Minor’s culture is reflective of its mission, vision and values. We have long felt that the way we treat our teammates is the way they treat our customers and that if we take great care of our teammates, they will take care of us.
Teammates are the company’s greatest asset and the culture focuses on these things. First is letting teammates know that we care very much about them. When people know you care, they will move mountains for you. They will almost always strive to exceed your expectations. Second is letting teammates know they make a difference regardless of the position they hold in the company. If a teammate feels that what they do contribute to the success of the company, they are extremely happy and productive.
Last but certainly not least, we give our teammates the freedom to express themselves. Our leadership team is continually asking teammates questions such as, “What are we doing right? What are we doing wrong? What do we need to do to make Owens & Minor the best company in America? And most of all, “What do you need from our leadership team to be more effective in your job?”
Communication is the glue that holds organizations together, and our goal is to ensure that we communicate with our teammates in the most efficient and expeditious manner. Our mantra in terms of communication is the KISS method (keep is simple and sincere).
Source: http://www.owens-minor.com/companyinfo/whoisom/culture retrieved December 31, 2012.
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Exhibit 1.
Exhibit 2.
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Exhibit 3.
Exhibit 4.
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Exhibit 5.
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Exhibit 6.—Pharmacies in Europe—Commercial Pharmacy Chains Exist Only in Ireland, United Kingdom, Netherlands and Norway.
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Exhibit 7.—Pharmaceutical Supply Channels in Europe: Wholesaler Through to Patients—Prescription Medicines by Volume.
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Exhibit 8.—European Pharmaceutical Distribution Landscape
Movianto overlaps these
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Exhibit 9.—Pre-Wholesale Services.
Exhibit 10.—Next to their standard activities, full-line wholesalers conduct specialized activities.
Source: BG Pharma, Roland Berger, 2007.
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Exhibit 11.--Added value services for wholesaler’s clients.
Automated order processing and order aggregation Reduction of inventories by just-in-time delivery up to 6 times a day High service levels (almost 100% of all orders received are executed the same day) Special handling for difficult pharmaceuticals Collection of outdated drugs Product recalls Collection of packaging waste Emergency deliveries Purchase and sales analysis IT-solutions for pharmacies Stock counting aid Financial services (terms of payment, loans, insurance, consultancy) Own brands (generics) Marketing programs (sales analysis, patient information leaflets, shop design, promotion literature) Staff education and training.
Clement, Werner, Tuma, Martin, and Walter, Evelyn, The European Pharmaceutical Wholesale Industry: Structure, Trends, and Socio-economic Importance. Vienna, Austria, Institute for Pharmaceutical Research, 2005, p. 58.
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8.03
9.85
29.5
7.64
17.82
16.26
11.37
14.55
12.39
61.16
31.87
