This is an excerpt from the May 6, 2021 edition of Medically Necessary, a health care supply chain newsletter. Subscribe here.
The results: The three major health care distributors for the U.S. reported big declines in profits during the first quarter of 2021 compared to the previous year. Revenues, however, remained relatively flat for AmerisourceBergen, Cardinal Health and McKesson.
During the pandemic, distributors ramped up activities related to COVID-19, such as transporting vaccines, providing therapeutics or delivering personal protective equipment. But other types of health care usage still haven’t returned to pre-pandemic levels, dampening any positive financial effects.
This is the first quarter in which results from last year include some impacts from the COVID-19 pandemic.
“What played out over the course of the year proved to be more unpredictable than anyone could have imagined,” McKesson CEO Brian Tyler said on a conference call. “The up-and-down trajectory of the recovery was certainly different than we had originally anticipated.”
Comparing the year’s financial results also offers some insight into how the pandemic has affected the health care supply chain.
AmerisourceBergen: Demand for COVID-19 therapeutics contributed to an overall increase in revenues for drug distribution for AmerisourceBergen.
In the last three months of 2020, the company saw drug distribution revenues increased nearly 10% year over year. About three quarters of that increase was due to COVID-19 treatments.
In the most recent quarter, the contribution from COVID-19 treatments was far less. Executives expect that demand to wane over the next six months.
At the same time, falling case numbers means other types of prescriptions will likely return to more normal levels.
“With vaccines, and a lower incidence of COVID-19 in many parts of the country, people will be scheduling these diagnostic procedures,” CFO Jim Cleary said on a conference call.
AmerisourceBergen’s net income fell about 55%, but revenues rose by nearly 4%. (Source: AmerisourceBergen)
Cardinal Health took on the massive task of distributing personal protective equipment to health care providers, which led to higher revenues.
But masks and social distancing essentially eliminated cases of influenza last year, and some patients are still reluctant to go to doctors’ offices.
That means the use of generic drugs dropped compared to a normal year. Executives expect the low level of generic drug use to continue through the end of 2021.
“Antibacterials, antibiotics, antivirals and pain meds, those generics and those categories … have just not returned to the pre-COVID levels,” Cardinal Health CEO Mike Kaufmann said on a conference call.
The roller-coaster nature of the pandemic is also making it hard to predict when things will get back to normal. Cardinal Health leaders said demand for surgical products reached about 95% in the last three months of 2020, before the height of the winter surge in the U.S.
Rising case numbers drove surgical demand back down to about 90% during the first three months of 2021.
Cardinal Health’s net income fell about 66%, but revenues remained flat. (Source: Cardinal Health)
McKesson — the company responsible for distributing COVID-19 vaccines made by Moderna and Johnson & Johnson for the federal government — distributed 100 million doses from December 2020 through March 2021.
McKesson reported $55 million in profits related to the distribution of COVID-19 vaccines, about 2% of the company’s pharmaceutical segment income.
Like other health care distributors, those profits were offset by lower health care usage in other areas.
“Prescription volume and primary care patient visit trends negatively impacted the core of our business throughout the fiscal year,” Tyler said on a conference call.
The difficulty of predicting demand for health care products in the middle of a pandemic also took a toll. Demand for PPE dissipated faster than McKesson anticipated, and the company ended up spending $87 million during the first quarter to deal with unsold materials.
Executives at McKesson are expecting prescription volumes and health care appointments to return to pre-pandemic levels by the fall or winter of 2021. The company predicts vaccine distribution will also lose steam along a similar timeline.
“We do not assume a return wave of the virus, additional shelter-in-place or increased social distancing,” CFO Britt Vitalone said on a conference call. “We remain in a dynamic environment. We are, however, encouraged by recent signs that a broader recovery is forthcoming.”
McKesson’s net income fell about 35%, but revenues grew about 1%. (Source: McKesson)
Family doctors, pharmacies, schools will play a role in vaccine supply chain for kids
The news: This week, the Food and Drug Administration authorized Pfizer’s COVID-19 vaccine for children ages 12 through 15.
According to FDA, about 1.5 million cases of COVID-19 have been reported in children ages 11 to 17.
The approval opens up vaccinations to about 17 million people in the U.S.
How will it work? The dosage and schedule of the vaccine are the same for both teens and adults. But kids might end up getting the shot in a different setting.
Many adults have received vaccines at mass vaccination centers or drive-thru sites; public health officials are looking to schools, pharmacies and doctors to reach kids.
On Wednesday, Centers for Disease Control and Prevention Director Rochelle Walensky called out family doctors as an important part of the vaccine supply chain for kids.
“Some parents want more information before their children receive a vaccine,” Walensky said in a press release. “I encourage parents with questions to talk to your child’s healthcare provider or your family doctor to learn more about the vaccine.”
In an address on Wednesday, President Joe Biden also highlighted the role of pediatricians and family doctors when it comes to vaccinating children.“We’re also going to be getting vaccines to pediatricians and family doctors so parents and children can talk to their doctors who they trust about getting the vaccination,” Biden said. “And they’ll be able to do it at that office.”
According to NPR, the Biden administration has already been recruiting doctors to administer the vaccine and plans to deliver smaller packages of the Pfizer vaccine, which normally come in shipments of nearly 1,200 doses, to doctors’ offices.
In some cases, the federal government will partner with schools to set up vaccination clinics, Biden said. More than 15,000 pharmacies will also be ready to vaccinate teens starting on Thursday.
FDA Commissioner Janet Woodcock told reporters that any site currently administering vaccines could simply start vaccinating children, according to The Associated Press.