AmerisourceBergen Corporation
Address:
P.O. Box 959
Valley Forge, Pennsylvania 19482
U.S.A.
Telephone: (610) 727-7000
Toll Free: 800-829-3132
Fax: (610) 727-3600
http://www.amerisourcebergen.net
Statistics:
Public Company
Incorporated: 1985 as Alco Health Services Corp.; 1969 as Bergen Brunswig Corp.
Employees: 14,800
Sales: $49.6 billion (2003)
Stock Exchanges: New York
Ticker Symbol: ABC
NAIC: 422210 Drugs and Druggists' and Sundries Wholesalers
Company Perspectives:
Our mission is to build shareholder value by delivering pharmaceutical and healthcare products, services and solutions in innovative and cost effective ways. We will realize this mission by setting the highest standards in service, reliability, safety and cost containment in our industry.
Key Dates:
1907: Lucien Brunswig buys out his partner and renames his business Brunswig Drug Company.
1947: Emil P. Martini creates the Bergen Drug Company.
1969: Martini successfully negotiates the purchase of Brunswig Drug Corporation; the merged company is named the Bergen Brunswig Corporation.
1977: Alco Standard Corporation purchases The Drug House.
1985: Alco Health Services Corporation is incorporated.
1988: AHSC Holdings Corporation acquires Alco in a management-led buyout.
1994: Alco Health changes its name to AmeriSource Health Corporation.
1999: The company purchases C.D. Smith Healthcare and a substantial share of ADDS Telepharmacy Solutions, Inc.
2001: AmeriSource acquires Bergen Brunswig and renames itself AmerisourceBergen.
Company History:
AmerisourceBergen Corporation is one of the largest pharmaceutical services companies in the United States. The firm distributes pharmaceutical products and services to health care providers, including hospital systems, physicians' offices, alternate care and mail order facilities, independent community pharmacies, and regional chain pharmacies. It also provides logistical expertise, contract packaging services, and product marketing services to its manufacturing customers. AmerisourceBergen was created out of the 2001 union of AmeriSource Health Corp. and Bergen Brunswig Corp.
History of AmeriSource
In August 1985, the company that would become AmeriSource was incorporated as Alco Health Services and held an initial public stock offering of 4.7 million shares. The history of the predecessor Alco Health Services can be traced to 1977, when a diversified conglomerate, the Alco Standard Corporation, entered the pharmaceutical distribution business by purchasing The Drug House, a major wholesaler operating in Pennsylvania and Delaware.
Alco Standard was the brainchild of entrepreneur Tinkham Veale II, who had built a multimillion-dollar conglomerate on the principle of corporate partnership. Veale sought to acquire healthy, owner-managed companies in the $5 million to $10 million range. He allowed each company practically full autonomy, while providing support in legal and tax matters. When Alco Standard was incorporated in 1960, it was a modest $5 million chemical company. By 1968, sales were $140 million, coming from 52 subsidiaries with products ranging from stamped metal parts to wax paper.
Shortly after Alco Standard's acquisition of The Drug House, the company began to build a network of drug wholesalers. In early 1978, Duff Brothers of Chattanooga, Tennessee, was acquired, and later that year Marsin Medical Supply Company of Philadelphia, Pennsylvania, was purchased. Geer Drug, with annual sales of about $45 million, was acquired in 1979. Headquartered in Charleston, South Carolina, Geer foreshadowed an expansive drive southward. By the early 1980s, Alco Standard's pharmaceutical distribution network was the third largest in the nation.
Alco Standard soon made other acquisitions of pharmaceutical wholesalers, including Kauffman-Lattimer of Columbus, Ohio; Smith-Higgins of Johnson City, Tennessee; Strother Drug of Virginia; and Brown Drug, which operated in South Dakota, Iowa, and Minnesota. At the same time, the drug industry itself was undergoing intense change. Healthcare expenditures in the United States were on the uptrend, amounting to about 10 percent of the gross national product by 1985. As the population grew older, the health care industry promised continued growth.
