Specialty Rx: Bandage for MMA cuts?

Wednesday, March 31, 2004

YARMOUTH, Maine - With Medicare scheduled to implement a big reimbursement cut for respiratory drugs in 2005, the specialty pharmaceutical market may offer hope for those Rx/HMEs looking to generate additional revenue, say industry watchers.
“The folks in the HME business, if they are doing respiratory medications, then they can pretty easily get into specialty pharmacy, but often I don’t think they realize that opportunity,” said Bob Ciardi, a managing partner at Provident Healthcare Partners. “HMEs already have the patient base, so what else do they need?”

Providing specialty prescriptions, including IV/IG, hemophilia factor, infertility drugs, hepatitis C treatment, and infant respiratory injections, is not that big a jump from providing albuterol and other respiratory meds, say Ciardi and others.

The attraction for HMEs is in the cross-selling opportunities for drugs and services.

“Specialty drug providers have looked at adding neb meds to their mix because it is a similar model of patient retention, acquisition and distribution,” said M&A expert Dexter Braff. “So possibly, companies out there that have built a strong infrastructure providing neb meds may look at providing other specialty drugs.”

The rising interest in specialty prescriptions coupled with the tremendous R&D push by drug companies to develop them has made the specialty drug industry a target for acquisitions with several big players vying for position, including Accredo Health, Priority Healthcare and Caremark Rx. Additionally, while the Medicare Modernization Act cuts reimbursement for respiratory drugs, it creates new reimbursement for some specialty drugs, said Ciardi.

The Braff Group’s M&A Annual for 2004 also spotlighted the market’s allure, indicating demand for acquisitions in the market - due to their typically large size and scalability - would be “extremely high.”

“Extraordinary economies of scale can be gained by leveraging their sophisticated customer service, distribution and billing infrastructures,” said the report.