Cardinal Health 2010 Annual Report Download - page 32

Novation, LLC, and Premier Purchasing Partners, L.P. Arrangements with these two GPOs accounted fo
r
approximately 1
5
% of our revenue for fiscal 2010. Although GPO vendor selections may influence membe
r
sourcing decisions, GPO members generally are not required to comply with those vendor selections.
Accordingly, we believe that the loss of an agreement with a GPO would not cause the loss of sales to all
members of the GPO.
S
u
pp
liers
We rely on many different suppliers. Products obtained from our five largest suppliers accounted for a
n
aggregate of approximately 20% of our revenue during fiscal 2010, but no single supplier’s products accounted
f
or more than
6
% of that revenue. Overall, we believe our relationships with our suppliers are good. The loss of
some suppliers could adversely affect our results of operations and financial condition if alternative sources wer
e
unavailable at reasonable
p
rices
.
The Pharmaceutical distribution business is a party to distribution service agreements with pharmaceutical
manufacturers. These agreements generally have terms ranging from one year with an automatic renewal featur
e
to five years. Generally, these agreements are terminable before they expire only if the parties mutually agree, i
f
there is an uncured breach of the agreement, or if one party is the subject of a bankruptcy filing or similar
insolvency event. Some agreements allow the manufacturer to terminate the agreement without cause within a
defined notice
p
eriod.
Our Pharmaceutical segment’s nuclear pharmacy services business dispenses several products prepare
d
using a particular radioisotope. At the present time, it is difficult to acquire sufficient quantities of that
r
adioisotope from third party suppliers because of a continued and prolonged shortage of a critical raw materia
l
used to derive that radioisotope from two nuclear reactors, which are experiencing prolonged downtimes. Based
o
n information obtained from parties involved with the two affected nuclear reactors, we anticipate the supply of
r
aw material to normalize in the first half of fiscal 2011.
C
om
p
et
i
t
i
on
We operate in a highly competitive environment in the distribution of pharmaceuticals and related
healthcare services. We also operate in a highly competitive environment in the development, manufacturing and
distribution of medical and surgical products. We compete on many levels, including service offerings, support
services, breadth of
p
roduct lines, and
p
rice
.
I
n the Pharmaceutical segment, we compete with two other national, full-line wholesale distributor
s
(McKesson Corporation and AmerisourceBergen Corporation) and a number of regional wholesale distributors,
self-warehousing chains, direct selling manufacturers, specialty distributors, third-party logistics companies, and
nuclear pharmacies, among others. In addition, the Pharmaceutical segment has experienced competition from
a
number of organizations offering generic pharmaceuticals, including telemarketers.
I
n the Medical segment, we compete with many different distributors, including Owens & Minor, Inc.,
T
hermo Fisher Scientific Inc., PSS World Medical, Inc., Henry Schein, Inc., and Medline Industries, Inc. I
n
addition, we compete with a number of regional medical products distributors and with third-party logistics
companies. Competitors of the Medical segment’s development and manufacturing business include Kimberly
-
Clark Corporation, Ansell Limited, DeRoyal Industries Inc., Medline Industries, Inc., and Mölnlycke Healt
h
C
are.
E
m
pl
o
y
ees
A
s of June 30, 2010, we had approximately 22,600 employees in the United States and approximately 8,60
0
employees outside of the United States. Overall, we consider our employee relations to be good
.
6