Specialty Pharma Update

Inventory:

A Specialty Pharmacy is a full service pharmacy that specializes in filling prescriptions for patients who need certain high-cost biotech and injectable medications. These drugs are extremely expensive with single scripts for 30 day supplies retailing in excess of $4,300.00 versus a maintenance medication that averages approximately $60.00 per script. These specialty medications help patients with complex conditions including multiple sclerosis, rheumatoid arthritis, certain types of cancer, solid organ transplant, hepatitis c, HIV and hemophilia. These drugs can be injected, infused or taken orally, and typically require special handling and other specialty expertise.

There has been significant acquisition activity in the last 90 days as retailers and pharmacy benefits managers look to leverage their newly acquired increased volumes on the purchasing side from suppliers and on the benefits side when quoting to provide services for large employers and government plans.

The following are examples of a few of the most recent acquisitions:

  • Diplomat Specialty purchased BioRx for $210 million cash and 4.05 million shares of Diplomat Stock; 2014 BioRx revenues were $227 million
  • Fred’s Super Dollar purchased EntrustRx (specialty pharmacy) and Reeves-Sain (retail pharmacy) for $53 million cash and 13 million shares; revenue was not available
  • On May 20 , 2015, Meijers announced they signed an agreement to acquire agreement to acquire Aureus Health Services, a national specialty pharmacy and health services company based in Pittsburgh, Pa. and a portfolio company of BelHealth Investment Partners, to enhance its customer offerings, particularly to patients with complex chronic conditions. Details were not immediately available; and
  • On May 21, 2015, Drugstore operator CVS Health Corp (CVS.N) said it will spend $10.1 billion to buy Omnicare Inc (OCR.N), a company that supplies prescription medicines to nursing, assisted living and other healthcare facilities. The move gives CVS, the second-largest U.S. drugstore operator, access to the older, sicker U.S. population and builds on its specialty pharmacy, which provides drugs to people with expensive chronic conditions. Specialty sales totaled $1.4 billion in 2014.

While they have not made any acquisitions to date, Walmart has kept pace with the specialty pharmacy revolution and is positioning itself to play a stronger role in this most innovative, dynamic and complex area of pharmaceutical R&D and bioengineering.

Experts are predicting the sales in Specialty Pharmacy to increase from $63.2 billion in 2013 to $400 billion in sales by the year 2020. The scripts tied to this revenue are an important asset for the lender to consider.