Alco Health Services Grows as an Independent Operation
In 1985, Alco Standard's drug distribution operations were spun off into a separate company, Alco Health Services Corporation. Alco Standard retained approximately 60 percent of the new company's stock. The new company continued to use Alco Standard's administrative functions on a fee basis. Alco Health was led by John H. Kennedy as chairman and Joseph B. Churchman as president.
Shortly after Alco Health began to operate independently, it acquired the Valdosta Drug Company of Valdosta, Georgia, with $22 million in annual sales, and the $100-million-a-year Meyers and Company of Tiffin, Ohio. These two acquisitions helped push Alco's sales over the $1 billion mark.
In the early 1980s, drug wholesalers found new ways to support the independent drug retailers that comprised nearly 60 percent of their business. Wholesalers offered more non-drug products, including hospital supplies and health and beauty aids. Alco Health sought to strengthen its independent customers by sharing its own primary strength-marketing. By offering services such as in-store merchandising and group advertising, wholesalers could help their customers compete with the growing drugstore chains. Alco Health introduced its retail support program in 1982. Such support tactics as customized price stickers gave a boost to those independent druggists who participated. A year later, Alco introduced a complete line of medical equipment for home use, from wheelchairs to disposable syringes under the Total Home Health Care program, which provided independent retailers the marketing support they needed for such products through direct-to-customer delivery and accounting assistance.
Computer services provided by the wholesaler included management information reports, automated retail accounts-receivable systems, and shelf labels for automated inventory control. By 1985, Alco Health was marketing an in-pharmacy computer system based on an IBM personal computer that was capable of being used for total store automation.
At the same time, wholesalers, including Alco Health, began to develop the business of large drugstore chains and mass merchandisers. In 1981, 25 percent of all wholesalers' business was to drugstore chains, up from 15 percent in 1971. The opportunity arose because of the reluctance of manufacturers to maintain the costly sales force needed for direct selling to chains. The trend continued throughout the 1980s. By 1985, chain drugstores and mass merchandisers made up 18 percent of Alco Health's annual revenues.
Sales to hospitals also increased in the early 1980s, as health care facilities attempted to lower their costs by reducing their pharmaceutical inventories. Alco was able to provide rapid, often same-day, service to many facilities. By 1985, 24 percent of Alco Health's sales were to hospitals.
During the latter half of the 1980s, Alco Health continued to grow at a tremendous rate. In 1986, further acquisitions included L.S. DuBois Son and Company of Paducah, Kentucky; Pennington Drug of Joplin, Missouri; Mississippi Drug of Jackson, Mississippi; and MD Pharmaceuticals of Dothan, Alabama, adding $300 million in annual revenues. Archer Drug of Little Rock, Arkansas, and Michiana Merchandising of Mishawaka, Indiana, were also purchased.
In 1987, Alco Health reorganized several of its operating units. Smith-Higgins, Valdosta Drug, MD Pharmaceuticals, Mississippi Drug, and Duff Brothers were combined to make up the southeastern region of Alco Health. Geer Drug and Strother Drug were combined to eliminate overlap. Management of the new units remained in the hands of regional managers, and their territories were enlarged considerably.
Alco Health's marketing strategy, which focused on three areas--independent druggists, hospitals, and chain drugstores and mass merchandisers--remained constant throughout the 1980s. A major boost to the third segment came in 1987, when Alco Health was selected as the primary wholesale supplier to 1,000 of the Revco chain's 2,000 drugstores. In 1988 revenues passed $2 billion.
John F. McNamara, formerly chief operating officer, became president of Alco Health in 1987. McNamara came to the company in 1981 when Kauffman-Lattimer was acquired. Kennedy remained chairman until August 1988, when previously retired Ray Mundt returned temporarily to oversee changes in Alco Health's ownership. Mundt previously had served as president of Alco Standard and on the Alco Health board of directors.
Management-Led Buyout in 1998
In early 1988, a management group attempted a leveraged buyout of Alco Health, offering $26 per share to take the company private. Shortly thereafter, in June, McKesson Corporation, formerly Foremost-McKesson, the largest drug wholesaler in the country with 28 percent of the national market, offered $30 per share, or $508 million, for Alco Health. The deal, however, fell through three months later when the Federal Trade Commission (FTC) ruled against the acquisition on antitrust grounds. Alco Health was still 49-percent owned by its former parent, Alco Standard Corporation. Alco Health explored options with its investment banker, Drexel Burnham Lambert.
