Matria sells direct-to-consumer biz

Saturday, July 31, 2004

CLEARWATER, Fla. - CCS Medical, a leading direct-to-consumer provider of medical supplies, in June acquired Matria Pharmacy Lab and Supplies, a division of Matria Healthcare.

The $130 million deal transferred Matria’s diabetes and respiratory supplies and medications business to CCS Medical, doubling the company’s customer base and revenues, according to David Quick, CCS Medical’s vice president of sales and marketing. The Matria-owned subsidiaries included in the transaction are Diabetes Self Care and Diabetes Management Solutions.

“As far as CCS Medical is concerned, those guys stepped to the next tier,” said Michael Patton, senior director of mergers and acquisitions for Provident Healthcare Partners, an M&A firm in Boston. “CCS Medical was always a middle of the road player, and now they have stepped up to the same tier with MP TotalCare and Liberty.”

For Matria, the deal allows the company to redirect its focus to the core disease management business. The company will receive $102 million in cash for the sale of the pharmacy division, which will boost capital and be used to fund development of disease management programs, said a company press release.

“Over the last couple of years disease management has been the buzz word around everything. Everyone is looking for ways they can save money,” said Patton. “So, I think that is Matria’s focus going forward, and now they have the cash if they want to do acquisitions.”

Also included in the contract, was a partnership agreement between the two companies. CCS Medical will be given priority in providing diabetes supplies to Matria’s disease management contracts, according to Quick.

Matria Pharmacy Lab and Supplies, along with diabetes supplies, was also a provider of respiratory medications. Respiratory medications are facing a huge deduction in reimbursement in 2005 from approximately 80% of the AWP to ASP plus 6%, a reality that may have played a role in Matria’s decision to sell.

“I think it may be a piece of it, but these patients are going to need to be serviced by someone,” said Patton. “The whole industry is not going away but certainly there is concern right now.”

CCS Medical said the proposed cuts are not standing in the way of its growth.

“No question we are concerned about the changes with Medicare - we always are, but we weathered the storm through [this year’s] first round of cuts in the respiratory business and we continue to invest in that business,” said Quick.