Specialty Pharmacy M&A: Our Look at 2018’s Deals

Let’s kick off 2019 with a quick review of last year’s specialty pharmacy mergers and acquisitions (M&A). Our list (below) includes only deals that were publicly announced in 2018.

Pharmacy benefit managers (PBMs) were especially busy. CVS Health bought five specialty pharmacies. UnitedHealth’s OptumRx bought Avella Specialty Pharmacy, the largest independent specialty pharmacy.

Diplomat Pharmacy was uncharacteristically quiet during 2018, though it had been one of the most active acquirers in previous years.

The specialty pharmacy industry is rapidly maturing, so I expect many more exits in the coming years. Looking to pick up a fast-growing specialty pharmacy? Click here for your post-holiday shopping list.

DEAL DATA

The market for the buying and selling of specialty pharmacy and infusion services companies remains active. This chart shows the Braff Group’s count of M&A transactions since 2011.

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Below is our list of specialty pharmacy transactions that were publicly announced in 2018. There were 11 such deals announced in 2018, compared with 8 in 2017 and 14 in 2016. Transactions are listed alphabetically by the acquirer’s name.

• BioMatrix Specialty Pharmacy acquired two specialty pharmacies:

• Cardinal Health Specialty Pharmacy, which was owned by one of the Big Three pharmaceutical wholesalers. See Surprise Deal: Cardinal Health Sells Its Specialty Pharmacy (Again).

• Decillion Healthcare, a pharmacy and infusion services company that focuses neurology, oncology, gastroenterology, immunology, and rheumatology.

In 2017, BioMatrix itself had been purchased by ACON Investments and Triton Pacific
Capital Partners.

• CVS Health made five publicly announced specialty pharmacy acquisitions in 2018:

• Apothecary By Design (ABD), the fourth-largest independent specialty pharmacy. (Apothecary itself had been purchased by BelHealth Investment Partners in 2017.)

• Central Drugs, a 340B contract specialty pharmacy located in Oregon

• EncompassRX, a small specialty pharmacy based in Georgia

• EntrustRx, the specialty pharmacy business unit of Fred’s

• SimplicityRx, a specialty pharmacy that focuses on hepatitis C, Crohn’s disease, rheumatoid arthritis, and cardiovascular conditions.

• Galen Partners, a private equity firm, acquired SMP Pharmacy Solutions, which had 2017 revenues of $164 million. SMP was one of 2017’s fastest-growing, private specialty pharmacies.

• NewSpring, Gemini Investors, and Celerity Investors—also private equity firms—together purchased Total Care RX, which focuses on transplant care, cystic fibrosis, HIV, hepatitis C, oncology, and nutritional care.

• Noble Health Services acquired Transcript Pharmacy, a small specialty pharmacy based in Mississippi. Kinney Drugs, the second-largest regional drugstore chain, launched Noble in 2016. Kinney and Noble are part of the KPH Healthcare Services holding company.

• UnitedHealth Group’s OptumRx acquired Avella Specialty Pharmacy, the largest private specialty pharmacy. Avella’s revenues in 2017 were $1.4 billion. The purchase price was reported to have been $325 million.

Please email me if I omitted any transactions.

We’ll have a complete update on the state of specialty pharmacy in our forthcoming 2019 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers, which will be available on March 5.

In the meantime, savor the immortal—and still relevant—words of Gordon Gekko in his famous speech. Click here if you can’t see the video.