WEBVTT 00:00:00.000 --> 00:00:02.020 Welcome back to The Deep Dive, where we take 00:00:02.020 --> 00:00:04.080 on a mountain of information, financial reports, 00:00:04.360 --> 00:00:06.900 legal documents, and corporate histories, and 00:00:06.900 --> 00:00:09.039 distill the critical knowledge you need to be 00:00:09.039 --> 00:00:12.080 well -informed. Today, we are undertaking a deep 00:00:12.080 --> 00:00:15.220 dive into an organization that, despite its massive 00:00:15.220 --> 00:00:18.519 shadow across American life, often remains, well, 00:00:18.679 --> 00:00:20.940 pretty much invisible to the public. And that 00:00:20.940 --> 00:00:23.640 company is Sincora. It truly is the invisible 00:00:23.640 --> 00:00:26.359 giant of the global pharmaceutical world. If 00:00:26.359 --> 00:00:28.679 you, the listener, have picked up a prescription 00:00:28.679 --> 00:00:31.579 recently, whether a simple generic or a complex 00:00:31.579 --> 00:00:34.200 biologic, there's about a one in five chance 00:00:34.200 --> 00:00:37.880 that Sincora or its former iteration, Amerisource 00:00:37.880 --> 00:00:40.240 Bergen, handled the logistics of getting that 00:00:40.240 --> 00:00:42.740 pill or vial to your pharmacy or hospital bed. 00:00:42.939 --> 00:00:44.939 So our mission today is really to pull back that 00:00:44.939 --> 00:00:47.799 curtain. Exactly. We're going to unpack its history, 00:00:48.039 --> 00:00:50.619 understand the immense operational muscle that 00:00:50.619 --> 00:00:52.719 generates hundreds of... billions of dollars 00:00:52.719 --> 00:00:55.439 in revenue and critically confront the history 00:00:55.439 --> 00:00:58.100 of controversies, including the massive legal 00:00:58.100 --> 00:01:00.240 settlements that ultimately forced this company 00:01:00.240 --> 00:01:02.920 to undergo a complete rebranding. Okay, so let's 00:01:02.920 --> 00:01:05.079 just start right there with the scale, because 00:01:05.079 --> 00:01:07.540 it's hard to wrap your head around. We are talking 00:01:07.540 --> 00:01:11.019 about a critical component of the S &P 500. A 00:01:11.019 --> 00:01:14.980 huge component. A logistics company so vast that 00:01:14.980 --> 00:01:18.239 its predicted 2025 revenue figure is, what, U 00:01:18.239 --> 00:01:22.620 .S. $321 billion? That's the projection, $321 00:01:22.620 --> 00:01:25.840 billion. I mean, that is a number that is approaching 00:01:25.840 --> 00:01:28.500 the gross domestic product of an entire developed 00:01:28.500 --> 00:01:31.019 nation. not just a distributor's annual sales 00:01:31.019 --> 00:01:33.799 that scale is why they matter so much they don't 00:01:33.799 --> 00:01:36.680 invent the drugs but they control the flow And 00:01:36.680 --> 00:01:39.239 that control, coupled with that financial history, 00:01:39.459 --> 00:01:41.680 is why we have to start with the rebranding. 00:01:41.700 --> 00:01:43.840 Right. So they weren't always Sincora. No, not 00:01:43.840 --> 00:01:46.260 at all. The company officially transitioned from 00:01:46.260 --> 00:01:48.840 Amerisource Bergen Corporation to Sincora It 00:01:48.840 --> 00:01:51.959 on August 30, 2023. And what's fascinating here 00:01:51.959 --> 00:01:54.480 is that our source material explicitly links 00:01:54.480 --> 00:01:57.480 this identity shift, which is an incredibly expensive 00:01:57.480 --> 00:02:00.599 and complex undertaking for a global giant, to 00:02:00.599 --> 00:02:03.019 the severe fallout from the American opioid epidemic. 00:02:03.459 --> 00:02:05.620 That's the critical piece of context we need. 00:02:05.680 --> 00:02:07.719 to hold on to throughout this discussion. You 00:02:07.719 --> 00:02:09.379 just don't spend that kind of money on a name 00:02:09.379 --> 00:02:11.560 change for no reason. It's a strategic move. 00:02:11.740 --> 00:02:14.219 It's a massive strategic move. A corporate name 00:02:14.219 --> 00:02:16.500 change of this magnitude, you know, it almost 00:02:16.500 --> 00:02:19.400 always serves a clear purpose to create distance 00:02:19.400 --> 00:02:22.840 between the current operating entity and a controversial 00:02:22.840 --> 00:02:26.539 past dominated by legal risk and frankly, negative 00:02:26.539 --> 00:02:29.120 public association. So the business itself doesn't 00:02:29.120 --> 00:02:31.379 change. The underlying business, the assets, 00:02:31.659 --> 00:02:33.759 the operational model, all of that remains the 00:02:33.759 --> 00:02:36.830 same. But the public -facing identity attempts 00:02:36.830 --> 00:02:40.330 to signal a clean slate, a fresh start. So we 00:02:40.330 --> 00:02:43.009 start with this immediate dual identity, Sincora 00:02:43.009 --> 00:02:45.710 as the essential backbone of the medical supply 00:02:45.710 --> 00:02:48.509 chain and a firm intrinsically linked to one 00:02:48.509 --> 00:02:50.530 of the greatest public health crises in modern 00:02:50.530 --> 00:02:52.550 American history. A difficult balancing act, 00:02:52.629 --> 00:02:54.550 to say the least. So what is the fundamental 00:02:54.550 --> 00:02:57.789 business model that drives this $321 billion 00:02:57.789 --> 00:03:00.849 machine? Is it as simple as just filling prescriptions? 00:03:01.629 --> 00:03:05.189 No, their role is far more specialized and pervasive 00:03:05.189 --> 00:03:07.469 than that. Their core business is really twofold. 00:03:07.590 --> 00:03:10.949 First, they are a massive drug wholesaler and 00:03:10.949 --> 00:03:13.870 distributor. They are the crucial high volume 00:03:13.870 --> 00:03:17.009 logistics layer that moves products from the 00:03:17.009 --> 00:03:19.870 manufacturer, think Pfizer or Merck, to the health 00:03:19.870 --> 00:03:22.289 care provider like a CVS or the Mayo Clinic. 00:03:22.530 --> 00:03:24.789 They're the middleman, the super efficient giant 00:03:24.789 --> 00:03:27.250 middleman. The essential middleman. And second. 00:03:27.919 --> 00:03:29.439 and this is really important for their profit 00:03:29.439 --> 00:03:32.199 margins, they operate as a contract research 00:03:32.199 --> 00:03:35.319 organization or CRO. What does that entail? They 00:03:35.319 --> 00:03:37.939 offer highly specialized services, consulting, 00:03:38.080 --> 00:03:40.909 data analytics. All to the biopharmaceutical 00:03:40.909 --> 00:03:43.169 industry. So they don't just move the product, 00:03:43.250 --> 00:03:45.490 they actually help design the path the product 00:03:45.490 --> 00:03:47.990 takes from the lab to the patient. That financial 00:03:47.990 --> 00:03:50.990 power, that massive revenue projection, it has 00:03:50.990 --> 00:03:53.750 to be built on a pretty solid foundation. Let's 00:03:53.750 --> 00:03:55.310 rewind to the beginning and look at how this 00:03:55.310 --> 00:03:58.009 behemoth was actually constructed. Yeah, that's 00:03:58.009 --> 00:03:59.669 the right place to start. The current structure, 00:03:59.810 --> 00:04:01.849 well, the structure that existed for 20 years 00:04:01.849 --> 00:04:04.330 under the name Amerisource Bergen, was formally 00:04:04.330 --> 00:04:06.530 created in 2001. And it was a merger, right? 00:04:06.879 --> 00:04:09.580 A huge one. It was the result of a massive merger 00:04:09.580 --> 00:04:12.419 between two already large, powerful pharmaceutical 00:04:12.419 --> 00:04:15.599 distribution entities, Amerisource Health Corporation 00:04:15.599 --> 00:04:19.019 and Bergen -Brenzwig Corporation. So this wasn't 00:04:19.019 --> 00:04:21.540 just a simple consolidation. It was a major move 00:04:21.540 --> 00:04:24.839 toward concentrating power in the market. Why 00:04:24.839 --> 00:04:27.259 merge two giants instead of just trying to out 00:04:27.259 --> 00:04:29.500 -compete each other? In the pharmaceutical distribution 00:04:29.500 --> 00:04:32.660 sector, efficiency and scale are everything. 