Operator: The next question comes from Charles Rhyee from TD Cowen. Please go ahead.
Charles Rhyee: Yes. Thanks for taking the question. Jason, I wanted to follow-up on your comments on commodity prices. And you said that you’re seeing less volatility in pricing than before. Would you say that when you look at sort of the increase in oil over the past six months or so, is that – would you say that’s within the – your expectations of volatility? And – or would you might expect to see that get reflected into freight and/or some of your other input costs at some point? Thanks.
Jason Hollar: Yes. No, that’s a great question. And it’s – so when I step back and think about 18 months ago, what the root issue was, of course, we had international freight that was driving up the cost of everything in a multiple that was crazy, but you also had these other commodities that were – okay, so there are some commodities that are oil-based, so the oil input costs, but then you had the supply-demand factors going on too that I think overemphasized that issue because we don’t buy oil, we buy products that contain oil. And so as oil goes up and down, that’s often absorbed within the supply chain in a normal steady state, unless it gets outside of a certain band. So it did get outside that band, right? Oil went above $100 per barrel.
And then you had other demand factors that were driving those commodity costs well beyond what the input cost impacts were. So you had a bit of an exponential increase in a number of commodities. So today, given that we’re in a much more muted demand environment, as a broad industry because this is way outside of healthcare, right? This is a general economy not being as hot as it was at that point in time. When you see these types of input costs going up and down, it goes back to a bit more of a normal model, which is they’re not being exaggerated and multiplied, they’re just flowing through in a much more normalized steady state. So that’s the reason why that I would not expect this under this current environment to get outside of normal bounds.
So if you see the input costs going up and you see a heated economic environment that can further compound that impact, that’s when we need to start worrying more about this. I know the importance of this will certainly be – day-to-day, we certainly spend a lot of time on this, but we’ll continue to provide any insight that we see going forward. Of course, when we get into the very significant changes, that’s the changes to our contracting structure that we’ve put into place. That’s never going to be perfect. It’s never going to be a one-for-one offset, but it’s meant to really be active and impactful when you have those more extraordinary types of impacts that really kind of compound these items like I just referenced, and not just the normal types of more muted movements.
Charles Rhyee: Thank you.
Operator: The next question comes from Allen Lutz from Bank of America. Please go ahead.
Allen Lutz: Good morning and thank you for taking the questions. I want to go after the Pharma margin dynamic a little bit differently. So they were up 5 bps year-over-year. It sounds like the vaccine benefit is going to peak in your fiscal 2Q. So is the right way to think about the margin growth in the Pharma segment year-over-year is it could peak or the growth could peak in 2Q and then kind of more of a normalized lower margin trajectory in the back half? Just trying to get a sense of the seasonality there? Thanks.
Jason Hollar: We really haven’t provided quarterly guidance at the margin level for the pharma business. We were – we leaned in a bit in describing the impact to Q1 from the COVID vaccine distribution as well as Jason’s comments around the expectations for Q2. Beyond that, I think you just need to take into account what we typically say about our business, which is, first, that we expect the consistent market dynamics from a generic perspective, right? And we are not assuming some of the benefits from a brand perspective in Q3 that we have previously seen. And that’s how we are offering up today.
