Cardinal Health, Inc. (NYSE:CAH)
While Nestle is making things to help people stay out of hospitals, Cardinal Health, Inc. (NYSE:CAH)’s agreement to buy AssuraMed will put it in a position to deliver the products that people need to stay in their homes longer. AssuraMed is a large supplier of products for home use to treat diabetes, wounds, and incontinence, among other things.
While the company is largely a middle man, since it doesn’t make most of the products it delivers, its distribution systems are vital to delivering care in a cost effective manner. And keeping people at home is far better, for everyone, than sending them to a hospital because of such things as bed sores, which can be prevented with the right care.
Others that Should Benefit
Two of Cardinal Health, Inc. (NYSE:CAH)’s biggest customers are CVS Caremark Corporation (NYSE:CVS) and Walgreen Company (NYSE:WAG)‘s. These drug stores have been growing by taking market share from small, individually owned pharmacies for years. Now that they are nationwide chains, they have been looking for other avenues to grow. CVS Caremark Corporation (NYSE:CVS), for example, bought pharmacy benefit management service Caremark to enter a related business and expand its reach. Walgreen Company (NYSE:WAG)’s, meanwhile, has partnered with Alliance Boots to expand overseas.
CVS Caremark Corporation (NYSE:CVS)’s 2007 purchase of Caremark quickly boosted the company’s top line, as the two companies merged. The combined company, despite a slight dip in 2010, has continued along the path to higher sales and earnings. The real benefit, however, will likely be felt in the future as more emphasis is placed on the use of pharmaceuticals, notably generic drugs, to lower medical costs. As the largest dispenser of drugs, CVS Caremark Corporation (NYSE:CVS) has an immense amount of leverage over suppliers.
Walgreen Company (NYSE:WAG)’s bold move to expand abroad is still in uncharted waters. It is hard to tell exactly how an international drug store will fare. However, the baby boom generation isn’t just a U.S. phenomena, so developed markets around the world will see the same trends. Moreover, as developing nations advance, more people will be able to afford the types of healthcare products, drugs and otherwise, that the company sells. Boots has a notable footprint in emerging markets, including stores in China.
Interestingly, however, as the baby boomers reach their peak medical spending years, these two companies could see growth in the United States pick up. With a generation that is struggling with chronic illnesses like none before it and increasing use of prescription medicines to treat these ongoing problems, demand is very likely to tick up.
Sure, the baby boomers have been dealing with illnesses like diabetes and high blood pressure for some time, but they were younger and their bodies were better able to handle the stress. As the bulk of the generation crests toward 65, their bodies will increasingly feel the strain under their illnesses. CVS Caremark Corporation (NYSE:CVS) and Walgreen Company (NYSE:WAG)’s are both set to benefit as more drugs are used more often to keep people at home.
Good and Bad
It certainly isn’t a good thing that more and more people are aging and getting ill. However, it is a fact of life. That there is technology that can keep people happily in their homes, and make investors money along the way, is good.
The article Companies That Are Keeping Patients Out Of Hospitals originally appeared on Fool.com and is written by Reuben Gregg Brewer.
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