00:04:33.180 --> 00:04:35.660 absolutely everything okay why is that the profit 00:04:35.660 --> 00:04:39.949 margins on any individual drug delivery I mean, 00:04:39.970 --> 00:04:42.009 they're razor thin. We're talking pennies or 00:04:42.009 --> 00:04:44.470 maybe low single digit percentages. It's a volume 00:04:44.470 --> 00:04:46.490 game. So to make any real money, you have to 00:04:46.490 --> 00:04:49.410 move an unbelievable amount of product. Unimaginable 00:04:49.410 --> 00:04:51.449 volume. And you have to drive down your operational 00:04:51.449 --> 00:04:54.370 costs relentlessly. So by merging Amerisource 00:04:54.370 --> 00:04:56.970 and Bergen Brunswick, they did two things immediately. 00:04:57.209 --> 00:04:59.550 First, they eliminated a major competitor. Right. 00:04:59.649 --> 00:05:02.149 And second, they gained massive negotiating leverage 00:05:02.149 --> 00:05:04.370 with both the manufacturers and the providers. 00:05:04.610 --> 00:05:07.189 They could realize huge cost efficiencies by 00:05:07.189 --> 00:05:12.500 streamlining their logistics. So that single 00:05:12.500 --> 00:05:16.160 action fundamentally reshaped the competitive 00:05:16.160 --> 00:05:18.779 landscape of U .S. drug distribution. It really 00:05:18.779 --> 00:05:21.399 did. It was a foundational moment for the oligopoly 00:05:21.399 --> 00:05:23.899 we see today. And we should probably note the 00:05:23.899 --> 00:05:26.459 leadership continuity that guided this process. 00:05:26.740 --> 00:05:29.720 Our source details that David Yost was the CEO 00:05:29.720 --> 00:05:32.639 of Amerisource before the merger. And he maintained 00:05:32.639 --> 00:05:35.379 the top position after the two companies combined, 00:05:35.579 --> 00:05:37.399 which is pretty key. Why is that so important? 00:05:38.439 --> 00:05:41.579 That kind of leadership tenure provides necessary 00:05:41.579 --> 00:05:44.379 stability during what is an incredibly complex 00:05:44.379 --> 00:05:47.379 integration phase. Merging two companies this 00:05:47.379 --> 00:05:49.800 size is a nightmare of logistics and culture 00:05:49.800 --> 00:05:52.120 clash. Right. So he steered the ship. He did 00:05:52.120 --> 00:05:53.879 before he was eventually succeeded by Stephen 00:05:53.879 --> 00:05:56.279 Collins in 2011, who later became chairman. OK, 00:05:56.339 --> 00:05:59.019 so the executive leadership stabilized this newly 00:05:59.019 --> 00:06:01.879 formed giant. It's headquartered in Conshohocken, 00:06:01.980 --> 00:06:04.939 Pennsylvania, and it trades on the NYSE under 00:06:04.939 --> 00:06:08.079 the ticker COR. Yes. But as we established earlier, 00:06:08.339 --> 00:06:10.639 Conshohocken is just the corporate home base, 00:06:10.740 --> 00:06:13.399 the actual operational muscle that spans the 00:06:13.399 --> 00:06:16.000 entire globe. This is where the sheer physical 00:06:16.000 --> 00:06:18.959 scale really comes into focus. I mean, to process 00:06:18.959 --> 00:06:22.100 20 percent of the entire U .S. pharmaceutical 00:06:22.100 --> 00:06:25.379 volume, you need more than just a large warehouse. 00:06:25.779 --> 00:06:28.639 Oh, much more. We need to dive into the distribution 00:06:28.639 --> 00:06:30.879 network that's described in our sources. The 00:06:30.879 --> 00:06:33.339 footprint is vast and it's highly diversified. 00:06:33.720 --> 00:06:36.720 Domestically, they run 26 traditional pharmaceutical 00:06:36.720 --> 00:06:39.899 distribution centers across the U .S. 26. And 00:06:39.899 --> 00:06:42.860 that's not all. They also operate nine distribution 00:06:42.860 --> 00:06:45.660 centers up in Canada. These are the workhorses, 00:06:45.660 --> 00:06:47.720 you know, managing the fast -moving generics 00:06:47.720 --> 00:06:50.819 and the high -volume brand -name drugs day in, 00:06:50.939 --> 00:06:54.519 day out. But the strategy is also built on specialization, 00:06:54.620 --> 00:06:57.509 which... I assume often means higher margins. 00:06:57.730 --> 00:06:59.949 Exactly. That's where the real money is. They 00:06:59.949 --> 00:07:02.769 run four dedicated specialty distribution centers 00:07:02.769 --> 00:07:04.370 in the U .S. And what makes them a specialty? 00:07:04.589 --> 00:07:06.750 These facilities are distinct because they handle 00:07:06.750 --> 00:07:09.089 products that require very strict temperature 00:07:09.089 --> 00:07:12.509 controls, specialized handling or complex regulatory 00:07:12.509 --> 00:07:14.610 compliance. So we're talking about things like. 00:07:14.939 --> 00:07:18.259 Expensive cancer drugs. Right. Expensive biologics, 00:07:18.300 --> 00:07:21.240 gene therapies, certain vaccines, things that 00:07:21.240 --> 00:07:24.060 can't just be thrown on a truck. This specialization 00:07:24.060 --> 00:07:26.560 allows them to move beyond general distribution 00:07:26.560 --> 00:07:29.740 into the high value, fast growing segments of 00:07:29.740 --> 00:07:31.519 the drug market. And their infrastructure goes 00:07:31.519 --> 00:07:35.079 beyond just basic warehousing. Yeah. They also 00:07:35.079 --> 00:07:38.680 provide value added services like packaging and 00:07:38.680 --> 00:07:41.589 repackaging. which requires a significant physical 00:07:41.589 --> 00:07:44.110 presence of its own. How significant? They possess 00:07:44.110 --> 00:07:46.910 over 1 million square feet of packaging production 00:07:46.910 --> 00:07:49.750 capacity, and that's split between the U .S. 00:07:49.750 --> 00:07:52.439 and the U .K. A million square feet just for 00:07:52.439 --> 00:07:54.300 packaging. Yeah. And this highlights a crucial 00:07:54.300 --> 00:07:57.220 function. They're converting bulk manufactured 00:07:57.220 --> 00:08:00.279 product into the precise, ready to use formats 00:08:00.279 --> 00:08:02.920 needed by hospitals and small pharmacies. So 00:08:02.920 --> 00:08:05.379 like smaller unit doses or specialized kits. 00:08:05.560 --> 00:08:08.220 Exactly. This isn't passive logistics. It's active 00:08:08.220 --> 00:08:10.240 supply chain engineering. They're adding value 00:08:10.240 --> 00:08:12.579 at every step. But the true global leap, the 00:08:12.579 --> 00:08:15.279 move that. really changed them from a North American 00:08:15.279 --> 00:08:18.600 giant into a worldwide logistics power. That 00:08:18.600 --> 00:08:20.800 seems to be the acquisition of World Courier 00:08:20.800 --> 00:08:24.620 in 2012. Oh, that was absolutely a game changer, 00:08:24.680 --> 00:08:27.240 not just for them, but for the entire biopharmaceutical 00:08:27.240 --> 00:08:30.139 sector. I saw it was a $520 million acquisition. 00:08:30.279 --> 00:08:33.379 It was. And World Courier is described in our 00:08:33.379 --> 00:08:36.399 source as the largest specialty courier company 00:08:36.399 --> 00:08:39.159 in the world. So it didn't just add a shipping 00:08:39.159 --> 00:08:40.960 department to their business. It was more than 00:08:40.960 --> 00:08:43.960 that. So much more. It integrated a certified, 00:08:44.200 --> 00:08:46.840 complex, international temperature -controlled 00:08:46.840 --> 00:08:49.860 logistics network directly into Sincora's system. 00:08:50.019 --> 00:08:52.379 They bought the best in the world at what they 00:08:52.379 --> 00:08:55.100 do. And why is that capability so critical, especially 00:08:55.100 --> 00:08:57.460 for modern pharmaceuticals? Modern medicine, 00:08:57.580 --> 00:09:00.559 particularly in fields like oncology, rare diseases, 00:09:00.980 --> 00:09:04.759 gene therapies, it relies heavily on complex 00:09:04.759 --> 00:09:07.519 biologics that have to maintain precise temperatures. 