Growth of Oncology Distribution

Based on growth and aging of the U.S. population, medical expenditures for cancer in the year 2020 are projected to reach at least $158 billion (in 2010 dollars) — an increase of 27 percent over 2010, according to a National Institutes of Health analysis. The Center for Healthcare Supply Chain Research noted recently that oncology has grown its share among specialty products, rising to 59% of distributors’ annual sales volume in 2010 from 56% in 2009.

Planning for the drug spending on cancer is touching many in the health care market. Oncology drugs, which make up approximately 35% of drug spending in the medical channel, are increasing in price and effectiveness. Companies that manage oncology practice networks have grown over the past ten years. The Big 3 Wholesalers dominate this market as they do in the overall drug wholesaling business. Estimates state that AmerisourceBergen (ION Solutions) controls approximately 55% of the market, followed by McKesson, and to a lesser extent Cardinal Health.

McKesson recently closed on its acquisition of US Oncology, the leading oncology practice network other than the Big 3 Wholesalers.  Integrated delivery networks and hospitals play an increasingly important role in the oncology field besides community practices.

For manufacturers, the specialty distribution business is the key way of getting their drugs to market. The practice networks also provide helpful services to manufacturers. McKesson, with its recent acquisition of US Oncology, added approximately 1,300 physicians to its network. The company is being integrated into McKesson Specialty Care Solutions, which McKesson created after acquiring Oncology Therapeutics Network and the National Oncology Alliance. The acquisition moves McKesson closer to the forefront of the vertical integration of the oncology drug wholesale business and the GPOs that oncologists work with for discount drug pricing.