Bergen Brunswig Corporation Business Information, Profile, and History

History of Bergen Brunswig Corporation

Bergen Brunswig Corporation is the nation's largest supplier of pharmaceuticals to the managed care market and the second largest wholesaler to the retail pharmacy market. In addition, Bergen Brunswig is the only pharmaceutical distributor that also supplies medical and surgical products on a national basis. Since its incorporation in 1969, it has been on the leading edge of technological advances in electronic data interchange (EDI).

Lucien Napoleon Brunswig, the founder of Bergen Brunswig, was born in 1854 in France, the son of a country doctor. While Lucien felt little inclination to pursue the healing art of his father, he did develop an interest in some day providing the drugs that were vital to patients' treatment. When political turmoil in France in the 1870s prompted Lucien, and many other young French people, to emigrate, he arrived in the United States unemployed and nearly penniless. In 1871 the 17-year-old Lucien was accepted as an apprentice to a U.S. druggist.

Apprenticeship meant more than learning the drug trade; it also entailed sweeping floors, cleaning out the cages of the druggist's pets, and attending to other menial tasks. Despite his meager income, Lucien Brunswig's hard work and thrift helped him save enough to open a retail drug store in Atchison, Kansas, when he was 21 years old. His drugstore was such a success that he sold it profitably and took the train as far southwest as it would go, to a few miles outside of Fort Worth, Texas, then a small, dusty town of a few hundred people.

Brunswig's Fort Worth drugstore, serving both retail and wholesale, flourished. By 1883, less than five years after he had opened the store, his business reported $350,000 in annual sales. In 1882, George R. Finlay, the owner of a wellestablished wholesale drug firm in New Orleans, invited Brunswig to join him as a partner. Lucien Brunswig readily agreed to sell his own drug business and become Finlay's business partner in New Orleans. Finlay's firm, Wheelock-Finlay, became Finlay and Brunswig. Upon Finlay's death in 1885, Lucien Brunswig took over the entire wholesale drug operation and settled into New Orleans, where he served as a police commissioner of the city for four years. In 1887 Brunswig took on a partner, F.W. Braun.

The following year, Brunswig became interested in expanding West, setting his sights on faraway Los Angeles, California, a growing town of 30,000. Brunswig dispatched Braun to Los Angeles to open one of the few wholesale drug companies in the area, the F.W. Braun Company. Business opened in Los Angeles on the first floor of a two-story adobe house. Pharmaceuticals were not only sold over the counter, but a few salesmen also ventured out to visit druggists and procure their orders, which could be filled within two or three weeks. After a year, F.W. Braun Company was flourishing and moved into the Old Post Office Building next-door, the first of a series of major expansions.

In 1890, while Lucien Brunswig remained in New Orleans, he ordered the opening of what would become a prosperous branch of F.W. Braun in San Diego, California, a city even smaller, dustier, and with fewer drugstores than Los Angeles. The coming of the Spanish-American War was a boost for the drug business nationwide, and Lucien Brunswig's profits continued to soar. In 1903, deciding that the future of his company lay in the West, Brunswig sold his profitable New Orleans establishment and moved with his family to Los Angeles to preside over the continued expansion of his business. In 1907, he bought out Braun, and his business was renamed Brunswig Drug Company.

With headquarters in Los Angeles, the wholesale drug enterprise was soon expanded to include branches in Phoenix and Tucson, Arizona, as well as a short-lived store in Guaymas, Mexico. As a result of World War I, Pacific Coast business boomed, far beyond Brunswig's wildest dreams. In 1922 when other U.S. businesses were experiencing a slump, Brunswig's sale of drugs as well as cosmetics, a recent and lucrative addition to the drug line, reached a record high level. In that same year, Brunswig decided the company needed a manufacturing plant that would house a laboratory and produce cosmetics. Goods that were manufactured in the Brunswig labs eventually made their way to the Philippines, Japan, and the Hawaiian Islands.

A wealthy businessman, Lucien Brunswig had also become an ardent bibliophile, art collector, and philanthropist. In 1927 he presented to the University of California at Los Angeles more than 1,000 books for its library of French language and literature. Moreover, with the onset of the Great Depression, Brunswig's company opened soup kitchens to feed the desperately poor; his own business did not suffer significantly during this time. Brunswig died in 1943, two years after his retirement; he did not live to see his kingdom expand tremendously, as it did in the years following World War II.

Roy V. Schwab succeeded Lucien Brunswig as president of the Brunswig Drug Corporation, moving the company's headquarters in 1947 to Vernon, California. By then, the Brunswig Drug Corporation had divested itself of its manufacturing plant and laboratories, concentrating solely on the wholesale distribution of pharmaceuticals. In fact, Brunswig was considered the most advanced wholesale drug operation in the United States, although by no means the largest. It was, for example, the first wholesale drug company in the United States to introduce computerized punchcards for keeping track of inventories.