00:09:07.779 --> 00:09:09.580 The cold chain? The cold chain, exactly. We're 00:09:09.580 --> 00:09:11.990 talking often... low freezing from the moment 00:09:11.990 --> 00:09:13.750 they leave the manufacturer until they reach 00:09:13.750 --> 00:09:16.509 the patient. Any deviation, any temperature change, 00:09:16.750 --> 00:09:19.230 and the drug is compromised. And you've wasted 00:09:19.230 --> 00:09:22.549 hundreds of thousands of dollars. Or more. So 00:09:22.549 --> 00:09:25.210 World Courier provided the infrastructure over 00:09:25.210 --> 00:09:29.529 150 company owned offices globally, trained personnel, 00:09:29.769 --> 00:09:32.649 specialized packaging to manage this cold chain 00:09:32.649 --> 00:09:35.250 across multiple international borders seamlessly 00:09:35.250 --> 00:09:38.590 and reliably. This acquisition cemented Sincora 00:09:38.590 --> 00:09:41.149 as an indispensable partner for companies developing 00:09:41.149 --> 00:09:43.990 the absolute cutting edge of medicine. And all 00:09:43.990 --> 00:09:46.309 of that massive scale is managed through four 00:09:46.309 --> 00:09:50.029 distinct business units. It shows how they compartmentalize 00:09:50.029 --> 00:09:52.820 the diverse. risks and services. Yes. And these 00:09:52.820 --> 00:09:55.279 units really reflect their core business segregation. 00:09:55.799 --> 00:09:58.519 First, you have the Amerisource Bergen Drug Corporation 00:09:58.519 --> 00:10:01.279 or ABDC. That's the main engine. That's the high 00:10:01.279 --> 00:10:04.059 volume engine, your core drug distribution. Then 00:10:04.059 --> 00:10:06.059 you have the Amerisource Bergen Specialty Group, 00:10:06.220 --> 00:10:08.580 ABSG. And that's focused on those high touch 00:10:08.580 --> 00:10:10.179 expensive drugs we just talked about. Right. 00:10:10.259 --> 00:10:12.120 Often working directly with patient assistance 00:10:12.120 --> 00:10:15.240 programs and things like that. Third is Amerisource 00:10:15.240 --> 00:10:18.200 Bergen Consulting Services, ABCS. The advisory 00:10:18.200 --> 00:10:20.600 arm. The advisory arm. Yeah. Providing data, 00:10:20.779 --> 00:10:23.000 analytics, business services to manufacturers 00:10:23.000 --> 00:10:26.200 and providers. And finally, you have World Courier, 00:10:26.320 --> 00:10:29.139 the global cold chain specialty transport provider. 00:10:29.480 --> 00:10:31.779 It's a structure that ensures they can maximize 00:10:31.779 --> 00:10:35.340 efficiency in low margin generics while capturing 00:10:35.340 --> 00:10:37.500 those really high margins in specialty services. 00:10:37.679 --> 00:10:40.120 It's a very, very smart structure. When you have 00:10:40.120 --> 00:10:42.940 this much market power, your relationships with 00:10:42.940 --> 00:10:45.379 other giants in the industry become... Well, 00:10:45.500 --> 00:10:48.600 they become symbiotic. The most significant tie 00:10:48.600 --> 00:10:51.120 noted in the source is that deep connection with 00:10:51.120 --> 00:10:53.950 Walgreen's Boots Alliance. That relationship 00:10:53.950 --> 00:10:56.789 is absolutely critical to understanding Sincora's 00:10:56.789 --> 00:10:59.990 financial and operational strategy. Walgreens 00:10:59.990 --> 00:11:02.970 Boots Alliance owns 10 % of the company, according 00:11:02.970 --> 00:11:06.730 to the 2025 financial update. 10%. But back in 00:11:06.730 --> 00:11:09.750 2016, Walgreens exercised an option to purchase 00:11:09.750 --> 00:11:13.129 15 % of the stock. So while the ownership percentage 00:11:13.129 --> 00:11:16.149 has shifted a bit, this initial agreement demonstrates 00:11:16.149 --> 00:11:18.730 a powerful, mutually vested interest between 00:11:18.730 --> 00:11:21.870 one of the world's largest distributors and one 00:11:21.870 --> 00:11:24.059 of the world's... largest retail pharmacy chains. 00:11:24.259 --> 00:11:25.879 So for Walgreens, it secures the supply chain. 00:11:25.940 --> 00:11:27.419 They know they'll get their product. It locks 00:11:27.419 --> 00:11:30.500 it in. And for Sancora, it guarantees massive, 00:11:30.600 --> 00:11:33.799 steady, predictable volume. It's a win -win at 00:11:33.799 --> 00:11:37.179 that scale. And looking at their history of acquisitions, 00:11:37.299 --> 00:11:41.220 it shows this pattern of relentless market consolidation 00:11:41.220 --> 00:11:44.480 and diversification into adjacent high margin 00:11:44.480 --> 00:11:47.820 fields. It really is a roadmap for cornering 00:11:47.820 --> 00:11:50.120 the entire distribution market. You can trace 00:11:50.120 --> 00:11:53.570 that roadmap very clearly. In 2015, they diversified, 00:11:53.710 --> 00:11:57.870 buying MWI Veterinary for $2 .5 billion. OK, 00:11:57.950 --> 00:11:59.909 so why veterinary medicine? That seems like a 00:11:59.909 --> 00:12:01.929 bit of a left turn. It's actually a very smart 00:12:01.929 --> 00:12:04.669 hedge. Animal health is generally less regulated 00:12:04.669 --> 00:12:06.669 than human health. It often has higher margins 00:12:06.669 --> 00:12:08.889 and it provides a stable revenue stream that's 00:12:08.889 --> 00:12:11.009 completely divorced from the specific pressures 00:12:11.009 --> 00:12:13.190 of the human pharmaceutical market. So if there's 00:12:13.190 --> 00:12:15.350 a big political fight about human drug pricing. 00:12:16.169 --> 00:12:18.889 their vet business is insulated. Completely insulated. 00:12:18.889 --> 00:12:20.889 It's a smart portfolio move. Then in the same 00:12:20.889 --> 00:12:23.529 year, 2015, they focused on specialized pharmacy 00:12:23.529 --> 00:12:26.490 services. They agreed to buy the compounding 00:12:26.490 --> 00:12:29.470 drug company, Farmedium, for $2 .58 billion. 00:12:29.929 --> 00:12:32.389 Right. And compounding, for those who don't know, 00:12:32.470 --> 00:12:34.490 involves creating custom medications for individual 00:12:34.490 --> 00:12:37.009 patients. It's a high -skill, high -margin activity. 00:12:37.429 --> 00:12:40.330 So by integrating that capacity, they're controlling 00:12:40.330 --> 00:12:42.830 not just the movement of standard drugs, but 00:12:42.830 --> 00:12:45.799 also the creation of custom ones. They own another 00:12:45.799 --> 00:12:48.019 piece of the value chain. And the focus returned 00:12:48.019 --> 00:12:50.539 to core distribution consolidation in 2018. That's 00:12:50.539 --> 00:12:52.600 when they acquired H .D. Smith. And the source 00:12:52.600 --> 00:12:54.879 notes that H .D. Smith was the largest privately 00:12:54.879 --> 00:12:57.379 held national pharmaceutical wholesaler in the 00:12:57.379 --> 00:13:00.379 U .S. So this move was. Crucial. It was huge. 00:13:00.460 --> 00:13:02.940 In a market that's already concentrated among 00:13:02.940 --> 00:13:06.340 really four major players, taking out the largest 00:13:06.340 --> 00:13:08.740 independent competitor eliminates a major source 00:13:08.740 --> 00:13:11.320 of pricing pressure and strengthens the oligopoly 00:13:11.320 --> 00:13:14.039 that dominates American drug distribution. Fewer 00:13:14.039 --> 00:13:16.820 players means less competition. Much less. And 00:13:16.820 --> 00:13:19.019 their final massive move noted in our sources 00:13:19.019 --> 00:13:22.419 was in 2021, acquiring Alliance Healthcare from 00:13:22.419 --> 00:13:25.059 their primary shareholder, Walgreens, for about 00:13:25.059 --> 00:13:28.419 $6 .5 billion. That's right. How did acquiring 00:13:28.419 --> 00:13:30.419 an international wholesaler from a company that 00:13:30.419 --> 00:13:34.039 already owns a large stake in UBEN benefit the 00:13:34.039 --> 00:13:37.700 structure? Seems a bit circular. It was highly 00:13:37.700 --> 00:13:40.639 strategic and it had two main benefits. First, 00:13:40.779 --> 00:13:43.299 it was a massive cash injection for Walgreens, 00:13:43.419 --> 00:13:45.220 which strengthened their financial position. 00:13:45.620 --> 00:13:48.740 And a strong Walgreens benefits Sankora indirectly 00:13:48.740 --> 00:13:51.580 as a major shareholder and customer. OK, that 00:13:51.580 --> 00:13:53.659 makes sense. But second, and more importantly 00:13:53.659 --> 00:13:56.320 for Sincora's structure, it dramatically enhanced 00:13:56.320 --> 00:13:58.620 their international presence, especially in Europe. 00:13:58.740 --> 00:14:01.200 It further globalized their operational reach 00:14:01.200 --> 00:14:03.320 to handle standard drugs as well as specialty 00:14:03.320 --> 00:14:06.200 drugs on a global scale. So the deal essentially 00:14:06.200 --> 00:14:08.620 traded ownership for operational scale. Exactly. 