Consolidation End-Game for Wholesalers

The consolidation end-game is underway among pharmaceutical wholesalers.

Today, AmerisourceBergen (ABC)announced that it is acquiring Bellco Health, a privately held wholesaler with about $2 billion in sales. (See AmerisourceBergen to Acquire Bellco Health.) You may recall that regional wholesaler Harvard Drug Group was acquired by private equity firm H.I.G. Capital in January 2007.

Companies such as Bellco and Harvard Drug Group disproportionately service independents and smaller chains. (Bellco also has a big dialysis business.) Loyal readers of Drug Channels know that I’ve been forecasting Trouble Ahead for Independent Pharmacies even as the overall drug market grows. Today’s WSJ article about the Deficit Reduction Act provides a good summary of the perceived hit to independents from AMP-based reimbursement. Check out last my post on Fred’s to read more about AMP's Impact on Pharmacy Profits.

Industries do not consolidate forever (even drug wholesaling). Given the limited number of possible buyers and the heightened risk of a distress sale, I expect that the remaining regional wholesalers will be looking for a reasonable exit strategy, too.