Cardinal Health settles with DEA; expands in China, and buys another regional US distributor

Pharmaceutical CommercePharmaceutical Commerce - July/August 2010

Press reports of the acquisition of Dik Drug Co. remain uncorroborated by Cardinal

Although Cardinal Health protested vociferously when its Lakeland, FL, distribution center was suspended from distributing controlled substances by DEA in February, it has now settled with the agency. The penalty: a two-year suspension of controlled substances sales from the facility (operations for other distribution remain in place for the DC). Company officials indicated that it would continue to supply controlled substances for Florida, Georgia and South Carolina from its Jackson, MS, DC.

"This agreement allows us to put this matter behind us, and just as important, will clear the way for a more productive dialogue about how we and others in the health care and regulatory community can work together to prevent the abuse and misuse of prescription drugs," said George Barrett, chairman and CEO of Cardinal Health. The company is also obligated to improve anti-diversion processes.

Meanwhile, in a presentation at a Bank of America/Merrill Lynch conference recently, Cardinal CFO Jeff Henderson announced that the company’s 2010 acquisition of Zuellig Pharma China has progressed nicely; Cardinal has built two additional DCs, in Beijing and Shanghai, and says that it can now serve 250 million from its network of facilities there. Except for operations in Canada and Mexico, the others of the Big Three wholesalers do not have drug distribution businesses outside the US. What Henderson, or any other Cardinal executive, has not publicly confirmed is reports that it has acquired Dik Drug (Burr Ridge, IL), a privately held regional distributor. The news was broken by Adam Fein at, but as of May 15, Cardinal had still not issued a statement about it. Fein (a member of the Pharmaceutical Commerce Editorial Board) speculated that Dik’s annual revenues are around $2 billion, and noted that it is a part owner of Pharmacy First, a Pharmacy Services Administrative Organization (PSAO), which manages contracts between independent pharmacies and PBMs. Cardinal itself operates another PSAO, LeaderNet.

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