00:14:08.620 --> 00:14:10.960 And it was paid for through a combination of 00:14:10.960 --> 00:14:15.299 $6 .275 billion in cash and 2 million shares 00:14:15.299 --> 00:14:18.379 of AmerisourceBergen common stock. What's fascinating 00:14:18.379 --> 00:14:21.259 here is that the acquisition strategy isn't about 00:14:21.259 --> 00:14:24.759 rapid, chaotic growth. It's methodical. It's 00:14:24.759 --> 00:14:27.080 very systematic. It's about building an interconnected, 00:14:27.360 --> 00:14:29.919 resilient distribution ecosystem that is nearly 00:14:29.919 --> 00:14:32.120 impossible to disrupt because it handles every 00:14:32.120 --> 00:14:34.399 single segment of the chain. Core distribution, 00:14:34.779 --> 00:14:38.000 global specialty logistics, custom compounding, 00:14:38.000 --> 00:14:40.759 and vet medicine. Okay, let's pivot now to the 00:14:40.759 --> 00:14:44.519 immense daily function of this ecosystem. What 00:14:44.519 --> 00:14:48.179 exactly is flowing through those 26 U .S. distribution 00:14:48.179 --> 00:14:51.580 centers and who relies on it? The product portfolio 00:14:51.580 --> 00:14:54.019 is designed to be completely comprehensive. It 00:14:54.019 --> 00:14:56.200 covers the standard requirements of almost every 00:14:56.200 --> 00:14:58.480 health care provider you can imagine. So the 00:14:58.480 --> 00:15:01.360 basics. The basics, which is the sheer volume 00:15:01.360 --> 00:15:03.860 engine. Their offerings include the distribution 00:15:03.860 --> 00:15:06.740 of both generic and brand name pharmaceuticals, 00:15:06.759 --> 00:15:09.279 but they also handle essential items like over 00:15:09.279 --> 00:15:11.720 -the -counter health care products and home health 00:15:11.720 --> 00:15:14.029 care supplies and equipment. And as we touched 00:15:14.029 --> 00:15:16.190 on earlier, they're not just selling goods. They're 00:15:16.190 --> 00:15:19.210 selling the expertise required to manage these 00:15:19.210 --> 00:15:21.370 goods efficiently. Absolutely. The consulting 00:15:21.370 --> 00:15:23.690 arm is a significant value add and, you know, 00:15:23.710 --> 00:15:26.769 a big profit center. They provide advisory services 00:15:26.769 --> 00:15:29.509 related to medical business operations, reimbursement, 00:15:29.529 --> 00:15:32.190 patient services. So they help hospitals and 00:15:32.190 --> 00:15:34.370 pharmacies run their businesses better. They 00:15:34.370 --> 00:15:36.629 do, and this includes highly specialized logistics 00:15:36.629 --> 00:15:39.870 and administrative services for complex areas 00:15:39.870 --> 00:15:42.490 like long -term care facilities, workers' compensation 00:15:42.490 --> 00:15:45.409 programs, and the delicate management of high 00:15:45.409 --> 00:15:48.070 -cost specialty drug patients. They make the 00:15:48.070 --> 00:15:50.470 complex administrative burden of modern medicine 00:15:50.470 --> 00:15:53.809 manageable for providers. So if they sell everything, 00:15:54.129 --> 00:15:57.809 who buys it? Who relies on Sincor to literally 00:15:57.809 --> 00:16:00.649 stock their shelves? When we say everyone, we 00:16:00.649 --> 00:16:03.110 really do mean everyone who is dispensing or 00:16:03.110 --> 00:16:05.370 administering medicine. So not just the big chains? 00:16:05.629 --> 00:16:08.070 Not at all. Their distribution reaches every 00:16:08.070 --> 00:16:10.690 level of the system. acute care hospitals and 00:16:10.690 --> 00:16:12.909 major integrated health systems, independent 00:16:12.909 --> 00:16:15.210 pharmacies, which we can talk more about, as 00:16:15.210 --> 00:16:17.649 well as the major chain retail pharmacies like 00:16:17.649 --> 00:16:19.990 Walgreens. And beyond that. Specialized mail 00:16:19.990 --> 00:16:22.649 order facilities, individual physician practices 00:16:22.649 --> 00:16:25.450 and clinics, and critical alternate sites like 00:16:25.450 --> 00:16:28.129 nursing homes and assisted living centers. They 00:16:28.129 --> 00:16:30.509 truly are the circulatory system of health care. 00:16:30.629 --> 00:16:32.710 This brings us back to the most critical data 00:16:32.710 --> 00:16:34.750 point that illustrates their influence, which 00:16:34.750 --> 00:16:37.940 is that 20 % market share figure. This is the 00:16:37.940 --> 00:16:41.340 figure that defines their market power. Amerisulzbergen, 00:16:41.480 --> 00:16:44.659 now Sincora, handles about 20 percent of all 00:16:44.659 --> 00:16:47.100 of the pharmaceuticals sold and distributed throughout 00:16:47.100 --> 00:16:49.559 the United States. Let's just sit with that for 00:16:49.559 --> 00:16:51.580 a second. Twenty percent. One out of every five 00:16:51.580 --> 00:16:54.720 prescriptions. One fifth of the nation's prescriptions, 00:16:54.779 --> 00:16:57.799 treatments and lifesaving drugs rely on their 00:16:57.799 --> 00:17:00.379 specific infrastructure. Their trucks, their 00:17:00.379 --> 00:17:03.600 warehouses, their people. What does that kind 00:17:03.600 --> 00:17:06.359 of... concentrated market share translate to 00:17:06.359 --> 00:17:08.940 in terms of real world power? It translates into 00:17:08.940 --> 00:17:11.799 immense leverage, particularly in negotiating 00:17:11.799 --> 00:17:14.359 drug prices and setting the terms for distribution. 00:17:14.579 --> 00:17:17.660 When you have basically four companies that collectively 00:17:17.660 --> 00:17:20.559 control virtually all drug distribution, they 00:17:20.559 --> 00:17:23.059 become unavoidable. For who? For both manufacturers 00:17:23.059 --> 00:17:25.660 seeking market access and for providers needing 00:17:25.660 --> 00:17:28.039 a predictable supply. You can't get around them. 00:17:28.160 --> 00:17:30.079 And that explains their Fortune 500 ranking. 00:17:30.480 --> 00:17:33.079 It does. It explains why AmerisourceBergen was 00:17:33.079 --> 00:17:35.700 ranked 10th on the Fortune 500 list in 2020. 00:17:36.539 --> 00:17:39.140 That scale ensures they are not just a business. 00:17:39.240 --> 00:17:42.880 They are a systemic necessity. If Sincora were 00:17:42.880 --> 00:17:45.599 to shut down for a day, 20 % of the U .S. medicine 00:17:45.599 --> 00:17:48.660 supply would stop moving, period. That concentration 00:17:48.660 --> 00:17:51.539 means that any operational decision they make, 00:17:51.619 --> 00:17:54.240 whether it's about efficiency or ethics, has 00:17:54.240 --> 00:17:57.099 immediate nationwide public health consequences. 00:17:57.460 --> 00:17:59.920 The stakes are incredibly high. It's also important 00:17:59.920 --> 00:18:01.900 to note how they structure the independent market 00:18:01.900 --> 00:18:04.279 segment, which is still so crucial to community 00:18:04.279 --> 00:18:06.609 health care. You said they control that through 00:18:06.609 --> 00:18:08.509 the Good Neighbor Pharmacy Network. That's right. 00:18:08.609 --> 00:18:10.890 It's a very clever model. But this isn't a direct 00:18:10.890 --> 00:18:13.430 chain of ownership like a CVS, is it? It's an 00:18:13.430 --> 00:18:15.970 affiliation model. Correct. The Good Neighbor 00:18:15.970 --> 00:18:18.450 Pharmacy Network is technically a retailer's 00:18:18.450 --> 00:18:22.769 cooperative. It's comprised of over 3 ,400 independently 00:18:22.769 --> 00:18:25.450 owned and operated pharmacies. So they're still 00:18:25.450 --> 00:18:27.589 small business owners. They are. But Sancora, 00:18:27.769 --> 00:18:29.670 as the sponsor and owner of the network name, 00:18:29.849 --> 00:18:32.589 provides crucial support. They are the backbone. 