The year started on a sour note for the major drug distributors. AmerisourceBergen
The drama unfolded when AmerisourceBergen announced what many viewed as a surprise loss of a $3 billion federal contract to rival McKesson
Under the contract, Amerisource was the primary pharmaceutical provider for the Department of Veteran Affairs. The deal was important enough to the company's revenues that any possibility of its loss was cited as a risk factor in its latest 10-K -- for five years. The plum contract is now McKesson's for the next two years, with the possibility of two three-year extensions.
On Friday, shares of McKesson and Cardinal Health
Amerisource shares traded down nearly 5% at $53.45 Friday morning, while McKesson dropped almost 3% to $31.24, and Cardinal Health slid 2.4% to $59.70.
Clearly, Amerisource faces a major challenge to replace the lost revenue from the contract. Whether the sell-off elsewhere in the sector overstated the challenges facing the industry remains to be seen.
Are investors going to get caught in the crossfire of an industry price war? Or are investors overreacting? Discuss these and more issues with other Fools on the Healthcare discussion board.
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