Cardinal Health 2008 Annual Report Download - page 5

Cardinal Health 2008 Annual Report
As we announced in early August, we are studying whether
or not we should take yet another step and separate
Cardinal Health into two, publicly traded companies, each
focused on its distinct area of the healthcare market and its
own set of business opportunities. Our goal is simple. We
want to allow each business to become the best it can be in
meeting the needs of our customers, our shareholders and
our employees.
A decision may have been publicly announced by the time you
are reading this letter. Whatever the decision, we continue to see
excellent long-term potential for both Healthcare Supply Chain
Services and Clinical and Medical Products, and we believe that
we have been taking the necessary steps to put us on the right
path for the future.
Healthcare Supply Chain Services
The combination of a pharmaceutical and medical product
supply chain business provides us the opportunity to serve
hospitals, clinical laboratories, ambulatory care centers and
doctors’ o ices with the industry’s most e cient network
of distribution centers. Our ability to improve the customer
experience and to drive additional e iciencies, as well as an
increasingly aging population, will be the primary growth
drivers for this business.
During fiscal 2008, Healthcare Supply Chain Services faced some
challenges, particularly in pharmaceutical distribution. During
the second quarter, the Drug Enforcement Administration (DEA)
suspended our licenses to distribute controlled substances
from three of our 24 pharmaceutical distribution centers.
Preventing prescription drug abuse is a public policy goal that
Cardinal Health fully supports. We do not want these powerful
drugs in the wrong hands. We have strengthened our quality and
regulatory a airs team and implemented new systems to better
report suspicious orders to state and federal regulatory agencies.
In August, we announced an agreement-in-principle with the DEA
to resolve our controlled substance license suspensions. While
we cannot predict the ultimate timing or terms of any settlement
with the DEA, we expect the suspensions to be lifted by the end
of calendar 2008.
Our medical supply chain business made great strides in fiscal
2008, and as we expected, the second half of the year marked a
return to growth. We also were awarded some key contracts late
in the year that will bene t us in the second half of  scal 2009. We
have good momentum in our core medical product distribution
businesses – hospital supply, scienti c products/laboratory and
ambulatory care – and expect that momentum to continue
through fiscal 2009. And while there was some softness in our
surgical kitting business, we expect a return to profitable year-
over-year growth in  scal 2009.
Overall for fiscal 2008, the Healthcare Supply Chain Services –
Pharmaceutical and Healthcare Supply Chain Services – Medical
segments grew combined revenue* by 4 percent to $87 billion,
with combined segment profit* declining 12 percent to $1.4
billion. Our anti-diversion investments, large chain customer
contract re-pricings and a decline in overall pharmaceutical
market growth contributed to the profit decline; however,
we expect to return to profitable growth in the second half
of fiscal 2009.
Looking ahead, we are focused on executing the basics with
excellence and on increasing the business we have with
our existing customers by capturing a greater share of their
purchases. We are doing this by improving the quality and
value of our o erings, while ensuring those o erings are
pro table for Cardinal Health. And the work we are doing in
category management will help us improve our customer mix.
Clinical and Medical Products
Clinical and Medical Products had another terri c year and is
quickly becoming one of the leading med-tech businesses in
the world, with leadership positions in medication and supply
dispensing, infusion systems, respiratory care and infection
prevention. We provide clinically di erentiated products and
services that make it easier for clinicians to follow evidence-based
protocols and deliver simple and compelling economic benefits.
During the year, Clinical and Medical Products remained ahead
of schedule for the VIASYS Healthcare integration. We also made
a significant investment to expand our infection prevention