00:18:32.829 --> 00:18:35.750 So an independent pharmacy maintains its local 00:18:35.750 --> 00:18:38.809 ownership and identity, but it gets the logistical 00:18:38.809 --> 00:18:41.809 and economic advantages of being tied to a massive 00:18:41.809 --> 00:18:44.430 distributor. Precisely. In a world dominated 00:18:44.430 --> 00:18:47.930 by giants like Walgreens and CVS, the independent 00:18:47.930 --> 00:18:51.829 pharmacy needs that scale just to survive. Sincora 00:18:51.829 --> 00:18:54.369 provides the massive purchasing power that results 00:18:54.369 --> 00:18:56.869 in competitive drug prices. And the logistics. 00:18:57.170 --> 00:19:00.990 High quality logistics, branding support. Everything 00:19:00.990 --> 00:19:03.890 that allows these 3 ,400 plus small businesses 00:19:03.890 --> 00:19:06.369 to compete effectively. The source mentions they 00:19:06.369 --> 00:19:08.990 sponsor the network's annual trade show. Thought 00:19:08.990 --> 00:19:11.549 spot. Which just reinforces this deep integration. 00:19:11.970 --> 00:19:14.150 They are the economic and logistical framework 00:19:14.150 --> 00:19:16.750 that keeps the entire independent pharmacy sector 00:19:16.750 --> 00:19:19.990 viable. It's a mechanism for control and collaboration, 00:19:20.289 --> 00:19:22.849 all within a single ecosystem. To fully grasp 00:19:22.849 --> 00:19:25.750 the critical, almost utility -like function Sincora 00:19:25.750 --> 00:19:28.049 plays, we really need to analyze a moment when 00:19:28.049 --> 00:19:30.289 the government relied entirely on their infrastructure. 00:19:30.630 --> 00:19:32.789 And that would be the distribution of remdesivir 00:19:32.789 --> 00:19:35.490 during the peak of the COVID -19 pandemic. Right. 00:19:36.069 --> 00:19:39.569 This incident. From back in June 2020, it seems 00:19:39.569 --> 00:19:42.250 to confirm Sincora's status as essential national 00:19:42.250 --> 00:19:44.910 infrastructure. Without a doubt. Remdesivir, 00:19:44.910 --> 00:19:47.789 manufactured by Gilead, was at the time the first 00:19:47.789 --> 00:19:50.710 major drug authorized to treat coronavirus patients. 00:19:51.069 --> 00:19:54.150 It was an incredibly scarce, high -demand, and 00:19:54.150 --> 00:19:56.750 potentially life -saving resource. So the government 00:19:56.750 --> 00:19:59.650 realized that standard market distribution, just 00:19:59.650 --> 00:20:02.589 letting hospitals order it, would lead to absolute 00:20:02.589 --> 00:20:05.400 chaos. hoarding inequity. It would have been 00:20:05.400 --> 00:20:07.759 a disaster. So they needed a centrally controlled 00:20:07.759 --> 00:20:09.819 allocation system. That's why the U .S. Department 00:20:09.819 --> 00:20:12.660 of Health and Human Services, or HHS, stepped 00:20:12.660 --> 00:20:14.859 in. And they struck a very specific arrangement 00:20:14.859 --> 00:20:18.140 with Gilead. They did. But crucially, they needed 00:20:18.140 --> 00:20:20.539 a logistics expert who could execute a highly 00:20:20.539 --> 00:20:23.380 complex, systematic distribution plan across 00:20:23.380 --> 00:20:26.380 50 states and thousands of facilities simultaneously. 00:20:26.900 --> 00:20:29.670 And they chose AmerisourceBergen. So Sincora 00:20:29.670 --> 00:20:31.829 was tasked with translating a government allocation 00:20:31.829 --> 00:20:34.690 strategy into actual physical drug movement. 00:20:34.890 --> 00:20:38.269 Yes. The source details that Amerisource Bergen 00:20:38.269 --> 00:20:41.130 worked hand in hand with HHS and state governments 00:20:41.130 --> 00:20:44.390 to allocate shipments of remdesivir vials to 00:20:44.390 --> 00:20:47.029 American hospitals all the way through the end 00:20:47.029 --> 00:20:50.130 of September 2020. And this wasn't a standard 00:20:50.130 --> 00:20:52.869 fulfillment job. It wasn't just ship this box 00:20:52.869 --> 00:20:55.799 to this address. Not even close. This required 00:20:55.799 --> 00:20:58.539 real -time coordination with state health departments 00:20:58.539 --> 00:21:00.740 to ensure that the allocation was proportional 00:21:00.740 --> 00:21:04.079 to local need and infection rates, not just hospitals' 00:21:04.579 --> 00:21:06.720 purchasing power. And the stakes were massive. 00:21:06.940 --> 00:21:09.539 This was defining the national response to the 00:21:09.539 --> 00:21:11.940 pandemic. The terms of the agreement confirmed 00:21:11.940 --> 00:21:15.259 the magnitude. In exchange for paying the manufacturer's 00:21:15.259 --> 00:21:17.940 wholesale acquisition price, American patients 00:21:17.940 --> 00:21:21.200 were guaranteed access to over 90 % of Gilead's 00:21:21.200 --> 00:21:23.819 projected output during that time frame. 90%. 00:21:23.819 --> 00:21:26.079 Which amounted to more than 500 ,000 treatment 00:21:26.079 --> 00:21:29.259 courses. The successful execution of this mobilization 00:21:29.259 --> 00:21:31.579 demonstrated that Sincora's infrastructure was 00:21:31.579 --> 00:21:34.619 considered reliable, secure, and widespread enough 00:21:34.619 --> 00:21:37.160 to handle a critical national public health operation. 00:21:37.519 --> 00:21:39.480 Here's where it gets really interesting for me. 00:21:39.789 --> 00:21:43.630 This entire process shows that when rapid, systematic, 00:21:43.690 --> 00:21:46.549 and controlled delivery of a scarce, temperature 00:21:46.549 --> 00:21:49.130 -sensitive drug is required, the U .S. government 00:21:49.130 --> 00:21:52.329 turns to the highly consolidated private logistics 00:21:52.329 --> 00:21:55.170 system. It underscores the ultimate paradox of 00:21:55.170 --> 00:21:57.710 this company. The government depends on the operational 00:21:57.710 --> 00:22:00.910 efficiency, scale, and proven track record of 00:22:00.910 --> 00:22:03.369 companies like Sincora to save lives during a 00:22:03.369 --> 00:22:05.190 crisis. They function as a critical utility. 00:22:05.529 --> 00:22:08.309 They do. It confirms that their immense scale 00:22:08.309 --> 00:22:11.190 is absolutely necessary for modern disaster response 00:22:11.190 --> 00:22:14.130 and public health mobilization. But this level 00:22:14.130 --> 00:22:16.670 of utility and dependency carries an immense 00:22:16.670 --> 00:22:19.829 specific responsibility when the crisis shifts, 00:22:20.009 --> 00:22:22.250 a shift we saw so tragically with the opioids. 00:22:22.509 --> 00:22:25.130 That pivot is unavoidable. The immense operational 00:22:25.130 --> 00:22:27.450 reach and crucial function of Sincora cannot 00:22:27.450 --> 00:22:29.710 be discussed without confronting the history 00:22:29.710 --> 00:22:32.089 of severe legal scrutiny and financial penalties. 00:22:32.369 --> 00:22:34.609 This is the history of AmerisourceBergen, and 00:22:34.609 --> 00:22:37.009 it is the primary catalyst for the new Sincora 00:22:37.009 --> 00:22:39.910 identity. We have to dissect these controversies 00:22:39.910 --> 00:22:42.829 impartially and factually, drawing directly from 00:22:42.829 --> 00:22:44.890 the allegations and settlements detailed in our 00:22:44.890 --> 00:22:48.690 sources. The sheer volume of legal risk really 00:22:48.690 --> 00:22:50.809 defines the company's history in the last decade. 00:22:51.210 --> 00:22:52.829 It really does. Let's start with the devastating 00:22:52.829 --> 00:22:55.910 impact of the opioid crisis, which first brought 00:22:55.910 --> 00:22:58.710 major scrutiny to the distributor's role. This 00:22:58.710 --> 00:23:01.029 would be in early and notably in West Virginia. 00:23:01.170 --> 00:23:03.569 West Virginia was ground zero for the crisis, 00:23:03.650 --> 00:23:06.670 and AmerisourceBergen was among several distributors 00:23:06.670 --> 00:23:09.039 sued by local governments there. And what was 00:23:09.039 --> 00:23:11.579 the core allegation? The core allegation was 00:23:11.579 --> 00:23:14.119 that these companies contributed directly to 00:23:14.119 --> 00:23:16.539 the epidemic by systematically shipping inordinate 00:23:16.539 --> 00:23:19.140 amounts of pain medication into the state, just 00:23:19.140 --> 00:23:21.200 flooding these small communities. So these were 00:23:21.200 --> 00:23:23.759 the foundational lawsuits arguing that the distributors 00:23:23.759 --> 00:23:26.839 had a duty to monitor and halt suspicious orders. 