Cardinal Health overview and strategic · PDF file · 2015-07-11Cardinal Health overview and strategic priorities Steve Inacker ... Acute Care Sales + Distribution Operations •

Cardinal Health overview and strategic priorities

Steve InackerPresident Channel Management

© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.

President, Channel ManagementMedical Segment

Cardinal Health helps healthcare providers focus on patient careproviders focus on patient carewhile reducing costs, enhancing

ffi i d i i litefficiency and improving quality.

32K+employees

19thon Fortune 500

$103Bin annual revenue

© Copyright 2012, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.

employees across the globe

on Fortune 500 in annual revenue

Did you know?

We deliver to more than

We deliver approximately Approximately We dispense

nearly

60Khealthcare sites in the

U.S. each day.

1/4of all medications

prescribed in the U.S. each day

1/2of all surgeries in the U.S. use our products

nearly

12Mradiopharmaceutical

doses annually.each day. our products. doses annually.

We are the business behind healthcare


3

Cardinal Health: Who we serve

Medical Device Mfg

Generic MfgResearch-based Pharma

Biotech Laboratory Equipment Mfg

Medical

Device MfgEquipment Mfg

Other Supplier Supply Mfg

ppPartners

Physician Office

Home Healthcare

Laboratory Pharmacy

ea t ca e


4 © Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.

Imaging Center

Surgery Center

Hospital

Two segments: Pharmaceutical and Medical

Pharmaceutical SegmentPharmaceutical Segment Medical SegmentMedical Segment


5

Our segments today*

Pharmaceutical Medical

Revenue >$89B >$8 7B$93 7B$93 7B $8 9B$8 9BRevenue >$89B >$8.7B

Segment profit $1.3b $370m

$93.7B$93.7B $8.9B$8.9B

$1.3B$1.3B $370M$370M

Employees (~4,000 corporate) ~ 17,000 ~ 15,800

U S distribution 2525

~ 12,000~ 12,000

48**48**

~ 16,000~ 16,000

U.S. distributioncenters 28 48

Manufacturing sites

2525 48**48**

1212

Sales and CS ~1200~1200 ~1400~1400


6

** Includes Canada1FY11 figures.

Pharmaceutical Segment


77

Pharmaceutical SegmentThree businesses across the value chain

Pharmaceutical Specialty Nuclear PharmacyPharmaceutical Distribution

Specialty Solutions

Nuclear Pharmacy Services


8


U.S. Pharmaceutical Di t ib ti

U.S. Pharmaceutical Di t ib ti • Pharmaceutical Distribution

• Pharmacy Solutions

DistributionDistribution

• Pharmaceutical Repackaging

• ParMed

• Medicine Shoppe®


9


• Specialty Pharmaceutical DistributionSpecialty SolutionsSpecialty Solutions• GPO Contracts & Services

• Third-Party Logistics Services

Spec a ty So ut o sSpec a ty So ut o s

• Scientific & Regulatory Consulting

• Healthcare Analytics & Marketing CommunicationsCommunications

• Clinical Pathways

• Specialty Pharmacy & Access Servicesp y y


10


• Nuclear Pharmacy ServicesNuclear Pharmacy S i

Nuclear Pharmacy S i L d i l i d tServicesServices • Leader in nuclear industry:

Reaching >90% of U.S. hospitals in <3 hours

• Only national network with both low-energy and high energy dispensingenergy and high-energy dispensing, and both branded cardiac imaging agents (Cardiolite and Myoview) and lower-cost alternative

• A leading U S player in number of• A leading U.S. player in number of cyclotrons and doses

• Partner in research with universities and pharmaceutical companies

• Leader in pharmacy management, outsourcing services and formulary management


11

Medical Segment


1212

Medical Segment today1

Product SKUs >80K>80KProduct SKUs

Customers (U.S.)

~5,000~5,000

~2 400~2 400

Acute Care Hospitals

Amb Surgery Centers ~2,400~2,400

~8,000~8,000

Amb. Surgery Centers

Physician Offices


13131FY11 figures.

Medical Segment U.S. locations


*Distribution *Manufacturing / Presource

14

Medical Segment locations outside U.S.

Shanghai *


15*Distribution *Manufacturing/Presource *Sourcing

Medical Segment

Business structure

Category ManagementChannel Management

Global Manufacturing and Supply Chain

Functional Support (QRA, OpEx, HR, Legal, IT, Public Affairs)


1616

Medical Segment

Business structure



Functional Support (QRA, OpEx, HR, Legal, Public Affairs)


1717

Category Management

Defined

A retailing concept in which the range of products sold by a retailer isof products sold by a retailer is broken down into groups of similar or related products known as product categoriesproduct categories.

Each product category is run as a mini business with its own strategies which involve a close working partnership with suppliers.partnership with suppliers.


