Becton, CareFusion to merge

Two major hospital suppliers will merge at a time when the sector is under pressure to try and control costs. Becton, Dickinson & Company will pay $12.2 billion to acquire CareFusion, about 26 percent above its stock price just before the deal, according to the New York Times.

"We're coming together to improve medication management, primarily in hospitals," Vicent Forlenza, Becton's chief executive officer, told the newspaper. The merger creates one of the largest medical supply companies in the world.

CareFusion's software to track drug dispensing and usage, as well as the use of machinery to store drugs and dispense orders, was among the company's biggest draws, the Wall Street Journal reported.

Nationwide, hospitals are facing spot shortages of drugs. Some estimates say it costs them some $230 million a year. And they also are under pressure to better manage their use of antibiotics. Unnecessary use of those drugs cost the healthcare system about $163 million a year.

"It's really how do they change their business," CareFusion CEO Kieran Gallahue told the Wall Street Journal. He added that hospitals can no longer cut costs on drugs and equipment.

Although much of Becton's business is overseas, both companies together manufacture and distribute other bread-and-butter hospital equipment like catheters, tubes and pumps. Whether the merger of the two companies will impact the cost of such items remains to be seen.

Meanwhile, hospitals must upgrade their equipment on an ongoing basis while still keeping their costs under control. Nevertheless, many struggle with trying to keep a lid on expenditures in this area, with few able to embrace supply chain technologies and best practices in a consistent manner that would improve their efficiency and bottom lines.

To learn more:
- read the New York Times article
- check out the Wall Street Journal article