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Pharmaceutical distributor Cardinal Health raised its 2024 profit expectations following strong demand for generic and specialty drugs such as GLP-1 medications, the company announced in its Q4 2023 earnings call on Tuesday.
The Ohio-based company reported that its pharmaceutical segment profit increased 12% to $504 million in Q4 2023, up from $451 million during the same period last year. “Positive generics program performance” drove the increase, CFO Aaron Alt said during the call. Cardinal, whose fiscal year ends June 30, expects revenue from its pharmaceutical division to grow by 10%–12% in FY 2024, he added.
“Fiscal ’23 was an inflection point for Cardinal Health with improved performance, strong execution, and notable progress against both our short- and long-term plans,” CEO Jason Hollar said.
GLP-1 drugs such as Novo Nordisk-manufactured Ozempic and Wegovy were developed to treat diabetes, but have skyrocketed in popularity as a weight management tool. These medications can stimulate insulin production, which can help lower blood sugar levels and help Type-2 diabetes patients, according to the Mayo Clinic.
In 2022, medical professionals ordered 5+ million prescriptions for GLP-1 medications including Ozempic and Wegovy for weight management, a 2,000+% increase compared to 230,000+ prescriptions in 2019, health tech company Komodo Health found.
The demand for the drugs has outpaced supply, leading to shortages, leaving some Type-2 diabetes patients without necessary medication.
“The primary reason for the raise in the guidance on the revenue is related to the GLP-1,” Alt said in the earnings call. “We saw a strong finish to the year as relates to that. And looking forward, we see that there’s nothing that we can foresee in the near term that will change those trends.”
Despite the ongoing trend, the GLP-1 medications, which are branded products, “do not meaningfully contribute to segment profit,” Alt added.
Fellow pharmaceutical distributor AmerisourceBergen also highlighted GLP-1 drugs as a potential revenue boost, but noted that the medications have “lower profit margins,” the Pennsylvania-based company said in its Q3 2023 financial report published earlier this month.
Some insurers, such as Elevance Health, have been hesitant to cover the GLP-1 medications despite high demand.