Cardinal Health CEO George Barrett followed his counterparts at drug distributors McKesson Corp. and AmerisourceBergen in expressing concern with generic-drug price deflation and slowed price increases for branded drugs.
Public backlash over price hikes for drugs like the EpiPen and Daraprim has had a significant impact on how drugmakers have chosen to price their products this year, Barrett said on Monday. That, along with limited generic-drug launches and reimbursement pressures among providers, has led to less-than-satisfactory results for drug distributors, who are often paid based on the amount of drugmaker revenue they handle.
“Price erosion during the period has been more pronounced than it has been in quite some time for our industry,” Barrett said, later adding that the election cycle has created “an enormous amount of discussion and noise.”
In response to these pressures, Cardinal, which distributes drugs and medical supplies, lowered its fiscal 2017 profit guidance to $5.40 to $5.60 non-GAAP diluted earnings per share, from an initial estimate of $5.48 to $5.73. That would represent a roughly 3% to 7% increase in profit from fiscal 2016.
Barrett's comments follow a downward revision in profit guidance from drug distrubtor McKesson last Friday, which came with similar comments from the company's CEO, John Hammergren. AmerisourceBergen CEO Steven Collis similarly said in May that he was “severely disappointed” that generic-drug deflation and a reduction in generic-drug launches has left the company with a fiscal 2017 forecast that falls below historic performance.
Cardinal reported $309 million in its first-quarter results released Monday, down 19% from the year before due to pharmaceutical pricing trends, the company said. Revenue was up 14% at $32 billion, driven by strong segment from the Dublin, Ohio-based company's medical supply segment.
Cardinal recently lost grocery chain Safeway as a drug distribution customer, but gained a major medical supplies customer in Kaiser Permanente, which dropped its $525 million contract with Owens & Minor earlier this year.