Alleyba says....................
...........this is an interesting article on compounding....
By Jaimy Lee
Posted: January 19, 2013 - 12:01 am ET
Tags: Acquisitions, Deals, New England Compounding Center, Pharmaceuticals, Suppliers, The Week in Healthcare, U.S. Food and Drug Administration (FDA), Walgreen
Ongoing shortages of sterile injectable drugs have triggered a wave of investment in new and existing compounding pharmacies, which so far, at least, hasn't alleviated the shortages.
A combination of high margins, persistent drug shortages and cash-strapped hospitals unwilling to invest in their own sterile pharmacy facilities has ignited interest from a number of investors. They include private equity firms, drug and device manufacturers and healthcare management firms.
“This whole industry popped up,” said Lou Diorio, a principal with LDT Health Solutions, a pharmacy consulting firm. “It's gained such momentum over the last three or four years.”
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Compounding began at local pharmacies, which traditionally formulated sterile and non-sterile prescriptions for individual patients. However, the rising number of drug shortages as well as the introduction a decade ago of new regulations that established stricter rules for the production of sterile drugs have made hospitals increasingly reliant on obtaining sterile injectable drugs from compounding pharmacies, some of which are operating more like small drug manufacturing plants.
Little attention had been paid to this under-regulated and largely fragmented segment of the drug market until a contaminated batch of steroid injections compounded by the New England Compounding Center last year led to the deaths of 44 people and sickened an additional 678 patients. The Food and Drug Administration has, for the most part, left oversight of the industry to the states.
The scale of NECC's reach—the company eventually recalled more than 2,000 products after distributing 17,000 vials of the tainted steroid injections to 23 states—pushed federal regulators and lawmakers to consider new rules for compounding pharmacies that operate more like drug manufacturers. New industry regulations are likely, but are still some time away.
Pharmacists say that whatever the scope of the new regulations, compounders will continue to play a crucial role in the supply chain and that should drive more investment in the sector.
“In health systems, with so much uncertainty, with healthcare changing on a daily basis, a hospital might not want to give a couple million dollars to its pharmacy to get it up to snuff,” said Erin Fox, director of the drug information service at the University of Utah Hospitals and Clinics. “It's easier to spend a little extra to get the drugs from someone else.”
Deals, partnerships and investments in the sector have accelerated in recent years. Walgreen Co. acquired a compounder owned by Omnicare in 2010. Arise Healthcare, which owns surgery centers and other healthcare facilities, opened the Texas Compounding Pharmacy in 2009. The compounder is now licensed in 15 states.
Private equity firms also have been active in the space. Last year, Baxter International considered purchasing Pharmedium, a national compounding pharmacy owned by Oak Investment Partners, Baird Capital Partners and Baird Venture Partners, but it backed away because of the possibility of new industry regulations, according to media reports. A Baxter spokeswoman said the company does not comment on rumors, and Pharmedium did not return calls for comment.
In December, two more deals were announced. Arseus, a Rotterdam-based medical supplier, said it would buy B&B Pharmaceuticals, an Aurora, Colo.-based supplier of controlled substances and raw materials used in compounding. Pharmagen, a publicly traded distributor of specialty and scarce drugs, spent $1.1. million to acquire Bryce Rx Laboratories, a Stamford, Conn.-based compounder.
Pharmagen, formerly Sunpeaks Ventures, aims to serve as the primary backup supplier of drugs in short supply to U.S. hospitals, said Mackie Barch, Pharmagen president and CEO. It bills itself as the first integrated company that is working actively on the sterile drug shortage.
The number of new drug shortages has nearly tripled in the past six years, jumping from 70 in 2006 to 204 in 2012. There were 299 active shortages in the fourth quarter of 2012, compared to 188 in the same quarter in 2010.
“I don't see any near-term resolution” to drug shortages, Barch said. “I wouldn't be in this business if we saw it going away in a year or two.”
Barch is the former managing director of HealthRite Pharmaceuticals, a now-closed pharmacy that was cited in a congressional investigation into secondary drug distributors that were accused of selling drugs in short supply at marked-up prices.
The link highlights how some companies have emerged as players in the secondary drug distribution and pharmacy compounding markets. NECC, along with selling compounded drugs, had also been marketing drugs in short supply to providers before the meningitis outbreak.
A report published by research firm IBIS World cited drug shortages, the public's increased awareness of compounding pharmacies and an aging population as factors in the industry's growth during the past five years. A separate report released last year by the private equity firm Bain & Co. identified pharmaceutical compounding as a consolidation opportunity that could yield “outsized profit margins.”
Diorio of LDT Health Solutions said another factor driving provider reliance on compounders is the number of hospitals that choose not to build their own sterile facilities. About 70% of hospitals surveyed in 2011 by the American Society of Health-System Pharmacists said they “partially or completely outsource some drug preparation activities.”
“You're always going to have the 50-bed hospitals that are not going to be able to make that investment,” Diorio said. “There's always going to be a need for some compounding.”
AI
