EUR 850.00 For Business Accounts Only

Morningstar | AmerisourceBergen: Striving to Maintain Scale in an Evolving Healthcare Market; $86 FVE

AmerisourceBergen has developed a pharmaceutical platform addressing the comprehensive sourcing and distribution needs of manufacturers and providers. With 20,000 employees and an electronic inventory platform, the company is equipped to ship more than 3 million products a day worldwide. The global scale and sheer pharmaceutical volumes enable the company to negotiate competitive prices, and it can efficiently provide access to a vast portfolio of drugs. The core business, roughly 96% of revenue, is focused on pharmaceutical distribution, and the balance of revenue is attributable to acquired businesses. AmerisourceBergen handles roughly a third of the drugs sold in the United States and has created an extensive footprint into physician-administered products, with key anchor customers within communities. Further, the company operates efficiently in a highly regulated environment, which provides some insulation.The core business, distribution services, is largely driven by drug pricing, drug mix (generics versus branded drugs), and overall volume. With the deceleration of pharmaceutical drug growth due to the slower branded drug inflation, shifting mix favoring generic drugs with lower prices, slower introduction of blockbuster drugs, and increasing provider negotiating leverage, operating margins have been under pressure. The high cost of specialty pharmaceutical drugs has offset some of the declines stemming from the introduction of fewer branded drugs, but overall operating margins relative to displaced branded drugs are likely lower. AmerisourceBergen touts having the highest concentration among competitors, and specialty drugs represent roughly 20% of overall revenue, which has likely helped the company grow slightly faster than competitors recently. Similar to the two other largest distributors, the company has grown to such a significant size that regular acquisitions will likely be necessary to supplement growth to offset the overall market deceleration with slower growth in pharmaceutical drug spending.