Drug Distributor Cencora to Invest $1 Billion in U.S. Supply Chain
The company will open two new distribution centers and expand a third as demand surges for GLP-1s and other refrigerated medications
Cencora will invest $1 billion over five years to expand its U.S. supply chain, including new distribution centers.
Half of new medicines from 2023-2027 are expected to need cold storage, up from 37% in 2013-2017, increasing logistics complexity.
Cencora’s revenue grew almost 9% to $80.7 billion for the quarter ended June 30, partly due to GLP-1 and specialty medication sales.
Pharmaceutical distributor Cencora will invest $1 billion in its U.S. supply chain as demand soars for cancer therapies, weight-loss drugs such as Ozempic and other medications that need special handling and refrigeration.
The Conshohocken, Pa.-based company plans over the next five years to open two new distribution centers and expand an existing warehouse that handles specialty drugs.
The investment is meant in part to help the company respond to a surge in the number of medications that require more complicated logistics handling than traditional pills, cough syrups and topical ointments.
“We’re starting to see, and continue to see, more cold-chain products come to market,” said Heather Zenk, the company’s president of U.S. supply chain. “We need to expand cold-chain capabilities.”
Half of new medicines hitting the global market from 2023 to 2027 are expected to require cold storage, up from 37% of products launched between 2013 and 2017, according to healthcare research firm IQVIA.
Cencora—known as AmerisourceBergen before rebranding in 2023—is one of the largest companies in the U.S. that handle pharmaceutical distribution between drug manufacturers and healthcare providers such as pharmacies, doctors and hospital systems.
Cencora and its rivals such as Cardinal Health and McKesson have seen revenue climb over the past several years amid skyrocketing demand for the class of diabetes and weight-loss medications known as GLP-1s. Beyond the weight-loss drugs, many popular medications such as AbbVie’s arthritis therapy Humira, Regeneron Pharmaceuticals’s eye treatment Eylea and Merck’s cancer drug Keytruda are injections or intravenous infusions that have to be stored at specific temperatures.
Cencora’s revenue grew to $80.7 billion for the quarter ended June 30, up about 9% from a year earlier, which the company attributed in part to increased sales of GLP-1s and other specialty medications. The company is scheduled to report earnings Wednesday morning.
Cold-storage requirements make transporting and storing items more expensive and difficult for logistics providers. “If you don’t manage it appropriately, you can lose product,” said Maria Nieradka, an analyst with research firm Gartner. “These logistics providers are really upping their game and building the capability so that they have it available to pharmaceutical clients.”
Cencora today operates one so-called national distribution center in Lockbourne, Ohio, near Columbus. Drug manufacturers ship truckloads of their products to that warehouse, where shipments are broken down into smaller quantities and sent to other facilities throughout the U.S. that handle final-mile delivery.
The company plans to open a second national distribution center about 120 miles southwest in Harrison, Ohio, by spring 2027. That 530,000-square-foot warehouse will increase Cencora’s storage capacity and make its supply chain more resilient by providing a nearby backup in case of disruptions to the power grid.
“If I wanted to move the same manufacturer between the two, it’s only two hours apart,” Zenk said. “It’s far enough, but close enough.”
The building will use more automation such as robotic arms to break down and build pallets and autonomous picking machines that bring items directly to human workers for sorting.
Cencora also plans to close a wholesale distribution center in Corona, Calif., outside Los Angeles, and replace it with a new building in nearby Fontana that is twice as large, adding to its network of more than 30 distribution facilities across the U.S.
The company plans to build an addition to its specialty distribution center in Dothan, Ala., that is one of its three facilities across the U.S. handling specialty medicines. The expansion will dramatically increase the building’s refrigerated storage and frozen capacity.