Walgreens strengthens infusion play

DEERFIELD, Ill. - Walgreens OptionCare continues to build its home infusion empire, brick by brick. The company picked up CareMax Medical Resources for an undisclosed sum, it announced Feb. 27.

The Tampa, Fla.-based CareMax offers home infusion, respiratory and DME though a handful of locations in Colorado, Florida, Pennsylvania and Texas.

"This is really an infusion deal for Walgreens OptionCare," said Kevin Palamara, a managing director with Boston-based Provident Healthcare Partners. "For obvious reasons, most buyers in the infusion space don't have much interest in DME and respiratory. Walgreens OptionCare already provides this service in several markets, so they are willing to look at opportunities like CareMax--a business that is predominately infusion therapy with a small DME/RT component."

Walgreens leapfrogged into the No. 2 position in the home infusion market with its $850 million acquisition of Buffalo Grove, Ill.-based OptionCare in June 2007. Since then, the company has added several smaller, regional companies to its stable, including Louisville, Ky.-based CuraScript last June.

Walgreens appears well-positioned to continue growing its home health division, says analyst Alan Brochstein.

"There are synergies between (the core pharmacy) and the ancillary businesses," said Brochstein, president of Houston-based AB Analytical Services. "They have a lot of buying power when it comes to pharmaceuticals, whether it's infused pharmaceuticals or working with mail order. All these things put them more central and allow them to get even better purchasing power."

The home infusion market remains extremely fragmented, with most providers falling into the $5 million in revenues and under category, say analysts. Opportunities for consolidation, along with attractive margins and more infusible drugs in the biotech pipeline, means there is still interest in the home infusion space, even as deals in the respiratory and HME markets have come to almost a complete halt.

The slumping economy and ongoing credit crunch haven't helped, said Brochstein.

"It's harder to borrow money so there aren't many buyers right now," said Brochstein. "Walgreens has a very strong balance sheet and is in a good position as a consolidator."

CareMax is a subsidiary of Maxim Healthcare Service, a privately medical staffing, nurse employment, homecare, clinical staffing and wellness services firm.