Betting on big

Thursday, December 1, 2011

PORT WASHINGTON, N.Y. - There's a lot of talk about consolidation in the provider market, but Harvey Diamond, president of Drive Medical, says it's happening to manufacturers, too.

Diamond should know. In October, Drive Medical announced that it acquired not only Inovo/Chad Therapeutics, boosting its respiratory product line, but also ActiveCare Medical, boosting its power mobility product line.

"Unless you have critical mass, it's hard for some of the smaller manufacturers to survive," said Diamond, president. "It's very costly to do business today."

Two of the difficulties facing manufacturers, including Drive Medical: skyrocketing raw material and freight costs. Additionally, currencies in Asia are working against, not for, manufacturers who do business there.

With its recent acquisitions, Drive Medical is trying to ease these difficulties with increased sales, Diamond said.

"Because we're all being squeezed on margins, you have to sell more to make what you did years ago," he said.

Steve Neese, president of ActiveCare Medical, acknowledges that it needs Drive Medical's distribution capabilities and leasing services, among other big company benefits, to "accelerate success."

"We ran up ActiveCare pretty good by anyone's standards of success and profit," he said. "But to get to the next level, a company like Drive Medical is going to make a huge difference."

So what does this consolidation mean for providers? It means they can streamline purchasing with fewer manufactures, Diamond says.

"It's very costly for providers to buy each product from a different manufacturer," he said. "It's all about cost of ownership--it's not just the price of an item, it's about how many invoices you have to pay and how many freight minimums you have to meet."

Diamond says expect more acquisitions from Drive Medical in the future.

"We're now 10 years old, and I think we're maturing," he said. "Stay tuned."