17.54
44.47
37.97
33.19
28.93
68.51
36.86
31.33
41.17
87.55
30.63
46.92
46.53
43.88
Share Price
240
344
355
260
183
1,448
1,400
2,106
1,198
1,093
3,400
3,700
5,000
6,950
4,100
7,059
4,800
10,800
15,000
16,000
24,000
15,000
44,944
13,400
32,500
Employees
52 M 52
134 M 134
265 M 265
193 M 193
181 M 181
313 M 313
433 M 433
892 M 892
867 M 867
763 M 763
840 M 840
6,381 M 6,381
2,220 M 2,220
2,003 M 2,003
1,456 M 1,456
7,611 M 7,611
4,004 M 4,004
6,974 M 6,974
7,704 M 7,704
1,942 M 1,942
12,688 M 12,688
10,490 M 10,490
47,453 M 47,453
10,957 M 10,957
14,909 M 14,909
Market Cap
-
-
-
-
-
-
24.1
3.3448
29.0357
18.8765
25.0945
184.375
23.6543
14.8902
18.5419
22.7795
13.5933
18.7107
17.1542
20.8452
18.0177
14.2614
16.6179
13.8423
103.3636
PE RatioPE
7,567,782
9,777,000
18,244,186
23,420,287
56,891,000
33,485,000
40,535,000
198,249,000
158,876,000
629,517,000
362,523,000
530,242,000
584,295,000
815,000,000
768,842,000
1,837,857,000
1,364,166,000
3,257,000,000
4,530,577,000
9,937,000,000
2,307,922,000
1,028,728,000
15,970,000,000
12,987,414,000
18,016,000,000
Total Liabilities
33,858,890
37,647,766
76,483,000
178,061,480
199,392,000
145,563,000
721,769,000
361,112,000
434,812,000
935,594,000
1,123,562,000
2,137,869,000
1,405,696,000
1,627,600,000
1,155,970,000
3,347,892,000
2,739,368,000
8,488,000,000
9,005,193,000
4,740,144,000
1,946,815,000
21,290,000,000
33,083,000,000
15,444,126,000
24,260,000,000
Total Assets
8,243,490
7,173,000
18,642,000
11,862,089
10,755,000
82,022,000
58,320,000
26,793,000
(2,703,970)
(2,292,000)
316,839,000
275,296,000
243,900,000
171,217,000
469,939,000
385,409,000
683,000,000
638,191,000
224,715,000
(46,754,000)
1,287,082,000
1,219,000,000
5,127,000,000
1,377,084,000
2,034,000,000
EBITDA
752,000
(694,000)
5,214,973
9,739,000
7,428,429
3,201,000
44,669,000
31,337,000
74,319,000
(5,455,503)
(5,094,000)
254,850,000
136,115,000
120,800,000
319,309,000
212,815,000
293,000,000
825,793,000
441,000,000
367,661,000
115,198,000
718,986,000
(69,849,000)
3,617,000,000
1,069,000,000
Net Net Income
-
72.7
9.94
3.36
4.22
72.97
30.89
66.82
58.72
80.09
56.79
47.11
42.48
79.26
51.71
59.97
40.41
46.18
32.07
51.66
32.88
50.14
65.11
28.35
75.97
Gross Margin Gross
64,402,409
76,146,423
89,956,000
103,436,868
114,397,000
132,082,000
221,787,000
302,195,000
386,490,000
540,506,000
725,077,000
1,368,515,000
1,406,810,000
1,634,300,000
2,102,002,000
2,671,656,000
3,535,661,000
3,598,000,000
5,611,696,000
7,622,000,000
8,530,242,000
8,627,912,000
16,184,000,000
79,489,596,000
107,552,000,000
Revenues
Exhibit 12: Competitors (Public USA) 12: Competitors (Public Exhibit
AtriCure Inc AtriCure
Span-America Medical Span-America Systems, Inc.
Vascular Solutions Inc
Palomar Medical Technologies, Inc. Medical Palomar Technologies,
Chindex International Inc Inc International Chindex
PhotoMedex, Inc.
AngioDynamics Inc
ICU Medical, Inc. ICU
Cantel Medical Cantel Corp
Nuvasive Inc Nuvasive
Conmed Corp. Conmed
ResMed Inc. ResMed
Steris Corp.
Hill-Rom Holdings, Inc. Holdings, Hill-Rom
PSS World Medical Inc.
Pall Corp.
Patterson Companies Inc Patterson Companies
CareFusion Corp CareFusion
St. Medical, Inc. Jude
Boston Scientific Corp.
Schein (Henry), Inc. Schein (Henry),
Owens &Owens Minor, Inc.
Medtronic, Inc.
AmerisourceBergen Corp. AmerisourceBergen Cardinal Health, Inc. Cardinal Company Name
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Exhibit 13.-- Wholesale Channel Structure: Prescription Medicines in United Kingdom.
