Cardinal Health 2014 Annual Report Download - page 5

Medical Segment highlights
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Medical Segment scal year 2014 revenues grew 9 percent; segment
prot margin rate expanded by 35 basis points; and, segment prot
grew 19 percent.
The delivery of medical care has been undergoing fairly rapid change,
and the work of our Medical Segment has been focused on aligning to
address the evolution in the system.
Recently, we formalized some adaptations to these changes,
launching a team-based approach to addressing the needs of large,
integrated delivery networks (IDNs). These are not sales teams, but
rather business and system experts who are charged with delivering
the full range and breadth of the Cardinal Health portfolio to address
the complex needs of these diverse customers.
As I mentioned earlier, we have seen consolidation among hospital
systems, continued aliation between doctors and those systems,
and some shifting sand as it relates to where care is delivered.
On this last point, while the sickest patients will continue to be served
in acute care settings, it’s clear that many patients with lower acuity
will be served in dierent settings — whether that’s a community
hospital, a surgery center, a clinic, a physician’s oce or even the
home. This has been at the heart of our strategy to serve patients
across the continuum of care.
In this context, the March 2013 acquisition of AssuraMed, the leading
distributor of direct-to-home medical supplies, has been an important
extension of our strategy. It has signicantly increased our touch
points and created opportunities in a market that is growing an
estimated 5 to 7 percent per year. Most important for Cardinal Health,
it’s increasing our direct linkages with chronic patients.
As we indicated at the time of the acquisition, we intended to increase
the AssuraMed portfolio. We have, in fact, broadened the product line
as well as increased the number of Cardinal Health branded products
to this important channel of the home. All told, we are extremely
pleased with the progress here and the fact that AssuraMed exceeded
our articulated full- year, non-GAAP earnings per share accretion
target of $0.18 per share.
Our medical consumables business has represented an opportunity
to use our scale to bring signicant savings to the healthcare system
while at the same time expanding our margins. Our consumables
business grew faster than the market this year, driven by share gains
from new private label product launches, new channel penetration
and growth within our strategic accounts. We saw full year sales
growth of 6 percent and launched over 500 new SKUs.
During this past year, we have seen the challenges
many of our hospital, IDN and surgery center
customers face in managing physician preference
items. These categories tend to consume resources
and, from our perspective, represent an ineciency.
We have recognized an opportunity to bring
standardization and, with that, real-time value to this
system. We have positioned ourselves to address
some critical pain points building platforms in
orthopedic, wound management and — with our
third quarter acquisition of AccessClosure Inc. —
interventional cardiology.
China
China has continued to be an outstanding growth
story for us. In 2014, we grew revenues by 30 percent,
reaching $2.6 billion.
We continue to build strong relationships with
biopharmaceutical and medical device companies
at a time when company reputation is particularly
important. We’ve expanded our geographic
footprint and our lines of business, which now
include 30 direct-to-patient pharmacies focused
on specialized pharmaceutical products.
Fiscal Year 2015 outlook
As we leave scal year 2014 and turn to our scal
year 2015, we begin the year with increased scale
in generics, a more robust specialty business, a
recongured customer and product portfolio, some
important solution oerings for the medical system,
the exibility that comes with nancial strength, a
deep bench of organizational talent and a sense of
condence for the future.
Most important, we believe our strategic priorities
align with the needs of a healthcare system
experiencing rapid change, including new
performance-based models, a new world of bundled
risk, changing network design, accountable care
organizations and a more involved patient acting
more like a consumer.