Henry Schein Inc. Grapples with Major Data Breach Impacting Operations

Henry Schein Inc., a global distributor of medical and dental supplies, disclosed a significant breach within its core systems, affecting distribution and ecommerce functionalities. The breach, reported on October 14, led to extensive disruptions in the company’s operations.

CEO Stanley Bergman, addressing analysts during a November 12 earnings call, unveiled the arduous process of restoring their network from backup data. He mentioned the resumption of operational status for their distribution arm, along with the initiation of their ecommerce platform after grappling with the aftermath of the breach.

While specifics surrounding the breach’s origin and perpetrators remain undisclosed, Bergman did acknowledge the unauthorized acquisition of substantial information by a third party. This breach also involved the misuse of bank account details belonging to a limited number of suppliers, a matter already addressed directly with the affected parties as part of the ongoing investigation.

The breach significantly hampered Henry Schein’s sales processing capabilities, particularly impacting its digital commerce, which constitutes about 75% of their sales. Chief Financial Officer Ron South highlighted the disruptions caused by the breach, causing delays in the filing of their complete third-quarter earnings report and indicating plans for an insurance claim in 2024 linked to the incident.

Despite these challenges, the company reported a 3.1% increase in third-quarter sales, amounting to $3.2 billion, compared to the previous year. However, net income dipped to $137 million from $150 million during the same period in 2022. As of the quarter’s end, Henry Schein maintained an inventory of 300,000 products.

Bergman acknowledged the support received from customers amidst the cyber incident, noting the prevalent challenges faced by the healthcare sector concerning cybersecurity issues. He highlighted the industry’s awareness, citing over 300 incidents in healthcare alone during the first half of the year.

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