00:23:27.000 --> 00:23:29.099 And that their failure to do so, their failure 00:23:29.099 --> 00:23:32.440 to raise a red flag, led to mass addiction. The 00:23:32.440 --> 00:23:34.519 legal theory behind those state -level actions 00:23:34.519 --> 00:23:38.519 evolved pretty rapidly. In December 2019, Michigan 00:23:38.519 --> 00:23:41.180 pushed the legal envelope significantly. Michigan 00:23:41.180 --> 00:23:43.759 became the first state to sue AmerisourceBergen 00:23:43.759 --> 00:23:46.859 and three other major distributors by explicitly 00:23:46.859 --> 00:23:50.160 invoking the Michigan Drug Dealer Liability Act. 00:23:50.400 --> 00:23:53.859 The Drug Dealer Liability Act. That sounds aggressive. 00:23:54.279 --> 00:23:57.220 It was a highly aggressive legal theory. It sought 00:23:57.220 --> 00:23:59.660 to completely redefine the distributor's role. 00:23:59.799 --> 00:24:01.759 The claim wasn't just that they were negligent 00:24:01.759 --> 00:24:03.789 in their duties. What was the claim then? The 00:24:03.789 --> 00:24:06.769 claim was that by failing to monitor and flag 00:24:06.769 --> 00:24:10.140 suspicious massive orders flowing into small 00:24:10.140 --> 00:24:12.680 communities, the distributors transformed from 00:24:12.680 --> 00:24:15.740 neutral logistics providers into co -conspirators, 00:24:15.940 --> 00:24:18.880 that they were effectively acting as drug dealers 00:24:18.880 --> 00:24:22.180 by knowingly enabling the illicit market. These 00:24:22.180 --> 00:24:24.579 local suits created immense pressure, and that 00:24:24.579 --> 00:24:26.680 led to the first major financial compromises. 00:24:26.819 --> 00:24:28.579 That's right. Sincora, along with three other 00:24:28.579 --> 00:24:31.019 companies, agreed relatively early on to pay 00:24:31.019 --> 00:24:34.900 $260 million just to settle with two bellwether 00:24:34.900 --> 00:24:37.849 Ohio counties, Cuyahoga and Summit. Why settle 00:24:37.849 --> 00:24:39.990 so early? Well, these settlements demonstrated 00:24:39.990 --> 00:24:42.170 that the distributors recognized the need to 00:24:42.170 --> 00:24:44.970 quantify and mitigate their risk. They knew that 00:24:44.970 --> 00:24:47.089 juries might be highly sympathetic to the local 00:24:47.089 --> 00:24:49.769 government's claims of devastation in their communities. 00:24:50.009 --> 00:24:52.130 And the numbers cited in the lawsuits were often 00:24:52.130 --> 00:24:54.890 used to illustrate just how this saturation occurred 00:24:54.890 --> 00:24:58.990 in specific places. The Oklahoma lawsuit from 00:24:58.990 --> 00:25:02.309 May 2020 provides a particularly stark example. 00:25:02.569 --> 00:25:04.849 It's a shocking example. A coma suit against 00:25:04.849 --> 00:25:07.710 AmerisourceBergen, Cardinal Health, and McKesson 00:25:07.710 --> 00:25:10.970 alleged that the three companies combined provided 00:25:10.970 --> 00:25:14.130 enough opioids to Bryan County that every adult 00:25:14.130 --> 00:25:17.430 resident there could have had 144 hydrocodone 00:25:17.430 --> 00:25:20.329 tablets. 144 pills for every single adult in 00:25:20.329 --> 00:25:23.029 the county. Yes. That level of saturation is 00:25:23.029 --> 00:25:25.490 used to underscore the catastrophic failure of 00:25:25.490 --> 00:25:27.880 the distributor systems. to flag and halt those 00:25:27.880 --> 00:25:30.599 shipments. It moves the abstract discussion of 00:25:30.599 --> 00:25:34.259 volume into a very stark human reality. The ultimate 00:25:34.259 --> 00:25:36.720 outcome of all this widespread legal risk was 00:25:36.720 --> 00:25:40.079 the massive 2022 national settlement. This was 00:25:40.079 --> 00:25:43.839 the defining multi -party legal compromise. It 00:25:43.839 --> 00:25:46.140 was designed to staunch the bleeding across the 00:25:46.140 --> 00:25:49.819 entire country. In January 2022, AmerisourceBergen, 00:25:50.039 --> 00:25:52.480 McKesson, Cardinal Health, and Johnson & Johnson 00:25:52.480 --> 00:25:55.980 agreed to a staggering $26 billion settlement. 00:25:56.460 --> 00:25:59.579 And the scope of this deal was almost unimaginable. 00:25:59.700 --> 00:26:03.160 It covered 46 states, Washington, D .C., and 00:26:03.160 --> 00:26:06.380 roughly 90 % of municipal governments. Basically, 00:26:06.380 --> 00:26:09.059 the vast majority of litigants. And the significance 00:26:09.059 --> 00:26:11.440 here isn't just the sheer size of the payment. 00:26:11.619 --> 00:26:14.380 No, it's the liability they avoided. The source 00:26:14.380 --> 00:26:16.480 notes that had these states and localities actually 00:26:16.480 --> 00:26:18.660 gone to trial, the potential total penalties 00:26:18.660 --> 00:26:22.240 were estimated to be up to $95 billion. $95 billion. 00:26:22.319 --> 00:26:24.660 So the $26 billion master -sellment agreement 00:26:24.660 --> 00:26:27.740 was essentially a negotiated compromise. It provided 00:26:27.740 --> 00:26:30.240 long -term funding for remediation programs while 00:26:30.240 --> 00:26:32.359 giving the companies definitive financial closure 00:26:32.359 --> 00:26:34.720 against most of those pending claims. It's important 00:26:34.720 --> 00:26:36.519 to clarify what that money is legally intended 00:26:36.519 --> 00:26:39.049 for. Where does it go? The funds from these master 00:26:39.049 --> 00:26:40.950 settlement agreements are generally directed 00:26:40.950 --> 00:26:43.450 by the states and localities toward remediation 00:26:43.450 --> 00:26:46.269 efforts. So things like treatment centers. Exactly. 00:26:46.630 --> 00:26:49.210 Funding addiction treatment centers, public education 00:26:49.210 --> 00:26:52.490 campaigns, opioid court systems, and law enforcement 00:26:52.490 --> 00:26:55.910 efforts aimed at curbing the crisis. This money 00:26:55.910 --> 00:26:58.309 represents an effort to manage the immense damage 00:26:58.309 --> 00:27:01.619 caused. But there's a crucial note here. A very 00:27:01.619 --> 00:27:04.279 crucial note. AmerisourceBergen and the other 00:27:04.279 --> 00:27:06.740 companies involved did not admit any wrongdoing 00:27:06.740 --> 00:27:10.319 as part of this civil deal. So they paid $26 00:27:10.319 --> 00:27:14.039 billion. But admitted no fault. Correct. And 00:27:14.039 --> 00:27:16.259 despite that massive settlement being intended 00:27:16.259 --> 00:27:18.880 to cover state and local claims, the legal scrutiny 00:27:18.880 --> 00:27:21.519 did not end there. Right. The federal government 00:27:21.519 --> 00:27:23.180 was still involved. Yes. The federal government 00:27:23.180 --> 00:27:25.980 maintained a separate legal interest. In 2022, 00:27:26.420 --> 00:27:28.640 the United States Department of Justice filed 00:27:28.640 --> 00:27:31.119 its own lawsuit against AmerisourceBergen. What 00:27:31.119 --> 00:27:33.380 was their allegation? They alleged that the company 00:27:33.380 --> 00:27:35.980 distributed opioids that were later resold illegally. 00:27:36.640 --> 00:27:38.900 This just illustrates that the systemic issues 00:27:38.900 --> 00:27:41.220 uncovered were grave enough to warrant continued 00:27:41.220 --> 00:27:44.099 pursuit by federal authorities separate from 00:27:44.099 --> 00:27:46.640 that multi -state civil compromise. While the 00:27:46.640 --> 00:27:49.500 opioid litigation really drove the rebranding, 00:27:49.599 --> 00:27:51.940 Sancora's history includes another catastrophic 00:27:51.940 --> 00:27:55.259 legal liability. This one involving cancer drugs. 