Inside the Mind of the CEO

It's a New Day —and a New Script
Oct 01, 2011
By Pharmaceutical Executive Editors

WL: You now lead an organization that is the true pivot point in US healthcare, with responsibility for getting more than 20 percent of all pharmaceuticals sold in this country to their destination in a safe and timely manner. AmerisourceBergen is also less well known than other key players in the healthcare industry, even though your revenues—$78 billion last year—exceed those of even the biggest of Big Pharma. How do you as CEO intend to respond to this very interesting dynamic: a stealth leader with a size triple-X footprint?

SC: As a 17-year veteran of the business, I am acutely aware of our responsibilities as a healthcare provider. Don't look at AmerisourceBergen as just a "pick, pack, and ship" business; not only is what we do far more complicated than that—our guarantee of safety and quality in supply is non-negotiable—but we operate distinct, leading-edge businesses in specialty medicine services, consulting, and packaging. Our mission depends on consistent performance, every day of the week, to a diverse customer base whose expectations are high and often in flux; yes, we are big, racking up $300 million in sales every day, but we also have to be prepared to literally "turn on a dime" when our stakeholders call for it. This is why we have opted for a high degree of decentralization in our operations because it's a structure that optimizes the customer experience.

As CEO, I don't intend to stay running in place, but to build on the assets we have created to extend our value to the customer and the communities we serve. We must stay well ahead of market change. I expect in the next five years the pace of that change will be more intense than at any time in our history. From a strategy perspective, I must grapple with securing a better balance between our current devolved model of four largely independent businesses functioning around a central support service network and what our customers increasingly demand: an integrated, multichannel, solutions-oriented "suite" of offerings, delivered efficiently, on time, and at a lower cost. The fact that these solutions must be tailored to the distinct needs of each customer is a challenge, because doing that right tends to raise our fixed costs. Traditionally, we have operated as a high-volume, low-margin business, where differences in customer expectations were not that great. This is likely to change.

WL: What are the principal drivers of that market change? How specifically do you intend to respond?

SC: Overall, we are anticipating a marked increase in the sophistication and awareness of the customer base. The data and analytics they can marshal to compare our performance is daunting. Of course, we have to respond in kind, always raising the bar in terms of service and increasing the "stickiness factor" in keeping that customer close to us. In the distribution arena, our competitors are not structurally all that different from us, so it's a matter of creating a distinct culture of confidence focused on solutions and the quality of the overall relationship. I'd pose it as a question: Who do you feel exemplifies your own culture, has your back, and is willing to go the extra mile?

AmerisourceBergen is responding to the changing environment with more and better services, including support for launch activities in the specialty arena; offering a more comprehensive range of data-based consulting services, including economic modeling around cost-effectiveness, pricing support and patient compliance programs; and seeding the growth of community oncology practices that assist the drug makers in accessing physicians in ways that drive higher sales. We now have more than 70 PharmD staff working on ways to build the case for the value of a newer therapy versus older ones.

It's vital to remember that in the US the customer still has a choice. HDMA, our national trade association, is now down to about 30 members from more than 100 in the 1990s, but those remaining 30 are bigger and have the capacity to offer the solutions I emphasize as competitive differentiators. Consolidation is an area we must monitor in order to keep our edge.

Finally, in addition to the modifications in the organization structure I discussed earlier, we will over time be taking a closer look at global market opportunities. At present, 98 percent of our corporate revenues are posted here in the US, with the remainder in Canada and the UK. The specialty drug business we launched in Canada is doing very well and there may be lessons for that elsewhere. The emerging country markets represent a potential area of opportunity, partly because growth projections are so high and the need for low-cost delivery of medicines is obvious. However, I would not want to make the claim that AmerisourceBergen is moving away from its overriding focus on the US. That commitment is immutable.

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