Creating generic powerhouses

A deal announced last month between CVS Caremark and Cardinal Health created a joint venture that the companies said would be the largest generic drug sourcing entity in the United States.

Each company will have a 50% stake in the joint venture, contributing its respective sourcing and supply chain expertise. The deal also included an extension of Cardinal Health’s existing pharmaceutical distribution agreement with CVS Caremark through June 2019.

McKesson’s purchase in October of a majority stake in German drug distributor Celesio resulted in the two having a combined generic purchasing power of between $9.5 billion and $11.5 billion, according to an analysis by FBR Capital Markets. McKesson announced last month a bid to buy up the rest of Celesio, though hedge fund Elliott Management, which has a stake in Celesio of more than 25%, is trying to block the deal.

A similar analysis of the respective purchasing power of CVS Caremark and Cardinal Health means their deal will create a combined purchasing power of between $9.5 billion and $11.5 billion. According to FBR, the Walgreens-Amerisource-Bergen-ABC Consortium has about $12 billion in combined generic purchasing power. Pembroke Consulting president Adam Fein described McKesson-Celesio, Walgreens-AmerisourceBergen-ABC and now CVS Caremark-Cardinal Health as “King Kong vs. Godzilla vs. Mothra.”