Not Your Neighborhood Pharmacy

Some healthcare sectors have benefited more than others from demographic trends, the prevalence of chronic illnesses, and an abundance of drug pipelines. However, one subsector of health care services may really start cashing in. According to the 22nd Edition of The Health Care Services Acquisition Report, in 2011, there were only 6 specialty pharma acquisitions. By 2014 and 2015, there were 11 and 14, respectively.

Specialty pharmacies have the resources to handle the challenging prescriptions that retail pharmacies do not. These prescriptions are generally expensive, and, according to CVS Health (NYSE: CVS), the average cost to payers and patients for a specialty medication is $3,000 per month. Specialty drugs also tend to require special storage and handling, have restricted availability, and are for complex or rare conditions. The large number of drug candidates that are in development, in clinical trials or just entering the market, will only contribute to specialty pharma’s growth.

On June 7, Premier Inc. (NASDAQ: PINC) acquired Lincare’s specialty pharmacy businesses: Acro Pharmaceutical Services, LLC and Community Pharmacy Services, LLC. The transaction was valued at $75 million.

On June 27, Long’s Drugs Inc., a privately-held owner and operator of a chain of pharmacies in South Carolina, Georgia and North Carolina, purchased Avita Drugs Inc. for an undisclosed price. Avita Drugs is a privately-held, leading specialty pharmacy serving chronically ill populations in Louisiana, Texas, North Carolina, South Carolina and Virginia. This marked the fourth specialty pharma acquisition of 2016, so far.

This market is poised for continued growth. As people live longer and chronic diseases become more common, there will be a substantial demand for specialty pharma services. Chronic or rare disease such as oncology, autoimmune disorders, hepatitis and other areas of treatment that specialty pharma covers are common areas of interest for biotech and big pharma companies.

However, specialty pharmacies are not the path for everyone. The high risk associated with a minor mistake, coupled with the extensive amount of knowledge needed behind the counter can be a deterrent to many. This barrier-to-entry may only drive up the value of the already established and successful specialty pharmacy businesses.



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