In November 1988, a group of investors, which included Citicorp Venture Capital Ltd. and a group of Alco management-level employees, proposed a cash tender offer for Alco Health's shares at $31 per share. A holding company, AHSC Holdings Corporation, was set up to handle the acquisition. The proposal was accepted and when the tender offer expired at the end of December 1988, AHSC Holdings owned 92 percent of Alco Health's stock. The merger allowed for the conversion of the remaining equity into debentures due in the year 2004. Alco Health continued its normal daily operations during the transition of ownership. John F. McNamara led the company as chairman, CEO, and president from 1989.
New Challenges and Opportunities in the 1990s
The early 1990s provided new challenges and opportunities to Alco Health Services and pharmaceutical wholesalers in general. The drug market continued its expansion, fueled by an aging population and its need for health care. The trend in pharmaceutical distribution was toward fewer competitors handling a greater market share. From 1979 to 1990, the number of U.S. drug wholesalers decreased from 150 to 90, while the role of middlemen increased. The top five companies, including Alco Health, handled about half of the business nationwide. As the field of suitable acquisitions thinned out, and as the pharmaceutical-distribution field became a battle of the giants, Alco Health placed greater emphasis on internal expansion.
In July 1994, Alco Health, one of America's top five pharmaceutical wholesalers, changed its name to AmeriSource Health Corporation. The company aimed to increase its business by driving unnecessary costs out of its distribution system and repositioning itself as a unified source of products and programs nationally. Many of the company's divisions, which until then had maintained their original identity, became part of the AmeriSource family. The company, now located in Malvern, Pennsylvania, continued to acquire other companies throughout the latter half of the 1990s: in 1995, Liberty Drug Systems, the North Carolina-based provider of pharmacy software and hardware and Newbro Drug Co. of Idaho Falls; in 1996, Gulf Distribution Inc.; and in 1997, the equity interests of Walker Drug Company LLC. AmeriSource also aimed to tighten its relationship with its retail customers via a nationwide telemarketing program instituted in 1995. However, in 1996, several of those customers were less than satisfied. In a case later dismissed in District Court, several retail pharmacies claimed that AmeriSource had conspired to deprive them of discounts offered by HMOs, hospitals, and mail order pharmacies.
In 1997, AmeriSource made national news as it joined again with McKesson, this time as part of a proposed merger. The U.S. District Court blocked the move, as it did a similar move that year to merge Bergen Brunswig and Cardinal Health. Both mergers would have reshaped the distribution picture across the United States. All four companies argued that they sought consolidation in a move to make themselves more efficient and cut prices. However, the FTC claimed that the mergers were the companies' "chosen means to remove their incentives to cut prices." The drug wholesalers, according to the FTC, had so many distribution centers that they were forced to cut prices to keep products off their shelves.
AmeriSource responded to the court's decision by turning its attention to local objectives, signing on new customers, attempting to control costs, and investing in new marketing initiatives cumulatively known as "disease state management." "At the end of the day," according to R. David Yost, president and chief executive officer of the company, in a 1998 Drug Store News article, "we maintain that wholesaling is a local business. ... In our vision for the future, we see the community pharmacy playing a key role. ... We see the pharmacist of the future being totally involved in customers' healthcare management and being paid for it."
To this end, AmeriSource, introduced value-added programs in the late 1990s, such as MedAssess, a disease state management program to help pharmacists monitor clients' regimens, and the Diabetes Shoppe, a program designed to train the pharmacist to train the diabetic. Other programs included Family Pharmacy, American Health Packaging, Health Services Plus, and ECHO, the company's proprietary software system. In 1999, the company purchased a substantial share of ADDS Telepharmacy Solutions, Inc., a leading provider of e-commerce medications management.
