Another Significant Specialty Deal: Cardinal Health Buys Raintree Oncology

Cardinal Health just acquired RainTree Oncology Services, the largest independent group purchasing organization (GPO) for community oncology practices and clinics. Cardinal did not issue a press release because it was a small tuck-in acquisition. So, today's article counts as another Drug Channels exclusive.

The acquisition is another good move for Cardinal and its growing specialty distribution business. Since RainTree is a major player in oral oncology, the deal also features some of the same strategic motivations as McKesson’s acquisition of Biologics.

Read on to learn more about physician practice GPOs and Raintree’s tangled history with Express Scripts and AmerisourceBergen.

GPOs for Physician Practices

The table below, which appeared in our 2015-16 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, lists the largest GPOs focused on community physician practices. Unlike such hospital GPOs as Novation and Premier, the largest GPOs for physician practices are owned by the largest specialty products distributors.

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For example, ION is the largest community oncology GPO, with an estimated 4,800 oncologists in 1,600 practices. ION has a prime vendor distribution arrangement with Oncology Supply. Both organizations are part of AmerisourceBergen’s Specialty Group, which operates two other GPOS that have similar affiliations.

These GPOs create strong physician practice incentives for purchasing via a distributor instead of directly from a manufacturer. They also help specialty distributors secure their role in the drug distribution system.

THE RAINTREE DEAL

Cardinal’s 2015 acquisition of Metro Medical significantly expanded its specialty distribution business while offering access to new practice settings. Metro’s oncology distribution business (and its Bellweather GPO) complemented Cardinal’s existing operations. By adding RainTree, Cardinal can further grow its specialty drug distribution business to physician offices and clinics. That business still lags behind the corresponding businesses at AmerisourceBergen and McKesson.

RainTree's strength in oral oncology is the real prize. As I discuss in Inside McKesson’s Acquisition of Biologics Specialty Pharmacy, oncology practices now operate significant specialty pharmacies for dispensing of patient-administered oral oncology products and patient self-injectable drugs. The deal also prevents RainTree from being acquired by a competitor.

In 2015, Cardinal Health became the exclusive distributor of injectable, infused, oral oncolytic and supportive care specialty medications for members of RainTree Oncology Services. Cardinal Health’s VitalSource GPO serves as RainTree’s GPO for injectable and infused medications.

Raintree has an interesting history with two other major drug channel players.

• In 2013, RainTree's physician practices members became "specialty network" pharmacies for Express Scripts' plan sponsor clients (source). As part of that arrangement, Express Scripts’ CuraScript SD business had briefly been the primary specialty distributor for RainTree.

• RainTree was founded by executives who had left AmerisourceBergen’s ION group. ABC successfully sued the executives. The case was International Oncology Network Solutions, Inc., et al. v. Alan Eagle, et al., Case No. 401-03043-2011, in the 401st Judicial District Court of Collin County, Texas. Consequently, Raintree was enjoined from contracting for certain non-oral oncology products through July 2014. Click here to read the Permanent Injunction and Judgement Against the RainTree Defendants, Martin, Lovesy, and Boyd.

For manufacturers, the Cardinal-RainTree deal further illustrates the emergence of organized channel customers that blur traditional commercial boundaries. Pay attention!