Cardinal mulls spinoff of medical, clinical units

DUBLIN, Ohio —Maybe being a $90 billion wholesale and health services behemoth isn’t always the best way to serve and profit from the healthcare market.

Cardinal Health has taken a good, long look in the mirror, and what it sees is a company that may be too big and diverse to get the job done most effectively. So the healthcare and distribution giant is mulling a partial breakup of its primary operating and reporting segments.

Following a two-year, top-to-bottom appraisal of its mission and business strategy, Cardinal last month revealed the dramatic fruits of that effort: a long-term plan to streamline its sprawling and complex operating structure and focus more effectively on its core businesses in drug distribution and medical supplies. The strategy could involve a tax-free spin-off of the company’s clinical and medical products businesses as a separate, publicly traded company.

In August, Cardinal’s leaders said the company most likely would announce its decision in a 60- to 90-day timeframe.

The move follows a long process of self-evaluation for the huge company, which posted sales of $91 billion in fiscal 2008. In July, Cardinal revealed a plan to consolidate its businesses into two primary operating and reporting segments “to reduce costs and align resources with the unique needs of each segment.”

Last month’s announcement of a possible spin-off goes a big step further. “For two years, we have been taking steps to sharpen our focus on healthcare supply chain services and clinical and medical products, culminating with our announcement in July to operate these businesses in two distinct segments that reflect the unique characteristics and requirements of each,” said R. Kerry Clark, chairman and chief executive officer.

Under the consolidation plan announced in July, Cardinal’s $80 billion core business, its network of pharmaceutical and medical product distribution centers and nuclear pharmacies, will form the Healthcare Supply Chain Services segment, led by vice chairman George Barrett. Products for infusion, medication dispensing, respiratory care and infection prevention will be grouped in the Clinical and Medical Products segment under the leadership of vice chairman David Schlotterbeck.