The company continued to grow in size and reputation in 1999 and 2000. In 1999, AmeriSource purchased C.D. Smith Healthcare, a leading regional wholesale pharmaceutical distributor, and gained a contract with the Department of Veterans Affairs to provide services to its more than 500 pharmacies. In 2000, it purchased Pharmacy Healthcare Solution, a pharmacy consulting company. The company became a "preferred provider" in 1999 of both the Pharmacy Providers Service Corporation, representing 1,200 independent pharmacies, and Premier, Inc., the nation's largest alliance of hospitals and healthcare systems in the United States.
History of Bergen Brunswig
Lucien Napoleon Brunswig, the founder of Bergen Brunswig, was born in 1854 in France, the son of a country doctor. While Lucien felt little inclination to pursue the healing art of his father, he did develop an interest in some day providing the drugs that were vital to patients' treatment. When political turmoil in France in the 1870s prompted Lucien, and many other young French people, to emigrate, he arrived in the United States unemployed and nearly penniless. In 1871, the 17-year-old Lucien was accepted as an apprentice to a U.S. druggist.
Apprenticeship meant more than learning the drug trade; it also entailed sweeping floors, cleaning out the cages of the pets sold at the drugstore, and attending to other menial tasks. Despite his meager income, Lucien Brunswig's hard work and thrift helped him save enough to open a retail drug store in Atchison, Kansas, when he was 21 years old. His drugstore was such a success that he sold it profitably and took the train as far southwest as it would go, to a few miles outside of Fort Worth, Texas, then a small, dusty town of a few hundred people.
Brunswig's Fort Worth drugstore, serving both retail and wholesale, flourished. By 1883, less than five years after he had opened the store, his business reported $350,000 in annual sales. In 1882, George R. Finlay, the owner of a well-established wholesale drug firm in New Orleans, invited Brunswig to join him as a partner. Lucien Brunswig readily agreed to sell his own drug business and become Finlay's business partner in New Orleans. Finlay's firm, Wheelock-Finlay, became Finlay and Brunswig. Upon Finlay's death in 1885, Lucien Brunswig took over the entire wholesale drug operation and settled into New Orleans, where he served as a police commissioner of the city for four years. In 1887, Brunswig took on a partner, F.W. Braun.
The following year, Brunswig became interested in expanding west, setting his sights on faraway Los Angeles, California, a growing town of 30,000. Brunswig dispatched Braun to Los Angeles to open one of the few wholesale drug companies in the area, the F.W. Braun Company. Business opened in Los Angeles on the first floor of a two-story adobe house. Pharmaceuticals were not only sold over the counter, but a few salesmen also ventured out to visit druggists and procure their orders, which could be filled within two to three weeks. After a year, F.W. Braun Company was flourishing and moved into the Old Post Office Building next-door, the first of a series of expansions.
In 1890, while Lucien Brunswig remained in New Orleans, he ordered the opening of what would become a prosperous branch of F.W. Braun in San Diego, California, a city even smaller and dustier than Los Angeles, and one with fewer drugstores. The coming of the Spanish-American War was a boost for the drug business nationwide, and Lucien Brunswig's profits continued to soar. In 1903, deciding that the future of his company lay in the West, Brunswig sold his profitable New Orleans establishment and moved with his family to Los Angeles to preside over the continued expansion of his business. In 1907, he bought out Braun, and his business was renamed Brunswig Drug Company.
With headquarters in Los Angeles, the wholesale drug enterprise was soon expanded to include branches in Phoenix and Tucson, Arizona, as well as a short-lived store in Guaymas, Mexico. As a result of World War I, Pacific Coast business boomed, far beyond Brunswig's wildest dreams. In 1922, when other U.S. businesses were experiencing a slump, Brunswig's sale of drugs as well as cosmetics, a recent and lucrative addition to the drug line, reached a record level. In that same year, Brunswig decided the company needed a manufacturing plant that would house a laboratory and produce cosmetics. Goods that were manufactured in the Brunswig labs eventually made their way to the Philippines, Japan, and the Hawaiian Islands.