In 1949, the 61-year-old Brunswig Drug Corporation merged with the Coffin Redington Company of San Francisco, the first of numerous significant mergers. The company expanded rapidly in California. In 1950 it opened its San Jose division; in 1951, its Sacramento division; and in 1954, its San Bernardino division. In 1952, it acquired the Smith-Faus Drug Company, and by 1960, it had 14 divisions in the southwestern United States.

In the eastern United States, another drug company benefited from the postwar economic boom. In 1947 Emil P. Martini founded and became the first president of the Bergen Drug Company based in Hackensack, New Jersey. A graduate of the New Jersey College of Pharmacy in 1923, Martini opened his first retail pharmacy in Hackensack five years later. A second pharmacy was acquired at the height of the Depression, and a third was acquired in 1937. A well-established member of the community and president of the New Jersey State Board of Pharmacy, Martini helped establish a wholesale drug distribution company in 1947 named after the county of Bergen in which they lived. The success of the Bergen Drug Company was phenomenal, in part because of the insatiable demand for the wonder drugs of World War II, including such antibiotics as penicillin. Despite the growing sales volume, the company continued to offer same-day service.

With the 1955 death of Emil P. Martini, Sr., leadership of the company was turned over to Martini's son, Emil P. Martini Jr. The Bergen Drug Company then began rapidly expanding and acquiring other wholesale drug companies. In 1956, Bergen acquired Drug Service Inc. of Bridgeport, Connecticut. Between 1957 and 1958, Bergen operations were started in three California cities, Fresno, San Francisco, and Covina. In 1959, it became the first company in the nation to use computers for inventory control and accounting purposes. By the 1960s, Bergen Drug Company was among the largest wholesale drug distributors in the United States, supplying 5,000 pharmacists and hospitals.

In May 1969 Martini successfully negotiated the purchase of Brunswig Drug Corporation. The latter had sought to buy the former until Brunswig Drug managers realized that financially it made more sense to have Bergen buy their company, as the price-earnings figures of Bergen's stocks were more advantageous. The name of the new company would be the Bergen Brunswig Corporation.

Several acquisitions followed. In 1970 alone, the Bergen Brunswig Corporation added 12 drug companies and laboratories to its fold, transforming itself into a truly national drug distribution business. Head of the Bergen Drug Company since 1956, Martini, who had graduated with a degree in pharmacy from Purdue University, was given his original job in his father's firm with the understanding that he was to learn the drug distribution business from the bottom up, which he did. Under his direction and that of his younger brother, Robert E. Martini, also a pharmacist and vice-president of the company, the Bergen Brunswig Corporation became in the 1970s one of the most modern drug distribution companies in the United States.

Bergen Brunswig revolutionized the trade in 1971 when it pioneered the electronic transmission of purchase orders to Eli Lilly & Co. In the early 1970s, Bergen Brunswig introduced the handheld computer scanner, with which pharmacists could scan the barcodes on merchandise. Stock was then reordered on the basis of the information collected by the scanner. The inauguration in the late 1970s of an advanced computer system automated the prescription department still further, connecting hospitals and chain pharmacies electronically to Bergen Brunswig's distribution centers. Soon the majority of orders could be transmitted to Bergen Brunswig via telephone lines, and in the 1980s, satellite communication replaced conventional telephone lines. One hundred years after the opening of the F.W. Braun Company wholesale drug store in Los Angeles, the distribution time of drug orders was down from two to three weeks to less than 24 hours.

The 1980s saw the explosion of pharmaceutical and health care product demand, contributing significantly to Bergen Brunswig's phenomenal growth. In 1981 the president of the National Wholesale Drug Association noted a 17 percent increase in the sales of pharmaceuticals in the first half of that year. The stock value of Bergen Brunswig Corporation increased between 1977 and 1981 by 50 percent, while its net earnings in the three-year period of 1987 to 1990 increased 316 percent, with an average annual growth rate of 25 percent. The aging of the U.S. population had something to do with this success, as did the popularity of its two biggest selling drugs, Zantac, for the treatment of ulcers, and Epogen, used in kidney dialysis treatment.

Despite the considerable increase in the number of its customers--10,000 by 1990--Bergen Brunswig could still guarantee next day service by means of its computer system. Bergen Brunswig supplied software to some 300 hospitals, thereby linking them to the company's computer-driven distribution and pricing system. This equipment helped Bergen Brunswig become the largest supplier in the United States of pharmaceuticals to hospitals. In addition, the company attracted customers through its Good Neighbor Pharmacy plan, which catered to the particular needs of independent pharmacies.

The development in the 1980s of a new generation of automated distribution centers speeded up service and delivery to the point where Bergen Brunswig had become the model for drug distribution companies nationwide, although it was second-largest in the drug distribution industry. The corporation's new distribution facility in Corona, California, processed an order every three seconds--with 100 percent accuracy--of any of the 2,500 most popular pharmaceuticals or health care products. The company then focussed on getting closer to the customer--the pharmacist or store manager--in order to anticipate needs to such a degree that the customer might never have to place an order. Toward that end, Bergen Brunswig monitored the customer's stocks and automatically replenished supplies. The automated distribution system enabled Bergen Brunswig and all other wholesale drug companies to process three times as many orders as previously.

