How has AmerisourceBergen—former Tefen client and leader in healthcare delivery—managed to thrive in the ever-changing financial, political, technological, medical and social trends of healthcare, remaining a leader in this dynamic climate? Bruce Bennett and Mike Miller, Senior Vice Presidents of Distribution Services at AmerisourceBergen, share their perspectives.
AmerisourceBergen is the market leader in global pharmaceutical sourcing and distribution services. As part of the largest global generics purchasing organization, and leading provider of patient-centered services and solutions, AmerisourceBergen is well positioned to help customers capitalize on the dynamic changes in healthcare—improving access to life-saving products and transforming the healthcare supply chain every day.
With patients top of mind, AmerisourceBergen is constantly striving to be an easy partner to work with for manufactures and pharmacy customers, and to do their part to make sure patients get the medications they need.
How has AmerisourceBergen managed to remain a leader in this fast-moving industry?
AmerisourceBergen’s Bruce Bennett and Mike Miller, Senior Vice Presidents of Distribution Services were invited to share their insights about their careers at AmerisourceBergen and in the life sciences industry.
Written by Sarah Simonson, Senior Consultant, and Leah Schultheis, Consultant
Could you share a little bit about yourself and how you got to where you are? Why pharmaceutical distribution?
Mike Miller (MM): This question brings me back to my childhood. When I was in high school, my very first job was working for a community pharmacy. The owner gave me a lot of the responsibility for ordering and checking the deliveries from Bergen Brunswig—the company Amerisource Health Corporation merged with in 2001. I flourished working there and realized my passion for helping customers and patients.
Soon after I graduated from High School, I transitioned from the pharmacy setting to the supplier/wholesaler as an order filler. In this role, I packed the totes and stocked the shelves. Eventually I became a warehouse supervisor, an inventory manager learning product procurement, and various operational roles that enabled me to learn all of the functions in a warehouse.
Bruce Bennett (BB): For most of my adult life—33 years to be exact—I’ve been with AmerisourceBergen and many of its business units. I've really grown up with the industry. Saying 33 years aloud makes me feel old, but then I say Mike has 39 years, and I don’t feel so bad (laughs). After going through a number of acquisitions and trying to reach economies of scale, I've seen how wholesale distribution is an integral part of how pharmaceutical products are developed and delivered.
What are the current trends you see in the industry?
BB: With 17 years in distribution center operations and sales, I've seen plenty of structural changes, but I can confidently say overall the trend has been to elevate the quality of care for patients while reducing cost and increasing operating efficiency. Although this may seem to be a paradox for my colleagues in the supply chain industry, this is the current challenge.
MM: When I first started working for the organization, our value statement reflected that it was best for our customers to buy in bulk and sell in single bottle quantities so they didn’t have to carry large amounts of inventory – giving them a small discount off the list price of the drug.
As we became more efficient and customers were demanding more competitive pricing, the discounts got deeper and we eventually moved to a Cost+ model, which consisted of making a small margin on top of our acquisition costs. This traditional wholesale model was very focused on reducing inventory carrying costs for our customers and reducing AR (Accounts Receivables) risks for our suppliers. In that model, a big source of our profit came from price increases on the inventory that we were holding for our suppliers.
Then, the industry changed overnight, and we weren't able to hold inventory for a long time anymore. We reacted by changing our value statement from reflecting that our customers should buy and hold to a more efficient supply chain model. In this new model we held a minimal amount of inventory – just enough, to service our customers’ need.
Furthermore, our suppliers started paying us for the services we provided including carrying their AR, taking returns, and managing their inventory. So, by default, the value statement went from buy and hold to being compensated for services we provide to suppliers and providers.
Most importantly, we realized that our customers’ patients were our primary focus and we had to provide a best-in-class experience to maintain those customers.
BB: AmerisourceBergen truly has evolved from a pharmaceutical distributor to a healthcare partner. Our partnerships with manufacturers position us to help bring new medications to market. We have numerous solutions that maximize product success at every stage of the product lifecycle. Manufacturers have two primary focuses: create new drugs and get those treatments to patients. With a presence in more than 52 countries, AmerisourceBergen's strength is to improve product access and efficiency throughout the healthcare supply chain, allowing our customers to spend more time caring for their patients.
What has been ABC's experience regarding the move towards patient-centric mentality? Do you see this across the industry?
BB: I briefly spoke earlier about our balance of quality of care and cost to serve. Although that model worked for AmerisourceBergen, we realized that all of the hard work our associates1 put forth every day came down to one thing: the patient experience. Traditionally, medicine focused on metrics that demonstrated how the patient got better. Now it focuses on the hierarchy of patients’ needs – specifically focusing the metrics on convenience, comfort, education and knowledge regarding their condition, and support.
