Interesting Aspects of AmerisourceBergen’s $815 million Acquisition of H.D. Smith
H.D. Smith made a few interesting moves in the past few years to grow market share and, potentially, be a more interesting acquisition target.
1. 2015 Creation of Holding Company
It is likely that H.D. Smith’s corporate structure and minor executive leadership changes made in 2015 were done so to streamline acquisitions – and potentially their sale. Holding companies make easier acquisition targets because it simplifies ownership, voting rights, tax, and most importantly, top-line revenue to maximize sticker price.
2. Arete Pharmacy Network: With direct control over H.D. Smith voting shares and a rock-solid relationship with Smart-Fill (and likely their voting shares), AmerisourceBergen might have achieved control over Arete Pharmacy Network for a merger with their Good Neighbor Pharmacy and, potentially, a back-door relationship with AAP, currently served by Cardinal.
18 months ago, H.D. Smith announced a partnership with American Associated Pharmacies (AAP) to combine their respective Pharmacy Service Administration Organizations (PSAO) under Arete Pharmacy Network, LLC. A PSAO negotiates for pharmacy against PBMs and other payors to protect reimbursements and profitability.
AAP is a pharmacy buying group that brings together over 2000 pharmacies to pool buying power and reduce drug acquisition costs and increase profits – they work with upstream partners, namely Cardinal Health, to accomplish this.
12 months ago, Arete Pharmacy Network acquired RxPride, another PSAO, from Smart-Fill Management Group. Smart-Fill is also a pharmacy buying group but they work with AmerisourceBergen.
This acquisition was a very early and very smart move into the specialty market in 2013. AmerisourceBergen is obsessed with specialty pharmaceutical, boasting 12 operating companies under their Specialty Group. Triplefin is a reimbursement, patient assistance, and pharmaceutical brand support services company that solidified their end-to-end value chain for specialty pharmaceuticals.
CompleteCare Pharmacies provides for continuing growth for AmerisourceBergen’s Good Neighbor Pharmacy.
5. Valley Wholesale Drug
The acquisition of Valley Wholesale Drug in 2012 made H.D. Smith a nationwide force and increased top-line revenue.