Diversified Pharmaceutical Services

SmithKline Beecham merged with Diversified Pharmaceutical Services ( 2.3 billion) and Sterling Winthrop ( 2.9 xlO9). 

Diversified Pharmaceutical Services, Inc., with roots going back to the early 1970s, is credited for establishing maximum allowable cost (MAC) programs and mandatory generic drug programs.It has been associated with SmithKline Beecham Healthcare Services and was once a subsidiary of the United Healthcare Corporation, but is now part of the Express Scripts network. 

Additionally, these diversifications may represent sources of distraction for senior management, which can be exacerbated if the companies are publicly traded. A recent example is the diversification of the contract service organization aaiPharma (Wilmington, NC, U.S.A.) into a specialty pharmaceutical manufacturer. Quintiles (Research Triangle Park, NC, U.S.A.) also diversified aggressively in the 1990s and the acquisition of a patient billing company was problematic. 

Portfolio management concepts have been an accepted component of the financial services realm for decades, and the need to diversify risk continues to be an effective organizing principle for many financial instruments and analytic techniques. Risk assessment is also a key component in the pharmaceutical world, where as few as 1 in 5000 laboratory-tested compounds ever makes it to the market. As such, the pipeline portfolio is a critical indicator of the future of a pharmaceutical firm, and the process of analyzing and managing it effectively is of vital strategic importance. 

The companies chosen for background material in Section 7.2 of this chapter include four chemical companies, two oil companies, four medium-sized companies in the agricultural-biotech, food, paper, and pharmaceutical sectors, as well as a major diversified company. They were selected based on their major business lines as examples of the CPI. The data presented were obtained from Standard Poor s Stock Reports, Moody s Investor Service, company annual reports, and company lOK reports. This material, which is referred to in future chapters, should provide the reader with a basis for understanding some of the similarities and differences of the CPI companies. The short summaries pre-... 

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