AmerisourceBergen is the source for many of North America's pharmacies and health care providers. The distribution company serves as a go-between for drug makers and the pharmacies, doctors' offices, hospitals, and other health care providers that dispense drugs. Operating primarily in the US and Canada, it distributes generic, branded, and over-the-counter pharmaceuticals, as well as some medical supplies and other products, using its network of more than two dozen facilities. Its specialty distribution unit focuses on sensitive and complex biopharmaceuticals. Other operations include pharmaceutical packaging. AmerisourceBergen also provides commercialization and consulting services to its customers.
The company operates through an alphabet soup of subsidiaries. Its main operating segment -- pharmaceutical distribution -- consists of its AmerisourceBergen Drug Corporation (ABDC) and AmerisourceBergen Specialty Group (ABSG). The company's remaining revenues (classified under the "other" segment) come from the AmerisourceBergen Consulting Services (ABCS) and World Courier (specialty logistics) units. Its AmerisourceBergen Packaging Group (ABPG) was taken apart in 2012 and its American Health Packaging and AndersonBrecon businesses were moved into other divisions. (AndersonBrecon was divested in 2013.)
Its primary distribution business, ABDC, offers a full range of generic and brand-name pharmaceuticals, over-the-counter products, and home health care supplies and equipment. Meanwhile, ABSG delivers specialty drugs for particular diseases (especially cancer) directly to the doctors who administer them.
The company's consulting services business helps retailers and manufacturers coordinate marketing programs to successfully launch new biotech drugs and increase sales of existing drugs. ABCS also provides sales tracking and logistics support, as well as research, field staffing, co-pay assistance programs, and risk mitigation services. In addition, the division provides group purchasing, merchandising, and managed care services to independent and hospital-based pharmacies.
The company operates about 30 distribution centers throughout the US and has 150 offices in more than 50 countries worldwide.
Sales and Marketing
AmerisourceBergen's ABDC division serves customers including hospitals and health systems, retail and mail order pharmacies, medical clinics, and long-term care facilities throughout North America. Pharmacy chain Express Scripts, the company's biggest customer, contributes about 24% of revenue.
Each of the company's segments have independent sales and marketing personnel who specialize in the unit's specific offerings. AmerisourceBergen also has a corporate marketing group for branding and broad-scale initiatives.
In 2013 revenue increased 11%, from $79.5 billion to $88 billion, as sales picked up at Express Scripts and Walgreen and in the company's specialty group. However, an increase in the cost of goods sold, the loss of a group purchasing organization customer, and reduced sales of oncology drugs lead to a 40% decline in net income. In 2013 AmerisourceBergen signed a 10-year agreement to supply a joint venture between Walgreen and Alliance Boots; it made additional drug purchases to service the contract, which added about $90 million to its cost of goods sold for the year. Accordingly, cash from operations also dropped, by about 40%, from $1.3 billion to $788 million, due to the inventory increase associated with the Walgreen Alliance Boots deal.
AmerisourceBergen's mission is to help its customers reduce health care expenses, increase channel efficiencies, and improve the quality of patient outcomes.
The company benefits from forming large supply agreements with key clients, and factors such as competitive pressures and industry consolidation can occasionally hamper (or assist) the company's growth efforts in this area. In 2012 its biggest customer, Medco Health Solutions (17% of revenues) merged with Express Scripts, which contracted with one of AmerisourceBergen's competitors; however, following the merger, Express Scripts alleviated concerns when it signed a new supply agreement with AmerisourceBergen. The company expected the new Express Scripts contract to boost revenues in 2013 and it did. Increased spending to service the contract did take a bite out of net income and cash flow though. In 2013 it also signed an agreement to supply Walgreen and Alliance Boots (through their joint venture) for 10 years.
AmerisourceBergen occasionally divests non-core operations to focus on key areas of growth. In 2013 the company sold its AndersonBrecon division, which provided contract packaging services, to an investor group led by Frazier Healthcare for some $308 million. It also sold its AmerisourceBergen Canada Corporation (ABCC) pharma distribution business that year, while retaining its Canadian specialty distribution operations.
Mergers and Acquisitions
Acquisitions have helped AmerisourceBergen expand its reach to new customer segments and geographic markets. In 2014 it purchased about 20% of Brazilian pharmaceutical wholesaler Profarma Distribuidora de Produtos Farmcêuticos; the two companies then launched a joint venture to provide pharmaceutical distribution in Brazil.
In 2012 the company acquired World Courier, a specialty transportation and logistics provider. World Courier specializes in delivering specialty medicines used in clinical trials to locations around the globe. The $520 million purchase allows AmerisourceBergen to expand its specialty drug distribution services outside North America.