Cardinal’s Profit Prescription

In February, you announced the $2 billion-plus acquisition of the direct-to-home medical supply distributor AssuraMed. How does that purchase fit [...]

July 24 2013 by Jennifer Pellet


In February, you announced the $2 billion-plus acquisition of the direct-to-home medical supply distributor AssuraMed. How does that purchase fit into your strategy?

If you look at the number of patients being cared for at home and the incentives to reduce hospital stays today, it’s pretty clear that more care is going to be delivered in the home. AssuraMed allows us to serve that market. This direct-to-consumer part of our business represents a significant move in our history toward being more directly engaged with the patients we serve—from elderly patients or patients recuperating from surgery, who need certain care in the home to insulin-dependent diabetics. It also allows us to work with our independent pharmacy customers with whom we can collaboratively serve patients.

You’ve done five acquisitions in China. What are your goals there?

China is an extraordinary market, facing meaningful challenges as it tackles the issue of how to provide health care to this enormous, [migrating] population. It’s also a market that is strategically important to our upstream partners, global pharmaceutical and medical-device companies, so we felt the ability to serve them in China could be an important value driver for us. Still, if we had not had the opportunity to acquire a business that we knew with a leadership team we knew, we might not have made that move into China because I think having a robust base there is important.

What advice do you have for other CEOs expanding into China?

If you are going to compete in China, you have to be ready to learn quickly and course correct quickly. For example, we are a major player in nuclear medicine here in the U.S., and we saw that as an opportunity in China, where there is no mature industry providing cardiologists with the tools to do advanced, diagnostic imaging. However, we discovered in our first month there that, despite the need, there wasn’t really a financing system to tackle it.

On the flip side, we discovered another opportunity that we had not planned on, which had to do with the fact that unique specialty products of global pharmaceutical companies were being counterfeited and not getting to patients. We set up specialty pharmacies to ensure the pharma companies that their products would be under control from the moment they hit the border until they were in patients’ hands. This meant their patients could be sure they were getting the product they thought they were going to get. So, while our first plan ended up not being a priority, the second that had not been on our radar became one.

The industry has changed significantly in the five years you’ve been at Cardinal. What do you see on the horizon?

One thing we can say about health care is that we know demand will not diminish. We also know that it will have to be delivered in different ways—the system is going through all kinds of corrections. For us, that old Wayne Gretsky cliché of going where the puck is going has been a big part of our strategy. That’s why we felt we needed a bigger position in generic drugs, an IT platform that could enable growth and a presence in the delivery of care outside of hospitals—which led us to expand into ambulatory settings and to acquire AssuraMed.

What have you found most challenging about leading a company through change?

It is always an interesting dynamic when you have to be sure you are competing in the present in the world you know today and at the same time anticipate change in future. You must serve your customers’ distinct needs today but also with a clear sense that change will come. We don’t know all the changes that will take place in health care; we just know directionally that we will need to deliver care in a more integrated, cost-controlled way and with a greater focus on outcomes. Trying to build our business in a way that we can constantly adapt to those changes—not all of which are predictable—is an exciting leadership challenge.