Specialty infusion pharmacies have found it necessary to achieve accreditation in order to contract with drug manufacturers and payers. In the limited distribution market, drug manufacturers are increasingly giving preference to independent pharmacies that credibly provide exceptional services to their patients.
Likewise, payers favor pharmacies that most effectively manage their part of patient treatment programs. Accreditation, therefore, has become a critical attribute of pharmacies being considered for drug distribution and coverage contracts for specialized medicines.
The Value of Accreditation for Infusion Pharmacies
From the point of view of the drug manufacturers and payers, accreditation reduces the burden of extensive due diligence. The accrediting body has reviewed the pharmacy’s policies, procedures, and its organizational structure, inspected its facilities, and observed its normal operations; the drug manufacturer or payer is thus spared from this effort in the vetting process.
There are a number of accreditations available, of which URAC is probably the most sought by general specialty pharmacies and ACHC (Accreditation Commission for Healthcare) sought by infusion pharmacies. JCO (The Joint Commission) also provides accreditation for pharmacy, although it is not as valuable as the others. The latter two bodies are deeming authorities; thus, their accreditation allows a pharmacy to bill Medicare for qualifying products and services.
Factors Driving the Need for Specialty Infusion Pharmacy Accreditation
The main reason for accreditation is the limited distribution of some medications. Many of the medications handled by specialty infusion pharmacies have limited supplies, and are complex treatments requiring injection. These treatments require careful monitoring and patient outreach on the part of the pharmacy. From the perspective of one of our current Infusion Pharmacy clients: “URAC accreditation was necessary to gain access to certain PBM pharmacy networks.”
Pharmacy qualifications are also critical to the drug manufacturers’ program development efforts. The specialty infusion pharmacies are a key front-line source of data on drug utilization and patient responses, and accreditation is a signal to the drug manufacturers that a pharmacy will serve in this role reliably.
Beyond the requirements of the manufacturers, specialty infusion pharmacies must also manage complicated handling and reporting requirements for medications with toxicity risk issues under the FDA’s Risk Evaluation and Mitigation Strategies (REMS) program.
Drug manufacturers must have volume if they are going to sell limited distribution drugs through an independent pharmacy; just because a drug is limited distribution does not mean the manufacturer will not try to maximize sales. Accreditation is also an indicator, at least indirectly, of a strong customer base. It is unlikely there are any specialty infusion pharmacies selling limited distribution drugs without accreditation, a strong referral network, and a large patient base.
Is Accreditation Helpful in the Sale of a Pharmacy?
The accreditation process is costly and time-consuming; a URAC assessment can take as long as eight to 10 months. Whether this is worthwhile to the pharmacy depends on its objectives.
If a sale of the business is considered, going through the accreditation process may not be worthwhile. At best, the accreditation will only add as much value to the business as what is spent to obtain it, if the intention is to exit the business soon.
If accreditation is a strategy to expand niche drug therapy or have access to limited distribution drugs, then it will add value to the pharmacy.
A number of criteria drive specialty infusion pharmacy multiples; the details of which go beyond the scope of this article. These pharmacies sell between a range of 5X – 7X adjusted EBITDA. Assuming that most of the criteria are in place, accreditation can elevate value by up to 100 basis points in value (taking it from 6X to 7X).
If you are considering the sale of your specialty infusion pharmacy, please contact us for a market valuation based on your specific criteria.
Pharmacy Accreditation can be Helpful During the Due Diligence of an Acquisition
In general, URAC or ACHC accreditation is considered a certification of the “specialty” designation of a pharmacy. Because of the rigorous accreditation process, it confers legitimacy on the pharmacies’ operations and patient care practices.
As part of the due diligence for a prospective pharmacy acquisition, the buyer should check the validity of the accreditation and review the accreditation process – the accrediting bodies all make this information available through their respective websites – to understand what aspects of the pharmacy’s operations and business structure have been reviewed.
Although the accreditation itself signifies an appropriate level of competence and management, if a detailed report from the accrediting body is available, this should be reviewed as well to gain greater insight into the pharmacy’s processes and policies.
About the Authors
Since 1990, American Healthcare Capital has been one of the nation’s largest and most successful M&A advisory firms. Team M+A at American Healthcare Capital consists of the company’s top performing advisors and analysts: Mike Moran, Andre Ulloa, and Mark Thomas. For any questions regarding Team M+A, selling your Healthcare business, or targeting a Healthcare acquisition, please contact us via the form below and we will be in touch shortly.