00:27:55.420 --> 00:27:57.579 That's right. We need to go into extensive detail 00:27:57.579 --> 00:28:00.220 on the 2018 civil fraud settlement involving 00:28:00.220 --> 00:28:02.279 what was called the Pre -Filled Syringe Program 00:28:02.279 --> 00:28:06.160 or PFS program. This case. I mean, it reveals 00:28:06.160 --> 00:28:08.900 a profound failure of corporate governance and 00:28:08.900 --> 00:28:11.640 a systematic scheme that prioritized profit over 00:28:11.640 --> 00:28:14.920 patient safety for over a decade. A decade. In 00:28:14.920 --> 00:28:18.200 October 2018, Amerisource Bergen agreed to pay 00:28:18.200 --> 00:28:22.200 a $625 million civil fraud settlement. And the 00:28:22.200 --> 00:28:25.000 charges were comprehensive. Repackaging and selling 00:28:25.000 --> 00:28:27.220 adulterated drugs, double billing government 00:28:27.220 --> 00:28:29.980 health care programs, and providing unlawful 00:28:29.980 --> 00:28:32.400 kickbacks to physicians. And if we combine this 00:28:32.400 --> 00:28:35.700 $625 million civil settlement. with the previous 00:28:35.700 --> 00:28:38.579 $260 million payment for a related misdemeanor. 00:28:38.680 --> 00:28:40.920 The total financial penalty for this specific 00:28:40.920 --> 00:28:44.220 scheme was over $885 million. That's right, almost 00:28:44.220 --> 00:28:46.299 a billion dollars. This wasn't a one -off mistake. 00:28:46.519 --> 00:28:48.779 It was a sophisticated operation spanning over 00:28:48.779 --> 00:28:51.700 13 years. Let's detail the specifics of this 00:28:51.700 --> 00:28:56.150 PFS program, which ran from 2001 to 2014. The 00:28:56.150 --> 00:28:58.789 program was run by two ABC subsidiaries, MII 00:28:58.789 --> 00:29:02.430 and OSC, and their purpose was to create, pack, 00:29:02.569 --> 00:29:05.170 and ship millions of these pre -filled syringes 00:29:05.170 --> 00:29:07.890 directly to oncology practices. So they were 00:29:07.890 --> 00:29:10.150 going to some of the most vulnerable patients 00:29:10.150 --> 00:29:12.750 imaginable, those undergoing cancer treatment. 00:29:12.890 --> 00:29:15.710 The most vulnerable. And the method they used, 00:29:15.829 --> 00:29:18.960 harvesting overfill. is the core of the adulteration 00:29:18.960 --> 00:29:21.420 charge. Okay, so how did this dangerous practice 00:29:21.420 --> 00:29:24.640 actually work? It relies on a known factor in 00:29:24.640 --> 00:29:27.359 pharmaceutical packaging. Most drug vials contain 00:29:27.359 --> 00:29:31.039 a small excess volume or overfill to ensure that 00:29:31.039 --> 00:29:33.099 a nurse or doctor can always draw the precise 00:29:33.099 --> 00:29:35.440 dose reliably. Right, a little extra just in 00:29:35.440 --> 00:29:39.240 case. Exactly. The ABC subsidiary, MII, which 00:29:39.240 --> 00:29:41.900 was located in Alabama, adopted a systematic 00:29:41.900 --> 00:29:43.839 process where they would deliberately remove 00:29:43.839 --> 00:29:46.099 the drug product from the original manufacturer's 00:29:46.099 --> 00:29:49.059 sterile glass. So they weren't using the drug 00:29:49.059 --> 00:29:51.059 as intended right out of the vial. They were 00:29:51.059 --> 00:29:53.640 consolidating the contents. They were pooling 00:29:53.640 --> 00:29:55.880 it. They would pool the contents of multiple 00:29:55.880 --> 00:29:58.720 original vials, including that overfill volume, 00:29:58.920 --> 00:30:02.200 into untested plastic containers. Untested plastic 00:30:02.200 --> 00:30:04.519 containers. Untested. Then they would repackage 00:30:04.519 --> 00:30:07.400 this pooled, consolidated drug into their own 00:30:07.400 --> 00:30:09.980 proprietary syringes. And that pooling process, 00:30:10.319 --> 00:30:12.740 moving a drug product out of the manufacturer's 00:30:12.740 --> 00:30:15.640 sterile, FDA -regulated environment into unvalidated 00:30:15.640 --> 00:30:18.200 containers, that resulted in the charge of selling 00:30:18.200 --> 00:30:21.400 adulterated drugs and unapproved new drugs. The 00:30:21.400 --> 00:30:23.589 crucial issue here... is the loss of sterility 00:30:23.589 --> 00:30:27.049 assurance and traceability. Why is that pooling 00:30:27.049 --> 00:30:30.269 process so dangerous? When a drug leaves the 00:30:30.269 --> 00:30:32.509 manufacturer's vial, it leaves the certified 00:30:32.509 --> 00:30:34.809 controlled environment that was designed specifically 00:30:34.809 --> 00:30:38.130 to prevent microbial contamination. Pooling drug 00:30:38.130 --> 00:30:40.750 products from multiple vials into an untested 00:30:40.750 --> 00:30:43.829 plastic container severely compromises that sterility. 00:30:43.910 --> 00:30:46.329 And it destroys the chain of custody. It completely 00:30:46.329 --> 00:30:49.230 destroys it. If a batch was later found to be 00:30:49.230 --> 00:30:51.769 ineffective or contaminated, it would be impossible 00:30:51.769 --> 00:30:54.470 to trace which original manufacturer's vial it 00:30:54.470 --> 00:30:56.930 came from or which specific patient received 00:30:56.930 --> 00:30:59.930 compromised medication. This failure endangered 00:30:59.930 --> 00:31:02.529 thousands of cancer patients whose immune systems 00:31:02.529 --> 00:31:05.470 were already severely weakened. And the incentive, 00:31:05.509 --> 00:31:07.789 once again, was purely financial gain. The profit 00:31:07.789 --> 00:31:10.890 motive was immense. By harvesting the overfill, 00:31:11.049 --> 00:31:14.369 ABC effectively created more saleable doses than 00:31:14.369 --> 00:31:16.200 they had actually paid for. They're creating 00:31:16.200 --> 00:31:18.839 inventory out of thin air. Out of thin air. They 00:31:18.839 --> 00:31:21.140 also avoided having to fully open some of the 00:31:21.140 --> 00:31:24.160 original glass vials. Those unopened vials could 00:31:24.160 --> 00:31:26.460 then be sold to other customers and to their 00:31:26.460 --> 00:31:29.859 own distribution subsidiary, ABDC, for resale 00:31:29.859 --> 00:31:32.000 at full price. So how much did they make from 00:31:32.000 --> 00:31:34.180 this? The sources estimate that the total profit 00:31:34.180 --> 00:31:37.079 generated from the PFS program over its 13 -year 00:31:37.079 --> 00:31:40.519 run was at least $99 .6 million. So they were 00:31:40.519 --> 00:31:42.440 manufacturing a fraudulent product worth nearly 00:31:42.440 --> 00:31:45.369 $100 million in profit. all by compromising the 00:31:45.369 --> 00:31:48.029 integrity of chemotherapy drugs. But the scheme 00:31:48.029 --> 00:31:50.509 also leveraged billing fraud. That's right. The 00:31:50.509 --> 00:31:53.349 mechanics of the scheme enabled ABC to bill multiple 00:31:53.349 --> 00:31:55.910 health care providers for drug portions that 00:31:55.910 --> 00:31:58.490 all originated from a single manufacturer's vial. 00:31:58.630 --> 00:32:00.490 Which then got passed on to the government. Exactly. 00:32:00.849 --> 00:32:03.109 This caused some of those providers to subsequently 00:32:03.109 --> 00:32:05.650 bill federal health care programs, Medicare and 00:32:05.650 --> 00:32:08.809 Medicaid, for the same vial more than once. This 00:32:08.809 --> 00:32:11.269 constituted direct fraud against the U .S. government 00:32:11.269 --> 00:32:14.349 and the American taxpayer. And this fed back 00:32:14.349 --> 00:32:16.670 into their overall business strategy. It allowed 00:32:16.670 --> 00:32:19.049 them to gain market share through leveraged pricing. 00:32:19.230 --> 00:32:22.509 Yes. By creating this massive high margin secondary 00:32:22.509 --> 00:32:26.309 stream of profitable, questionably sourced syringes, 00:32:26.430 --> 00:32:29.650 ABC could afford to offer deep product discounts 00:32:29.650 --> 00:32:32.609 on their entire portfolio of oncology drugs. 00:32:32.930 --> 00:32:35.170 So they use the profits from the scheme to undercut 00:32:35.170 --> 00:32:37.609 competitors on legitimate products. That's the 00:32:37.609 --> 00:32:39.930 playbook. This leveraged pricing was designed 00:32:39.930 --> 00:32:41.910 to lock in new customers and retain existing 00:32:41.910 --> 00:32:44.650 ones who purchase their full range of ABC services. 00:32:45.029 --> 00:32:47.150 It increased their dominance in the lucrative 00:32:47.150 --> 00:32:49.960 oncology distribution market. all built on a 00:32:49.960 --> 00:32:51.980 foundation of compromised product integrity. 