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Lowering Our Pharma Distributor Moat Ratings and Valuations

Soo Romanoff (soo.romanoff@morningstar.com)

On the basis of the continued decline of pharmaceutical spending growth and external shock threats, we have lowered our economic moat ratings for  AmerisourceBergen ABC ,  Cardinal Health CAH , and  McKesson MCK to narrow from wide with a negative trend. The role of pharmaceutical distributor continues to evolve in an increasingly competitive and highly regulated environment. Scale and regulatory requirements have provided insulation to maintain share and generate market returns, but competitive pressures continue to build with declining reimbursement, healthcare consolidation, and decline in overall pharmaceutical spending growth.