Inside the Mind of the CEO

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

WL: So is there reason to be optimistic about the survival of your business model?

SC: Definitely. AmerisourceBergen is riding the wave of the generics boom; [generics] now account for more than 70 percent of all prescriptions in the US and are available through us to patients for as little as a few dollars copay. A recent study done for HDMA documents that if our industry's high-volume, low-cost distribution model did not exist, spending in the US healthcare system would rise by about $30 billion a year. The demographics of aging alone are favorable; the average senior in the US takes about seven prescription drugs. There is also the trend toward a growing middle class in high-population emerging countries with the incomes to spend on medicines. I also note that politicians, as represented in the US Congress, cannot—try as they might—legislate good health. Hence, there will always be a role for the private sector in the development and delivery of drugs useful to the patient.

However, there is one issue that worries me: the ability of the drug industry to continue innovating around the science. Without innovation, we will have no generics. As a leading drug distributor, our future depends on a continuous cycle of new products for us to move to the clinician and the patient. It's very important for us to have a vibrant and productive environment on the manufacturers' side. Appropriate public support for innovation is crucial to maintaining this dynamic, which is very fragile.

WL: Are you taking this position forward in Washington policy circles?

SC: AmerisourceBergen has significantly upgraded its federal policy activities in recent years. I intend to expand our commitment even further, with the basic objective of ensuring our customers can carry on in serving the patient at an economically viable reimbursement rate. Frankly, we weren't active enough when the Medicare Modernization Act gave seniors a public drug benefit in 2004 and as a result the fees we earned from manufacturers were not included in the Act's basic reimbursement formula. That omission negatively impacted our customers.

WL: In contemplating your agenda as AmerisourceBergen's new CEO, what learnings do you take from your reputation as champion "internal entrepreneur" in launching the company's successful specialty business?

SC: I find my progress depended on getting three things right: 1) communicating to win the confidence of not just the customer but key internal decision-makers who may have been skeptical about our intentions; 2) finding and building a top-class team, and keeping them motivated at the critical early stages of the enterprise; and 3) handling the complexities of executing around practices, technologies, and logistics we were not entirely familiar with. In the latter case, building a new skill set to facilitate physician contracting with the manufacturer around sophisticated oncology products was one challenge where we literally had to step up and help physician groups manage their practice—everything from cash flow controls to creating "just in time" supply chain vehicles. The human interface was another element, and being by nature a people person, I was usually good at the small things that count.

I recall at one early stage of the business we were confined to an office with 1,500 square feet for 30 people, which included our entire customer service team. I had hired a new person to launch a division and found there was no other choice but to put him to work in the office kitchen. I hired him and then said everyone had to go out to lunch so the poor guy could work—until we could get management to approve a lease for a larger space. Yes, it's true: My boss at the time refused the lease because he thought we were growing too quickly! These are the things that test your mettle and make life interesting. And I am pleased to say our "kitchen help" stayed with it and now is responsible for a
$4 billion business here.

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