Cardinal Health, Inc.

Company information

• Date founded: 1979
• Industry: Healthcare Wholesale
• Corporate headquarters: Dublin, Ohio
• Type: Public

Overview

Cardinal Health, Inc., is a healthcare company with branches across various medical products, services, and distribution systems. The company works with and supplies healthcare facilities, including pharmacies, hospitals, surgery centers, doctors’ offices, and laboratories. In the mid-2020s, it employed nearly 49,000 workers in the United States and about thirty other countries. It also worked with about 4,500 manufacturing and sourcing partners. According to the Cardinal website, the company serves almost 90 percent of all hospitals in the United States, along with more than 140,000 clients. The company, whose motto is “Essential to Care,” positions itself as a force in addressing the complex present and future questions and concerns in the healthcare industry.

Entrepreneur Robert D. Walter founded the company in Ohio in the 1970s after a brief and moderately successful foray into grocery distribution. He chose the name Cardinal to honor the Ohio state bird. From its relatively humble origins, the company expanded into an international conglomerate through a steady process of acquisitions and partnerships. In the 2020s, the broad range of fields of these acquired businesses have been divided generally into a pharmaceutical segment and a medical segment. The pharmaceutical segment distributes name-brand, generic, prescription, and over-the-counter drugs. Meanwhile, the medical segment sources, produces, and distributes a wide range of other non-pharmaceutical medical equipment and services, ranging from health monitors to disposable gloves.

In the twenty-first century, Cardinal Health is one of the world’s healthcare industry superpowers. Its business rose dramatically in 2020 with the onset of the COVID-19 pandemic, when millions of people placed orders for COVID-related medications and protective equipment such as gloves and masks, which Cardinal produced and distributed. Around the same time, however, the company faced allegations of improper behavior regarding the ongoing American opioid epidemic, leading to a large multi-corporation settlement and lawsuits brought by dozens of states and communities.

History

Cardinal Health, Inc.'s history began with a young Harvard graduate named Robert Walter. In 1971, Walter bought out an Ohio food distribution company, Monarch Foods, to expand its grocery service and delivery offerings. However, he soon questioned that plan, as the Ohio food distribution system was not thriving, and a salmonella outbreak worsened matters. Walter shifted his focus from distribution to sales and opened a supermarket franchise called Mr. Moneysworth, which proved moderately successful.

However, Walter held on to his original interest in distribution, which he decided to shift into the drug industry. In the late 1970s and early 1980s, pharmaceuticals was a quickly developing segment of the economy. Walter entered the market around 1979 with the purchase of a Zanesville, Ohio, pharmaceutical distribution company. He named this company Cardinal Distribution—the cardinal theme, which would carry to his later ventures, was inspired by Ohio’s state bird.

Next, he began executing a plan he had originally developed for his food distribution venture: to build quickly using acquisitions. Throughout the 1980s, he acquired many small drug distributors in Ohio and neighboring states. A few larger acquisitions included Ellicott Drug in 1984; James W. Daly, Inc., in 1986; and John L. Thompson Sons & Co., also in 1986. Walter focused on finding companies with proven track records and used their knowledge of their local customers by allowing most companies to continue their normal operations but under the Cardinal umbrella.

Walter saw that he had made the right decision in focusing on pharmaceutical distribution. The industry was picking up steam quickly as hospitals and retail druggists were increasing their orders at a steady pace. The grocery business, on the other hand, was largely stagnating, so Walter sold off his grocery holdings to focus more on the drug business. In the late 1980s, Cardinal grew quickly, both through acquisitions and the adoption of new technology. The computer was only starting to show its immense potential in the industry. Walter fully embraced the technology, and his company created its own software to manage its inventory, sales, and other crucial business figures. This system greatly reduced Cardinal’s operating costs while significantly increasing its customer service level, with computers allowing distributors to send out orders within one day.

Acquisitions had worked well for Cardinal in its early years, and Walter only increased their size and frequency in the coming decades. In the 1990s, Cardinal’s reach spread quickly, and it contributed to a major trend in the drug distribution industry in which a handful of powerful businesses bought up smaller ventures and vied for influence on a national level. Cardinal’s new acquisitions spread its reach far beyond Ohio to the Southeast and Mid-Atlantic. Competing conglomerates blocked its expansion into the West, but Cardinal demonstrated careful dealings and recruited several top industry minds from that region.

