This is a snippet of the transcript, sign up to read more.
Once we built up enough distribution volume and business through our contracting strategy and relationships, we started making inroads into larger health systems. By around 2016, Medline's market share had grown enough that companies could no longer claim Medline wasn't a real distributor. Now, nearly everyone distributes through Medline. The exception is still in the lab distribution space. In our first call, we discussed the different distribution sectors; here's med-surg distribution, there's pharmaceutical distribution and then there's yet another section, which is the laboratory and Cardinal and then Thermo Fisher are the market leaders in laboratory.
This is a snippet of the transcript, sign up to read more.
Absolutely, it does. Those back-end funding and terms are never publicly disclosed, but from my experience, specialty reps from large companies often travel with their counterparts from Cardinal to make joint calls on customers. This doesn't happen as frequently with Medline. I'm confident, based on circumstantial evidence, that there are back-end funding and incentives going to Cardinal and Owens to compete against Medline. They're actively putting people on the ground to help with sales. Many companies, as Medline holds 60% market share, see it as a necessary evil. If you're distributing through Medline, they might eventually try to compete against your product. But with their significant market share, you don't have much choice. Most companies aren't putting much effort into working with Medline, and we see this more in other areas.
This is a snippet of the transcript, sign up to read more.
It's quite significant. While I don't know the specifics of what Cardinal negotiates with third parties, for companies that are Medline Platinum vendors, part of our preferred distribution program, the back-end funding can be as much as 5% to 7%. This is significant, especially with a decent volume. You might get cost plus one bulk distribution plus a 2.5% added fee, netting cost plus three and a half on the Medline side. If you can get seven points of funding below the line for selling that product, you have a 10.5% gross margin. You're profitable selling those products, and there are usually sales tracings and other fees on top. Medline could net 12% to 13% gross on distributing a preferred product, whereas a company offering only sales tracings and no back-end funding might result in Medline netting just 2% to 3%. It's a substantial difference. Medline's salesforce is highly incentivized through compensation. For preferred Platinum vendors, there are additional incentives, like a half-percent SPIFF or $500 SPIFF, to motivate collaboration.
This is a snippet of the transcript, sign up to read more.
This document may not be reproduced, distributed, or transmitted in any form or by any means including resale of any part, unauthorised distribution to a third party or other electronic methods, without the prior written permission of IP 1 Ltd.
IP 1 Ltd, trading as In Practise (herein referred to as "IP") is a company registered in England and Wales and is not a registered investment advisor or broker-dealer, and is not licensed nor qualified to provide investment advice.
In Practise reserves all copyright, intellectual and other property rights in the Content. The information published in this transcript (“Content”) is for information purposes only and should not be used as the sole basis for making any investment decision. Information provided by IP is to be used as an educational tool and nothing in this Content shall be construed as an offer, recommendation or solicitation regarding any financial product, service or management of investments or securities. The views of the executive expressed in the Content are those of the expert and they are not endorsed by, nor do they represent the opinion of In Practise. In Practise makes no representations and accepts no liability for the Content or for any errors, omissions, or inaccuracies will in no way be held liable for any potential or actual violations of laws, including without limitation any securities laws, based on Information sent to you by In Practise.
© 2025 IP 1 Ltd. All rights reserved.
Subscribe to access hundreds of interviews and primary research