A conversation with Chris Smith, H. D. Smith

Chairman Dale Smith, left, and president, Chris Smith

H. D. Smith, founded in 1954, is today the largest privately-held wholesaler in the US. Based in Springfield, IL, the company services clients nationally from seven full-line distribution centers, its specialty subsidiary, Smith Medical Partners and a dedicated home healthcare/DME distribution facility. Besides its basic pharmaceutical supply business, H. D. Smith has a growing presence into specialty, home healthcare and business solutions, to name a few. Pharmaceutical Commerce sat down with Chris Smith, president and COO; here's what he had to say.

ONE. H. D. Smith lives in a world dominated by the Big Three wholesalers; how does it position itself to succeed in the marketplace?

From its beginnings as a one-person operation nearly six decades ago, H. D. Smith has grown to become the largest independent pharmaceutical wholesaler in the country. Acquisitions, strategic placement of new distribution facilities, and diversification of offerings and customer mix have positioned H. D. Smith shoulder-to-shoulder among the country's largest wholesalers. In addition to a complete line of brand, generic and specialty pharmaceuticals, H. D. Smith provides home healthcare products; durable medical equipment; seasonal merchandise; and a wide range of solutions that help customers optimize savings opportunities and manufacturers maximize reach.

Providing exceptional service to America's independent community pharmacies is the core of our mission and our passion. During the past several years, we have also been leveraging growth opportunities within hospital systems, regional retail chains and alternate care markets Ð but as we expand and diversify our customer and product mix, we do not stray from our founding vision of providing exceptional service to each and every layer of the healthcare industry we touch.

In a market that is changing at a fierce pace, many companies are not listening to or meeting their customers' needs -- but we refuse to run our business that way. We define "customer" as the hospitals, long-term care facilities, regional chains and independent retail pharmacies we serve, as well as the manufacturers with whom we partner. A key component of our value proposition is a true partnership with our customers. Through these partnerships, we develop unique customized solutions that add value to the quality of patient care.

TWO. What are the most recent significant business developments at H. D. Smith? Let's talk about Smith Medical Partners, the specialty services group (there might be several subsidiary questions on this topic): how is it structured, what is its proposition to brand owners, how is it differentiated?

Today, H. D. Smith is investing heavily in its technology infrastructure, Third Party Network, and in building a leadership team with the credentials and vision to take our company into the next era of evolution of contributing positively to patient care.

In alignment with market shifts and the increased importance of specialty, H. D. Smith continues to invest in our wholly owned subsidiary, Smith Medical Partners, which is focused on specialty distribution and services.

Smith Medical Partners functions as a specialty distribution company that is firewalled and separated from the parent company. It services hundreds of specialty pharmacies and thousands of physician offices and clinics. Smith Medical Partners is investing to enhance its manufacturer service offering by providing flexible and tailored services throughout the development and commercial product lifecycles. These services range from helping manufacturers procure credentialed comparator products for clinical trials to back-end telesales support for new and end-of-lifecycle commercial products.

We recognize that new product introductions have unique needs outside of traditional wholesale. Through Smith Medical Partners, we utilize a blended distribution model that provides the opportunity for patients to receive products that will not be distributed through the traditional retail pharmacy model due to REMS requirements, manufacturer preference and/or managed care obligations.

An evolving component of Smith Medical Partners' enhanced manufacturer service offering is third-party logistics support. What sets Smith Medical Partners apart is the ability for manufacturers to work alongside our team to co-develop solutions that offer the flexibility to build exactly what the manufacturer needs. Smith Medical Partners is an increasingly attractive option for manufacturers seeking a strategic partner because we are willing to listen to manufacturer needs and partner with them to develop something truly unique.

Watch us for news about Smith Medical Partners! We have some developments in the works we feel will make a big difference in the specialty care market in the near future.

THREE. PharmaGen is your generics supply unit; how that operate?

Whether we are partnering with a brand manufacturer that desires a broad or limited distribution, or with a generic manufacturer looking to ensure immediate access to the most recent launch of a new generic, H. D. Smith has programs in place.

A benefit specific to H. D. Smith's generic manufacturer partners is our PharmaGen generic portfolio. PharmaGen is H. D. Smith's premier portfolio of quality generic pharmaceuticals, providing customers access to one of the most robust generic portfolios in the market. PharmaGen ensures customers the best possible coverage, availability, quality and value on generic pharmaceuticals. During the bid process, we identify manufacturer partners that can guarantee the best value and product availability for our customers. Manufacturers occupying a primary position earn approximately 95% of our customers' sales for that product.

The PharmaGen portfolio consists of more than 7,500 items. H. D. Smith maintains an extensive selection of primary and secondary manufacturers to facilitate high service levels. Over the past few years, the generic industry has yielded an unprecedented number of supply chain interruptions, recalls, limited product supply and regulatory activity. Through these intervals, H. D. Smith has maintained excellent service levels through strong relationships with multiple manufacturer partners for each chemical entity.

FOUR. Is Home Health exclusively DME sales, or is there a pharma component?

Our home healthcare offering extends to standalone DME providers, and integrates with the standard independent retail pharmacy model. Home healthcare is a fast growing and high margin segment of the healthcare industry. Accordingly, we partner with a wide range of home healthcare/DME manufacturers to ensure we are able to provide a robust product inventory to our customers, including special request and hard to find items.

We are willing to invest in this critical segment of the market from both a product and support perspective. Our dedicated home healthcare sales specialists take the time to learn the products, understand the market, and develop customized solutions to help community pharmacies and DME providers meet patient needs.

FIVE. What's it like running a multibillion dollar family business? Can you tell us a little more about yourself?

As the president and COO, I enjoy working for and learning from my brother, Dale, the chairman and CEO. The company was founded by our grandfather's and father's vision. The company has experienced significant growth in the past couple decades. This growth was built upon a regional wholesaler model, and is now multiple distribution centers servicing hospital and retail pharmacies in most major US markets.

Through Smith Medical Partners, H. D. Smith is able to supply specialty products into specialty pharmacies, physician offices, hospitals or wherever that specialty medication needs to be within the contiguous 48 states. We consider the company always open to exploring additional acquisition opportunities, either in distribution or around healthcare solutions. At the moment, our plans for geographic expansion include expanding and diversifying the customer base around existing distribution centers.

I joined H. D. Smith in 1980 as a buyer, and moved up through the ranks, including stints in operations, division management and purchasing. Our company is a member of HDMA, NCPA, ASHP, and numerous other industry organizations. We are committed to the past, present, and future of wholesale distribution and patient care.

I attended Northwestern and the University of Illinois, and our entire family arguably represents the most enthusiastic and devoted Big 10 fan base. Go Illini!