The Healthcare Supply Chain: A Look Inside Steve Collis President and CEO AmerisourceBergen
Today’s Agenda Part 1 AmerisourceBergen: A Quick Primer Four Disruptions in the Healthcare Supply Chain Part 2 Part 3 Where Do We See Opportunities to Shape Healthcare Delivery? Part 4 Q&A
AmerisourceBergen: A Quick Primer
Provide more than 70,000 healthcare facilities with the right medication and supplies overnight. Deliver over 1.5 million product lines from our 30+ distribution centers, located in the United States and Puerto Rico. Help millions of patients safely receive the treatments they need for timely, successful care.
Who Are Our Customers?
AmerisourceBergen: By the Numbers 16,000 associates 140+ offices 50+ countries
Historic Growth for the Company FY 2014 FY 2013 Change Revenue $119,569 $87,959 36% $3,306 $2,762 20% Gross Profit Operating $1,556 $1,290 21% Income $3.97 $3.21 24% Adjusted EPS
A Monumental Deal Among Industry Titans “ “ “ “ Deal Potentially The long- Has the transforms transformational term potential to global pill for ABC, relationship— transform the “ pipeline. creating a both smart and pharmaceutical Groundbreaking wholesaler with unprecedented. supply industry “ “ “ global the broadest on a global partnership. global reach. basis.
Knowledge, Reach and Partnership on a Global Scale Local Presence in 50+ Countries
Solutions that Span The Industry’s Needs Largest breadth and depth of commercialization services #1 provider in virtually every offering
About Me Born in South Africa Graduate of the University of Witwatersrand in Johannesburg with a degree in accounting Lieutenant in the South African Air Force Came to California in 1989 to work for an orthopedics distribution company Joined Alternate Site Distributors (ASD) Healthcare in 1994 as the general manager
About Me President of Bergen Brunswig Specialty Group in 1999 President, AmerisourceBergen Specialty Group (ABSG) following the merger of Amerisource Health and Bergen Brunswig in 2001 President of AmerisourceBergen Drug Corporation (ABDC) in 2009 President and CEO of AmerisourceBergen (ABC) in 2011
Four Disruptions in the Healthcare Supply Chain
Global Spending on Drugs Will Reach about $1.3 Trillion by 2018 Global Sales and Growth, 2009-2018 Source: IMS Health Market Prognosis, Sept. 2014, at ex-manufacturer price levels, not including rebates and discounts
Spending by Geography
US Pharmaceutical Trends Specialty Growth Source: Evaluate Pharma, Team Analysis ; McKinsey data
1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality
Provider Consolidation and Integration Continues Source: Kaufman, Hall and Associates, February 2015 Source: The Health Care M&A Information Source, February 2015
Physician Employment Trends (2008-2013) Physicians have been leaving independent practice for hospital-employment. However, majority of physicians are still practicing in an independent setting.
Health System Pharmacy Challenges Generic price spikes Drug shortages Specialty distribution shift 340B coordination Cost management—especially for specialty medications
Costs for Specialty Care Are Increasing – Regardless of Where the Care Is Administered
Shifting Site of Care: Key Takeaways Issue runs deeper than just where products are delivered and administered Regardless of where care is delivered, supply chain partners must be nimble enough to respond in a value-additive way Market change creates increased needs for solutions that align with customer business goals
1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality
Virtual Care and Telehealth Telehealth is a potential solution for challenges created as a result of an aging population and an increase in chronic disease states. Additional benefits include an increase in quality care and decrease in healthcare expenditures. Source: “Global Markets for Telemedicine Technologies,” BCC Research, available at http://www.bccresearch.com/; “Global Telehealth Market Set to Expand Tenfold by 2018
A Patient-centric Approach to Adherence Services
Changing Patient Population: Key Takeaways Patient population growing in size and complexity Aligning services with patient expectations will be key—not just for supply chain partners, but for all healthcare stakeholders Reach and scale will still be key
1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality
Launch influenced by: Regulatory approval Patent challenges Commercial acceptance Interchangeability
Biosimilar Opportunities
Biosimilars: Key Takeaways Still playing the waiting game for the big biosimilars rush But waiting does not equate with inactivity Winners will be determined by who’s best prepared to serve full spectrum of needs—both distribution and commercialization
1 Shifting Site of Care 2 Changing Patient Population 3 Biosimilars 4 Balancing Cost vs. Quality
Emergency Room Usage by Country Source: 2013 Commonwealth Fund International Health Policy Survey in Eleven Countries.
