When a COVID-19 vaccine is ready, McKesson will deliver it as it did with H1N1 over a decade ago – The Dallas Morning News

Many companies are working to develop a vaccine for COVID-19, but one key player in Irving is focusing on another part of the public health response: how to deliver those hundreds of millions of doses as soon as theyre available.

McKesson Corp., which relocated its corporate headquarters from San Francisco last year, recently was named a central distributor for the vaccines and related supplies.

The company will be reimbursed $178 million from the government to build new distribution centers and beef up existing distribution systems. When it delivers the vaccine to providers aiming to inoculate most Americans, McKesson could bring in another $238 million, one analyst conservatively projected.

The numbers are relatively small for a company whose revenue topped $231 billion in fiscal 2020 more than AT&T and Exxon Mobil over the past year. Still, the stakes are enormous because of the personal and economic destruction of the coronavirus, along with the politics over the public health crisis.

Yet one analyst isnt worried about the risk for McKesson. The nations largest pharmaceutical distributor delivers about 1 in 3 prescription drugs in North America, and its been down this road before.

In 2009 and 2010, it distributed over 126 million doses of the H1N1 vaccine. That effort was considered a success despite some problems with manufacturers creating enough vaccines in the early months.

This is what McKesson does, and this is what theyve been doing forever, said Jonathan Palmer, senior health care analyst for Bloomberg Intelligence. A lot of work is being done behind the scenes to build the capacity to make this happen. Its just a question of when and how.

McKesson has not said much about its plans except to make clear its not driving the train.

The government will direct all of the administration of the vaccine, Britt Vitalone, McKessons chief financial officer, said during an investor call on Wednesday. They will also direct the vaccines that will be distributed in the program, and it will be the governments decision if they choose to bring other distributors into the process.

Vitalone was asked about the differences with the COVID-19 effort, including the expected volume and pricing of the vaccines. He said the Centers for Disease Control and Prevention was taking a similar approach.

But its still fairly early in the process, Vitalone said. There are still some things that are unknown. And if you draw in a correlation, I would just say the operational approach is similar, but thats all that we can really disclose at this time.

At least eight vaccines are expected to enter late-stage development this year, and an effort to speed up the process has created controversy. President Donald Trump has suggested that a vaccine could arrive by Election Day, but CEOs for nine major drug companies pushed back this week.

They said they would not seek regulatory approval before the safety and efficacy of the vaccines were established. It was an extraordinary statement intended to bolster public confidence amid Trumps rush to a breakthrough.

The coronavirus has caused over 190,000 deaths in the United States, and the economic damage has been severe and widespread. Every aspect of the vaccine response will be in the spotlight, including distribution.

Its a daunting prospect to vaccinate the entire country with a two-dose vaccine, said Dr. Amesh Adalja, a senior scholar at the Center for Health Security at Johns Hopkins University. "No matter how well we do with preparedness, unforeseen obstacles are going to emerge. Using companies that are already familiar with the supply chain, like McKesson, is one way to minimize the difficulties.

The partnership with McKesson is a very favorable development, said Adalja, who focuses on infectious disease and pandemics.

McKesson and two chief rivals, AmerisourceBergen and Cardinal Health, account for about 90% of the market. Acquisitions have been a big part of McKessons growth strategy, and the company spent almost $16 billion on deals over the past decade.

The giant distributors' scale allows them to negotiate lower prices with drug manufacturers, which is important in a mature business with low margins. McKessons adjusted operating margins have averaged 1.7% for the last 10 years, Morningstar analyst Soo Romanoff wrote in an August report. Yet he raised his valuation on the stock because distributors are faring better than others in health care.

Providers have been pressed to rely on their supply chain partners to navigate the operating challenges during the pandemic, Romanoff wrote.

McKesson, AmerisourceBergen and Cardinal Health are often in the news because of opioid-related lawsuits. In its latest annual report, McKesson said it was a defendant in over 3,000 legal proceedings related to opioids. In the past two years, it spent $383 million on opioid-related expenses, and the big payout is still to come.

Almost a year ago, state attorneys general outlined a framework for a global settlement. It called for $18 billion to be paid over 18 years by the three major distributors. McKessons share would be $6.9 billion, according to its annual report.

In Wednesdays call, when Vitalone was asked for an update, he said he couldnt provide new information: I think the focus has really been on the pandemic, Vitalone said.

Some vaccines require cold storage, which complicates distribution. And its not clear which groups will get treatment first and which distribution points will be used.

Ultimately, several hundred million doses are expected to be shipped in the U.S., and tracking and registering the activity will be crucial.

We havent seen anything like this in modern history, and everybodys going to look at the U.S. distribution system for lessons, said Adalja of Johns Hopkins. The stakes are very high to get this right.

Read the rest here:

When a COVID-19 vaccine is ready, McKesson will deliver it as it did with H1N1 over a decade ago - The Dallas Morning News