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Firm Finds an Rx to Please Pharmacies : Bergen Brunswig System Speeds Products to Drugstore Shelves

November 17, 1987|LESLIE BERKMAN | Times Staff Writer

When Emil P. Martini Jr.'s new IBM business computer balked at reading punch cards in 1963, he sent out a call for help. To his amazement, it was answered by then IBM Chairman Thomas J. Watson Jr.

Not only did Watson make sure the bugs in one of IBM's pioneer business computers were quickly worked out, he struck up a lasting relationship with Martini and his wholesale pharmaceutical business in Bergen County, N.J.

Working together, Martini and Watson developed an automated accounting and inventory system, custom-designed for the needs of drug distributors.

Today, Bergen Brunswig Corp. spends more than $350,000 a month to lease IBM computer hardware. With the help of advanced computer technology, Bergen Brunswig has helped transform the way that pharmaceutical products--from antibiotics to pregnancy test kits--get from their manufacturers to the pharmacies that dispense them.

By providing extensive distribution networks and technological support, such as computer-assisted ordering, wholesalers like Orange County-based Bergen Brunswig have become increasingly popular with both drug makers and drug sellers.

Acquired Bigger Firm

As a result, the proportion of drugs sold through distributors has increased by more than 50% in less than 15 years.

In 1969, the Bergen Drug Co., founded by Emil Martini Sr. in 1947, acquired the much larger Brunswig Drug Co., an enterprise started by French emigrant pharmacist Lucien Brunswig in Los Angeles in 1888. At the time of the merger, the combined companies posted $180 million in annual sales and claimed about 5% of the wholesale drug market.

Bergen Brunswig, which moved its headquarters to the city of Orange in 1985, currently reports annual sales of $3.4 billion. The lion's share--$2.8 billion--is generated by the company's wholesale drug business, which has captured about 16% of the national market. The company is also the nation's largest distributor of videotaped movies.

Martini, the company's chairman and chief executive, said Bergen Brunswig is striving for an even bigger slice of the national drug distribution market, which is expected to burgeon with the introduction of new products and the aging of the baby boom generation.

Bergen Brunswig officials said the company has no immediate plans to acquire smaller firms, but they do not rule out acquisitions. Industry analysts point out that the company will have $40 million available for expansion plans or a buyback of stock in January after the completion of the recently announced sale of its hospital supply division.

Although Bergen Brunswig owes most of its success to the wholesale drug business where it started, it has ventured into other areas over the years--with varying results.

John T. Fay Jr., Bergen Brunswig's director of corporate affairs, recalled that the company once launched a vitamin-manufacturing operation, but gave up when it failed to gain a sufficient foothold in the market.

Sheer 'Serendipity'

In 1982, the company acquired Commtron, a Des Moines, Iowa, distributor of consumer electronics.

By sheer "serendipity," Fay said, the acquisition coincided with a nationwide boom in the home video market. Commtron, which in 1982 had only a fledgling wholesale video business, quickly became the nation's largest distributor of videotaped movies, sold principally through video specialty stores.

Last year, however, Commtron's growth tapered off abruptly. During the fiscal year ended Aug. 31, the subsidiary's operating earnings declined 59% to $5.5 million from $13.4 million. But George E. Reinhardt Jr., Bergen Brunswig's chief financial officer, said the future looks bright for Commtron because of an expected increase this year in the number of video movie releases.

Not all of Bergen Brunswig's diversification moves have been lasting. Acknowledging that it has faced stiff competition in supplying hospitals with such items as needles and catheters, the company has agreed to sell its medical supply subsidiary to a group of private investors, including the subsidiary's top management.

Bergen Brunswig officials frequently refer to the company as the "Avis" of the wholesale drug industry, second only to McKesson Corp. in San Francisco and striving hard to close the gap. The company has 10,000 customers, including independent, chain-owned and hospital pharmacies, and about 700 suppliers, including major drug manufacturers from Abbott to Upjohn.

With a national work force of 4,000 employees, Bergen Brunswig has thrived in a consolidating industry in which hundreds of other family-founded operations have collapsed or sold out over the last 20 years.

As surviving companies competed for a greater market share, Bergen Brunswig expanded through strategic acquisitions, spending $200 million in 1985 and 1986 to buy six drug-distribution companies that generated about $1 billion in annual sales.

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