Featured Health Business Daily Story, Dec. 23, 2015

OptumRx Continues to Boost Its Specialty Presence With Acquisition of AxelaCare

Reprinted from SPECIALTY PHARMACY NEWS, a monthly newsletter designed to help health plans, PBMs, providers and employers contain costs and improve outcomes related to high-cost specialty products. Sign up for an $84 two-month trial subscription today.

By Angela Maas, Managing Editor
December 2015Volume 12Issue 12

With the pharmaceutical pipeline heavy with specialty products, many of them infusible, OptumRx continues to make deals to solidify its specialty pharmacy offering. On Nov. 17, the company said it had acquired AxelaCare Holdings, Inc., a provider of home infusion solutions, from private-equity firm Harvest Partners, LP. As specialty drugs and their high prices continue to garner publicity — much of it unflattering — the acquisition will help OptumRx treat patients at home, the most cost-efficient and patient-friendly site of care.

The companies did not reveal details of the deal. OptumRx also declined to respond to SPN questions about the transaction.

Founded in 2008, AxelaCare has a network of owned and contracted registered nurses, and it treats patients in 44 states and Washington, D.C. It has a network of 34 pharmacies and offers treatments for chronic conditions such as autoimmune disorders and hemophilia, as well as more traditional home infusion acute-care therapies such as antibiotics and total parenteral nutrition. According to Harvest, AxelaCare is the fifth largest national provider of immune globulin. In addition to its clinical services, the company offers educational and reimbursement assistance.

OptumRx also will benefit from AxelaCare’s proprietary offerings, including CareLogix, which assesses the impact of immune globulin treatment in order to optimize therapy management, and CareExchange, an industry-first electronic patient outcomes assessment technology that captures and reports real-time patient-specific data on treatment regimens’ clinical efficacy.

The deal comes only a few months after Optum finalized its purchase of PBM Catamaran Corp. in July (SPN 4/15, p. 1). In their joint press release unveiling the deal, the firms said that “both companies have distinctive, rapidly growing specialty pharmacy services businesses. The combined organization will help customers manage the complex costs and outcomes as this portion of the pharmaceutical market expands from an estimated $100 billion in revenues in 2014 to potentially $400 billion annually by 2020.”

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Harvest initially invested in AxelaCare in April 2013, when it acquired the stake owned by private-equity group Excellere Partners (SPN 7/13, p. 9). Excellere acquired the company in late 2010, and “following this transaction, Excellere Partners led the expansion of AxelaCare’s management team and facilitated a series of tuck-in acquisitions geared to diversify AxelaCare’s therapy mix, while also expanding the company’s geographic footprint,” points out Stephen Cichy, founder of and managing director at Monarch Specialty Group, LLC.

With the continuing merger-and-acquisition focus on infusion firms — and the decreasing number of companies of scale to potentially purchase — the deal for AxelaCare may not have been a complete surprise. When Walgreens Boots Alliance Inc. sold a majority stake in its infusion business to Madison Dearborn Partners, LLC earlier this year, a source who declined to be identified told SPN that AxelaCare was a likely target (SPN 2/15, p. 1). The company had been “one of the most acquisitive” firms in the industry, with recent purchases including Ambient Healthcare (SPN 1/15, p. 12) and Advanced Care (SPN 10/14, p. 12). “AxelaCare itself is growing nicely, having done five or six deals under Harvest ownership,” commented the source.

The SPN source pointed out in January of this year that if Harvest were to sell AxelaCare, that would make it a “relatively short holding period” compared with the seven or eight years that private-equity groups traditionally hold their acquisitions. However, “given where the markets are now,” it may make sense to do just that. “A lot of [financial] sponsors are seeing robust multiples and want to take advantage of” this trend, he noted.

Industry Is ‘Highly Fragmented’ but Offers Value

According to Cichy, “This active trading activity for AxelaCare over the course of the past six years reflects, in part, the highly fragmented nature of today’s home and alternate-site infusion therapy industry. This also shows that pharmacies that have the ability to deliver quality and value to patients or lower cost to the system can have real transaction value and staying power.”

Asked what AxelaCare qualities likely appealed most to OptumRx, Cichy tells SPN that “from a PBM perspective, when it comes to specialty pharmacy distribution, you need buy-side leverage and the right programs/offerings. OptumRx/Catamaran knows this and is likely to have viewed AxelaCare’s focus on technology plus higher-margin therapies…[such as] home infusion and IVIG therapy services for chronic patients as major value drivers. AxelaCare’s geographic footprint is likely to be an additional synergy opportunity for Optum regarding its ability to service members/patients more effectively in local/regional communities.”

Noting AxelaCare’s focus on treatments for autoimmune diseases and hemophilia, as well as acute infusion therapies, Cichy maintains that the company’s “operating business will be similar to that of BioScrip, although with a larger focus on chronic (vs. acute) business. At the same time, AxelaCare’s business concentration within the IVIG market and in servicing autoimmune and primary immune patients will be comparable to that of MedPro Rx, which was acquired by Diplomat in July 2014” (SPN 7/14, p. 8).

According to a Nov. 18 research note from analysts Christine Arnold and Calvin Sternick of Cowen and Co., “In addition to expanding OptumRx’s specialty capabilities, AxelaCare’s focus on treating patients in the home furthers the company’s goal to better manage costs by delivering more care in lower cost settings. In light of the biotechnology pipeline, with more drugs expected to come to market that are expected to be delivered via infusion, AxelaCare better positions OptumRx to manage the total spectrum of drug spend.”

“Apart from winning in the open market, a key driver to any PBM’s ability to grow its specialty share is its ability to convert its book to exclusive or preferred specialty contracts,” says Cichy. “AxelaCare’s integration with existing United/Optum resources will expand Optum’s pharmacy service offering to newly include the ability to deliver integrated pharmacy-nursing care to the growing number of consumers managing complex conditions through at-home infusions. Look for this new capability to be levered by United as a tailwind driver for Optum leading into fiscal year 2016.”

Ultimately, Cichy says that Monarch believes that “the net result of this transaction isn’t how much it grows OptumRx (from a size perspective), but the effect to enhance Optum’s capability to newly compete — and potentially win — local market segments where they may offer a distinct competitive advantage.”

© 2015 by Atlantic Information Services, Inc. All Rights Reserved.

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