The healthcare industry is going through some seismic changes, and these changes are altering the landscape of the marketplace in a way that’s virtually unprecedented. As healthcare organizations become more integrated across the board, their suppliers have to change with them and adapt to the shifting conditions in the industry. Perhaps no player in the entire healthcare system has more opportunity to align with these changes than Cardinal Health Inc. because, as Chairman and CEO George Barrett explains, the scope of Cardinal Health’s operations puts it in touch with an enormous cross-section of the industry. 

“I’m not sure there’s any company in healthcare that has a broader reach across the industry than Cardinal Health,” Barrett says. “We really touch every part of the healthcare system, and this gives us a great line of sight through to a system that’s going through a lot of changes.” 

As one of the largest healthcare products and services companies in the world, Cardinal Health provides pharmaceuticals and medical supplies to more than 100,000 healthcare locations every day, as well as being one of the largest providers of direct-to-home medical supplies. Barrett says the company has worked hard in recent years to expand its footprint even further to keep up with the rapidly changing needs of its customers throughout the United States and, increasingly, around the world. 

It is this broad network of touch points throughout the healthcare industry that is making it easier for Cardinal Health to adjust to the changing nature of the industry, but it’s far from the only key to the company’s success. Thanks to its strong internal culture characterized by an intense service mentality;  its strong foundational capabilities built over 100 years; and a disciplined deployment of capital, Barrett says, Cardinal Health is in a strong position to meet the needs of its customers no matter how they change in the coming years. 

Continuum of Care

Significant changes are occurring within the healthcare world, not only in the way care is delivered, but in the settings. Care is increasingly shifting to ambulatory settings including the home. Care will be more patient-focused, ideally focused on wellness, complemented by preventive measures. That means healthcare organizations are becoming larger and more distributed as they integrate hospitals, specialty clinics, surgery centers, physician offices and other sites of care. Patients are more involved in their own medical care, and that requires better linkages and accountability between these integrated systems and their patients. With so many aspects of care integrated into single healthcare organizations, the need for new solutions can be addressed by companies like Cardinal Health.

“We have a system where we’re seeing a greater demand for coordination and a much more broadly distributed and more highly integrated system,” Barrett says, adding that these changes are accompanied by new payment models, further complicating matters for Cardinal Health’s customers. “It’s an exciting time to lead a healthcare organization.” 

Barrett also notes that the company’s strategic priorities align with the changes in payment models, with the focus shifting to outcomes rather than activity. In January, the department of Health and Human Services set clear goals and timelines to shift Medicare to value based models. And in recent weeks, CMS created targets for bundled payments in joint replacements covered by Medicare. 

“Our consumable and physician preference item strategies address the needs for efficiency and standardization combining products and innovative services and technologies to help eliminate waste and improve outcome,” Barrett says.   The acquisitions of AccessClosure, Innovative Therapies, and the planned acquisition of J & J’s Cordis offer solutions to customers in medical devices. He also notes that the company’s ability to serve the Medicare bundled payment requirement with products and innovative services, across multiple therapeutic areas as another key differentiator and customer value creator.

Emerging Segments

On the pharmaceutical side of the industry, Barrett says two distinct segments have been emerging, and Cardinal Health is addressing that change in ways that put it at the forefront of the industry. Barrett notes generic drugs represent a major force in the industry, accounting for approximately 85 percent of all prescriptions filled today. While at the same time, a new era of innovation in branded pharmaceuticals addressing the needs of unique patient populations require a very integrated approach to patient management. 

On the generics side, Cardinal Health launched a joint venture with CVS Health in 2014 to form the largest sourcing entity for generic drugs in the United States. According to Cardinal Health, this joint venture allows for Cardinal Health and CVS Health to combine capabilities and generic volume to create efficiency and global know-how which Barrett believes will be an ongoing competitive advantage.

Cardinal Health’s position in generic pharmaceuticals was further enhanced in July with the acquisition of The Harvard Drug Group. The $1.1 billion acquisition not only gives Cardinal Health The Harvard Drug Group’s extensive generic drug distribution infrastructure, but also expands the company’s telesales capabilities presence in over-the-counter pharmaceuticals, and brings specialized packaging offerings to meet the needs of hospital systems and other institutions according to the company. 

On the specialty side of the pharmaceutical world, Barrett says Cardinal Health’s position has grown significantly, with a specialty business that exceeds $5 billion in revenues and is expected to exceed $8 billion by the end of fiscal 2016. The completion of the Metro Medical acquisition in 2015, enhanced the company’s reach in specialty and expanded its therapeutic areas. He notes the company is deepening its relationships with biopharmaceutical manufacturers with valuable offerings in regulatory sciences, patient access and support and health economics outcomes research. 

People and Culture

Barrett describes the state of the healthcare industry as one where successful companies have to operate in two places at once. “It’s a unique time when you have to be outstanding and totally committed to performance in the present while, at the same time, have the right game plan in motion for the future,” he says. “It’s not really optional to choose one over the other – you have to do both.” 

Cardinal Health’s culture is the main reason why it can have one eye on serving the present needs of its customers and the other on the future. Barrett says the company’s emphasis on metrics for measuring execution and its policies of clear communication contribute to what he calls Cardinal Health’s “intense service mentality,” but those things alone don’t achieve results. “Our people are really special,” he says. “They completely internalize the work that we do.”

Barrett says the people within Cardinal Health exhibit great discipline as they focus on executing their roles to provide the best possible service for the company’s customers and their patients. Additionally, their knowledge and understanding of the impact the roles they all play in the company’s ability to deliver for customers and impact the lives of patients make it easier for Cardinal Health to adapt to changes in the industry. 

“I see the work that we do every day and how it affects consumers, and we regularly this internally,” Barrett says, adding that this is especially evident during extraordinary challenges, such as natural disasters when the company shifts into overdrive to help its customers respond. “I know that our people are behind the scenes and doing their work with incredible focus and energy.” 

Cardinal Health is confident that it is headed in the right direction to match the movement of the healthcare industry. Increasing standardization and expanding into new areas are putting the company on the right track. “The steps we’ve taken in recent years perfectly align Cardinal Health with some very important health care trends,” Barrett says. 

Even though the company has had a strong track record in recent years of responding to the needs of its customers, Cardinal Health constantly looks for ways to better support the complex needs of its increasingly integrated customer base. “At a time of great change, we can help facilitate the key changes in the system, and we really can deliver what are very customized programs for customers with distinct needs,” Barrett says. “We intend to be a company that continues to provide value in that way.” 

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