A niche for Newburgh

e-Magine Art_Pills

Like other regions, the Hudson Valley is struggling to find where it has comparative advantages for new economic activities. Its specialists in economic development have identified clusters in which they hope to build additional employment. Because these earnest efforts are based on an incomplete understanding of the opportunities in their regional economies, they often fail to help. They’re just wish lists.

A deeper understanding is essential. Here’s an illustration.

Back in October, U.S. vice-president Joe Biden came to New York for a photo op with governor Andrew Cuomo. It was Biden, you might remember, who had that February used LaGuardia Airport as an example of this nation’s failure to invest properly in its infrastructure. “If I took you and blindfolded you and took you to LaGuardia Airport in New York, you’d think, ‘I must be in some Third-World country,’” Biden said. The crowd laughed. “I’m not joking,” he added.

Cuomo used Biden’s presence to announce ambitious plans to take over the modernization of the New York area airports from the Port Authority. He announced master-plan design competitions for JFK and LaGuardia airports, and then provided his marching orders for Stewart Airport: “A regional cargo distribution hub will be established at Stewart Airport by growing its current cargo capacity, which will relieve JFK Airport of most cargo shipping facilities and create room to expand potential amenities and services for JFK Airport.” In addition, a Start-Up New York tax-free zone at Stewart would “allow companies to move back-office manufacturing into one, connected major distribution center.”

Advertisement

The reaction in the air cargo industry was one of surprise, bafflement and not a little amusement. Relieving JFK of most of its cargo shipping facilities? What could the governor be talking about? It was one thing to be talking about a gradual shift of some air freight from JFK to Stewart, but “most of its cargo shipping facilities”? That would take decades. At the present time, JFK handles about a hundred times as much air freight as Stewart (two million tons annually versus 20,000 tons).

On April 29 it was announced that McKesson Corp, the largest pharmaceutical distribution company in the country, would build a $85-million, 340,000-square-foot distribution center and create 164 jobs on a 37-acre site in Hamptonburgh, six or seven miles west of Stewart Airport. McKesson, a $138-billion company, is involved in an expanding variety of information, pharmacy, hospital and contract partnerships in the healthcare industry. Among its most immediate local neighbors will be UPS and Fed Ex freight, a Home Depot distribution center, the Taylor waste recycling facility, Hunter Panels (formerly at TechCity in Ulster), and a number of trucking firms.

On June 2 AmerisourceBergen, another major pharmaceutical distribution firm and McKesson’s largest domestic competitor, with sales of $121 billion, announced it would build a $40-million distribution center and create 121 jobs on a parcel of land within a mile of Stewart near the intersection of Route 17K and Corporate Boulevard.

The pharmaceutical distribution business is consolidating. As they lock up contracts with large chains of hospitals and pharmacies, the players in the industry face competition from integrated pharmacy benefit managers specializing in on-line script fulfillment, who are cutting deals with the largest pharmacy chains. Others on the periphery of the industry (even Iron Mountain, which has local facilities) are seeking various pieces of the health information pie.

Cardinal Health, which is another neighbor to both McKesson and AmerisourceBergen, is also in the business of distributing pharmaceuticals and medical products, serving more than 100,000 locations. Cardinal Health, a $91-billion company which provides medical products to over three-quarters of hospitals in the United States, teamed up in December 2013 with CVS Caremark to form the largest generic drug-sourcing operation in the country.

What are several of the biggest players in the pharmaceutical distribution, warehousing and operations industry doing investing considerable resource in a single neighborhood in the mid-Hudson region? If there’s an answer in the Mid-Hudson Regional Economic Development Council’s 2014 progress report, I couldn’t find it. There’s talk in the REDC report about healthcare employment and a biomed cluster. Not much I can see about distribution.

“We have a thriving biotech cluster that includes more than 90 biopharmaceutical firms and a highly educated workforce which has aided in the attraction of companies like Spectrawatt and the retention of Gillette Creamery, the largest supplier of ice-cream products in eastern New York State,” new Empire State Development (ESD) mid-Hudson regional director Meaghan Taylor recently wrote. “Even with economic challenges facing companies nationwide, manufacturers such as San-Mar Laboratories and biopharmaceutical companies like Regeneron have reinvested in New York. Why? Because of our successful combined efforts to leverage our resources and foster partnerships with public and private entities.”

The Hudson Valley EDC’s New York BioHud Valley literature similarly misses the mark: all boosterism and little business analysis.

For the pharmaceutical distribution business, the marketplace is telling us that the fundamentals are here. No matter what his faults, Andrew Cuomo’s emphasis on opportunities for distribution around Stewart Airport seems an accurate portrayal. The combination of a huge consumer market, good ground and air transportation connections, developed clusters of kindred businesses and governmental encouragement has led to a recent commitment by two industry leaders in pharmaceutical distribution to create 285 rather good new jobs near Stewart. It wouldn’t be surprising if more were coming. The opportunity merits prominent inclusion in the 2015 REDC progress report.

Not everyone is going to be happy, of course. Middletown Times Herald-Record reader Timothy Sullivan penned a sardonic response to the news from AmerisourceBergen. “Great,” he wrote. “Just what Newburgh needs…more drug dealers.”

Post Your Thoughts