A wealthy businessman, Lucien Brunswig had also become an ardent bibliophile, art collector, and philanthropist. In 1927, he presented to the University of California at Los Angeles more than 1,000 books for its library of French language and literature. Moreover, with the onset of the Great Depression, Brunswig's company opened soup kitchens to feed the desperately poor; his own business did not suffer significantly during this time. Brunswig died in 1943, two years after his retirement; he did not live to see his kingdom expand tremendously, as it did in the years following World War II.
Postwar Growth as a Wholesale Distributor
Roy V. Schwab succeeded Lucien Brunswig as president of the Brunswig Drug Corporation, moving the company's headquarters in 1947 to Vernon, California. By then, the Brunswig Drug Corporation had divested itself of its manufacturing plant and laboratories, concentrating solely on the wholesale distribution of pharmaceuticals. In fact, Brunswig was considered the most advanced wholesale drug operation in the United States, although by no means the largest. It was, for example, the first wholesale drug company in the United States to introduce computerized punchcards for keeping track of inventories.
In 1949, the 61-year-old Brunswig Drug Corporation merged with the Coffin Redington Company of San Francisco, the first of numerous significant mergers. The company expanded rapidly in California. In 1950, it opened its San Jose division; in 1951, its Sacramento division; and in 1954, its San Bernardino division. In 1952, it acquired the Smith-Faus Drug Company, and by 1960 it had 14 divisions in the southwestern United States.
In the eastern United States, another drug company benefited from the postwar economic boom. In 1947, Emil P. Martini founded and became the first president of the Bergen Drug Company based in Hackensack, New Jersey. A graduate of the New Jersey College of Pharmacy in 1923, Martini opened his first retail pharmacy in Hackensack five years later. A second pharmacy was acquired at the height of the Depression, and a third was acquired in 1937. A well-established member of the community and president of the New Jersey State Board of Pharmacy, Martini helped establish a wholesale drug distribution company in 1947 named after the county of Bergen in which they lived. The success of the Bergen Drug Company was phenomenal, in part because of the insatiable demand for the wonder drugs of World War II, including such antibiotics as penicillin. Despite the growing sales volume, the company continued to offer same-day service.
With the 1955 death of Emil P. Martini, Sr., leadership of the company was turned over to Martini's son, Emil P. Martini, Jr. The Bergen Drug Company then began rapidly expanding and acquiring other wholesale drug companies. In 1956, Bergen acquired Drug Service Inc. of Bridgeport, Connecticut. Between 1957 and 1958, Bergen operations were started in three California cities, Fresno, San Francisco, and Covina. In 1959, it became the first company in the nation to use computers for inventory control and accounting purposes. By the 1960s, Bergen Drug Company was among the largest wholesale drug distributors in the United States, supplying 5,000 pharmacists and hospitals.
Bergen and Brunswig Merge in 1969
In May 1969, Martini successfully negotiated the purchase of Brunswig Drug Corporation. The latter had sought to buy the former until Brunswig Drug managers realized that financially it made more sense to have Bergen buy their company, as the price-earnings figures of Bergen's stocks were more advantageous. The name of the new company would be the Bergen Brunswig Corporation.
Several acquisitions followed. In 1970 alone, the Bergen Brunswig Corporation added 12 drug companies and laboratories to its fold, transforming itself into a truly national drug distribution business. Head of the Bergen Drug Company since 1956, Martini, who had graduated with a degree in pharmacy from Purdue University, was given his original job in his father's firm with the understanding that he was to learn the drug distribution business from the bottom up, which he did. Under his direction and that of his younger brother, Robert E. Martini, also a pharmacist and vice-president of the company, the Bergen Brunswig Corporation became in the 1970s one of the most modern drug distribution companies in the United States.
Bergen Brunswig revolutionized the trade in 1971 when it pioneered the electronic transmission of purchase orders to Eli Lilly & Co. In the early 1970s, Bergen Brunswig introduced the handheld computer scanner, with which pharmacists could scan the barcodes on merchandise. Stock was then reordered on the basis of the information collected by the scanner. The inauguration in the late 1970s of an advanced computer system automated the prescription department still further, connecting hospitals and chain pharmacies electronically to Bergen Brunswig's distribution centers. Soon the majority of orders could be transmitted to Bergen Brunswig via telephone lines, and in the 1980s satellite communication replaced conventional telephone lines. One hundred years after the opening of the F.W. Braun Company wholesale drug store in Los Angeles, the distribution time of drug orders was down from two to three weeks to less than 24 hours.
