In a series of warehouses in Louisville, Ky., drugs from A to Z are lined up in six-story racks that reach toward a 40-foot ceiling.

The racks hold boxes with drugs for allergies, asthma and diabetes from some of the world's best known drug companies: Abbott Laboratories, Dr. Reddy's, Philips Healthcare and many more.

Courtesy UPS (ENLARGE)

The warehouses in Louisville, where UPS has its air hub and main sorting center, are part of an effort by the shipping giant to extend its supply-chain reach deep into the medical industry.

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There are also aisles of spare parts — 55,000 for one customer alone — for CT scans, defibrillators and other medical machines. Refrigerated and freezer units, just installed in June, hold temperature-sensitive remedies as they wait to be shipped to doctors offices, pharmacies, hospitals and nursing homes. Some drugs — wrapped in a special pink cellophane — are stored pending approval for sale in the United States.

The warehouses in Louisville, where UPS has its air hub and main sorting center, are part of an effort by the shipping giant to extend its supply-chain reach deep into the medical industry.

At a time when shippers are limiting premium express mail and cutting back on expenses, UPS wants its logistics services unit to take up some of the growth slack. One way is to boost specialized services that make it more than just a "commodity" to customers, said Kim Caughey, an analyst for Fort Pitt Capital Group in Pittsburgh.

"Handling freight that has special requirements allows them to do two things: Charge a higher rate but also solidify a relationship with their customer," she said.

UPS this week posted a sharp decline in second-quarter profits as soaring fuel costs ate into earnings. But growth in logistics was a bright spot.

Kurt Kuehn, UPS's chief financial officer, said the health care sector is "one of our top industry segments as far as development going forward. We're very excited to develop more capabilities."

UPS has 23 health care buildings in North America and is building more health care warehouses around the world, he said, specifically in Puerto Rico and the Netherlands.

UPS's pitch, said Kuehn, is that its tracking software keeps a "clear chain of custody" of health care products — essential to getting Federal Drug Administration approval to handle pharmaceutical products. It's similar to the company's pitch in the logistics and freight forwarding business: that people can track their shipments from point A to B.

"It gives absolute visibility and security that fit very well in the health care industry," said Kuehn.

The Louisville facility is approved by the FDA, the National Association of Boards of Pharmacy and the Drug Enforcement Agency, said Rich Shaver director of operations for the Louisville health care warehouse.

The demand, said Shaver, is there. The warehouse was first built in 2005 and has "sold out" its capacity in two years. "That's not normal," he said.

The pharmaceutical industry faces its own "headwinds," Kuehn said. "Those companies are becoming more cost conscious," as they experience pressure from generic drugs and global competition. UPS is trying to help them streamline their shipping costs, said Kuehn.

With the UPS health care warehouse located close to the air hub, health care companies can get shipments dropped near the runway as late as midnight and "still get them on our planes," said Kuehn. The warehouse also feed trucks, said Shaver.

One of the warehouses, about 526,000-square-feet, is kept at 20 to 25 degrees Celsius with less than 60 percent humidity. There are 20 bug lights to zap any insects that get in, plus 170 pest control stations. The warehouse is spic and span, its cement floors gleam and no stray paper litters the floors.

There's another part of the warehouse that is licensed to handle controlled substances available only by prescription. That area, called "the cage," is under strict supervision behind tall chain link fences. Only a limited number of workers have access to the area, said Shaver.

"Even I don't have access," he said.