MM: Focusing on the customer has been part of AmerisourceBergen’s DNA for as long as I can remember. We have always focused on the customer, but now we are making a more formal commitment to customer centricity and patient care.
ersonally, having experience working in a pharmacy and directly with patients has really shaped how I’ve conducted business and how we’ve led and trained associates for decades. When I’m with our associates at the warehouse level, unprompted, they come up and share their stories about what they’ve done to ensure our customers’ patients are experiencing the best care. Our interactions with our customers matter the most – they define how we are seen in the marketplace.
2017 is a big year for pharmaceuticals, as manufacturers need to have all products serialized in compliance with the DSCSA, and test data transfers with partners like wholesale distributors per the Drug Supply Chain Security Act. What can the supply chain expect from this race towards serialization?
MM: Serialization is more important today than ever before. As I’m sure you’re aware, criminals have developed the capability to create counterfeit drugs that threaten our secure supply chain in the US. Serialization will enable us to maintain 100% integrity with the products we’re distributing. While there are certainly challenges to implementation, there are additional opportunities and benefits created. For example, tracking returns from customers and managing inventory expiration dates should become more systematic. Ultimately, I think the winners will be the companies that focus on the possibilities versus the challenges.
BB: I’ve noticed a strong connection between AmerisourceBergen’s Continuous Improvement (CI) capabilities and how we are addressing Secure Supply Chain elements. Over the last year and a half AmerisourceBergen operations has shifted to an extremely proactive approach to problem-solving.
We realized that serialization actually opened many innovative doors, to have better control over the distribution of our pharmaceuticals. An example of continuous improvement is how we are capturing data downstream. We now have the ability to track and trace the movement of products, having complete visibility to them at all times. We are implementing systems and processes that will enable us to be a better provider – it’s a really exciting time!
Speaking of Continuous Improvement, we know that this program has been a big source of AmerisourceBergen’s attention in recent years. How has CI changed the culture within your organization and what benefits have you seen from it?
MM: Our Continuous Improvement program has given us the tools, resources, and ability to innovate in order to act more effectively and consistently on our intentions to create a better experience for our customers and their patients.
I’ve also noticed that the engagement level for our associates has gone up dramatically. I believe it has to do with the new collaborative approach; they are much more optimistic about bringing teams together as one to work with subject matter experts for problem solving. We now have a formal program to drive improvement, and we have the associates who want to make the changes. It’s been a cultural phenomenon – people are eager to take on whatever is next. They have a genuine interest in contributing to the culture of continuously evolving and improving.
Where do you think the industry will be ten years from now?
MM: I don’t have a crystal ball for the future, but I think we can assume that the fee-for-service model will still be important. Everyone in the supply chain is getting squeezed. Our downstream customers, especially in a hospital setting, are being held accountable to increase quality, but at the same time, decrease costs to make healthcare more affordable. I think some of our value will come from innovative ways to operate more efficiently and effectively. We will continue to improve quality for our customers and their patients and decrease cost across the supply chain.
What are the top challenges for ABC? How is the company, being a leader in the industry, addressing these challenges?
BB: Looking broadly, one of the wonderful things about healthcare is how dynamic it is. In the US we are a long way from solving all the challenges in the industry, but that ongoing complexity is what makes my job so exciting. At the same time, this complexity also causes a constant state of change. There used to be change cycles, with gaps of stability. However, those gaps have gone away in recent years. While it's very exciting, it can be taxing on people – from dealing with technology challenges to supply chain effectiveness.
MM: In terms of managing the effectiveness of our business, I think it’s all about willingness to change and adapt. We’ve been fortunate to have leaders such as Bob Mauch (current Group President of Pharmaceutical Distribution & Strategic Global Sourcing) and Chuck Ball (most recently the SVP, Distribution Services) who are committed to innovation. We’re doing so much more now in the organization that we may not have thought of in the past.
I’ve been a part of this company for almost 40 years now and I still wake up every day excited to do my job: interact with associates, customers and patients. It's a very exciting time for our company and this industry.
Recognizing the importance of our customers and their patients is key, but we also have to be dedicated to retaining the best associates. We have to be more in tune with our associates at a level much deeper than just compensation. They should be able to come to work every day and know they will be respected and appreciated with the opportunity to learn and grow. If we continue to embrace that state of mind, I think we’ll continue to accelerate growth and thrive amidst the industry changes.
1 ABC refers to each of its employees as an associate. It's a very important cultural theme for the organization.
Monopoly Building, Operational Excellence, Change Management & Supply Chain Expert