18

Category Management

OrganizationSurgical Products

Presource Critical Care Patient Care Environmental Technologies

Laboratory Products

Surgeon Gloves Procedure kits Anesthesia Wound Care Fluid Management DiagnosticSurgeon GlovesSurgical InstrumentsWound Closure

Procedure kits, Trays and packsDrapes & GownsOR Accessories

AnesthesiaRespiratoryMonitoringNormothermiaNeedles & syringesIV solutions & sets

Wound CareUrologyExam GlovesInfection control apparelThermal

Fluid ManagementSterilityDurable Medical Equipment

Diagnostic InstrumentationConsumablesEquipment

Marketing & InnovationMarketing & InnovationResearch & Development

Specialty Sales (four teams)

Global SourcingGlobal ManufacturingChannel Management


19

Category Management

Deep product offering

National brandSelf-manufactured SourcedCardinal Health brand

Ability to make, source and distribute products


20

Cardinal Health branded product examples

fluid tmanagement

products

surgical drapes and gowns

dprocedure kitssurgical and

exam gloves


21

Category Management

Disciplined product offering drives value

• Clear set of preferred products for each channelClear set of preferred products for each channel

• Aligned purchasing incentives across suppliers and providersp

• Inventory efficiency, higher service levels

• Volume growth for supplier partners• Volume growth for supplier partners


22

Medical Segment

Business structure



Functional Support (QRA, OpEx, HR, Legal, Public Affairs)


2323

Channel Management

Defined

Delivering the best supply chain solution to each customer group we serve, including:g p , g• Hospital systems/networks• Hospitals• Physician offices• Surgery centers• Home healthHome health• Independent labs• U.S. government• Suppliers


24

Channel Management

Broadest reach across all sites of care

• Deeper relationships across the continuum of care

One stop• One-stop shopping for integrated providers

• Ability to aggregate product volume


2525

Channel Management

Organization

Five regionsSupply chainservices

Ambulatory Care business

Acute Care Sales + Distribution Operations

• Spend management• Distribution management

Surgery Center,Physician Office, Home Health SalesSupported by centralized

Marketing/Strategy team• Inventory management Home Health Sales

+ Marketing


26

Channel Management

Integrated Region Sales and Operations teams

Leadership

Region Sales + Operations

Customer Focus


27

Channel Management

Ambulatory Care

Focus today

• Develop optimal product portfolios

Today: Area of strengthFuture: Continued growth

Surgery Center

p pfor each channel

• Deploy supply chain services

Physician Office

Today: Growing faster than the industryFuture: Gain additional scale

Home Healthcare Long Term Care

Other growth opportunities


28

Channel Management

Industry leading supply chain services• Cardinal Health

Supply Solutions• ConsolidatedSpend Consolidated

Services• Deman Data Systems • PriceLinkSM

Spend management

• PriceLinkSM

• OptiFreight®

• ValueLink®Distribution management

• ValueLink® Par Optimization

• Supply Management

management

Inventory pp y gServices

• Wound Closure Management Services

Inventory management


29

Channel Management Strategy “in a page”

VisionBecome the easiest and most efficient supply chain partner for medical providers

StrategyDeliver a differentiated day-to-day customer experience earning us the opportunity to deploy our industry leading supply chain services and preferred products portfolio

FY 12 Priorities

Capitalize on our acute channel

positionDrive mix Improve profitability

Improve our position in

Physician Office

Strategy supply chain services and preferred products portfolio

Why

Pipeline for preferred products and services• Customers need our help in

improving their supply chain cost-effectiveness

Best value for the customer and business• Improved service levels• Opportunities to drive cost

reduction beyond the cost of the product

Growth opportunity• Care is migrating to the

physician office • Important channel in

serving the entire care continuum

Macro influences• Healthcare reform and

reimbursement pressure• Commodity variability• Supplier funding models

How

p continuum

1. MBT2. Service excellence3. Targeted prime vendor

growth4. Sales force development

1. Contracting with Preferred Category mix

2. Preferred mix initiatives within current accounts

3. Enhanced distribution i i

1. Cross-channel IDN growth2. Website enhancements3. Allscripts / Lab / Equipment4. Service level improvements

1. Profit roadmap execution for all prime vendor accounts including selective exits

2. ValueLink profitability focus3. OpEx projects4 A i i i

FoundationalCapabilities

services penetration 4. Assortment optimization5. Pricing discipline

MBT; Cross referencing capabilities; Pricing excellence; Talent management & diversity; Cost, working capital and complexity reduction


Bringing it all together

Category and Channel

Medical Segment strategy:Leverage our product depth and channel breadth to deliver an effective mix of products and a robust set of supply chain services thatand a robust set of supply chain services that enable our customers to provide quality care while improving their cost-effectivenesswhile improving their cost effectiveness.