In 1994, Cardinal merged with Whitmire Distribution, a major move that catapulted Cardinal into the third national spot in the industry, with sales increasing by $2.25 billion annually and greater influence in the Western states. In the last half of the 1990s, a lucrative deal with Kmart added to Cardinal’s strengths. So too, did a move into retail drugs with the acquisition of the Medicine Shoppe International franchise, as well as companies that created drug packaging and dispensing machines.

Cardinal entered the new millennium with record sales of more than $25 billion annually. Cardinal also marked the year 2000 with a flurry of new acquisitions as well as two websites, one for the company in general and the other to serve as a link with other major healthcare suppliers. By 2001, the company had spread from its origins in Ohio across the United States, five continents, and twenty-two countries, and employed nearly fifty thousand people.

In 2008, Walter retired from the leadership of the company, allowing George S. Barrett to become the new CEO and chairperson. Seemingly endless acquisitions continued in the twenty-first century. Cardinal acquired ParMed Pharmaceuticals, Healthcare Solutions, Kinray, Cordis (a division of Johnson & Johnson), Tradex International, Medtronic, and many others. These ventures continued the ever-expanding range of Cardinal’s holdings and interests into diverse fields such as cardiology devices and latex gloves.

In 2022, the company expanded its digital health offerings by acquiring ScalaMed, a smart prescription platform aiming to enhance patient-centered prescription management. The same year, Cardinal Health also acquired several portions of Bendcare, strengthening its position in the rheumatology market.

In 2023, Cardinal Health partnered with Zipline to launch long-range drone deliveries in North Carolina to improve the efficiency of medical product distribution. In 2024, Cardinal Health expanded into cancer care by acquiring Integrated Oncology Network for $1.12 billion, providing the company access to a network of over one hundred healthcare providers across ten states.

Impact

According to Forbes, Cardinal Health ranked #99 on the list of America’s largest public companies in 2018. It remained on the list in 2022. In 2021, it ranked #123 among the best employers in the world. It has also received positive mention for its promotion of cultural and gender diversity, and Forbes chose it as #65 among world businesses as being “female friendly” in 2021.

Cardinal Health was one of the major pharmaceutical distributors in the world by 2020, which saw the global onset of the COVID-19 pandemic. The sudden demand for COVID-19-related medicines and protective equipment, such as face masks and rubber gloves, sent Cardinal’s stocks and profits skyrocketing. Its sales figures increased 5.1 percent following the start of the pandemic, according to Fortune. Demand remained unusually high for related medicine and protective gear through the following year, although it leveled off somewhat following that. By 2022, Cardinal’s profits had slowed due to the rapidly increasing prices of producing, sourcing, and distributing goods, including those related to COVID-19. Still, 2022 saw a 12 percent increase in revenue for Cardinal, and by 2024, revenues reached $227 billion.

In the 2000s, like many other major drug distributors, Cardinal Health became embroiled in accusations that it contributed to the growing opioid epidemic in the United States. Accusations claimed that Cardinal and other companies shipped unacceptably large amounts of commonly abused drugs to states and cities where drug abuse was clearly becoming widespread. Legal proceedings over this matter began around 2008 and continued throughout the coming years. Cardinal paid $44 million to settle a fine in 2016, but the larger judgment brewed for several more years. In early 2022, Cardinal joined a group of several other major distributors in an agreement to settle related lawsuits from forty-five states and several territories for $26 billion. In 2023, along with other major drug distributors, Cardinal Health agreed to a $300 million settlement to resolve claims by health insurers and benefit plans regarding their role in the opioid epidemic.

In the mid-2020s, the Cardinal Health website reported that the company recognized the severity of the opioid epidemic as a public health crisis, largely fueled by too many prescriptions for opioid-based medications. Cardinal established new practices to show the company’s “commitment to being part of the solution.” These practices include security measures for the transportation of prescription opioids, regular site inspections by trained investigators, and the rejection of pharmacies and other partners that do not meet standards. The company also promotes a reduction in opioid prescriptions, increased public awareness of the risks involved in drug abuse, and community solutions such as take-back events for excess medications.

Bibliography

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Hensley, Scott. “The Cardinal Rules: Growth, Agility: Cardinal CEO Robert Walter Has Used Relentless Dealmaking to Build a Diverse Healthcare Giant.” Modern Healthcare, 19 Apr. 1999, www.modernhealthcare.com/article/19990419/PREMIUM/904190325/the-cardinal-rules-growth-agility-cardinal-ceo-robert-walter-has-used-relentless-dealmaking-to-build-a-diverse-hea. Accessed 20 Jan. 2025.

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