Forward integration into the service sector may be right for a select number of medical product companies, but many such mergers fail. Services require dramatically different core competencies and prospective customers may view the product company as a competitor. The few successes highlight the strategies' hurdles.

Drug distributors are re-defining their role in the new health care delivery system, moving from anonymous product suppliers to providing greater value through enhanced service capabilities. Cardinal Health is among the leaders of wholesaling's new breed, moving closer to the hospital and establishing new relationships with pharmaceutical companies. Cardinal's latest venture, an outcomes data program called Jericho, could be a major step toward shedding the wholesaler's product-neutral label, putting distributors in the role of influencing drug selection and moving market share.

A few years ago, generics looked unstoppable; today, pricing's reached suicidal levels. As for generic substitution, patients would rather fight than switch.

After two years of tough times, Owen is now poised to grow again with new management and a climate ripe for outsourcing.