Cardinal CEO doesn’t rule out settling opioid suits

The chief executives of Cardinal Health and its two main drug-distribution competitors expressed confidence at an industry event this week that they can face down competition from Amazon if it decides to get into health-care distribution, as has been rumored. They also denied allegations that they are at fault for the opioid epidemic gripping the nation, calling it a multifaceted issue of which they are just one piece.

Mike Kaufmann made his first investor presentation as CEO of Dublin-based Cardinal Health on Monday at the J.P. Morgan Health Care Conference in San Francisco.

Kaufmann, a 27-year veteran of Cardinal, had been the company’s chief financial officer before taking over the CEO title from George S. Barrett on Jan. 1. Barrett will remain at Cardinal as chairman until November.

Cardinal and its peers, along with drug manufacturers, are facing a growing number of opioid lawsuits from states and municipalities across the U.S. While denying wrongdoing by Cardinal, Kaufmann said

he wouldn’t rule out settling those lawsuits if it was deemed “efficient” to do so.

But he added that any such decision was a long way off.

“Do we feel that we’ve done all the right things (in handling opioids). … I do,” Kaufmann said, according to a transcript of the question and answer session after his presentation.

Kaufmann pointed to longstanding Cardinal initiatives such as Generation Rx, a decade-old program designed to combat opioid abuse by educating pharmacy professionals, parents and educators on the topic.

“(T)his isn’t something where we’re just going to … settle because we

haven’t done anything right. In fact, we feel we’ve done things incredibly well, have reached out to all the right folks over the years. But down the line potentially, if it’s a more potentially efficient way to go, there might be a settlement, but that’s probably going to be a long time off and it’s really hard for me to quantify at this point in time.”

His counterpart at competitor McKesson took a similar stance toward the opioid issue.

In an interview with Bloomberg Television ahead of his own presentation on Tuesday morning, McKesson CEO John Hammergren said it was “nonsense” to suggest that his company intentionally turned a blind eye to the spread of opioid addiction.

“I can’t imagine any

company of our size and scale, for a small amount of our business, to do something willfully and negligently to try to sell controlled substances.”

Like Cardinal, McKesson in recent years has paid large penalties to the federal government to settle specific allegations of not providing enough oversight of controlled substances — such as prescription painkillers that fueled the opioid epidemic and sometimes served as a gateway drug to heroin for those who became addicted.

Cardinal and a third competitor, AmerisourceBergen, reached a combined $36 million settlement with the state of West Virginia a year ago over the opioid issue, after which a steady number of similar lawsuits have continued to be filed.

The city of Columbus and Franklin County have both recently said that they are considering filing opioid-related suits against Cardinal along with other drug distributors and manufacturers.

Another challenge of a different type faces Cardinal — ecommerce giant Amazon’s rumored interest in entering the pharmaceutical business. Kaufmann expressed confidence that Cardinal could face that challenge.

He said Cardinal’s size and scope would allow it to continue having a price advantage over new entrants. He said the price Cardinal is “selling at today is significantly, and I mean significantly, lower that what else is out there,” and that it would be hard for another competitor to offer lower prices.

Kaufmann added that Cardinal’s advantages include the fact that a good portion of its profits from the medical segment come from outside the United States, and the sheer size and range of its offerings to hospitals and other health care providers.

Shares of Cardinal, McKesson and AmerisourceBergen have been pressured in recent months by the specter of possible competition from Amazon. On Tuesday, with the J.P. Morgan conference still ongoing, Cardinal shares were trading at their highest price since October.

Cardinal shares closed at $67.10 on Tuesday, up 6 percent from Friday’s close of $63.22. That still is well off its 52-week high of $84.88.

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