Medium-Term Management Plan

The Fifth Medium-Term Management Plan Slides

Medium-Term Vision

Business model innovation for the next generation

The VITAL KSK Group is working to achieve Vision for 2025, or “becoming an indispensable presence in regional and community healthcare by strategically providing products and services that support medical and nursing care” by deepening our involvement in regional healthcare.

In addition to medical institutions, we have built up a network—together with many community healthcare providers, including local governments and nursing care business operators—enabling us to help support and find solutions for community healthcare issues.

In the Fifth Medium-Term Management Plan, covering the three years from April 2022 to March 2025, we are developing business operations guided by the medium-term vision of “business model innovation for the next generation capabilities.”

Basic Policies, Priority Measures

Basic Policies Priority Measures Details of Measures
Pursuing a drug distribution model tailored to structural market changes and market characteristics Developing a more advanced supply chain
  • Logistics system that complies with the Good Distribution Practice (GDP) Guidelines for pharmaceuticals
  • High-quality logistics system that partially complies with the Good Manufacturing Practices (GMP) standards for manufacturing and quality control of pharmaceuticals
  • Improving productivity by fully allocating personnel and reviewing sales locations and logistics centers to ensure a consistent supply
  • Strengthening response to disasters
  • Expanding the 3PL (third-party logistics) business segment through advanced pharmaceutical logistics
Evolution of distribution and a marketing model in step with the progress of DX (digital transformation) in healthcare Implementing pharmacy business initiatives and DX at drug wholesalers and pharmacies
  • Responding to demand for advanced pharmacy management and information sharing/collaboration with healthcare services by gaining accreditation for pharmacies affiliated with specialized medical institutions and community pharmacies
  • Promoting digital transformation at pharmacies, including introducing remote medication guidance, installing medication lockers*1 and automated drug picking equipment
  • Supply chain optimization integrating pharmaceutical wholesalers and pharmacies, through predictive ordering systems and package delivery*2
  • Full compliance by setting up a pharmacy operations audit office
Improving the sales system for the hospital market
  • Enhancing sales system for the hospital market, where growth is expected in the future
  • Focusing on sales of not only pharmaceuticals but also medical devices, in line with the advancing technology of medical care
  • Professional sales staff who are experts in hospital treatments, drugs, devices, and diagnostics, etc.
    Establishing MAPs*3
  • MAPs, pharmaceutical MSs,*4 and device MSs form teams to approach hospital doctors and management
Implementing group management that meets the requirements for the TSE (Tokyo Stock Exchange) Prime Market Group Management Strategies
  • Issued a press release on October 28, 2022, titled “Strengthening Efforts Toward Corporate Value Enhancement,” and are improving our group management strategies
  • Shifted from a company with a board of company auditors to a company with an audit and supervisory committee
  • Introduced a performance-linked restricted stock (RS) compensation system for not only Directors and Executive Officers but also department and branch managers
  • Enhanced shareholder returns by changing our dividend policy from “a dividend payout ratio of at least 25%” to “a DOE of at least 2%”
  • Set an ROE target of 8.0% for FY2031

Notes:

  1. Yakubo, a medication locker for prescription drug delivery
  2. A unique system where products are inspected and sealed multiple times at distribution centers, then delivered to customers in their original packaging
  3. MAPs: Medical Assist Partners
  4. MSs: Marketing Specialists (wholesale pharmaceutical sales representatives)

Growth Strategy

Developing a more advanced supply chain

In response to dizzying changes in the business environment, the VITAL KSK Group is developing a more advanced supply chain, with the aim of achieving sustainable growth while being an important part of the social infrastructure.

Growth investments in existing businesses

Optimizing logistics centers based on regional characteristics

VITAL-NET, INC. covers Tohoku, Niigata, and the Tokyo metropolitan area, while KSK Co., Ltd. covers the Kinki (Kansai) area.

Both of these operating companies are required to ensure that pharmaceuticals are distributed to all corners of urban and rural areas, so we have established seven logistics centers and 83 branches and sales offices (combined). Going forward, the Group will continue building an efficient, high-quality logistics system while being an important part of the social infrastructure and optimizing logistics centers in line with current needs.

Investment for new earnings sources and growth

High-quality pharmaceutical logistics system and promoting 3PL business

While demand in the wholesale pharmaceutical business segment remains steady, overall growth in this segment is expected to be slow. Although the volume is increasing for patent-expired/off-patent products (long-term listed products and generic drugs), the unit price of products is declining at a faster rate than before due to the revised drug pricing system and annual drug price revisions. It is essential to build a more efficient supply chain to continue delivering these products quickly and efficiently. At the same time, in the patented products market, high-priced pharmaceuticals will become the central focus of market growth. The majority of these are specialty drugs that address unmet medical needs, including modalities of anticancer drugs and drugs used to treat rare diseases. These specialty drugs are used at a limited number of specialized medical institutions. In addition to demanding high-quality logistics, such as strict temperature control, there are also new needs for drug distribution requiring specialized expertise, such as providing more detailed information. There is also an urgent need to build a more advanced, high-quality supply chain, including for products used in regenerative medicine, as well as support for ultra-low-temperature logistics.