31

Product Contracting and Pricing Ownership

C di l H lthCo-ownership of contract

Cardinal Health

M f t Health Care

pricing alignment

GPOs

Manufacturer Provider

Pricing d i i t tiadministration

Distributor


32

Contract Transformation Update

Education began on 7/1/11, execution began February 1, 2012, fees to start in July 2012

All constituents benefit – customer, supplier, distributor, GPO All constituents benefit customer, supplier, distributor, GPO

Results through November show continued improvement 1. On time contracts improved 55%2 Backdated contracts reduced by 1/32. Backdated contracts reduced by 1/33. Late contract fees reduced – not assessed - by 50%4. Trend improvement in amount of time prior to contract start date

Driving for 100% Supplier compliance (industry benefit) Driving for 100% Supplier compliance (industry benefit)

Process customer credit and rebills for any price discrepancy that is due to CAH process (e.g., backlog of contracts)


33

Cardinal Health China


34

Why Cardinal Health China?

• Global strategic partnership (past and future)• Financial strength and commitmentFinancial strength and commitment• Operational excellence (Lean Six Sigma)• Service innovation• Proven management excellence

inclusive

• Proven management excellence• Transparency• Corporate governance• Compliance


Cardinal Health China

Expanding to 10 distribution centers; service area covers >250M people

• Opened new state-of-the art DCs in Shanghai and Beijing• Enhancing our geographic coverage and Local Direct Distribution business

Building new platforms to leverage Cardinal Health brand strength

• Consumer healthcare products for retail pharmacies

• Direct-to-patient specialty distribution

• Diagnostics and lab supplies• Medical device


36

Cardinal Health China Strategy

Supplier/ ProviderEvolution

Government and Regulatory

Demographicsand Demand

Aspiration To be the trusted, go-to-market partner. Cardinal Health enables healthcare in China by providing essential, world-class healthcare services and products.

Build NED & LS;Invest in Logistics

Infrastructure

GrowthPillars

Strengthen the Core Expand into adjacencies

Expand our Geographic

Network of LDD

ConsumerHealth and

Retail

Lab Supplies and Medical

Devices

SpecializedRural (T3/T4)

Service Offerings

Direct-to-Patient

Capability g

Foundational Capabilities

Data Enhanced channel information management and collections (CMI)

Infrastructure World class supply chain assets; optimized through Operational Excellence

M&A Strengthen local presence in key markets

Compliance Using the right controls and processes


37

Cardinal Health China: Facts FY11 Annual revenue: CNY 7.9 billion (~US

$1.1 billion (1))− In China, top 9 distributor; #1 foreign-owned

T di t ib ti t

First licensed foreign distributor− Established 1993

Full import & distribution rights Ten distribution centers

− Shanghai (x2), Beijing (2x), Shenyang, Wuhan, Chongqing, Chengdu, Wuxi, Guangzhou (cold chain dedicated)

Principals: 500+

− Medical Prescription, OTC, medical devices, vaccines, health supplements, cosmetics, food, third-party logistics

One of the largest pharmaceutical importers in China

Principals: 500+

Extensive coverage across 330+ cities through all channels− Wholesalers: 700 directly (6,000 indirectly)

Four business lines− National Exclusive Distribution (“NED”)

− Local Direct Distribution (“LDD”)− Hospitals: 49,000+ (combined direct/indirect, including

community hospitals and health centers)− Retail pharmacies: 123,000+− Centers for Disease Control (“CDCs”): 1,250+

− Logistics Service (“LS”)

− Consumer Health Care

800+ employees− 11 offices; 49 locations;


38 Note: “NED” refers to sales to wholesalers; “LDD” refers to direct sales to hospitals and retail pharmacies; “LS” refers to third party logistics service.

(1) CNY converted to USD at CNY6.7 / 1USD. July 10 to June 11. Switched reporting calendars from acquisition.

Comprehensive Healthcare Platforms…

Direct toPatient

ConsumerHealthcare

PatientSolutions

ChannelMgmtInfo

ClinicalTrial Mgmt

MedicalDevices

LabRx

Specialty / Biologics


39

NED RETAILLS LDD

Where we add value• Customs Control• Documentation• Regulatory• Duties• Inspection

• Storage• Bonded/Unbonded• Controlled environment• Quality Assurance• Inspection

• Hospital relationships• World-class standards• Direct feedback• Direct Coverage

• Wholesale management• Nation wide coverage• Strategic selling• Cost effective modeling• Transparency• Inspection • Inspection • Transparency• Channel Intelligence (Data)

Importation Logistics Direct to PatientWarehousing Risk Management Bidding Sales to HP/RPDistributionHOSPITALS

RETAIL PHARMACIES

• Transportation• Handling• Cold Chain

• Taking title• Mitigate risk• Optimize working capital

• Documentation• Tendering• Pricing and strategy

• Nation-wide Commercial team

• Multi-skilledS l t kiCo d C a

• Urgent / life saving• Inspection

Optimize working capital• Compliance • Inventory

g gy• Policy intelligence• Lobbying• Generics tracking

• Sales tracking• Demand creation

(Retail)


© Copyright

40

Q&AQ&A


41

Thank you!y


42

Documents

Cardinal Health overview and strategic · PDF file · 2015-07-11Cardinal Health overview and strategic priorities Steve Inacker ... Acute Care Sales + Distribution Operations •