Creative Ways to Own the Customer

Mark Twain once said: “History doesn’t repeat itself, but it does rhyme.” Keep that quote in mind when thinking through the possible lessons from some recent acquisition activity in the health care space.

McKesson (MCK), one of the country’s biggest drug wholesalers, just announced a deal to buy Oncology Therapeutics Network (OTN) for $575 million. I don’t normally blog about specific transactions. However, this acquisition highlights a very interesting counter-trend for wholesaler-distributors concerned about disintermediation.

Here's the twist. OTN is a distributor that also owns Onmark, a large buying group for thousands of small accounts. Now, the buying group portion of the business will be under common ownership with McKesson, a major wholesaler-distributor.

Such forward integration makes it virtually impossible for a manufacture to bypass and sell directly to the customer -- because the distributor and the customer are the same company! Nevertheless, the customers of OTN/Onmark still operate as independent businesses. McKesson is not planning to operate physician offices or oncology clinics.

AmerisourceBergen (ABC), a competitor to McKesson, uses this strategy to great success. ION, the largest community oncology buying group, has a prime vendor distribution arrangement with Oncology Supply. Both organizations are part of AmerisourceBergen’s Specialty Group.

Learning from Other Industries

As I see it, the McKesson deal provides an intriguing opportunity to think about possibilities in your own line of trade. I know that customer buying groups exist in many wholesale distribution lines of trade. So I wonder: Are there any similar opportunities to establish a unique competitive advantage through forward integration?

There are interesting lessons and examples like this one all around the $4 trillion wholesale distribution industry. So I also want to tell you about an upcoming opportunity to learn about these examples -- the NAW Executive Summit.

I’ll be leading a panel discussion on customer focus featuring three wholesaler-distributors from three very different lines of trade. I hope that you can make the time to attend and get inspired by the creative strategies of wholesaler-distributors in other lines of trade.