Cardinal Goes to China

Let’s take a break from bailout talk and look at China, which is not just a source for counterfeit drugs. It’s also one of the fastest growing markets for (legitimate) pharmaceuticals and is projected to be the fifth largest market within a few years.

Way back in a January 2007 post, I pointed out the growth opportunity for U.S. drug wholesalers in China. So I was especially intrigued by Pharmaceutical distribution at the heart of Cardinal Health’s China Strategy, a just-published interview with Jason Chen, head of Cardinal Health’s (CAH) Asian operations.

According to the article, Cardinal is rapidly growing its Chinese drug distribution business, while expanding manufacturing in India (but not China). This strategy is especially interesting given Cardinal’s anticipated separation of its supply chain division from clinical & medical products.

Just consider what’s been going on in China, where the number of drug distributors in China has been dropping rapidly since the Chinese government began opening up the market in 2003. A few notable foreign investors:

• Swiss-based Zuellig Pharma has long been a major player in Asia and established a Chinese presence before distribution industry was open to direct foreign investment.
• Global wholesaler Alliance Boots entered in January 2007 by buying a 50 percent stake in Guangzhou Pharmaceuticals Corp., the third-largest pharmaceutical wholesaler in China.
• US-based BMP Sunstone (BJGP) has been actively acquiring Chinese drug wholesalers. (BMP is also linked to Alliance Boots via the Guangzhou investment.)

The era of global wholesalers is coming, with or without a U.S. importation law. Perhaps it's time to start considering how it will alter manufacturer-wholesaler relationships.

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And to those readers for whom it is relevant: L'Shanah Tovah!