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Acquisition increases scale of generics distribution
Having just swallowed Cordis, a J&J subsidiary for which it finalized acquisition in May, Cardinal Health enters June with the purchase of The Harvard Drug Group (THDG), a $450-million/yr drug distributor based in Livonia, MI. THDG is owned by Court Square Capital Partners, a private equity firm; the acquisition is expected to close in early 2016.
"This acquisition enhances our ability to support retail and institutional customers and further utilizes Red Oak, our joint venture with CVS Health to source generics," commented George Barrett, chairman and CEO of Cardinal Health, in a statement. Red Oak, announced in 2013, is Cardinal’s effort to align more closely with leading retailers, following similar moves by AmerisourceBergen (with Walgreens). The company also noted that the acquisition expands Cardinal Health's existing telesales programs and capabilities; broadens the company's portfolio of OTC pharmaceutical products; and brings specialized packaging offerings to meet the needs of hospital systems and other institutions.
For the past two decades, US drug distribution has been consolidating among the Big Three: McKesson, Cardinal Health and AmerisourceBergen. Collectively they handle nearly 90% of primary distribution, and there’s only a few more national-scale distributors still independent of them. Most recently, the Big Three have been both aligning with retailers and expanding their international businesses; standing pat is not, apparently, an option.