Key features of the U.K. pharmaceutical reimbursement system are:
― Wholesalers and retail pharmacies may be vertically integrated (as with Alliance Boots and Celesio) ― The Department of Health (DoH), through the Pharmaceutical Pricing Regulation Scheme, reimburses pharmacies monthly for their expenditure on reimbursable medicines ― Wholesalers typically carry roughly 25 days of inventory, and have gross margins capped at 12.5% (as a percentage of the price paid by the National Health Service [NHS]) ― Pharmacies are remunerated for “Essential Services” (e.g., dispensing), Advanced Services (Medicine Usage Review — MUR) and Enhanced Services (e.g., Stop Smoking); reimbursement for the MUR, for example, is £25 per review, with a maximum of 400 MURs per pharmacy ― Total remuneration to pharmacies in the United Kingdom has recently risen from £1,766 million to £1,911 million according to Celesio ― Dispensing earns a professional fee per prescription of 90p. In addition, extra fees can be earned for prescriptions which involve preparation, and for handling expensive prescriptions ― Pharmacies are able to retain sourcing gains (sourcing medicines below the reference reimbursement tariff), but this is subject to DoH clawback arrangements if “excessive”; the current six-month period is seeing £300 million taken out of the retail pharmaceutical market for this reason ― 85% of prescriptions are dispensed without charge to the patient; where patients must pay, there is a flat co- payment fee of £6.65 which is passed back to the DoH
In our view, the United Kingdom is entering a period of stability. The new pharmacy contract, which came into operation in April 2005, and service-oriented remuneration scheme are now complete. Government action to increase healthcare spending to levels seen in mainland Europe should enable growth in the budget available to pharmacy retailers, with a mix shift toward services rather than medicines. We believe the most at-risk area would be wholesaling profits, as the aim to put a margin cap on wholesaling leaves profitability at risk to falling NHS medicine tariffs.
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Exhibit 14.-- Wholesale Channel Structure: Prescription Medicines in France.
Key features of the French pharmaceutical reimbursement system are: ― Pharmacies cannot (at this time) be owned by wholesalers ― CEPS opines on the therapeutic value of a medicine; the category it assigns determines the reimbursement rate, at 35% (non-serious ailments), 65% (high medical value) or 100% (life-threatening disorders/expensive treatments) ― Wholesalers must carry 90% of the medicines approved for marketing in France; typically, they carry roughly 22 days of inventory ― Wholesalers face a tax of 1.9% on turnover, plus 2.25% of their year on-year change (increase) in revenues, which directly contributes to the social security budget ― Pharmacy and wholesaler gross margins are regulated on a regressive basis, which encourages the use of generic or lower-cost prescriptions (see Exhibit 12)
While having almost the lowest pharmaceutical prices in Europe, France has a high spend per capita, which may be due to low penetration of generics and/or the low price environment being associated with higher consumption patterns. The country is trying to stimulate the prescription of lower-cost medicines, and is rewarding the value chain with higher margins for lower-cost drugs. We believe this initiative to lower the per-capita drugs expenditure highlights a key requirement for wholesaler scale (Alliance Boots operates the second-largest wholesale operation in France, with some 30% market share), and an opportunity, for example, for Alliance Boots’ generic own-label Almus range, since there is no volume restriction, and the potential to leverage a largely fixed-distribution-cost base. Also, the French government exercises a clawback regime on the industry if national pharmaceutical expenditure rises faster than permitted. On the conference call following the recent Celesio third-quarter results, the company said France was debating a windfall tax of some 50 million from the pharmaceutical distribution chain, to save a total of 350 million from total pharmaceutical spend.
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Exhibit 15.--Wholesale Channel Structure: Prescription Medicines in Germany.
Key features of the German pharmaceutical reimbursement system are: ― Pharmacies cannot (at this time) be owned by wholesalers ― Wholesalers have come through a hugely disruptive time, with the 2004 Health Reform Bill effectively halving wholesalers’ gross margins to an average 6.2%. Today, wholesalers operate within regressive permitted gross margin bands (see Exhibit 14) ― Pharmacies are remunerated at the fixed rate of 8.10 per pack, plus 3% of the pharmacy purchase price of the medication; no discounts are permitted from wholesalers from the reference prices, which may reduce customer loyalty and encourage churn (ANZAG — 29.9% owned by Alliance Boots — points to this in its latest annual report) ― There are no industry clawback arrangements in Germany.