An Accountable Care Organization (ACO) is a group of health care providers who work to deliver coordinated care and are collectively accountable for the cost and quality of care. ACOs have the potential to improve the quality of care and lower costs. To show success, ACOs must report on specific quality measures. Source: National Pharmaceutical Council
A Shift from “Fee-for-service” to “Value-based” Care as a Result of the Affordable Care Act Source : HIDA: “Healthcare Supply Chain 2015” Source : MM&M-online: Health systems are embracing value-based care: survey, December 2014.
Projected 2015 Private Health Insurance Spending Inpatient and professional services account for the largest amount of private health insurance spending Source: PwC Health Research Institute, Medical cost trend: Behind the numbers 2015, June 2014 analysis based on the 2014 Millman Medical Index
The Hepatitis C Marketplace A leading manufacturer planned to launch their Hepatitis C drug via limited distribution They made the decision to instead launch full line wholesale The result was expanded patient access and arguably the most successful healthcare product launch of this century
Financial Impact of New Hepatitis C Therapies 2015 – 2016 is the highest cumulative impact on benefit costs for employer plans Source: PwC Health Research Institute estimate based on National Health and Nutrition Examination Survey and 2012 Truven claims data from employers23
Balancing Cost vs. Quality: Key Takeaways Smarter spending—not just reduced spending Results matter just as much as (or even more than) procedures Support needed for providers entering into ACOs and other care coordination models
Where Do We See Opportunity to Shape Healthcare Delivery?
The Independent Community Pharmacy The community pharmacy industry represents 37% of all retail pharmacies in the US, an estimated $89 billion in annual revenue. Top three disease state management services offered at a community pharmacy are immunizations , blood pressure monitoring and diabetes training. Pharmacists play an increasingly important role in public health and many states are expanding the role of the pharmacist as provider. Source: IMS Health Data
Independents Remain a Formidable Presence Customer Utilization of Pharmacies, by Dispensing Format, 2014 Prescriptions (millions) Share of Prescriptions Dispensing Format 2012 2013 % Change 2012 2013 % Change Chain drugstores 1,885 1,947 +3.3% 44.0% 45.3% +135 b.p. Independent drugstores 723 719 -0.6% 16.9% 16.7% -13 b.p. Mass merchants with pharmacies 439 442 +0.7% 10.2% 10.3% +5 b.p. Supermarkets with pharmacies 522 536 +2.7% 12.2% 12.5% +30 b.p. Mail pharmacies 1 717 651 -9.2% 16.7% 15.2% -157 b.p. Total 4,286 4,295 +0.2% 100.0% 100.0% 1. Excludes Tricare prescriptions. Prescription data for mail pharmacies show Equivalent Scripts (Actual Scripts x 3) Totals may not sum due to rounding. b.p. = Basis Point (one hundredth of one percent; 0.01%) Source: Pembroke Consulting analysis of IMS Health data; Pembroke Consulting estimates
Independent Community Pharmacy Market Share of Prescription Revenues, 2013 Source: 2013-14 Economic Report on Retail, Mail, and Specialty Pharmacies, Drug Channels Institute, January 2014.
Customer Satisfaction with Pharmacies Customer Satisfaction with Pharmacies, by Dispensing Format, 2014 Customer Satisfaction Index Ranking (based on a 1,000-point scale) Source: Pembroke Consulting analysis of 2014 U.S. National Pharmacy Study , J.D. Power and Associates, September 2014
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