New Faces of Distribution

Edition: August 2001 - Vol 9 Number 08
Article#: 1024
Author: Repertoire

Some new faces, and at least one familiar one, have found their way to ABCO Dealers, the Nashville, TN-based med/surg distributor buying group.


He's Back

After taking a two-year hiatus from running a distribution company, Ted Pacha is back in business, heading up physician distributor Heartland Medical Supply in Iowa City.


Pacha, 51, founded Hawkeye Medical Supply in Iowa City 25 years ago. Ultimately, the company grew into a $70 million distributor with five branch operations in the Midwest and Upper Midwest. In 1996, Pacha merged the company with the Medical Group of McKessonHBOC, which closed down the Iowa City branch in April of this year.


On April 16, Pacha and two partners – Brian Rummelhart and his brother Doug Rummelhart – opened Heartland.


''We found there was a high interest in local ownership,'' says Pacha, who started in the distribution business at age 17. ''Local, same-day service is critical to our customers.''


In addition, Heartland is building up its repair business. ''Doctors can't have their EKG go down and cancel patients,'' he says. Heartland will strive to provide equipment loaners on a same-day basis. The company will fix what it can in-house, farm out what it can't.


Unlike Hawkeye, Heartland is located in an industrial park, and so will stay away from retail and home care sales, says Pacha.


No stranger to ABCO, Pacha spent 20 years in the organization, 17 of those years either on the board or as chairman.


''Twenty-five years ago, we had to go to each manufacturer to pick up product lines,'' he says. ''Now, being part of ABCO, we can pick up a lot of branded names and go right to the marketplace with products on the shelf.''


Pacha and his two partners – Brian Rummelhart, a 16-year veteran of Hawkeye, and his brother, Doug – are building Heartland ''one step at a time.''


Although as owner of Hawkeye, he had merged the company with Portland, ME-based Atlantic Healthcare in order to secure a whopping 20-year exclusive agreement with the purchasing group Premier, Pacha doesn't think those kinds of mega-moves are necessary to succeed in the market anymore.


''The independent is alive and well,'' he says.


''It's cyclical. We're coming back to a time when independents can get back to doing a good job at what they do.''


After leaving McKessonHBOC Medical Group, Pacha and several partners formed Startups Unlimited. Its mission was to help entrepreneurs bring their products and services to market.


Startups Unlimited did not get involved with medical companies, but did help launch AudioNet International, an e-commerce sales and training company.


Small Is Beautiful: Island Medical


Hey, it's tough duty. But somebody's got to do it.


And Tom Carter's the guy. Carter and partner Paul Young started Island Medical in August 2000. Their territory? Grand Cayman Island.


One hundred and fifty miles south of Cuba and 180 miles west of Jamaica, Grand Cayman is the largest of three islands comprising the Cayman Islands. All three are actually outcrops of a range of submarine mountains.


Approximately 22 miles long and eight miles wide at its widest point, Grand Cayman has two hospitals, surgery centers and some doctors' offices.


The island is so small, no other distributor is based there, says Carter. But when a second hospital opened up on Grand Cayman not long ago, Carter and Young seized what they felt was a good opportunity.


Hospitals on the Caymans have traditionally sourced many products directly from U.S. suppliers, says Carter. But because they are government-owned, they pay slowly, and U.S. companies have shied away from doing business with them. ''The hospitals have been getting by, but it's not easy,'' says Carter.


Because it is local, Island Medical understands slow pay and works around it, he says. And it helps that he and Young are on-hand to personally shake some leaves from the trees from time to time.


So, how does one build a successful business in the Cayman Islands? One adjusts one's expectations.


''This isn't a huge market,'' says Carter. ''We won't grow to any great size.''


In fact, right now, just two people work full-time for Island. At some point, they may hire a delivery person.


Another way to help ensure success is to diversify outside the medical business. Carter and Young also operate retail stores that appeal to tourists on the island.


Finally, says Carter, there are lots of reasons to start a business on an island-mountain in the Pacific. Some are obvious. Others are not.


''One good thing about being located here is that there's no expectation of next-day delivery,'' says Carter.


In the Footsteps of Randolph: J&B Medical

After starting J&B Medical in Farmington Hills, MI, just five years ago, its founders have some big ambitions.


''We want to emulate Randolph Medical's successful business model as Michigan's Premier ABCO dealer,'' says CEO and Executive Vice President Julian Shaya. ''Five years from now, we hope to have a nationwide presence and go public.''


J&B is a family affair. A medical family affair. Shaya's father and two brothers are physicians.


Prior to starting the company, the Shayas owned and then sold a medical lab. ''[J&B] was a natural utilization of our network in the medical field,'' says Shaya.


Twenty-five percent of the company's sales are in the veterinary business. The Shayas sell more than 800 nutraceuticals and pharmaceuticals to vets in 42 states. Many sales are generated on-line at www.jandbmedicalmall.com.


Another 60 percent of J&B's sales are medical supplies, equipment and pharmaceuticals to physicians' offices and centers.


An additional 15% is international medical equipment sales.


The company has 14 people, including five reps.


''Our company has evolved over the last five years by developing a sound business structure from a startup family business,'' says Shaya.


Its biggest challenge? To manage growth.


''In the medical supply business, no company can afford to grow too quickly,'' says Shaya, adding that its biggest opportunities lie in large institutional accounts. Recently, J&B became the premier vendor for a network of 1,600 physicians.