00:32:52.279 --> 00:32:55.180 Perhaps the most shocking detail for me relates 00:32:55.180 --> 00:32:57.240 to the attempt to conceal this program internally. 00:32:57.950 --> 00:33:00.970 The source notes that ABC deliberately excluded 00:33:00.970 --> 00:33:04.089 the entire PFS program from its standard regulatory 00:33:04.089 --> 00:33:06.809 audit and pedigree compliance programs. They 00:33:06.809 --> 00:33:09.710 put a wall around it. A complete wall. For a 00:33:09.710 --> 00:33:12.009 company that specializes in regulatory compliance 00:33:12.009 --> 00:33:15.190 and logistics integrity to wall off a program 00:33:15.190 --> 00:33:17.829 handling life saving and life threatening medications 00:33:17.829 --> 00:33:22.289 for over a decade. It represents profound systemic 00:33:22.289 --> 00:33:25.369 ethical failure that allowed this scheme to continue 00:33:25.369 --> 00:33:28.279 completely unchecked. The public impact was clear. 00:33:28.619 --> 00:33:31.559 Approximately 57 % of the patients injected with 00:33:31.559 --> 00:33:33.799 these syringes were federal health care program 00:33:33.799 --> 00:33:36.140 beneficiaries. Which means government -backed 00:33:36.140 --> 00:33:38.519 programs paid for the compromised product, and 00:33:38.519 --> 00:33:40.200 the patients themselves were highly vulnerable 00:33:40.200 --> 00:33:42.680 individuals. Finally, we should briefly acknowledge 00:33:42.680 --> 00:33:46.099 a more contemporary risk that all massive centralized 00:33:46.099 --> 00:33:49.519 infrastructure faces. Cyber vulnerability. Yes. 00:33:49.579 --> 00:33:53.000 In May 2024, Sincora disclosed that it had experienced 00:33:53.000 --> 00:33:56.059 a significant cyber incident. In the 21st century, 00:33:56.220 --> 00:33:58.440 being a good steward of the supply chain isn't 00:33:58.440 --> 00:34:01.039 just about moving physical boxes. It's about 00:34:01.039 --> 00:34:03.319 protecting the data surrounding those boxes. 00:34:03.640 --> 00:34:06.119 Precisely. And the impact was severe. The source 00:34:06.119 --> 00:34:08.320 confirms that the breach resulted in the exposure 00:34:08.320 --> 00:34:11.360 of patient health information. Given Sankora's 00:34:11.360 --> 00:34:13.679 role in distributing sensitive specialty drugs 00:34:13.679 --> 00:34:16.659 and managing patient services, they hold vast 00:34:16.659 --> 00:34:19.300 amounts of personally identifiable and highly 00:34:19.300 --> 00:34:22.760 sensitive medical data. So a breach of this scale 00:34:22.760 --> 00:34:24.860 adds another layer of public responsibility. 00:34:25.179 --> 00:34:28.400 It does. And it reinforces that centralization, 00:34:28.480 --> 00:34:31.639 while incredibly efficient, also concentrates 00:34:31.639 --> 00:34:34.500 risk, whether that risk is legal, ethical, or 00:34:34.500 --> 00:34:37.320 in this case, digital. As we conclude this deep 00:34:37.320 --> 00:34:40.519 dive into Sincora, we are left trying to reconcile 00:34:40.519 --> 00:34:42.480 this fundamental tension that really defines 00:34:42.480 --> 00:34:45.380 the company. It's a huge tension. On one hand, 00:34:45.460 --> 00:34:47.820 Sincora is an indispensable engine of modern 00:34:47.820 --> 00:34:50.409 medicine. It was the trusted partner for distributing 00:34:50.409 --> 00:34:53.090 crisis medicine like remdesivir, and it moves 00:34:53.090 --> 00:34:55.429 one -fifth of all U .S. pharmaceuticals, keeping 00:34:55.429 --> 00:34:57.949 the entire system afloat. Yet that essential 00:34:57.949 --> 00:35:00.309 status is permanently linked to these immense 00:35:00.309 --> 00:35:03.929 legal and ethical liabilities. The multibillion 00:35:03.929 --> 00:35:06.789 dollar opioid settlements, which signal a failure 00:35:06.789 --> 00:35:10.469 to control diversion and volume, and the $885 00:35:10.469 --> 00:35:14.030 million penalty for systematic civil fraud involving 00:35:14.030 --> 00:35:17.050 the adulteration and fraudulent billing of chemotherapy 00:35:17.050 --> 00:35:20.269 medications. So the name change to Sincora attempts 00:35:20.269 --> 00:35:22.889 to create a new narrative. It does. But the history 00:35:22.889 --> 00:35:25.449 of AmerisourceBergen and the scale of the alleged 00:35:25.449 --> 00:35:28.519 harm. That remains central to its identity. When 00:35:28.519 --> 00:35:30.619 we connect the sheer financial scale of the company, 00:35:30.739 --> 00:35:34.099 U .S. $321 billion in annual revenue and total 00:35:34.099 --> 00:35:37.639 assets of $76 .6 billion, with the near $30 billion 00:35:37.639 --> 00:35:40.320 in cumulative penalties they faced. What does 00:35:40.320 --> 00:35:42.119 this tell us about the stakes? It tells us two 00:35:42.119 --> 00:35:44.840 key things. First, that in a high volume, low 00:35:44.840 --> 00:35:47.019 margin environment, the temptation to engage 00:35:47.019 --> 00:35:49.380 in schemes like the PFS fraud, which are designed 00:35:49.380 --> 00:35:51.940 to siphon off profit, is immense. And the subsequent 00:35:51.940 --> 00:35:54.079 harm, when magnified across 20 percent of the 00:35:54.079 --> 00:35:56.320 market, necessitates these astronomical penalties. 00:35:56.619 --> 00:35:58.340 And the second thing. Second, it demonstrates 00:35:58.340 --> 00:36:00.659 that the cost of doing business in a highly concentrated, 00:36:01.000 --> 00:36:04.059 regulated environment includes systemic risk. 00:36:04.400 --> 00:36:07.119 These penalties are the price paid for operational 00:36:07.119 --> 00:36:10.159 failures on a continental scale. The logistics 00:36:10.159 --> 00:36:13.000 layer of healthcare is where the pursuit of extreme 00:36:13.000 --> 00:36:15.559 efficiency meets the absolute requirement of 00:36:15.559 --> 00:36:18.139 public safety. The consolidation we've described, 00:36:18.460 --> 00:36:20.940 the formation of this behemoth, the acquisition 00:36:20.940 --> 00:36:23.739 of competitors, the integration of global specialty 00:36:23.739 --> 00:36:26.579 logistics, that was all driven by efficiency 00:36:26.579 --> 00:36:29.139 and market dominance. And that consolidation 00:36:29.139 --> 00:36:32.099 is where the ultimate question lies. Given that 00:36:32.099 --> 00:36:34.760 massive, consolidated distributors like Sincora 00:36:34.760 --> 00:36:37.440 are arguably necessary for the sheer complexity 00:36:37.440 --> 00:36:39.699 and efficiency of modern healthcare logistics, 00:36:40.039 --> 00:36:42.820 I mean, we cannot logistically revert to a fragmented 00:36:42.820 --> 00:36:45.519 system. The only path forward is through rigorous 00:36:45.519 --> 00:36:48.559 oversight. So what level of responsibility must 00:36:48.559 --> 00:36:51.239 we, as a society, assign to the logistics layer 00:36:51.239 --> 00:36:53.829 of the healthcare system? When a company controls 00:36:53.829 --> 00:36:56.909 one fifth of the nation's drug supply, its operational 00:36:56.909 --> 00:36:59.670 choices become, by extension, public health decisions. 00:36:59.909 --> 00:37:02.599 That is the critical tension. How can regulation 00:37:02.599 --> 00:37:04.559 and internal corporate governance be structured 00:37:04.559 --> 00:37:07.099 to ensure that maximizing supply chain efficiency, 00:37:07.400 --> 00:37:10.019 which is necessary to keep costs low and deliveries 00:37:10.019 --> 00:37:13.039 fast, doesn't create a systemic conflict with 00:37:13.039 --> 00:37:15.099 public safety and ethical distribution practices? 00:37:15.500 --> 00:37:18.380 The future of health care relies as much on the 00:37:18.380 --> 00:37:20.500 integrity of the distributors as it does on the 00:37:20.500 --> 00:37:23.059 genius of the drug developers. That is the challenging 00:37:23.059 --> 00:37:26.699 dynamic Sincora and all of us must continue to 00:37:26.699 --> 00:37:28.980 navigate. Thank you for joining us for this deep 00:37:28.980 --> 00:37:31.070 dive into Sincora. We'll catch you next time 00:37:31.070 --> 00:37:32.050 for more essential insights.