The 1980s saw the explosion of pharmaceutical and health care product demand, contributing significantly to Bergen Brunswig's phenomenal growth. In 1981, the president of the National Wholesale Drug Association noted a 17 percent increase in the sales of pharmaceuticals in the first half of that year. The stock value of Bergen Brunswig Corporation increased between 1977 and 1981 by 50 percent, while its net earnings in the three-year period of 1987 to 1990 increased 316 percent, with an average annual growth rate of 25 percent. The aging of the U.S. population had something to do with this success, as did the popularity of its two biggest selling drugs, Zantac, for the treatment of ulcers, and Epogen, used in kidney dialysis treatment.
Despite the considerable increase in the number of its customers--10,000 by 1990--Bergen Brunswig could still guarantee next-day service by means of its computer system. Bergen Brunswig supplied software to some 300 hospitals, thereby linking them to the company's computer-driven distribution and pricing system. This equipment helped Bergen Brunswig become the largest supplier in the United States of pharmaceuticals to hospitals. In addition, the company attracted customers through its Good Neighbor Pharmacy plan, which catered to the particular needs of independent pharmacies.
The development in the 1980s of a new generation of automated distribution centers speeded up service and delivery to the point where Bergen Brunswig had become the model for drug distribution companies nationwide, although it was second largest in the drug distribution industry. The corporation's new distribution facility in Corona, California, could process an order every three seconds--with 100 percent accuracy--of any of the 2,500 most popular pharmaceuticals or health care products. The company then focused on getting closer to the customer--the pharmacist or store manager--in order to anticipate needs to such a degree that the customer might never have to place an order. Toward that end, Bergen Brunswig monitored the customer's stocks and automatically replenished supplies. The automated distribution system enabled Bergen Brunswig and all other wholesale drug companies to process three times as many orders as previously.
The 1980s also saw the development of another line of products, which resulted from Bergen Brunswig's acquisition in 1982 of Commtron, Inc., a national distributor of home videos as well as 4,000 consumer electronic products. By 1990, Commtron, a 79 percent owned subsidiary of the Bergen Brunswig Corporation, became the nation's number-one distributor of videos, with distribution centers and headquarters in Des Moines, Salt Lake City, and Chicago. With 1,000 employees, Commtron's sales in 1990 increased 17 percent over the previous year. However, in June 1992, Bergen Brunswig sold Commtron in an effort to return its focus to its core pharmaceutical operations. Number two video distributor Ingram Entertainment acquired Commtron for $78.3 million.
Leading the company into the 1990s was Robert Martini, company president and CEO, and Emil Martini, Jr., the chairman of the board. Later, Robert Martini took over the position of chairman, and Dwight A. Steffensen became president and chief operating officer. In addition, pharmacists occupied many of the company's top management positions.
Restructuring in the Early to Mid-1990s
In the early 1990s, Bergen Brunswig, like many pharmaceutical and health care wholesalers, was caught in a margin squeeze, as the public outcry over soaring health care costs kept drug prices from increasing. In fact, according to industry statistics, gross profit margins declined every year since 1989 because the drug wholesaling industry continued to be very competitive on pricing, and there had been reductions in the rate of drug price inflation over recent years. During this time, Bergen Brunswig went through some restructuring, including staff reductions, a move to more efficient warehouse facilities, and the elimination of duplicate operating systems resulting from mergers. The company indicated that it saved in excess of $20 million annually from its restructuring. In spite of industry trends, Bergen Brunswig was the only company in the drug wholesaling industry to post an increase in gross profit margins in the December 1994 quarter.