Delivering medicines anywhere to those who require them, at any time. To fulfill this social responsibility, the Group has established a safe, secure, and stable logistics system that complies with the Good Distribution Practices (GDP) guidelines for pharmaceuticals, clearing obstacles to delivering all pharmaceuticals to people awaiting treatment in the areas where we operate, regardless of unit prices, drug attributes, or advanced, high-quality management systems. As a group of specialists in pharmaceutical logistics, we have internal standards that include some of the Good Manufacturing Practices (GMP) standards for manufacturing and quality control of pharmaceuticals required of pharmaceutical manufacturers and distributors, based on the expertise we have accumulated over many years, with an eye on upstream logistics. We have been highly appreciated by customers for our logistics with in-depth quality control, and we are now also in the 3PL (third-party logistics) business, where we are entrusted with logistics operations by the pharmaceutical companies. The Group will continue to focus on making the 3PL business segment one of our growth drivers.

Strengthening the sales structure for the hospital market

Under the Fifth Medium-Term Management Plan, the VITAL KSK Group aims to “pursue a drug distribution model in keeping with market structure changes and market characteristics,” and we are strengthening the sales structure for the hospital market as one of our main priorities.

Hospital market: growing with the advancements in medical care

Despite the decline in the number of hospitals in recent years, hospital medical expenses are continuing to grow due to the higher complexity of medical technologies and the increased number of high-priced pharmaceuticals. The proportion of hospitals in the Group’s sales is also rising.

In addition, with more advanced medical care in hospitals, the market is growing significantly for not only for pharmaceuticals but also for medical devices. In particular, the market for devices used in treatments continues to grow steadily, and it is especially important and essential for the Group to capture the demand in this market.

In 2022, the Group introduced professional salespeople with expertise in hospital care, pharmaceuticals, equipment, and diagnostics called MAPs: as part of strengthening the sales structure to expand our share of the hospital market, which is expected to continue growing. MAPs is a coined term that stands for Medical Assist Partners. We have also set up a department in charge of the MAPs strategy within the Sales Division to support the development of MAPs by presenting a general strategy, providing training to enable MAPs to acquire more skills, and expanding the range of products that they can propose.

Growing Hospital Market

Source: Survey on the Trend of Medical Care Expenditures and Survey of Medical Institutions published by Ministry of Health, Labour and Welfare

Medical Device Market (Japan)

Source: Statistics of Production by Pharmaceutical Industry System published by Ministry of Health, Labour and Welfare

Organizational collaboration through MAPs to meet every requirement

A MAP training session

Strengthening relationships with hospitals

Until now, Pharmaceutical MSs* had proposed pharmaceuticals and Device MSs had separately proposed medical devices, even to a the same hospital. Since they were only conducting sales within the scope of their products, they were unable to make comprehensive proposals that considered the entire hospital. In response to this issue, we selected hospitals that are central to each community as target hospitals and assigned MAPs to each of them. At target hospitals, we employ the MAPs approach to build relationships not only with pharmacy departments and materials/equipment departments but also with clinicians, pathologists, laboratory technicians, and management staff, with whom we had little contact in the past.

Diseases are first detected during a health checkup, or as a result of visiting a medical institution for an exam after symptoms are presented, then tests are done to identify the disease, and treatment is carried out after the diagnosis is confirmed. There are a range of treatment methods, including medication and surgery. Even after treatment, diagnostic imaging and rehabilitation are performed, if necessary. MAPs take a bird’s-eye view of the entire flow of treatment, dive deeply into the many processes involved in examinations, and then find doctors who require medical equipment, medical supplies, or reagents, etc. Pharmaceutical MSs and Device MSs work together as one team to support hospitals by proposing products that patients require or that are useful for solving problems.

*MSs: Marketing Specialists (pharmaceutical wholesale sales representatives)

MAPs (Medical Assist Partners)

Professionals who are experts in hospital treatments, drugs, devices, diagnostics, etc.

プロフェッショナル達が、チームを編成することで組織的連携を行い、コメディカル、部門長、ドクター、経営層といった各階層にアプローチし、医療機器。新弾薬、スペシャリティ医薬品、レンタル、システムといったあらゆるニーズに対応できるようにしています

Click to enlarge

Development of New Products, Services, and Sales Channels

Evolving from Pharmaceutical Wholesaling to the Pharmaceutical Distribution Industry

So far, the VITAL KSK Group has dealt with more than 40,000 customers, including hospitals, clinics, and pharmacies, with the primary focus on pharmaceuticals. For medical institutions and pharmacies, the cost of medicines is a major part of monthly expenditures, but many other goods and services are also required to provide high-quality daily medical care. We are able to firmly grasp the needs of our customers and respond with tailored solutions because we have built up relationships with them through having a clear focus on pharmaceuticals that are indispensable for medical care.

Going forward, the Group will continue contributing to healthy and prosperous local communities by providing a range of goods and services to local governments, nursing care businesses, and local companies with whom we have collaborated extensively on health-related issues. We will also work to enhance our products and services, such as emergency generators and electrical products, and strengthen sales and rental services. We now respond to a wide range of customer needs, in addition to the medical equipment and other products that we have been providing in the past.

In the wake of the COVID-19 pandemic, digital transformation (DX) has progressed rapidly and the social environment has changed. The same is true in the medical field, and it is necessary to thoroughly identify what will change significantly going forward and what will remain unchanged even after the pandemic as well as to shape the industry and drive digital transformation as a pharmaceutical wholesaler. Based on the experience and knowhow accumulated over the course of many years as a pharmaceutical wholesaler, the Group will work to create new added value as part of the pharmaceutical distribution industry—which is indispensable for people’s health and welfare—while responding to the needs of the economy and society.

The VITAL KSK Group’s growing sales channels

当社グループから様々な商品を病院、薬局に販売レンタルしています。健康商品、検査キットを新商品として薬局、民間企業に販売しています。また、福祉用具、電化製品、発電機を新商品として、病院・診療所、自治体にレンタルしています。

Click to enlarge