Health Care the Developed Worlds Are Becoming

Health Care

The developed worlds are becoming older. America's population is approaching retirement age due in large part to the baby boomer generation. Those individuals born between 1946 and 1964 will be eligible for more social security and retirement benefits as time passes. As such, pharmaceutical companies, health services, and the medical industry at large will benefit from this influx of older individuals. As competition for new patents, facilities, drugs and more becomes more intense, companies will undoubtedly go bankrupt. Those companies that can continually innovate and provide products that are demanded will eventually prosper as our population ages. Cardinal Health, McKesson Corporation and Amerisource Bergen are at the forefront of this innovation. They continually push the existing boundaries of science to provide better products for society. How they accomplish this task however is very distinct to each company. By delving into the annual reports of each company an individual gains extensive insight into the strategic competitive advantages of each company and how the company intends to maintain that advantage.

To begin annual reports or form 10-k is a detailed overview of company performance over the past fiscal year. These reports include financials, goals, objections, future headwinds, letters from management and much more. On the surface, these reports seem to be very helpful to the investor; but upon further analysis another story emerges. Annual reports, in aggregate are indeed insightful when used in the right context. Cardinal Health, McKesson Corporation and Amerisource Bergen are no different in this regard. There annual reports provide extensive insights into the companies long-term growth strategies while also outlining tactics in which to achieve them.

Amerisource Bergen along with Abbott Laboratories was the best performer in the health care index last year. Its sales grew by 10.5 primarily due to international demand. As mentioned earlier, developed nations such as Japan, America, and Europe, are becoming much older. As such, they demand an increasing amount of health care services. The company's earnings grew by 11.8% which allowed them to return nearly $3 billion back to shareholders. Its strategy to maintain its top position within the industry is to separate into two companies. One company will be focused solely on products. This company will retain the Abbott name. The second company, which has yet to be named, will be focused primarily on research. This company will do much of the analysis needed to foster earnings growth for the company. This is unique as the company, even with its success, has split into entities. This allows the company to be more nimble in regards to innovation and product development. It also helps eliminate many of the layers and bureaucracy that many large organizations encounter when they grow. In regards to new products, Abbott is currently attempting to venture into the Asian market with particular emphasis on China. The company has recently release Similac and Pediasure within the market. The company has also release i-STAT which is a hand held diagnostic tool used emergency rooms and departments. In regards to expiring patents, many of them are related to the oncology segment of the business operations. The company intends to license these products and use of these patents in an attempt to salvage potentially lost value, while also building awareness of the company's products.

Competitive strategies for Amerisource include product innovation. Amerisource plans to hire 1500 new scientist to develop drugs catering to heart and obesity related aspects. These drugs will be marketed in emerging markets as Abbott believes it has a competitive advantage in those markets. In addition, developed nations are becoming older. Abbott intends to compete internationally using its heart and obesity related products. In regards to upcoming product development, Abbott intends to develop its Pediasure and I-Stat brands to compete internationally. New drugs currently being produced is that of Ureva. This drug is anticipated to become available in 2016 and will provide heart related solutions for individuals suffering from high blood pressure.

McKesson Corporation grew revenue last year by 5% which was not as good as its competitor Abbot Laboratories. In the fourth quarter of 2011, the company actually declined in revenue growth due in part to the loss of the patent on the Zyprexa drug. Also, the drug Gemzar has experienced declining sales due in part to generic competition. As mentioned earlier, Japan has an extremely old population. As such, revenue in that region alone grew by 31%. In addition, the company experienced 31% revenue growth in China due to increased demand. In regards to strategy, McKesson Corporation is first attempted to cut costs associated with business operation. The company in 2011 cut nearly $1 Billion in costs. It also eliminated 5,500 jobs in response to the expiration of the Zyprexa patent. The company is also pursuing an acquisition strategy in markets deem as growth opportunities. These opportunities exist primarily in China, Japan, and other emerging markets. Finally, the company is pursuing a growth strategy which incorporates innovation. This innovation will be the result of extensive research and development in products to replace those with expiring patents. This innovation will also fuel growth in emerging markets that are under served (BusinessWeek, 2012).

In regards to competitive strategy, McKesson Corporation intends to use cost cutting measure to compete internationally. It has cut staff in its development department but intends to provide its Zyprexa drug to international markets. It is also developing is Triuva drug which is awaiting approval for 2015. The company anticipates this drug generating nearly $3 billion in revenue over the next 5 to 10 years.

How Cardinal can improve the logistics and procurement side of the business to become more competitive against the competition.