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Cardinal Hopes Clark Is the Cure-All
The beleaguered health-care distributor has named P&G Vice-Chairman Kerry Clark as its CEO. But veteran chief Robert Walter isn't out of the picture
The Walter Era is coming to a close at Cardinal Health (CAH ). Robert D. Walter, long-time CEO of the Dublin (Ohio) distributor of health-care products, is stepping down from the post he has held since 1971, when he purchased Cardinal through a leveraged buyout. Cardinal has named Procter & Gamble (PG ) Vice-Chairman R. Kerry Clark as its new chief executive.
The $78-billion drug giant had nearly become synonymous with the driven but low-profile Walter. After taking over, he shifted the company's focus from food to drugs, expanded overseas, and had Cardinal manufacture more of the products it distributes. Walter transformed the company largely through acquisition. For more than a decade, Cardinal gobbled up other distribution outfits to the point where it now ships 30% of all drugs sold in the U.S., making it one of the pharma-distribution industry's big three, along with Amerisource-Bergen and McKesson.
But the last couple of years have been tumultuous for Cardinal and Walter. On the business side, Cardinal has been caught in the fundamental changes sweeping the industry. Drug makers have balked at letting wholesalers like Cardinal stock up on drugs ahead of price increases -- a practice that enabled Cardinal to ship cheaper drugs at higher prices.
LINGERING PRESENCE. Customers, meanwhile, are applying pressure at the other end of the business. Drugstore chains like CVS Corp. (CVS ) and Rite Aid (RAD ) have been pushing to keep prices down. So even though Cardinal and other distributors have been trying for higher markups, the drug chains have resisted -- in some cases by bypassing wholesalers altogether. The result: Drug-distribution margins are almost nil.
To make matters worse, Cardinal has been beleaguered by Securities & Exchange Commission investigations. In 2003, the agency looked into how and when Cardinal recognized a $22 million gain from a legal settlement in 2002. The company has received SEC subpoenas seeking information involving revenue classification and compensation of certain employees and directors.
It's not clear to what degree these operational and financial pressures pushed Cardinal's board of directors to replace Walter. But for the time being, his influence will continue to be felt, as he is expected to stay on as board chairman.
POTENT FORMULAS. In the 54-year-old Clark, Cardinal gains a strong up-and-comer. One of five vice-chairmen at the world's largest consumer products maker, he had been considered one of three possible successors to P&G CEO A.G. Lafley. Clark joined P&G in 1975 as an assistant brand manager in Canada and rose up the ranks (see BW Online, 5/20/04, "Shelter in a Household Name").
Cardinal hopes to gain from Clark's success in marketing drugs. As vice-chairman for family health products, a position he assumed last year, Clark heads P&G's global pharmaceutical business, which includes osteoporosis drug Actonel and heartburn drug Prilosec, on which P&G obtained over-the-counter distribution rights from the drug's manufacturer. Both drugs have proven strong successes for P&G. The family health division also includes P&G's Crest oral-care business, the market-share leader.
Within P&G, Clark is viewed as a strong strategist and is credited with helping to implement a new corporate structure launched in 1998 called Organization 2005. Aimed at improving how P&G functions as a global company, it broke the outfit down into several global business units, which handled development manufacturing and distribution of brands. These units, in turn, were supported by market-development organizations, which handled local marketing.
THIRD TIME'S A CHARM. After a successful stint as head of P&G's Asian feminine-care business, Clark became head of global marketing operations in 2000, distinguishing himself by making the new organizational structure work effectively. Analysts say the new organization structure has given it a big advantage over rival consumer-product makers.
Clark's move to become Cardinal's chief executive come as no surprise at P&G, where top brass knew that he was looking, says a person familiar with the situation. Indeed, it was disclosed publicly in 2004 that Clark was one of the candidates to head of Coca-Cola (KO ), a job he didn't get. Last year, according to the same person, Clark had been in the running at 3M (MMM ) to replace former Chief Executive W. James McNerney Jr., who left to become head of Boeing (BA ), the same source says.
He'll have his hands full at Cardinal, but it looks like Clark has finally landed the top job he coveted. Cardinal is betting the match will bring the company new life.
Copyright 2000- 2006 by The McGraw-Hill Companies Inc. All rights reserved.