It should be noted, however, that incentives for managing down the prescription medicines budget are in place, including strict local budgeting, and bonuses for prescribers for meeting reducing costs We view Germany as a difficult market, but much of the pain of reform for pharmaceutical wholesalers appears to have been taken. While the country is looking for ways in which to lower its overall pharmaceutical spend, Germany has one of the highest generic penetration rates by value in the large Western European economies. To achieve lower spend per capita, the newly formed IQWiG may be able to reassess the benefits of some medications and de-list from reimbursement, or to renegotiate reference prices with suppliers. Given the semi-fixed nature of the wholesale remuneration framework, and the recent movements in pharmacy ownership (current legal proceedings challenging the closure of a Dutch chain in Saarland), on balance we view Germany as an opportunity, rather than a threat.
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Exhibit 16. – Finland: Single Chain Market.
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Exhibit 17. – Norway: Multi-Channel Market.
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Exhibit 18. – Denmark: Multi-Channel Market with Multiple Wholesalers.
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Exhibit 19. – Sweden: Multi-Channel with New Wholesalers entering.
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Exhibit 20.-- Alternative Distribution Models.
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END NOTES
1 http://www.owens-minor.com... Retrieved December 31, 2012
2 http://www.supplychainleaders.com/contract_logistics/movianto-acq... Retrieved December 31, 2012.
3 http://www.bloomberg.com/news/2012-03-02/deutsche-post-said-to-c…. Retrieved December 31, 2012.
4 http://www.owens-minor.com... Retrieved December 31, 2012
5 http://www.pmlive.com/pharma_news/celesio_sells_off_movianto_a.., Retrieved December 31, 2012.
6 http://www.supplychainleaders.com/contract_logistics/movianto-acq... Retrieved December 31, 2012.
7 http://www.in.reuters.com/finance/stocks/CLSGn.DE/key-developments/arti... August 31, 2012; Retrieved December 31, 2012.
8 http://www.owens-minor.com... Retrieved December 31, 2012.
9 http://www.owens-minor.com... Retrieved December 31, 2012. 10 http://www.owens-minor.com... Retrieved December 31, 2012.
11 Celesio AG: Strategy, SWOT and Corporate Finance Report. Marketline, September 2012. Reference Code: 3E6B2-0859-45CD-B327-1694CA9E4FD0.
14 Department of Health, Trading Medicines for Human Use: Shortages and Supply Chain obligations. Gateway number 15176, Department of Health, United Kingdom, December 2010.
15 Solca, Luca and Andrew, James, Alliance Boots: The European Pharmacy Supply Chain—How It All Really Works. Bernstein Research, April 2007.
16 Court Allows Controversial Discount Pharmacy in Germany. http://www.dw.de/court-allows- controversial-discount-pharmacy-in-germany/a-2126760 Retrieved 1/3/2013
17 Doc Morris Online Pharmacy Forced to Close German Branch. http://www.dw.de/doc- morris-online-pharmacy-forced-to-close-german-branch/a-2173360-1.
18 Internet Pharmacies Not Bringing Expected Savings. http://www.dw.de/internet-pharmacies- not-bringing-expected-savings/a-1243550).
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19 Clement, Werner, Tuma, Martin, and Walter, Evelyn, The European Pharmaceutical Wholesale Industry: Structure, Trends, and Socio-economic Importance. Institute for Pharmaceutical Research, 2005, p. 10.
20 Clement, Werner, Tuma, Martin, and Walter, Evelyn, The European Pharmaceutical Wholesale Industry: Structure, Trends, and Socio-economic Importance. Vienna, Austria, Institute for Pharmaceutical Research, 2005, p. 12
21 Walter, Evelyn, Dragosits, Aline, and Said, Monica; Distribution Profile and Efficiency of the European Pharmaceutical Full-line Wholesaling Sector. Vienna, Austria, Institute for Pharmaceutical Research, 2011).
22 Behner, Peter and Bunte, Dr. Matthias, Getting to Grips with The Supply Chain: How Pharmaceutical Companies Can Enhance Patient Safety and Protect Revenues by Increasing Their Control of Drug Distribution. Booz & Company, 2007).