Analysts attributed Bergen Brunswig's success during this critical time to careful management decisions and smart acquisition moves. In 1992, Bergen acquired pharmaceutical distributor Durr-Fillauer Medical Inc. for $484 million. Durr-Fillauer was a national supplier of medical surgical products to hospitals, clinics, and alternate site health care facilities. In addition, the company acquired Southeastern Hospital Supply Company and Professional Medical Supply Company. In July 1995, Bergen signed an agreement to acquire Colonial Healthcare Supply Co., one of the ten largest full-line distributors of medical and surgical products in the country. Each of these acquisitions complemented the Durr Medical operations and expanded their presence nationally in this area. Durr Medical became the fourth largest medical-surgical distributor in the United States.
Joint ventures and agreements during the early and mid-1990s made Bergen Brunswig a more visible force in the worldwide pharmaceutical industry. In December 1994, Bergen Brunswig signed a five-year, sole source pharmaceutical distribution agreement with Columbia/HCA Healthcare Corporation, the nation's largest healthcare services provider, operating 195 hospitals and 125 outpatient centers in 34 states, England, and Switzerland. The total contract was expected to generate $2 billion in revenues for Bergen Brunswig over the life of the agreement. In addition, the company signed a five-year agreement with Safeway Stores Inc. to be its primary supplier of pharmaceuticals, pharmacy-related items, and selected over-the-counter products. The contract was expected to generate over $1 billion in revenue for Bergen over five years. Safeway operated 1,068 stores in the United States and Canada at the time and was the third largest retail grocery chain in North America.
Also known as a technology leader in the distribution industry, Bergen Brunswig focused on offering value-added services to its customers. In July 1994, the company introduced AccuSource, a multimedia communication, product information, and electronic ordering system for retail pharmacy customers. Developed in conjunction with Apple Computer, the program allowed pharmacies to look up items by category, list substitutions available for products, see special pricing, or communicate with a local Bergen Brunswig division through email. The service also provided personalized information so pharmacies could view statistics such as their own net sales, prescription volume, or product mix. In just four months, Bergen received over 2,000 signed contracts for AccuSource, and it represented Apple's largest multimedia project for a single company. Other state-of-the-art services included OnCall*EDI, a fully-integrated on-line ordering system for the institutional pharmacy, and QuikNet, a fully functional electronic system for ordering, managing, and tracking compliance of medical and surgical products for clinics and hospitals. Moreover, the Bergen Brunswig Drug Company, a wholly owned subsidiary of the Bergen Brunswig Corporation, had converted to paperless billing several years before and was constantly refining its funds transfer and information management systems.
The latter half of the 1990s proved to be more challenging for Bergen Brunswig. A planned merger with generic drug manufacturer IVAX fell through in 1997. Cardinal Health then made a $2.6 billion play for the company. Its plans were thwarted however when the FTC ruled against the merger. Throughout 1998 and 1999, Bergen Brunswig made several expensive purchases, including Stadlander Operating Co. and PharMerica Inc. The acquisitions led to a host of lawsuits. Shareholders filed suit against Bergen Brunswig, claiming the company used false information in order to inflate its stock price. The company then filed its own claim against Stadlander's former parent company, alleging the firm overstated profits to close the deal. In 2000, Bergen Brunswig sold off its medical supplies distribution firm and the Stadlander Pharmacy subsidiary. It also set plans in motion to settle the class action suit brought against the company.
The AmerisourceBergen Merger
Both AmeriSource and Bergen Brunswig entered the new century as two of the largest drug wholesalers in the nation. With competition biting at their heels, the two companies agreed to pair up in a multi-billion dollar union in 2001. The deal cleared regulatory hurdles and was completed in August. The newly merged company adopted the name AmerisourceBergen Corp. and took the leading position in its industry with nearly $36 billion in annual revenues. By 2003, revenues had climbed to $49.6 billion. As the largest purchaser of generic drugs in the United States, AmerisourceBergen operated as a supplier to over 25,000 chain and independent pharmacies and thousands of hospital, nursing homes, and mail-order pharmacies.
In a December 2001 Drug Store News article, CEO R. David Yost stated, "When [Bergen chairman] Bob Martini and I sat down to put this thing together, it was never about being the biggest; it was always about being the best. And sometimes bigger can help you be the best." He went on to claim, "We're excited about our position because, first, it gives us much larger scale than we ever had before, and we think this scale will translate into our ability to develop new programs and services for our customers." In addition, he added, "We're bringing together two companies that have a large array of value-added services for the retail trade."