Cardinal Hopes Clark Is the Cure-All
The beleaguered health-care distributor has named P&G Vice-Chairman Kerry Clark as its CEO. But veteran chief Robert Walter isn't out of the picture
The Walter Era is coming to a close at Cardinal Health (CAH ). Robert D. Walter, long-time CEO of the Dublin (Ohio) distributor of health-care products, is stepping down from the post he has held since 1971, when he purchased Cardinal through a leveraged buyout. Cardinal has named Procter & Gamble (PG ) Vice-Chairman R. Kerry Clark as its new chief executive.
The $78-billion drug giant had nearly become synonymous with the driven but low-profile Walter. After taking over, he shifted the company's focus from food to drugs, expanded overseas, and had Cardinal manufacture more of the products it distributes. Walter transformed the company largely through acquisition. For more than a decade, Cardinal gobbled up other distribution outfits to the point where it now ships 30% of all drugs sold in the U.S., making it one of the pharma-distribution industry's big three, along with Amerisource-Bergen and McKesson.
But the last couple of years have been tumultuous for Cardinal and Walter. On the business side, Cardinal has been caught in the fundamental changes sweeping the industry. Drug makers have balked at letting wholesalers like Cardinal stock up on drugs ahead of price increases -- a practice that enabled Cardinal to ship cheaper drugs at higher prices.
LINGERING PRESENCE. Customers, meanwhile, are applying pressure at the other end of the business. Drugstore chains like CVS Corp. (CVS ) and Rite Aid (RAD ) have been pushing to keep prices down. So even though Cardinal and other distributors have been trying for higher markups, the drug chains have resisted -- in some cases by bypassing wholesalers altogether. The result: Drug-distribution margins are almost nil.
To make matters worse, Cardinal has been beleaguered by Securities & Exchange Commission investigations. In 2003, the agency looked into how and when Cardinal recognized a $22 million gain from a legal settlement in 2002. The company has received SEC subpoenas seeking information involving revenue classification and compensation of certain employees and directors.
It's not clear to what degree these operational and financial pressures pushed Cardinal's board of directors to replace Walter. But for the time being, his influence will continue to be felt, as he is expected to stay on as board chairman.
POTENT FORMULAS. In the 54-year-old Clark, Cardinal gains a strong up-and-comer. One of five vice-chairmen at the world's largest consumer products maker, he had been considered one of three possible successors to P&G CEO A.G. Lafley. Clark joined P&G in 1975 as an assistant brand manager in Canada and rose up the ranks (see BW Online, 5/20/04, "Shelter in a Household Name").
Cardinal hopes to gain from Clark's success in marketing drugs. As vice-chairman for family health products, a position he assumed last year, Clark heads P&G's global pharmaceutical business, which includes osteoporosis drug Actonel and heartburn drug Prilosec, on which P&G obtained over-the-counter distribution rights from the drug's manufacturer. Both drugs have proven strong successes for P&G. The family health division also includes P&G's Crest oral-care business, the market-share leader.
Within P&G, Clark is viewed as a strong strategist and is credited with helping to implement a new corporate structure launched in 1998 called Organization 2005. Aimed at improving how P&G functions as a global company, it broke the outfit down into several global business units, which handled development manufacturing and distribution of brands. These units, in turn, were supported by market-development organizations, which handled local marketing.
THIRD TIME'S A CHARM. After a successful stint as head of P&G's Asian feminine-care business, Clark became head of global marketing operations in 2000, distinguishing himself by making the new organizational structure work effectively. Analysts say the new organization structure has given it a big advantage over rival consumer-product makers.
Clark's move to become Cardinal's chief executive come as no surprise at P&G, where top brass knew that he was looking, says a person familiar with the situation. Indeed, it was disclosed publicly in 2004 that Clark was one of the candidates to head of Coca-Cola (KO ), a job he didn't get. Last year, according to the same person, Clark had been in the running at 3M (MMM ) to replace former Chief Executive W. James McNerney Jr., who left to become head of Boeing (BA ), the same source says.
He'll have his hands full at Cardinal, but it looks like Clark has finally landed the top job he coveted. Cardinal is betting the match will bring the company new life.
Copyright 2000- 2006 by The McGraw-Hill Companies Inc. All rights reserved.
posted by Jones Lang LaSalle NJ News Blog at 12:26 PM
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