23 http://www.pharmaceuticalcommerce.com/business_finance?articeid.. Retrieved December 31, 2012).
24 http://www.bloomberg.com/news/2012-03-02/deutsche-post-said-to-c... Retrieved December 31, 2012).
25 http://www.bloomberg.com/news/2012-03-02/deutsche-post-said-to-c... Retrieved December 31, 2012).
26 Cool, Karel, Zemsky, Peter, and Butler, Charlotte, Pfizer and the Distribution of Pharmaceuticals in Europe in 2009. France, INSEAD, 2011.)
27 http://www.alianceboots.com/our-group/pharmaceutical-wholesale.aspx.. Retrieved December 31, 2012.
28 http://news/walgreens.com/article_display.cfm?article_id=5658.. Retrieved January 1, 2013.
29 http://www.bizjournals.com/chaicago/news/2012/10/30/walgreens-alli... Retrieved January 1, 2013.
30 http://consultbfg.com/allianceboots-and-wag-a-new-model-for-pharma.... Retrieved January 1, 2013.
31 http://www.hoovers.com/company-information/cs/company-profile... Retrieved January 1, 2013.
32 Exel, Role of Pre-wholesalers in Generic Pharmaceutical Manufacturers’ Demand Chain Management Strategy. Business Briefing: Pharmagenerics 2003. Retrieved February 3, 2013.
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33 Astrazeneca: Transforming how new medicines flow to patients, UV6507. Charlottesville, VA, Darden Business Publishing, University of Virginia, August 16, 2012). Pfizer and the Distribution of Pharmaceuticals in Europe in 2009, 02/2011-5679. France, INSEAD, www.ccmp- publishing.com.
34 Barnes, Kristy, Pharma wholesalers must evolve into service providers. Outsourcing – pharma.com, 27 June 2006. http://www.outsourcing-pharma.com/content/view/print/144431
35 Barnes, Kirsty, Nomenco bags region’s biggest pre-wholesaling contract. Outsourcing- pharma.com, July 11, 2006. http://www.ooutsourceing- pharma.com/copntent/view/print/100431 Retrieved February 3, 2013.
36 Hoffman, William Logistics Rx, The Journal of Commerce, January 26, 2008, p. 22. http://www.joc.com.
37 UPS moves into the European healthcare theatre. www.scemagazine.com, January/February 2009.
38 Alliance Boots 2011 Annual Report cited in Krishnamsetty, Meena, How the World’s Largest Drugstore Plans to Realize $1 Billion in Synergies. The Motley Fool, October 14th, 2012. http://beta.fool.com/insidermonkey/2012/10/14/how-worlds-largest- Retrieved January 1, 2013.
39 Houghton, Alistair, Sales up again at medical giant Phoenix Healthcare Distribution. Liverpool, UK, The Liverpool Post, October 18, 2012. http://www.liverpooldailypost.co.uk/Idpbusiness/busines-local/2012/ Retrieved 1/1/2013.
40 Celesio AG: Strategy, SWOT and Corporate Finance Report. Marketline, September 2012. Reference Code: 3E6B2-0859-45CD-B327-1694CA9E4FD0).
41 http://www.nytimes.com/interactive/2012/12/30/world/europe/eurocrisis- photos.html?nl=to... Retrieved January 1, 2013.
42 Sanandaji, Nima, Citizens shouldn’t pay for costs of long healthcare waiting times. December 10, 2012. http://www.thelocal.se/44978/20121210/...
43 Celesio AG: Strategy, SWOT and Corporate Finance Report. Marketline, September 2012. Reference Code: 3E6B2-0859-45CD-B327-1694CA9E4FD0.
44 Celesio AG: Strategy, SWOT and Corporate Finance Report. Marketline, September 2012. Reference Code: 3E6B2-0859-45CD-B327-1694CA9E4FD0.
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45 Scholl, Clemens, Celesio: An Undervalued Drug Wholesaler That Could Double in Price. May 3, 2011. (http://seekingalpha.com/article/267309-celesio-an-undervalued-drug... Retrieved December 31, 2012.
46 Solca and Andrew.
48 Booz and Company.
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