One of the biggest distributors of dental supplies is sinking its corporate teeth into the aftereffects of a major data breach.
On Oct. 14, Henry Schein Inc. reported a major hack into its core systems, including for distribution and ecommerce. Henry Schein Inc. is a worldwide distributor of medical and dental supplies including vaccines, pharmaceuticals, financial services, and equipment.
The company, which generated sales of $12.6 billion in 2022, is only now getting its systems back online, CEO Stanley Bergman told analysts on a Nov. 12 earnings call, based in a transcript from SeekingAlpha.
“Over the past weeks, we have worked to create a clean network in a controlled manner from the backup data we maintained,” he said. “Our distribution businesses are now operational, and we are initiating our ecommerce platform early this week, and we’re indeed hopeful that the website will come up tomorrow morning.”
Henry Schein isn’t giving out many details yet on where the data breach occurred and who initiated it. But the cyber crime did cause major disruption of its ecommerce operation, the company says.
“We are now aware that a significant amount of information was obtained by an unauthorized third party in the cybersecurity incident and bank account information for a limited number of suppliers was misused, and we have already separately addressed this with those impacted,” Bergman told analysts. “We are continuing our investigation of the cybersecurity incident.”
Disruptions from the security breach
The data breach caused serious disruption to Henry Schein’s ability to process sales, of which about 75% are digital commerce, the company says.
“If you take EDI [electronic data interchange] plus the web combined, so essentially electronics type of ordering, it’s in the 70% to 75% range,” chief financial officer Ron South told analysts.
The data breach caused Henry Schein to delay filing its full third quarter earnings report. Henry Schein also expects to file an insurance claim in 2024 related to the data hacking incident.
“This policy has a $60 million after-tax claim limit after a $5 million retention, and any recovery from the claim will likely not be recognized until late 2024,” the company says.
For the third quarter ended Sept. 30, Henry Schein generated sales of $3.2 billion, up 3.1% from sales of $3.06 billion the prior year. It reported net income of $137 million compared with $150 million in Q3 of 2022. Henry Schein carries an inventory of 300,000 products as of the end of the quarter.
“We are heartened by the support we’ve received from our customers,” Bergman said. “Cyber issues in health care have been quite prevalent. In fact, in the first six months of this year, there were over 300 incidents in health care alone. So, the customer base is quite attuned to this.”
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