By Angela Maas

The specialty pharmacy and infusion therapy spaces have certainly seen their share of merger and acquisition (M&A) activity over the years. Some challenges within those industries may have helped slow down 2018 activity a bit, observes Reg Blackburn, managing director at The Braff Group. And for 2019, we may see more of the same.

As far as specialty pharmacy trends in 2018, Blackburn points out that “the largest specialty pharmacies continue to get even larger. Payer- and chain-owned dominate. Most new entity growth is coming from large academic hospitals starting their own specialty pharmacies.”

Direct and indirect remuneration (DIR) fees in Medicare Part D that include rebates and price concessions occurring after the point of sale have been around since the start of that program more than a decade ago.

But they started really becoming an issue for specialty drugs around 2016, and it doesn’t look like that’s changing any time soon.

Within the specialty pharmacy space, M&A activity “was lower than in past years,” he explains. Through third-quarter 2018, The Braff Group recorded eight specialty pharmacy deals, compared with 18 for full-year 2017, 20 for 2016 and 10 for 2015.

This lower volume, he says, “is driven by fewer acquisition targets of a size large enough to move-the-needle for strategic buyers and/or large enough to be a platform for PE [i.e., private-equity] buyers. In addition, there is caution from both buyer types given the impact of DIR fees on gross margin.”

Moving forward into 2019, Blackburn expects to see “continued consolidation at a measured pace.” In addition, he says, “smaller independents will remain under pressure for gross margin and closed networks. They will want to exit, but buyers will be limited.”

Within the infusion therapy space over the past year, observes Blackburn, intravenous immune globulin and other specialty infusion products continue to drive revenue growth.

The Braff Group recorded four infusion therapy deals through the third quarter of last year, compared with seven in 2017, six in 2016 and 14 in 2015. 2018, says Blackburn, “continued the recent trend of low deal flow. The sector has experienced significant consolidation over the past five to 10 years.”

In the new year, Blackburn expects to see “continued modest deal activity primarily because of low inventory.”