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Dohmen pioneers an integrated, 'conflict free' pharmaceutical services company
In 1858, a German pharmacist, Friedrich Dohmen, set sail for America, with the goal of opening an apothecary in Wisconsin. That venture became The F. Dohmen Co., which grew to be a national drug wholesaler by the end of the 20th century. In 1990, fifth-generation Cynthia LaConte joined the family business, and in 1996, founded DDN Pharmaceutical Logistics as a service extension of the wholesaling business. A decade later, she was named COO, and initiated a complete transformation of the company. The $2-billion wholesaling business was sold (to Cardinal Health), and by 2009, after being appointed CEO, she had set a new vision for the company: to create a more efficient, affordable, and accessible healthcare supply system for healthcare producers and payers. The company now has 750 employees, 650,000 sq. ft. of warehouse space, and processes $9 billion in transactions annually.
Pharmaceutical Commerce sat down with Cynthia to learn what is driving the company forward.
For a medium-sized company in the healthcare industry, Dohmen has been aggressively adding new acquisitions; what are you looking for, and how do you assess potential acquisitions?
Dohmen grew historically by building greenfield operations in response to client needs. Both RESTAT and DDN are successful examples of that approach. Yet, while having an in-house development team to bring new capability to market remains an important part of our growth strategy, it takes awhile. We wanted to accelerate development timelines in key strategic areas, so we added acquisition to the mix.
In 2011, we acquired PlanIT, a healthcare analytics firm, MedComm Solutions, a medical call center, and Centric Health Resources, an integrated patient-care model for rare disease. This year we added to our safety offering by acquiring Biosoteria, a regulatory consulting firm.
Our acquisition strategy is simple. We approach best practice life science service companies to establish whether they view the world in the same way we do. If we don’t see a match with our vision of creating a more efficient healthcare supply system, then we move on. If we do, then we look for creative and committed leaders that are passionate about making a difference in healthcare and want to take their companies to the next level.
Our goal is to provide a service array that can help life science companies become therapeutic care companies. We provide a continuum of capabilities to propel their business, protect their brand and help bring them closer to the patients they serve. This means anticipating what they’ll need to be successful in the future and then taking the leap to invest in that future on their behalf. As a private company, we have the benefit of being able to think about acquisition more strategically over a longer-term horizon.
It’s ancient history now, but do you look back on the decision to leave wholesaling as a good one?
Definitely. Dohmen is still around after 154 years because we’ve been unafraid to change what we do, but unwilling to change who we are and what we stand for. We made the decision to exit the traditional wholesale model in 2006 because the purchase and sale of mass-marketed healthcare products required an intense capital commitment to inventory and infrastructure without the opportunity to provide a sustainable competitive advantage. In short, the model became highly commoditized.
While there will always be a need for big-box suppliers, we saw our unique capability as aligning more closely with high touch than high volume. As the industry paradigm begins to shift in response to the promise of personalized medicine, creativity, speed and flexibility become highly valued attributes. These are cultural characteristics that are often difficult for very large public companies to exhibit. For over 15 decades, our call to action has always been around delivering on the promise of pharmaceutical care—one person caring for another. In a way, this new model actually brings us closer to our roots as an apothecary.
Dohmen has a rather dramatic stance of “conflict free” pharma services—that the company should not be in a position to be, in effect, both a buyer and seller of healthcare services. Where does this philosophy come from, and how are you able to put it into practice?
Healthcare in this country has become unsustainable. We spend double the rest of the industrialized world, yet we do not yield a commensurate return on that investment according to most healthcare metrics. So we have to ask—why? What makes our system so expensive? Much has been written on the topic and, like most things, people find data to support their biases, but it’s hard to dismiss inherent conflict of interest as a contributor. Take the obvious example of physician-owned MRI. It’s not a coincidence that when physicians begin billing for MRI, use of MRI goes up an average of 38%.
Here at Dohmen we have a simple, but essential strategic pillar—remain conflict free. We stay very clear about who our customer really is, we align our interests with theirs and we remain true to our vision while serving them.
As a service provider, one way we eliminate potential channel conflict is by avoiding the purchase and sale of product as a source of profitability in our economic model. It’s difficult to imagine how companies like ExpressScripts and Caremark can be neutral to the objective of lowering the prescription spend for self funded employers when so much of their profit rests on the purchase and sale of prescription product. Likewise, it is hard to believe that the Big Three wholesalers can really be free to provide services in alignment with the interests of life science companies when they play a dual role as a top 5 customer to those same companies.
As this article was going to press, everyone was awaiting the US Supreme Court decision on healthcare reform. Is Dohmen vested in one outcome or another?
The systemic problems that drove PPACA are not political, they’re real; and they will remain long after the Supreme Court makes its decision in June. We cannot continue to ignore the big issues. Of the $2.5 trillion we spend annually on healthcare in this country, it’s estimated that $765 billion is wasted on inefficient administration, unnecessary services and on fraud. This is why our vision statement focuses on creation of efficiencies within the healthcare supply system. There are no magic bullets for a problem this large. This is a problem that will be solved by entrepreneurs with a sense of social responsibility within all facets of healthcare. The government will continue to intervene in the absence of private sector solutions.
Dohmen Co. is also involved in significant charitable work; is that a personal mission of yours?
In 2008, we established the Dohmen Company Foundation to connect people in need with lifesaving healthcare products and services. I wanted a way to honor Dohmen’s legacy of community commitment during its 150th anniversary year, but I also wanted a way to “walk the talk” of our values with our team going forward. Patterned after the Paul Newman model, Dohmen contributes a percentage of its operating profits to make the world healthier and as a result has become one of the most generous contributors in Wisconsin and among the top tier in the nation.
Major contributions have been made to improve access to healthcare services globally as well as solving problems like the need for improving maternal child health and the serious shortage of pharmacists right here at home.
With more than $8.5 million in contributions since 2008, the Dohmen Company Foundation has touched more than 123 million lives in 117 countries, by funding the delivery of lifesaving medicines to children in Vietnam, providing medical care to disaster-stricken communities in Haiti, building clinics in Africa, and enabling entire villages to receive basic healthcare services. In Wisconsin, scholarships and contributions to two universities will help substantially increase the number of pharmacists. This year, the Dohmen Company Foundation is focused on reducing the infant mortality rate in the communities where Dohmen divisions are located.
Many entrepreneurs would look on this track record as a complete career; what keeps you going forward?
There’s a special sense of responsibility that comes with the stewardship of a company with this much history. I’m a driven and demanding person by nature and I feel a deep commitment to the hard work of so many people over so many years. I get a lot of energy from the desire to pass a better, more vibrant company to future generations.