Henry Schein 2014 Annual Report Download - page 18

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Due in part to the inability of office-based health care practitioners to store and manage large quantities of
supplies in their offices, the distribution of health care supplies and small equipment to office-based health care
practitioners has been characterized by frequent, small quantity orders, and a need for rapid, reliable and
substantially complete order fulfillment. The purchasing decisions within an office-based health care practice are
typically made by the practitioner or an administrative assistant. Supplies and small equipment are generally
purchased from more than one distributor, with one generally serving as the primary supplier.
The health care products distribution industry continues to experience growth due to the aging population,
increased health care awareness, the proliferation of medical technology and testing, new pharmacology treatments
and expanded third-party insurance coverage, partially offset by the effects of unemployment on insurance
coverage. In addition, the physician market continues to benefit from the shift of procedures and diagnostic testing
from acute care settings to alternate-care sites, particularly physicians’ offices.
We believe that consolidation within the industry will continue to result in a number of distributors, particularly
those with limited financial, operating and marketing resources, seeking to combine with larger companies that can
provide growth opportunities. This consolidation also may continue to result in distributors seeking to acquire
companies that can enhance their current product and service offerings or provide opportunities to serve a broader
customer base.
In recent years, the health care industry has increasingly focused on cost containment. This trend has benefited
distributors capable of providing a broad array of products and services at low prices. It also has accelerated the
growth of HMOs, group practices, other managed care accounts and collective buying groups, which, in addition to
their emphasis on obtaining products at competitive prices, tend to favor distributors capable of providing
specialized management information support. We believe that the trend towards cost containment has the potential
to favorably affect demand for technology solutions, including software, which can enhance the efficiency and
facilitation of practice management.
Competition
The distribution and manufacture of health care supplies and equipment is highly competitive. Many of the
health care distribution products we sell are available to our customers from a number of suppliers. In addition, our
competitors could obtain exclusive rights from manufacturers to market particular products. Manufacturers also
could seek to sell directly to end-users, and thereby eliminate or reduce our role and that of other distributors.
In North America, we compete with other distributors, as well as several manufacturers, of dental, animal
health and medical products, primarily on the basis of price, breadth of product line, customer service and value-
added products and services. In the dental market, our primary competitors are the Patterson Dental division of
Patterson Companies, Inc. and Benco Dental Supply Company. In addition, we compete against a number of other
distributors that operate on a national, regional and local level. In the animal health market, our primary
competitors are MWI Veterinary Supply, Inc. and the Patterson Veterinary division of Patterson Companies, Inc.
Our primary competitor in the medical market is McKesson Corporation, which is a national distributor. We also
compete against a number of regional and local animal health and medical distributors, as well as a number of
manufacturers that sell directly to veterinarians and physicians. With regard to our dental practice management
software, we compete against numerous companies, including Carestream Health, Inc. and the Patterson Dental
division of Patterson Companies, Inc. In the animal health practice management market, our primary competitors
are IDEXX Laboratories, Inc. and the Patterson Veterinary division of Patterson Companies, Inc. The medical
practice management and electronic medical records market is very fragmented and we compete with numerous
companies such as the NextGen division of Quality Systems, Inc., eClinicalWorks and Allscripts Healthcare
Solutions, Inc.
We also face significant competition internationally, where we compete on the basis of price and customer
service against several large competitors, including the GACD Group, Pluradent AG & Co., Lifco AB, Planmeca
Oy, Billericay Dental Supply Co. Ltd., National Veterinary Services, Centaur Services Limited and Alcyon SA, as
well as a large number of dental, animal health and medical product distributors and manufacturers in Australia,
Austria, Belgium, Brazil, Canada, Chile, China, the Czech Republic, France, Germany, Hong Kong SAR, Iceland,
Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Poland, Portugal, Slovakia, South Africa,
Spain, Switzerland, Thailand and the United Kingdom.