Indeed, by 2003 revenues and profits had climbed substantially, and the company was well on its way to achieving the $150 million in cost savings as a result of the merger. During that year, the company acquired Anderson Packaging Inc., Bridge Medical Inc., and U.S. Bioservices Corp. It faced a minor setback when it lost the Department of Veterans Affairs contract worth $3 billion in operating revenue. Undeterred, AmerisourceBergen forged ahead, anticipating nothing but success in the years to come. A new Medicare drug benefit, expected to lead to an increase in drug use, promised to be quite lucrative for the company in the future. AmerisourceBergen appeared to be well positioned for growth in the years to come as it operated in a $200 billion industry that was expected to grow at a steady clip over the next decade.
Principal Subsidiaries: AmerisourceBergen Drug Corporation; Amerisource Health Services Corporation; Amerisource Receivables Financial Corporation; AmerisourceBergen Services Corporation; Amerisource Heritage Corporation; Anderson Packaging, Inc.; ASD Specialty Healthcare, Inc.; AutoMed Technologies, Inc.; 0Bergen Capital Trust I; Bridge Medical, Inc.; Brownstone Pharmacy, Inc.; Capstone Pharmacy of Delaware, Inc.; Compuscript, Inc.; Computran Systems, Inc.; Dunnington Rx Services of Rhode Island, Inc.; Family Center Pharmacy, Inc.; Goot Nursing Home Pharmacy, Inc.; Health Services Capital Corporation; Insta-Care Pharmacy Services Corporation; ION, L.L.C.; J.M. Blanco, Inc.; Pharmacy Corporation of America; PharMerica, Inc.; PharMerica Drug Systems, Inc.; US Bioservices Corporation.
Principal Competitors: Cardinal Health Inc.; McKesson Corp.; Owens & Minor Inc.
Further Reading:
- "Amerisource, A Drug Seller, to Buy Packaging Company," New York Times, May 23, 2003, p. C4.
- "AmeriSource Shifts Management to Focus on Three Key Channels," Drug Store News, April 5, 1999, p. 3.
- Barrett, Amy, "Bergen Brunswig: Time to Climb on Board?," FW, April 14, 1992, p. 14.
- "Bergen Brunswig Begins to Heal," Forbes, November 22, 1993, p. 212.
- Binzen, Peter, "One Leveraged Buyout Has Paid Off, and It Keeps On Growing," Philadelphia Inquirer, December 12, 1994, p. D3.
- Fay, John T., NWDA 1876-1986: Centennial Plus Ten, Alexandria, Vir.: National Wholesale Druggists' Association, 1987.
- Frederick, James, "Revolutionizing an Industry," Drug Store News, December 17, 2001.
- Gilpin, Kenneth N., "Two Drug Wholesalers to Merge in a $2.4 Billion Stock Deal," New York Times, March 20, 2001, p. C8.
- Heller, Al, "Formidable Four Move Ahead Separately, Optimistically," Drug Store News, September 21, 1998, p. 11.
- "Major Drug Wholesaler Upbeat Despite Losing Big Contract," Associated Press, May 24, 2004.
- Meilach, Dona Z., "At Home & On the Road, Pharmaceutical Distributor Uses Variety of Large-Screen Devices," Computer Pictures, May-June 1993, p. 14.
- Moukheiber, Zina, "Easy Pill to Swallow," Forbes, October 29, 2001.
- Reeves, Amy, "Merger Is a Year Old, but Work's Not Done," Investor's Business Daily, November 22, 2002, p. A6.
- Roller, Kim, "AmeriSource Trade Show Leaves All 'Energized' for the Real World," Drug Store News, August 28, 2000, p. 16.
- Werner, Thomas, "'Without Negatives': That's How Alco Health Services' Chief Describes Its Business," Barron's, April 13, 1987.
- Wiley, Karen, ed., Centennial Sampler: 1888-1988, Orange, Calif.: Bergen Brunswig Corporation, 1988.
Source: International Directory of Company Histories, Vol.64. St. James Press, 2004.
