Much like home health and hospice, pharmacy services providers have been consolidating for many years. And yet, go-forward opportunity remains. A pipeline of emerging therapies that, in some cases, have transformed once fatal ailments into chronic conditions that can be managed with specialty drugs, have enabled providers with go from start-up to $100 million seemingly overnight. And with its far greater margins, traditional home infusion therapy still gets its share of attention. That said, demand far exceeds supply, creating challenges for buyers – and unique opportunities for sellers.
2016 was a great year for specialty Rx, which fell one deal short of the record 19 set in 2003. However, down years in infusion therapy and institutional Rx pushed aggregate pharmacy services deals to their lowest point since 2013, continuing a more less steady fall-off that began in 2008. One reason? The number of particularly active buyers (a.k.a. serial buyers) has also been sliding as past consolidators have consolidated themselves.
In some markets, particularly those that may be comparatively small (such as Rx services), deal volume can be driven by “serial” buyers (defined here as buyers that have completed five or more deals since 2001). Here we can see that the number of “active” serial buyers peaked in 2007, and has generally fallen since, reaching an all time low in 2016.
The aggregate number of deals completed by serial buyers have fallen in near lock-step with the number of such buyers active during the period. For contrast, serial buyers accounted for 34 deals in 2007. In 2016, they accounted for only six.
Since 2001, the percent of deals closed by serial buyers has gone from 60% to just 20% in 2016. With such contraction, you need more “one-or-two-deals-and-done” type buyers to fill the gap. Although we’ve seen a rise in this group, it hasn’t been enough to completely offset the loss of serial activity. But they have moderated the decline, holding deal volume more or less in check since 2010.