The 1980s also saw the development of another line of products, which resulted from Bergen Brunswig's acquisition in 1982 of Commtron, Inc., a national distributor of home videos as well as 4,000 consumer electronic products. By 1990 Commtron, a 79 percent owned subsidiary of the Bergen Brunswig Corporation, became the nation's number-one distributor of videos, with distribution centers and headquarters in Des Moines, Salt Lake City, and Chicago. With 1,000 employees, Commtron's sales in 1990 increased 17 percent over the previous year. However, in June 1992, Bergen Brunswig sold Commtron, in an effort to return its focus to its core pharmaceutical operations. Number two video distributor Ingram Entertainment acquired Commtron for $78.3 million.

Leading the company into the 1990s was Robert Martini, company president and CEO, and Emil Martini Jr., the chairman of the board. Later, Robert Martini took over the position of chairman, and Dwight A. Steffensen became president and chief operating officer. In addition, pharmacists occupied many of the company's top management positions.

In the early 1990s, Bergen Brunswig, like many pharmaceutical and health-care wholesalers, was caught in a margin squeeze, as the public outcry over soaring health-care costs kept drug prices from increasing. In fact, according to industry statistics, gross profit margins declined every year since 1989 because the drug wholesaling industry continued to be very competitive on pricing, and there were reductions in the rate of drug price inflation over recent years. During this time, Bergen Brunswig went through some restructuring including staff reductions, a move to more efficient warehouse facilities, and the elimination of duplicate operating systems resulting from mergers. The company indicated that it saved in excess of $20 million annually from its restructuring. In spite of industry trends, Bergen Brunswig was the only company in the drug wholesaling industry to post an increase in gross profit margins in the December 1994 quarter.

Analysts attributed Bergen Brunswig's success during this critical time to careful management decisions and smart acquisition moves. In 1992, Bergen acquired pharmaceutical distributor Durr-Fillauer Medical Inc. for $484 million. Durr-Fillauer was a national supplier of medical surgical products to hospitals, clinics, and alternate site healthcare facilities. In addition, the company acquired Southeastern Hospital Supply Company and Professional Medical Supply Company. In July 1995 Bergen signed an agreement to acquire Colonial Healthcare Supply Co., one of the ten largest full-line distributors of medical and surgical products in the country. Each of these acquisitions complemented the Durr Medical operations and expanded their presence nationally in this area. Durr Medical became the fourth largest medical-surgical distributor in the United States.

Joint ventures and agreements during the early and mid-1990s made Bergen Brunswig a more visible force in the worldwide pharmaceutical industry. In December 1994, Bergen Brunswig signed a five-year, sole source pharmaceutical distribution agreement with Columbia/HCA Healthcare Corporation, the nation's largest healthcare services provider, operating 195 hospitals and 125 outpatient centers in 34 U.S. states, England, and Switzerland. The total contract was expected to generate $2 billion in revenues for Bergen Brunswig over the life of the agreement. In addition, the company signed a five-year agreement with Safeway Stores Inc. to be its primary supplier of pharmaceuticals, pharmacy-related items, and selected over-the-counter products. The contract was expected to generate over $1 billion in revenue for Bergen over five years. Safeway operated 1,068 stores in the United States and Canada at the time and was the third largest retail grocery chain in North America.

Also known as a technology leader in the distribution industry, Bergen Brunswig focused on offering value-added services to its customers. In July 1994, the company introduced AccuSource, a multimedia communication, product information, and electronic ordering system for retail pharmacy customers. Developed in conjunction with Apple Computer, the program allowed pharmacies to look up items by category, list substitutions available for products, see special pricing, or communicate with a local Bergen Brunswig division through e-mail. The service also provided personalized information so pharmacies could view statistics such as their own net sales, prescription volume, or product mix. In just four months, Bergen received over 2,000 signed contracts for AccuSource, and it represented Apple's largest multimedia project for a single company. Other state-of-the-art services included OnCall*EDI, a fullyintegrated on-line ordering system for the institutional pharmacy, and QuikNet, a fully functional electronic system for ordering, managing, and tracking compliance of medical and surgical products for clinics and hospitals. Moreover, the Bergen Brunswig Drug Company, a wholly owned subsidiary of the Bergen Brunswig Corporation, had converted to paperless billing several years before and was constantly refining its funds transfer and information management systems.

Expressing confidence and optimism in their letter to shareholders in the company's 1994 annual report, Martini and Steffensen attributed much of the company's success to its work force, noting that employee "resourcefulness, efficiency and innovation" resulted in "listening to our customers and creating programs and services to help them stay ahead of the competition and better manage their bottom line." Judging by the company's progress over the years, Bergen Brunswig Corporation was ready to face the new century as a leader in the competitive pharmaceutical supply and wholesale markets.

Principal Subsidiaries: Bergen Brunswig Drug Company; Alternate Site Distributors, Inc.; Durr Medical Corporation.